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[2007] VSC 377
Supreme Court of Victoria
2007-10-05
Byrne J
Original judgment source is linked above.
PRACTICE AND PROCEDURE - trial judge sitting as judge and as member of VCAT.
ENVIRONMENTAL LAW - source of pollution - compensation order - person who has caused pollution to occur - defendant caused pollutant to be brought onto land - whether pollution of soil a natural consequence of bringing the pollutant onto land - whether defendant caused pollution to occur - whether compensation available for pollution caused prior to commencement of the Act.
ENVIRONMENTAL LAW - pollution of groundwater - source of pollution - whether defendant polluted water - beneficial use of land - whether presence of contaminant is harmful or potentially harmful to the health, welfare or safety of human beings or other life.
CORPORATIONS - corporate group - lifting the corporate veil - whether subsidiary acted as agent for holding company - whether holding company and subsidiary engaged in joint enterprise.
NEGLIGENCE - duty of care - duty of occupier of land to future occupants of adjoining land.
NUISANCE - creating nuisance - whether interference with use and enjoyment of plaintiff's land - continuing nuisance - whether defendant knew of existence of nuisance.
LOCAL GOVERNMENT - building surveyor - whether building permit inconsistent with planning permit - whether duty is with respect to non-building conditions of planning permit - surveyor's duty to have regard to Ministerial Guidelines - duty of surveyor to enquire as to compliance with planning permit.
Building Act 1993 ss. 24, 188(7)
1 By contract of sale dated 10 November 1999 the plaintiff, Premier Building and Consulting Pty Ltd ("Premier"), purchased an industrial site situate at and known as 227-231 Barkly Street, Brunswick. Notwithstanding that the events of this judgment concern a period prior to the purchase of this land, I shall refer to it as "the Premier land". The vendor of the Premier land was Babka Pty Ltd, which is not a party to this proceeding. On the Premier land at the time of purchase there stood a warehouse which covered nearly the whole of the land. The intention of Premier at the time of purchase was to have the land rezoned and to develop it for residential units for sale.
2 And this was duly done. The Premier land was, on 4 May 2000, rezoned mixed use with an environmental audit overlay. This zoning permitted residential use with a planning permit from the responsible authority. The requirements of the overlay included that there be issued by a registered environmental auditor, a certificate of environmental audit or a statement of environmental audit either before the commencement of construction or before the commencement of the residential use, at the option of the responsible authority. Premier, on 21 April 2001, obtained a planning permit for the development which included a number of conditions, including a condition that there be issued a certificate of environmental audit or a statement of environmental audit prior to the commencement of any works, use or development. In September 2001 it had completed demolition of the existing warehouse and carried out bulk excavation for the underground carpark. By September 2002 it had completed, or substantially completed, the construction of the 49 residential units, most of which had been pre-sold. No certificate or statement had then been issued.
3 On 26 July 2002, it was apparent that, before issuing an occupancy permit for the apartments, the sixthnamed defendant, Moreland City Council ("Moreland Council"), required that there be obtained a certificate of environmental audit with respect to the land. The site investigations undertaken for the obtaining of this certificate revealed that the land was contaminated with chemicals which were identified as white spirit, perchloroethylene ("PCE") and trichloroethylene ("TCE") and the breakdown products of PCE and TCE. I shall refer to these chemicals as "the contaminants". The breakdown products of PCE mentioned at trial, apart from TCE, were, cis 1,2 - dichloroethylene (cis 1,2-DCE), 1,2 (trans) trichloroethylene, 1,1 dichloroethylene ("DCE") and vinyl chloride. When I refer to PCE I intend to include these breakdown products unless I indicate otherwise. In its statement of claim,[1] Premier says that it first became aware of this contamination on or about 7 March 2003.[2]
4 As a consequence of this, a certificate of occupancy permit for the apartments was refused pending remediation. A further consequence for Premier has been that the pre-sales were lost and it has received three clean-up notices from the Environment Protection Authority ("EPA"). Premier has suffered considerable loss and damage as a consequence.
5 PCE and white spirit are chemicals used in certain processes of dry cleaning. On the land adjoining the Premier land to the east is the property situate at and known as 225 Barkly Street. I shall refer to this land by the name of its occupier for most of the period with which this litigation is concerned, "the Spotless land". The Spotless land had some time previously been used for the purposes of conducting laundry and dry cleaning operations by one or other of companies within the Spotless Group. Premier, therefore, contends that the chemical contamination which existed in 2003 and which still exists on the Premier land has emanated from the usage of the Spotless land for dry cleaning purposes.
6 The secondnamed defendant, North Suburban Properties Pty Ltd ("North Suburban"), the current owner of the Spotless land, has also received three clean-up notices from the EPA in respect of the contamination which is said to be present on the Spotless land.
7 Premier alleges that one or more of the companies within the Spotless Group occupied the Spotless land and conducted on it the dry cleaning business and laundry business using white spirit and PCE, which products were released into the ground and which then made their way onto the Premier land. For present purposes the holding company in the Spotless Group was at all material times the firstnamed defendant, Spotless Group Ltd, formerly called Spotless Ltd, a publicly listed company. I shall refer to this company, as did the parties, simply as "Spotless" and it and the companies of which it was the holding company I refer to collectively as "the Spotless Group". Companies within the Spotless Group include the thirdnamed defendant, Ensign Services (Aust) Pty Ltd ("Ensign Aust"), and the ninthnamed defendant, Spotless Services Ltd, formerly called Ensign Holdings Ltd ("Spotless Services"),[3] which are parties to this proceeding. I shall refer to Spotless and these two subsidiaries as "the Spotless Parties".
8 Other companies within the Spotless Group but which are not parties to this litigation are the following:
9 It was common ground that, in the course of the dry cleaning operations conducted on the Spotless land between January 1963 and 1977, white spirit was used and stored in a number of underground storage tanks on the Spotless land. Throughout this period, the successive occupiers of the Spotless land were the deregistered companies, Spotless Laundry and Spotless Supply, which are not parties to this proceeding.
10 In mid-1977 the Spotless dry cleaning operation changed and a new dry cleaning machine manufactured by American Laundry Machine Industries ("the ALMI machine") was introduced. This machine used PCE and not white spirit. Thereafter, no white spirit was used in the dry cleaning operations conducted on the Spotless land. Premier's case was that the white spirit which is present on the Premier land was the chemical released on the Spotless land in the course of the dry cleaning operations conducted on the Spotless land between 1963 and mid-1977, or from the laundry operations conducted on the Spotless land between 1963 and early 1989. This is not to say, however, that in a later period, white spirit, if released into the ground of the Spotless land prior to mid-1977, did not make its way onto the Premier land.
11 The ALMI machine was used on the Spotless land for a relatively short period. In about September 1978 it was dismantled and reassembled on the Premier land which by that time was occupied by Spotless Services as a tenant of the then owner. The ALMI machine, and PCE used in connection with it, were then used by Spotless Supply on the Premier land until mid to late 1979 when the machine was taken away and dry cleaning operations ceased. After this time no dry cleaning operations were conducted on either the Spotless land or the Premier land. It follows from this that any release of PCE on the Spotless land from the dry cleaning operations must have occurred between mid-1977 and September 1978 at which time Spotless Laundry and later Spotless Supply were in possession of the Spotless land. Again, this says nothing about the possibility that any PCE so released did not later find its way to the Premier land. It also follows from this that it is possible that there was a release of PCE directly onto the Premier land during the period that this chemical and the ALMI machine were used on that land in 1978-9.
12 Both Spotless Laundry and Spotless Supply are, as I have mentioned, deregistered and neither is a party to this proceeding. These were the companies in occupation of the Spotless land between 1963 and 1982 when the activities said to be responsible for the release of the chemicals on this land took place. Premier seeks to overcome this difficulty by contending that Spotless Laundry[4] and Spotless Supply[5] carried on their dry cleaning activities as agents for Spotless or Spotless Services which are therefore vicariously liable for their wrongful acts. Alternatively, it is put that they, in turn, conducted these activities as part of a common enterprise with Spotless or Spotless Services.[6]
13 North Suburban, of course, faced the same difficulties. It sought to address them in much the same way and also, as will be seen, by alleging that Spotless or Spotless Services themselves caused or permitted the pollution to occur.
14 Premier also alleges, and the Spotless Parties admit,[7] that between 1982 and 1987 or thereabouts, Ensign Aust conducted a laundry business on the Spotless land. During this period the ALMI machine was not in operation on the Spotless land. Premier contends, however, that in this period the laundry operations conducted on that land involved the use of a product called Solex. This product, it is said, contains both PCE and white spirit. Accordingly, it is contended that the contaminants which are present on the Premier land were released on the Spotless land as part of the laundry operations conducted with Solex during this period. Again, it may be that any contaminants released on the Spotless land during this period made their way on to the Premier land during the period of its use, between 1982 and 1987, or thereafter.
15 The claims of Premier brought against Spotless, Ensign Aust and Spotless Services depend upon the releasing onto the Spotless land of white spirit and PCE which found its way onto the Premier land. Premier's causes of action against those defendants are put in negligence and nuisance and for statutory compensation under the Environment Protection Act 1970 s. 62A and the Water Act 1989 s. 15.
16 On 5 January 1995, North Suburban became registered as proprietor of the Spotless land and has occupied it since that date or thereabouts. It has not carried on any activity on that land which might involve the release of white spirit or PCE. Nevertheless, Premier brings claims against it in nuisance and negligence for its failure to stop the migration of the chemicals from the Spotless land to the Premier land and it makes statutory claims against North Suburban under the Environment Protection Act s. 62A and the Water Act s. 15.
17 I should mention at this point that the powers to award damages under the Water Act, and, it was suggested, those under the Environment Protection Act, are vested exclusively in the Victorian Civil and Administrative Tribunal ("VCAT"). Premier has, therefore, brought an application, No W9/2004 ("the Premier VCAT proceeding"), against the Spotless Parties and North Suburban seeking relief under these statutes. I was appointed a member of VCAT pursuant to the Victorian Civil and Administrative Tribunal Act 1998 s. 29 on 30 September 2004 and in that capacity, I have concurrently heard and will determine those of the Premier claims which must be brought before the Tribunal.
18 North Suburban, too, seeks statutory compensation from the Spotless Parties pursuant to the Environment Protection Act s. 62A and the Water Act s. 15. It has, therefore, brought an application, No W61/2005 ("the North Suburban VCAT proceeding"), against the Spotless Parties seeking relief under these statutes. Its claims likewise have been heard and will be determined by me as a member of VCAT appointed on 6 February 2006.
19 Premier also sues a firm of environmental consultants, the seventhnamed defendant, ACN 006 911 324 Pty Ltd, formerly called Kilpatrick & Associates Pty Limited ("Kilpatrick"), which provided a report on the soil on the Premier land in January 2000. This report failed to detect the presence of the white spirit and PCE which is now known to be present. This report was commissioned by Babka, the vendor of the land to Premier, perhaps as part of its responsibilities under the contract of sale. I shall return to this in a little detail. At this stage, I simply record that Premier's claim is that this report, which was prepared negligently, was a factor contributing to its loss and damage. The errors in this report are also relied upon by Premier as the basis for a claim for misleading and deceptive conduct in contravention of the Trade Practices Act 1974 s. 52 and the Fair Trading Act 1999 s. 9.[8]
20 For the purposes of the development, Premier also retained as planning consultants the fourthnamed defendant, Collie Planning & Development Pty Ltd ("Collie Planning"). At the end of June 2000, Bruce Robert Keen, who was responsible for this project, left Collie Planning and established his own planning consultancy using a company, the fifthnamed defendant, Keen Planning Services Pty Ltd ("Keen Planning"). Premier sued these defendants contending that they failed to provide proper advice as to its town planning obligations and as to the meaning and effect of the town planning permits which Mr Keen obtained for Premier in late 2000 and 2001. Premier's claim against Keen Planning has been settled. Nevertheless, Keen Planning remains a party for apportionment purposes. Premier's claims against Collie Planning continue.
21 The next defendant against whom Premier made a claim is Moreland Council. Moreland Council was the responsible authority which rezoned the Premier land so as to permit residential use, and granted planning permits for this use. The claims involving this party, too, have been settled and it is no longer a party.
22 The final defendant against which Premier made a claim was the eighthnamed defendant, McMullin Nominees Pty Ltd ("McMullin Nominees"). McMullin Nominees, as trustee of the McMullin Family Trusts, was until 6 January 1994 the owner of the Spotless land. As its name suggests, it is a company associated with members of the McMullin family which established the Spotless organisation some 60 years ago. As will be seen, members of that family continue to have interests in the Spotless Group and, at least in the period with which this litigation is concerned, held directorships in Spotless and in other companies within the Group. Premier's claims against McMullin Nominees, which were predicated upon its alleged responsibility for the acts of the companies within the Spotless Group, have been settled. So too have contribution claims between McMullin Nominees and the other defendants. McMullin Nominees is no longer a party.
23 The tenthnamed defendant, McKenzie Group Consulting (Vic) Pty Ltd ("McKenzie Group") is a firm of building surveyors whose employees or agents issued three staged building permits for the construction of the apartments on the Premier land. Premier makes no claim against McKenzie Group. This party was joined by Keen Planning as a defendant to enable Keen Planning to seek apportionment, or alternatively contribution against it pursuant to the Wrongs Act 1958. The contribution claims involving McKenzie Group, too, have been settled but it, too, remains a party for apportionment purposes.
24 The remaining party to the litigation was Burkett Properties Pty Ltd ("Burkett"), which was joined as third party by McMullin Nominees. The claim of McMullin Nominees against this party arose from the terms of the contract of sale of the Spotless land between them. McMullin Nominees said that, upon its proper construction, the contract of sale obliged Burkett to indemnify McMullin Nominees against any liability to Premier. Burkett, as vendor of the Spotless land to North Suburban under a contract of sale which contains a similar clause, sought a like indemnity against North Suburban against its own liability to McMullin Nominees. The claims involving Burkett, too, have been resolved and it is no longer involved in the litigation.
25 In the course of the trial the parties agreed to undertake a mediation in order to resolve their disputes. Master Efthim made himself available to act as mediator and the parties negotiated over a week.
26 In the days that followed a number of settled claims were announced and orders made. I record these because the settlements go some way to explaining the claims that remain:
27 The terms of the settlements between Premier and Keen Planning and Moreland Council and McMullin Nominees were put in evidence. In each case they contain a confidentiality clause. In deference to this wish of the parties, I will not set out any detail of the settlement except insofar as it is necessary for my purposes.
28 Each of the terms of settlement for the Keen Planning settlement and Moreland Council settlement provides for payment by that defendant to Premier of a specified sum in full settlement of Premier's claims against that party including interest but not including costs. Each party agrees to bear its own costs.
29 The terms of the McMullin Nominees settlement dated 1 November 2006 provide for McMullin Nominees to pay a sum of money to Colonial First State Investments Ltd, a secured creditor of Premier which has appointed receivers and managers of the rights of Premier in this litigation. The provisions of this settlement are not otherwise relevant for my present purposes.
30 The end result of this is that Premier still sues the Spotless Parties, North Suburban, Kilpatrick and Collie Planning, but no other party. Each of these defendants seeks contribution from each other, but only Collie Planning and Kilpatrick seek to diminish their responsibility by orders for apportionment. North Suburban seeks orders for statutory compensation or damages and declarations against the Spotless Parties.
31 It is convenient to mention at this stage four open offers which were announced at the trial. The first and second were offers made by counsel for Premier. On 13 November 2006 they offered to agree to the dismissal of Premier's claim against Collie Planning on the basis that there would be no order for costs. On the same day, they made a similar offer to agree to the dismissal of Premier's claim against North Suburban, again on the basis that there be no order as to costs and, further, that no further action would in the future be brought by either party against the other concerning the subject matter of the dismissed claim. The third offer was made on 16 November 2006 by counsel for the Spotless Parties that they would submit to an order that the notices of contribution by the Spotless Parties against Collie Planning be dismissed with no order as to costs. The fourth offer, made 21 November 2006 by counsel for the Spotless Parties, was in similar terms but addressed to Keen Planning. It seems that none of these offers, other than the fourth, provoked an acceptance, for the trial proceeded without any orders being made as to those three claims.
32 I mention these open offers because they were raised in final addresses. I agree that there may be many reasons other than a lack of confidence in its own case which might lead a party to make such an offer. I will place no reliance upon them in determining issues at this trial, other than costs.
33 Before I turn to consider the various claims in these proceedings, I should make brief mention of particular complications which arise in the claims for contribution and apportionment as they affect this trial. The first arises from the limited application of each of the apportionment and contribution regimes.
34 I am concerned with the interaction of four separate and different regimes.
(a) Wrongs Act Part IV contribution. Under Part IV of the Wrongs Act contribution is available between defendants whose wrongful acts caused the plaintiff's loss. Contribution, however, is not available for an apportionable claim under Part IVAA.[9]
(b) Wrongs Act Part IVAA apportionment. On 1 January 2004 there came into force a new Part IVAA of the Wrongs Act which established an apportionment regime for adjusting liabilities between parties to litigation to which the regime applied. The regime applies, broadly speaking, to claims for compensation arising out of a breach of a duty of reasonable care and those arising out of misleading and deceptive conduct in contravention of the Fair Trading Act s. 9. Premier's claims are put in nuisance, negligence, misleading and deceptive conduct contrary to the Trade Practices Act[10] and under the Environment Protection Act and the Water Act. Of these, only the negligence claim falls within the group of claims covered by the Part IVAA apportionment regime.
Premier brings its claims in negligence against the Spotless Parties, Kilpatrick and Collie Planning. The transitional provisions of the Part IVAA apportionment legislation provide that the regime applies only to claims brought after the commencement date.[11] This proceeding was commenced on 16 October 2003, before the commencement date, but against Spotless and North Suburban and Ensign Aust only. All of the other parties were joined after 1 January 2004 so that the claims against them were commenced after the commencement date.[12] This means that apportionment is available with respect to Premier's negligence claims against all defendants other than Spotless, North Suburban and Ensign Aust.
Since contribution is not available where apportionment is available[13] the defendants other than Spotless, North Suburban and Ensign Aust may not seek contribution against those defendants.
(c) Building Act apportionment. Under the repealed[14] provisions in Part 9 Div. 2 of the Building Act 1993, defendants to a building action commenced before 1 January 2004[15] are entitled to an order apportioning their liability with other defendants[16] and may not seek contribution against those defendants.[17] A building action is not defined by reference to the cause of action pleaded, but by reference to the subject matter of the proceeding, namely, "An action for damages for loss and damage arising out of or concerning defective building work".[18] Claims for Building Act apportionment were made by Collie Planning, Kilpatrick and by Keen Planning in its defence to the Kilpatrick statement of claim. In final address I was informed by counsel for Kilpatrick and Collie Planning that these apportionment claims were not pursued. No such concession was made by Keen Planning which then did not present a final address. Nevertheless, since Keen Planning became a party after 1 January 2004, the Building Act apportionment regime can have no application to claims against it, even if they amounted to a building action. Accordingly, I shall say nothing further about this apportionment.
(d) Apportionment pursuant to the Trade Practices Act. The Trade Practices Act Part VIA also establishes an apportionment regime for claims for damages for misleading and deceptive conduct in contravention of s. 52. The commencement date of this legislation is 26 July 2004 and Part VIA applies only to causes of action arising after that date.[19] The claim by Premier against Kilpatrick based on a contravention of s. 52 arose, on any view, prior to the commencement date so that no question of apportionment under this regime arises.
Premier's misleading and deceptive conduct claims against Kilpatrick:
Premier's statutory claims against the Spotless Parties:
North Suburban's statutory claims against the Spotless Parties:
35 The second matter of difficulty arose from the fact that Premier settled with four defendants, including Keen Planning,[20] and that two of the continuing defendants, Kilpatrick and Collie Planning, pursued their allegations that the loss of Premier was, to some extent, the responsibility of Keen Planning. An apportionment claim may be made only against a party to the proceeding. It was accepted that, notwithstanding that I had ordered that the claims of Premier against Keen Planning be dismissed, that Keen Planning remained a party in the proceeding for this purpose and was, therefore, a defendant for apportionment purposes. It is not necessary that I express any view as to the correctness of this and I do not do so.
36 And so, the claims for apportionment become somewhat complicated. In each case, apportionment requires a finding that the defendant in question was liable to Premier.
37 I then directed that each of Kilpatrick and Collie Planning, as parties asserting the liability of Keen Planning to Premier, give notice of its claim to Keen Planning pursuant to R. 11.15 and that they deliver a statement of claim setting out this claim. This was duly done. The Kilpatrick statement of claim against Keen Planning, dated 29 November 2006, and that of Collie Planning, dated 6 December 2006 followed the terms of the otiose Premier statement of claim against Keen Planning.
38 This left Premier's former claims without a contradictor other than Premier itself. For it is, of course, now in Premier's interest to avoid or minimise the dilution of the responsibility of Kilpatrick and Collie Planning by apportionment because the share which may be attributed to Keen Planning could not produce a money judgment against Keen Planning: Premier no longer seeks this. No financial benefit therefore other than that which it has already received is available to Premier against this party.
39 It seemed to me, however, that, notwithstanding that it was not at risk of an order for damages, Keen Planning was likely to be the object of allegations of a failure to take reasonable care in the performance of its professional functions and was therefore at risk that a finding against it to this effect might be made. Moreover, as a party to the proceeding, it might find itself bound by such a finding. Such a finding might have adverse commercial or even legal consequences, so that Keen Planning had an interest in resisting the allegations made against it. Accordingly, I directed that, if so advised, Keen Planning might file a defence to the allegations against it.
40 As a party, Keen Planning might wish to participate in the trial by leading evidence, by cross-examining witnesses, by making submissions and by presenting a final address. I directed, however, that it be not at liberty to participate in the trial unless it, like any defendant, filed a defence to the statements of claim of Kilpatrick and Collie Planning. In this way its position might be known and rulings as to evidence might be made.
41 Keen Planning duly filed a defence to the Collie Planning pleading only, but took no further part in the trial.
42 The trial was a long and complicated one - one that involved a very large number of issues and documents. The pleadings themselves occupied some 1,700 pages in the Court Book. The Court Book otherwise ran to about 95 volumes and about 22,000 pages, many of which were tendered in evidence. At this point I wish to record four general observations about the trial and about my general approach to certain matters which emerged.
43 First, a point of some difficulty which arose at an early stage, was the evidentiary value of much of this material. For example, environmental experts gave evidence of the results of enquiries made by non-parties, including enquiries made by members of their own staff, evidence of the content of Melbourne & Metropolitan Board of Works ("M&MBW") files, evidence of information provided by owners or occupiers of nearby allotments as to the usage of their land and evidence of historical records. This was all admitted without objection, notwithstanding its hearsay character. I have proceeded on the basis that, unless the point was taken, I should be at liberty to act upon this type of material as evidence of the facts asserted.
44 Another feature of the trial was the tender of masses of documents without objection either as annexures to witness statements or simply from the bar table. From time to time I raised my concern that my attention had not been drawn to the significance of this material. I told the parties that this course carried a double risk - that I might overlook the significance of a particular entry in one of these documents and, further, that I might see an entry as having a significance which no party asserted. I was assured that, in final addresses including the written outlines, the important documents would be identified and that no party would therefore complain if I failed to see the significance of a document where this did not appear from the circumstances of its tender or from final address. Counsel said that if I should stumble upon what seemed to me a rich vein in a document in evidence, which had not been so identified, I should, before acting upon it, raise this with the parties by some post-trial memorandum. This then, was to be the regime under which I am to prepare this judgment.
45 Let me say immediately that this is a very unsatisfactory state of affairs. It has the consequence of bringing into existence two classes of evidence - that which is comprised by the tendered documents to which I might have regard and that comprised in the tendered documents to which I might not. This unsatisfactory state of affairs is the product of the practice adopted by most of the parties of tendering, without objection from other parties, large bundles of documents without further explanation and by the tendering through witness statements of large bundles of documents whose significance is not there explained. I add, too, that the practice imposes a great burden on the Court in its task of absorbing the evidence as it is progressively presented. It imposes this further burden: if, in the course of revisiting these documents after the trial, I discover what appears to be a matter of some significance, I am obliged to trawl through the thousands of pages of transcript to discover if this matter has been adverted to. If I am uncertain I must reconvene the trial or ignore the matter entirely.
46 These difficulties have a particular importance in this case where some parties, particularly the Spotless Parties, called no evidence on a number of issues, contending that the evidence before me did not warrant the conclusions which counsel for the plaintiffs invited me to draw.
47 I, therefore, approach documents which are the subject of bulk tender on the basis that I will look at those whose significance is identified in the course of the trial including final addresses, written and oral. I see myself also as at liberty to look at documents whose significance is not so identified and I will attach to them such significance as seems to me appropriate. Where this discloses a matter to which no other reference has been made, I will not act upon the material in this way without drawing it to the attention of the parties and inviting submissions.
48 The second feature of the trial of which I make mention at this stage concerns the pleadings. The parties in this case, particularly Premier, laboured under the difficulty that they had no knowledge of the events which took place on the Spotless land in the decades of its operation of the laundry and dry cleaning businesses. To make out its case it depended upon material which emerged upon discovery and the results of its own investigations with persons who had been employed by the Spotless Group in those years. A consequence of this is that the Premier pleadings cast their net widely. This lead to interlocutory battles over particulars and also to amendments to the pleadings as the case advanced. Indeed, Premier's last amendments were made as late as 27 February 2007 when the evidence was, for the most part, completed.
49 Other parties, too, amended their pleadings in the course of the trial. To some extent this may have been in response to my statement made at a fairly early stage of the trial that I would decide the case on the pleadings and will not seek to make out some new or different case at the behest of any party from the evidence which came forward. In the circumstances, I shall assume that a failure of a party to seek to cure some infirmity in its pleading to which attention was drawn at trial was the result of a deliberate forensic decision. I shall approach this case on this basis unless it is apparent that the parties themselves proceed on the basis that some unpleaded point is in issue.
50 The third general observation about the trial is that a number of witnesses who might have had knowledge of contentious issues were not called. I will mention these as I deal with the issues themselves in this judgment. Most significant, however, was the failure of the Spotless Parties to call any witness as to the activities carried out on the Spotless land and of Kilpatrick to call any witness who was responsible for its impugned environmental report of January 2000. I will readily draw permissible inferences from the unexplained absence of such witnesses.
51 The final general observation is that, with the cooperation of the parties, the evidence from all parties upon particular topics was led together. In this way the environmental scientists gave their evidence in succession and then the remediation expert witnesses, the valuers and, finally, the forensic accountants. This had the great advantage, from the point of view of the Court, that it was possible to consider the technical issues raised by these witnesses while the competing opinions of other witnesses from the same discipline were fresh in mind. I should add, too, that a great deal of time was saved by these witnesses meeting before giving their evidence and producing a list of points of agreement and points of disagreement. The difficulties which these procedures might otherwise have caused of, for example, a defendant calling evidence before the evidence of the plaintiff or another party up the list of defendants was closed, did not arise due to the cooperative and practical approach which all the lawyers in this case were prepared to adopt. I gratefully acknowledge the spirit which generally prevailed throughout the trial.
52 In the course of the trial certain questions were agreed to be deferred for determination by a Master or, perhaps a special referee, after judgment. These questions related to the quantification of the s. 62A claims. I will deal with these matters below.[21]
53 Central to these proceedings are four non-controversial facts. First, in the course of the Spotless dry cleaning and laundry activities conducted in Barkly Street, the chemicals in question were used. In the dry cleaning processes white spirit was used between 1963 and mid-1977 on the Spotless land and PCE was used from mid-1977 until mid or late 1979 on one or other of the Spotless land or the Premier land. As I have mentioned, in the last 12 months or so of this period of PCE use, the dry cleaning activity was conducted on the Premier land, not on the Spotless land. In the laundry processes, which were conducted between 1963 and 1987 on the Spotless land only, white spirit was used in the laundry process for spotting garments, but in quantities so small that this may be put to one side. Associated with this is a further allegation, which is in controversy, that a product called Solex was used in the laundry process on the Spotless land from about 1982. This product, too, is said to have contained PCE and white spirit. So the first fact, largely non-controversial, is that both white spirit and PCE were used by the Spotless Group on the Spotless land and that PCE was used by the Spotless Group on the Premier land. The evidence, however, of the manner and extent of this use is meagre. The Spotless Parties called no evidence as to this.
54 The second non-controversial fact is that today and, indeed, in 2003, there is and was present in both the Spotless land and the Premier land quantities of PCE and white spirit. The extent and quantities of these chemicals and the degree of risk which they raise are matters of dispute, as is the time at which or the period over which the chemicals came upon the Premier land, and their source. What is not in dispute is that the EPA is satisfied that pollution of land and groundwater has occurred or has been permitted to occur upon or from the Premier land and the Spotless land and it has issued clean up notices to the occupier of each of the lots pursuant to the Environment Protection Act s. 62A.[22] The consequence of this is that some clean up must be carried out, and the two owners, Premier and North Suburban, each seek to recover the cost of this together with other consequential costs and losses, the quantum of which is in dispute.
55 The third uncontroversial fact is that none of the parties, except possibly the Spotless Parties, was, until 2003 aware of the presence on the Premier land or the Spotless land of PCE and white spirit. This fact provides an explanation for conduct which is otherwise difficult to understand.
56 The fourth non-controversial fact is that the laundry and dry cleaning business which was carried on over the period from 1963 to 1989 on the Spotless land and the laundry business conducted for a lesser period on the Premier land, was carried out by a variety of corporations within the Spotless Group. As will be seen, this raises difficult legal questions as to the responsibility of the Spotless Parties.
57 It is therefore convenient at this point that I outline the chronology as to the use of the Spotless land and the Premier land by companies within the Spotless Group. This can be approached in five periods of time. This chronology is, for the most part, derived from the pleadings, insofar as the matters were not put in issue.
58 In the early 1960s the present building was erected on the Spotless land and commenced to be used for the administration of the Spotless Group, for its dry cleaning and laundry activities and as a retail outlet.
59 For the whole of the period 1963 - mid-1977 the dry cleaning and laundry operations on the Spotless land, which included the use of white spirit, were conducted by Spotless Laundry, a company which is deregistered and is not a party to this proceeding. At the end of this period white spirit ceased to be used in the dry cleaning operation. Spotless Laundry was, for a very short time from January to June 1963, in possession of the Spotless land as a tenant under a lease granted by McMullin Nominees.[23] On 29 January 1963, Spotless Laundry assigned the term to Trawalla Trading Company Pty Ltd and became a sub-tenant of Trawalla in possession of the land until 1978.[24] Trawalla is not a party to this proceeding. Spotless Laundry was at this time a wholly owned subsidiary of Spotless. Premier was not then incorporated.
60 This is the period in which the ALMI machine, using PCE, was used for dry cleaning operations on the Spotless land. In the pleadings it is said that, for most of this period, Spotless Laundry remained in possession of and was the operator of the business conducted on the Spotless land. The evidence, however, showed that, on or about 30 June 1976, Spotless Laundry ceased to conduct the business[25] which was thereafter conducted by Spotless Supply. Spotless Supply, from 1 July 1978, took possession of the Spotless land as assignee from Spotless Laundry of its sub-lease. Spotless Supply, which is also deregistered, is not a party to this proceeding.
61 During this period the ALMI machine using PCE was operated, not on the Spotless land, but on the Premier land until mid-1979 when it was dismantled and removed to Sydney. The tenant in possession of the Premier land at that time was probably Spotless Services. The Spotless Parties contend that the operator of the dry cleaning business and the ALMI machine on the Premier land at this time was Spotless Supply.
62 During this period the activities of the Spotless Group on either piece of land are relatively obscure. What is clear is that the ALMI machine was not used there after it was dismantled, so no question of the release of PCE from this source arises.
63 The Spotless Parties in their defence admit that Spotless Supply was in exclusive possession of the Spotless land[26] and conducted the commercial laundry activities on the Spotless land between on or about 30 June 1978 and on or about 30 June 1982.[27] Thereafter, they say, Ensign Aust was in exclusive possession of that land as a direct tenant of McMullin Nominees until, in or about early 1989,[28] when it was sub-let to a third party. Ensign Aust itself commenced trading only on 1 March 1982. Between 1979 and 1989 it is said that Solex was used in the Spotless laundry operations which were conducted on the Spotless land. There are, however, entries in the Spotless General Ledger which show substantial purchases of white spirit as late as October 1981. These may, however, have been purchased for use on other sites. No party made anything of this.
64 So far as the Premier land is concerned, there is evidence that on 26 April 1982 the lease of that land was assigned by Spotless Services to Ensign Aust and that this lease was to expire in August 1988. Furthermore, an analysis of the Spotless general ledger shows that the Premier land was used by Ensign Aust as late as May 1984. There is, however, no evidence as to the use, if any, of the Premier land by the Spotless Group after 1988.
65 I mention also at this point that from 1982 the Spotless administration was no longer conducted from the offices on the Spotless land. From February 1989 or thereabouts the Spotless land was sub-let to a third party with no connection to the events the subject of these proceedings.
66 After 1989, there was conducted on the Spotless land or the Premier land no activity involving a Spotless company which may have released either white spirit or PCE onto that land.
67 On 26 October 1994 Premier was incorporated under the name Middle Brighton Motors Pty Ltd and on 2 July 1997 it changed its name to Premier Building Consultants and Development Pty Ltd. On 16 March 2000 its name was again changed to its present name. It purchased the Premier land from Babka on 10 November 1999. Meantime, in September 1993 McMullin Nominees had sold the freehold of the Spotless land to Burkett and, in turn, Burkett sold to North Suburban in February 1994.
68 Against this background, I turn to the issues raised in the pleadings between Premier and the Spotless Parties. As I have mentioned, its causes of action are put in nuisance, negligence and under the two statutes.
69 In its statement of claim[29] Premier describes the nuisance, inasmuch as it concerns the presence of white spirit, as arising from the contamination of the bedrock on the Premier land with that chemical.[30] The contamination with PCE, on the other hand, is said to arise from its presence in the bedrock and in the unconsolidated sediment which lies above the bedrock.[31] What is alleged is that, in about 1975 and thereafter, white spirit escaped from underground storage tanks or waste pits, or both, on the Spotless land and migrated through the sub-soil to the Premier land, thereby creating, what in the pleading was called, "the white spirit nuisance".[32] What is there referred to as "the PCE nuisance" is said to have been caused by the use of PCE on the Spotless land in laundry and dry cleaning activities between 1977 and 1978[33] and between 1982 and 1987,[34] in the course of which this chemical was, presumably,[35] permitted to enter the sub-soil and to migrate to the Premier land. Next, it is said that each of the Spotless Parties knew or ought to have known of the existence of the white spirit nuisance and the PCE nuisance and failed to bring the nuisances to an end.[36] These scenarios were in issue and this represented a major factual contest at trial. The cause of action in each case is said to arise from the acts or omissions of the relevant Spotless Party in creating[37] or continuing[38] the nuisance.
70 A further assertion, which appears to be implicit in this Premier claim, is that PCE was released on the Spotless land during the course of the dry cleaning operations carried on there in 1977-8. This is the factual basis underlying the Premier allegation that the pollution with PCE is due to the breach of duty of care by Spotless Services and Spotless in the conduct of those operations.[39]
71 It is apparent from the chronology that there is a limited opportunity for Premier to attribute to the Spotless Parties any act which actually released the contaminants into the environment on the Spotless land. It is not suggested that Spotless itself carried on any business of dry cleaning or laundry on the land. This was done by its subsidiaries. Ensign Aust's involvement was that of conducting the laundry business on the Spotless land from 1979 to 1989. These activities could have caused the release of the contaminants only by its use of Solex. It may be, too, that during this period, white spirit stored in the underground tanks was permitted to escape.
72 It is not alleged in the statement of claim that Spotless Services itself released any contaminants into the Spotless land. Indeed, this must be so, because it did not conduct any laundry or dry cleaning activities at any relevant time on the Spotless land. Any responsibility for this must be through its subsidiary.
73 The case of Premier against Spotless is that it is responsible for the acts and omissions of the deregistered companies, Spotless Laundry between 1963 and 1978 and Spotless Supply between 1978-9, because those companies carried on their commercial activities as its agents[40] or because they were engaged with it in a common enterprise.[41] It is alleged, too, that, for similar reasons, Spotless is responsible for the acts and omissions of Ensign Aust between 1982 and 1987.[42] The case against Spotless Services in this respect is very much more limited. It is said to be vicariously responsible only for the acts and omissions of Spotless Supply between 1978-1982 for the same reasons.[43]
74 The pleaded position with respect to the discharge of pollutants by the operation conducted on the Premier land itself is a little different. It is said that between 1978 and 1979 Spotless or Spotless Services or both conducted dry cleaning operations on the land and that PCE was used in these operations.[44] This leads to allegations that these companies conducted the operations negligently.[45] There seems to be implicit in all of this that in the conduct of these operations one or other or both of these operating companies released PCE onto the Premier land. For my present purposes these allegations do not involve any assertion that the responsibility of Spotless was anything other than that of an operator.
75 I need hardly say that there was a serious factual and legal issue raised as to the existence of this vicarious responsibility alleged against Spotless and Spotless Services.
76 The chronology also raises difficulties for the Premier claims which are predicated upon continuing the nuisance - the failure of the Spotless Parties to put an end to the existing nuisances.
77 In the case of Spotless, it is said that its failure to put an end to the white spirit nuisance occurred "from at least 1987".[46] This is the year in which, it is alleged, Spotless ceased to occupy the Spotless land[47] and the year in which it is alleged that Spotless became aware of the dangers of leaking underground storage tanks.[48] The period of its failure to bring the PCE nuisance to an end commences "from at least 1977".[49] This is the date when the ALMI machine commenced operation on the Spotless land.[50]
78 With respect to Spotless Services, it will be recalled that it did not conduct any dry cleaning or laundry activities on the Spotless land. It is said that, from at least 1978 or at least 1987 it failed to put an end to the white spirit nuisance[51] and from at least 1978 it failed to put an end to the PCE nuisance.[52] As pleaded, this contention appears to depend upon the fact that it shared directors with Spotless Laundry and Spotless Supply, the companies within the Spotless Group which actually conducted the laundry and dry cleaning businesses on the Spotless land between 1963 and 1978.
79 The failure of Ensign Aust and Spotless Supply to put an end to the white spirit nuisance and the PCE nuisance are said to date from "at least in or about 1982 or in or about 1987". The former date is the date when Ensign Aust commenced to conduct the laundry (but not the dry cleaning business) on the Spotless land.
80 In their defence,[53] the Spotless Parties contend, further, for various reasons that, if the released contaminants migrated from the Spotless land to the Premier land, this did not amount to actionable nuisance. These contentions depend upon the fact, which is not in dispute, that the Premier land was zoned and used for industrial purposes prior to 2001. In paras 40A, 40B and 42 of its statement of claim, Premier alleges in fairly conventional terms that it suffered loss and damage as a consequence of the nuisance of Spotless, Spotless Services and Ensign Aust. This is denied and it is said that the loss and damage is too remote.[54]
(a) To take reasonable care with the conduct of the laundry and/or dry cleaning operation conducted on the [Spotless land];[58]
(b) To take reasonable care with the underground storage tanks and the storage of White Spirits in the underground storage tanks below the [Spotless land];[59]
(c) To take reasonable steps to investigate the environmental conditions of the [Spotless land] and/or remove to the extent practicable the chemicals used in the laundry and dry cleaning business including White Spirit and PCE from the subsurface of the [Spotless land];[60]
(d) To take reasonable steps to investigate and eliminate the risk of the chemicals used in the laundry and dry cleaning process including PCE and White Spirit migrating from the [Spotless land] to the properties adjoining and/or surrounding the [Spotless land];[61] and
(e) To take reasonable steps to ensure that Spotless Laundry (deregistered), Spotless Supply (deregistered), Spotless Services and Ensign [Aust] took reasonable care with the laundry and/or dry cleaning operations.[62]
82 It will be recalled that for approximately a 12 month period in 1978-9 the ALMI machine was used on the Premier land. It is alleged by Premier that Spotless and the operator, Spotless Services, owed to current and future owners of the Premier land a duty -
(a) To take reasonable care with the conduct of the dry cleaning operation on [the Premier land]; and
(b) To take reasonable steps to investigate the environmental conditions of [the Premier land] upon cessation of dry cleaning operations thereon and/or vacation of [the Premier land] and/or remove to the extent practicable any contamination of [the Premier land] to unsafe levels and caused by the dry cleaning operations thereon.[63]
83 The existence of such duties is put in issue on a factual basis as well as on legal bases. Issue is also joined as to the breaches and consequential loss and damage.
84 In addition, there are a number of contentions raised by way of defence to these causes of action. At this point I simply list them:
85 Section 62A of the Environment Protection Act provides for the giving of clean up notices to the owner of contaminated land. Sub-section 62A(2) then gives to the owner the right to recover from the person who caused or permitted the contamination to occur, the reasonable costs incurred in good faith in complying with the clean up notices. Premier says that Spotless, Ensign Aust and Spotless Services caused or permitted the present contamination of the Premier land and that it should recover from them its costs incurred and to be incurred in cleaning up that land.[69] These claims are also made in its points of claim[70] in the Premier VCAT proceeding.[71]
86 In their defences to these claims the Spotless Parties raise a large number of contentions. I shall detail and deal with them in due course.
87 Premier's other statutory claim is brought in the Premier VCAT proceeding pursuant to s. 15 of the Water Act. In essence, this claim also relies upon the facts pleaded in the litigation that the contaminants have made their way on to the Premier land, but in this case, it is put that they thereby polluted the groundwater under that land - the shallow groundwater in the perched aquifer with PCE,[72] and the deep groundwater in the Silurian aquifer with both white spirit and PCE.[73] Premier alleges that this pollution has caused injury to it or damage to its property or economic loss and that the polluting parties are therefore liable to pay damages. I shall refer in due course to this claim and the many defences raised in answer to it.
89 North Suburban purchased the Spotless land from Burkett in February 1994 and became its registered proprietor on 5 January 1995, nearly five years before Premier purchased the Premier land. During its ownership, no activities were conducted on the Spotless land which might bring about the release onto that land of the contaminants. Insofar as the contaminants were present on the Spotless land in February 1994, it was not suggested that any activity on the part of North Suburban caused them to migrate subsequently to the Premier land. If they so migrated, this must have been as part of a natural process. Premier brings against North Suburban a claim in nuisance and negligence and statutory claims. In essence these claims allege that North Suburban did not take steps to prevent the contaminants being released onto the Spotless land or migrating from the Spotless land to the Premier land, or both.[76] In its defence[77] North Suburban denies that it continued the nuisances, contending[78] for a number of reasons, including that the asserted right of Premier to enjoy the Premier land was not at the time of its acquisition a right to use the land for residential purposes and that, after the rezoning, any such right was subject to the requirements of the Environmental Audit Overlay. Further, it contends that Premier voluntarily accepted the risk that its presently alleged damages would occur, alternatively that Premier caused or contributed to its own loss by commencing and proceeding with the residential development without first having obtained a certificate of environmental audit or a statement of environmental audit.[79]
90 The Premier claim in negligence against North Suburban is predicated upon the following duty of care:
(a) To take reasonable care with the underground storage tanks and the storage of White Spirits in the underground storage tanks;
(b) To take reasonable steps to investigate the environmental conditions of the [Spotless land] and/or remove to the extent practicable the chemicals used in the laundry and dry cleaning business including White Spirits and PCE from the subsurface of the [Spotless land];
(c) To take reasonable steps to investigate and eliminate the risk of the chemicals used in the laundry and dry cleaning processes, including White Spirit and PCE migrating from the [Spotless land] to properties adjoining and/or surrounding the [Spotless land] including Premier's Property.[80]
91 These duties are denied by North Suburban as a matter of law.[81] North Suburban also contends that Premier by itself or its agents, Collie Planning and Keen Planning, knew or ought to have known that the Premier land was potentially contaminated and that the requirements of the Environmental Audit Overlay had to be satisfied before the commencement of the residential development. North Suburban also says that, before it varied the contract of sale, Premier had protection against the risk of damage which it has now suffered.[82]
92 The third claim against North Suburban is brought under s. 62A of the Environment Protection Act. The allegation here is that North Suburban caused or permitted the pollution to occur[83] and is liable to reimburse Premier for the costs of complying with the EPA clean up notices. North Suburban denies this and contends that the expenses incurred for investigation of the Premier land and remediating it ought properly to be treated as having been incurred in compliance with the requirements of the Environmental Audit Overlay and of the planning permit, rather than in compliance with the clean up notices.[84]
93 The fourth claim is brought for damages under s. 15 of the Water Act. The allegation here is that, from January 1995, North Suburban polluted the shallow ground water with PCE and the deep ground water with white spirit and PCE[85] and is liable for Premier's loss and damage suffered as a consequence. The response of North Suburban was that it did nothing on the Spotless land to cause the pollution and that the loss and damage of Premier was for many reasons not foreseen or foreseeable.[86]
94 In the event that it should be found liable to Premier, North Suburban seeks contribution against the Spotless Parties.[87] The basis for this is that the loss of Premier has been caused or contributed to by the wrongful acts of the Spotless Parties in permitting the nuisances, the acts of negligence and causing or permitting the pollution of the Premier land.
95 Notwithstanding a passing reference to this in its defence[88] I was told that North Suburban did not seek apportionment orders under Part IVAA of the Wrongs Act, or otherwise.
96 Kilpatrick was retained by Babka in or about December 1999 to carry out an investigation of the soil of the Premier land. As I have mentioned, this investigation failed to disclose the existence of PCE and white spirit which was then present in the soil to the north east of the land. Premier says that this was because the investigation and the report dated January 2000 was deficient in many respects and that this amounted to a breach of duty of care owed to it.[89] The issues involving this claim may be very broadly stated as being as to the existence and ambit of the suggested duty of care, breaches, causation and the consequent loss.
97 Following the demolition of the warehouse on the Premier land, Premier's builder excavated the Premier land for the basement carpark. There was a surprising uncertainty in the document as to the actual identity of the builder. The contractor named in the building contract is Melbourne Transport Pty Ltd and this is the builder named in the building permits. In much of the correspondence, however, the builder is named EG Holdings Pty Ltd. Nothing turns on this and I shall refer to the builder simply as "the builder". It is alleged[90] that on 13 and 14 September 2001 representatives of Kilpatrick carried out a visual inspection of the excavated Premier land. Kilpatrick reported the results of this to EG Holdings by letter dated 14 September 2001. In this letter Kilpatrick concluded that the remaining soil on site would be classified as fill material.[91]
98 Premier alleges, too, that Kilpatrick is guilty of misleading and deceptive conduct in making the statements in its January 2000 report[92] and in its letter of 14 September 2001.[93] It is contended that this conduct contravened s. 52 of the Trade Practices Act so that Premier is entitled to damages for its loss caused by this contravention. The alternative claim that such conduct was a contravention of s. 9 of the Fair Trading Act was abandoned in final address. This statement is said to have been made negligently.
99 While it is correct, on the evidence, to say that the Kilpatrick report of January 2000 and the September 2001 letter failed to disclose the presence of the contaminants on site, there is an issue as to the true meaning of the statements contained in the report and the letter in the context in which they were made. In addition, counsel for Kilpatrick provided in list form the affirmative defences upon which their client relied:
100 Kilpatrick then claims contribution from the Spotless Parties and North Suburban on the basis that they were guilty of wrongdoing which caused or contributed to Premier's loss. In this way the issues between those parties and Premier again become relevant.
101 Kilpatrick's claim to apportionment raises difficult legal issues as well as the same factual issues. First, the apportionment regime is a little uncertain. Premier's claim against Kilpatrick in negligence may entitle it to seek apportionment under the Wrongs Act Part IVAA; for any claim based on misleading and deceptive conduct under the Trade Practices Act apportionment falls to be determined under Part VIA of the Trade Practices Act; and for a like claim under the Fair Trading Act the regime is that of Part IVAA of the Wrongs Act.[111] Furthermore, Kilpatrick limits its apportionment claims to two co-defendants only, Keen Planning and McKenzie Group. Neither of those defendants is pursued by Premier. Kilpatrick, therefore, undertakes to make out Premier's claim against those defendants, a claim which Premier disavows.
102 Collie Planning acted as Premier's planning consultant from November 1999, shortly after the purchase of the Premier land, to 30 June 2000 or thereabouts, a month or so after the rezoning was complete and about two weeks before the planning application was lodged with Moreland Council. During this period, it is common ground that there existed a retainer between Premier and Collie Planning, although the terms of this retainer are in issue. The case against Collie Planning is, therefore, put in breach of contract as well as a breach of duty of care.
103 The essence of the complaint against Collie Planning is that it failed to bring to the attention of Premier the fact that the planning requirements affecting the land when it became rezoned included a requirement that a certificate of environmental audit be obtained. It is said that the failure to bring this matter to the attention of its client meant that Collie Planning was in breach of its contractual obligations and of its duty of care, as a result of which Premier continued with the development without itself seeking to obtain a certificate. A related, but rather different, allegation is that Collie Planning failed to advise Premier that the Kilpatrick report of January 2000 was not itself a certificate or statement of environmental audit. Underlying this allegation is the further implicit allegation that Premier at all times believed that the report was in fact a certificate or statement and that, for that reason, it took no steps itself to obtain a certificate of environmental audit.
105 Collie Planning seeks contribution against the Spotless Parties on the basis that their wrongful acts contributed to Premier's loss. Collie Planning in its defence and in its notices to co-defendants also seeks apportionment. In its defence[114] this is predicated upon the fact that this is a building action within the meaning of the Building Act, a matter which is no longer pursued. In its more recent notices to co-defendants, Collie Planning narrows this apportionment claim somewhat. First, it directs its allegations only to Keen Planning, Kilpatrick and McKenzie Group. Second, it brings its claims under Part IVAA of the Wrongs Act. This creates some legal difficulties because the claims for breach of retainer are not apportionable claims. These difficulties I will address when I come to deal with the claims against Collie Planning in detail.
106 As I have mentioned,[115] Premier settled its claims against Keen Planning in the course of the trial and they were dismissed by order made on 27 November 2006. Since no party sought contribution from Keen Planning this may have been the end of its involvement in the litigation. But this was not to be. Each of Kilpatrick and Collie Planning, as defendants to claims brought by Premier, alleges against Keen Planning an entitlement pursuant to Part IVAA to apportionment of any liability to Premier on the basis that Keen Planning was a concurrent wrongdoer.
107 These allegations were, then, set out in the statements of claim against Keen Planning delivered by Kilpatrick[116] and Collie Planning[117] in which they set out the claims which Premier might have, but chose not to, advance and the defences of Keen Planning are to be found in its defence to the Kilpatrick statement of claim.[118]
108 It will be recalled that Keen Planning became involved in the Barkly Street project when its principal, Mr Keen, left Collie Planning at the end of June 2000. The planning work which Collie Planning was performing pursuant to its retainer with Premier entered into in November 1999, passed with Mr Keen to his own company, Keen Planning, which was incorporated on 7 July 2000. By this stage, the Premier land had been rezoned so that that the next planning step was to prepare and lodge an application for the necessary planning permit.
109 In identical terms, Kilpatrick and Collie Planning allege that an agreement was made between Keen Planning and Premier on or about 7 July 2000 whereby "Premier retained Keen [Planning] to project manage the planning process and prepare, lodge and monitor a planning permit application for the development of apartments and underground car parking spaces on [the Premier land]".[119] Keen Planning in its defence to the Kilpatrick pleading denies the words which I have italicised but otherwise admits the allegation.[120] It is not alleged that the terms of the Keen Planning retainer included an obligation to carry out the work with due skill and care.[121] The two statements of claim then allege a breach of this retainer, again in similar terms,[122] none of which amounts to an allegation of a failure to take reasonable care.
110 The claims for apportionment must therefore depend upon the allegations of the existence and breach of a tortious duty of care.
111 These allegations are put in issue by Keen Planning which alleges that it provided Premier with copies of the relevant planning permit documents and that it informed Premier of the Moreland Council requirement that it receive a certificate of environmental audit. It also alleges that Premier, at all material times, was aware that the Kilpatrick report was not a certificate of environmental audit or a statement of environmental audit.[123]
112 The final claim in the litigation is that for apportionment against the building surveyor, McKenzie Group. McKenzie Group was joined as a defendant by Keen Planning in order to seek apportionment[124] and it remained a defendant after Premier settled with Keen for the purposes of other apportionment claims. Premier has never asserted that McKenzie Group was liable to it for its loss. The defendants putting forward allegations of such a liability are Collie Planning[125] and Kilpatrick.[126] McKenzie Group filed a defence to the Kilpatrick statement of claim[127], but not to the Collie Planning statement of claim.
113 McKenzie Group was not engaged until August 2001. There is an issue as to whether McKenzie Group was engaged by Premier, as Collie[128] and Kilpatrick[129] allege or by the builder, as McKenzie Group contends in its defence. On 18 February 2007, in the course of final addresses, counsel for Kilpatrick and Collie Planning each sought to file a reply to the McKenzie Group defence touching this issue. In this document it was sought to contend that, if McKenzie Group was retained by the builder, then the builder did so as agent for Premier. Counsel for McKenzie Group strenuously opposed this application and I refused it. As I indicated in the course of argument, I did so because the application was very late, after all the evidence was in and after Premier and McKenzie Group had presented their final addresses. I was told by counsel for McKenzie Group that if the amendment were allowed they would need to call further evidence on the new issue. Moreover, insofar as the proposed allegation put the allegation against Premier in the alternative, it was not appropriate to do so by way of reply. The issue, in any event, was a very peripheral one given its context in the trial, especially as no monetary relief was sought against McKenzie Group. Finally, it was not alleged that a term of the retainer included a term to perform work with reasonable care; so that the claim was not an apportionable claim.
114 McKenzie Group is a firm of building surveyors which issued three staged building permits for the construction of the apartments on the Premier land. There were in fact four permits issued under the Building Act with respect to this project. The first, dated 3 July 2001 issued by a building surveyor, other than the McKenzie Group, was for demolition.[130] The first permit issued by McKenzie Group on 17 August 2001 was for excavation and the construction of the basement car park; the second, on 12 April 2002, was for structural works, and the third, on 12 March 2002, was for architectural services.
115 The basis of the allegations against McKenzie Group is that these permits were not consistent with the conditions of the planning permit and, in particular, condition 28 which required the issue of a certificate of environmental audit prior to the commencement of any work. It is put that by issuing each of the three permits McKenzie Group failed to exercise due skill and care inasmuch as it did not insist upon the issue of the certificate of environmental audit before permitting the work to commence. The factual basis of this allegation was not much in issue. The substantial question here was whether it is part of the role of a building surveyor issuing a building permit to be concerned with such planning requirements. The resolution of this question depends upon a construction of the relevant legislation although evidence was also led for and against the factual proposition that the normal practice of building surveyors was to look to these matters.
North Suburban's Claims against the Spotless Parties
116 These are statutory claims brought under s. 62A of the Environment Protection Act and s. 15 of the Water Act. The claim under the Environment Protection Act is brought by North Suburban by a statement of claim[131] delivered to the Spotless Parties as co-defendants in the litigation and in its points of claim[132] in the North Suburban VCAT proceeding; its claim under the Water Act is brought in the North Suburban VCAT proceeding. The claims brought in these two proceedings are, naturally enough, similar but they are not identical.
117 In the court proceeding a claim is brought only under the Environment Protection Act. North Suburban's claims in the VCAT proceeding also includes a claim under the Water Act and, perhaps for that reason, draws a distinction between pollution of the sediment and pollution of the groundwater on the two sites and moving between them.
118 The claims are, first, that the present pollution of the Spotless land is due to the dry cleaning and laundry operations of the Spotless Parties on the Spotless land. This claim, to the extent that it attributes responsibility for the release of the contaminants on the Spotless land, mirrors that claim by Premier. The second claim is predicated upon an allegation that the dry cleaning operations conducted on the Premier land in 1978-9 was conducted by Spotless and that their operations caused the release of PCE on that land.[133] Then, it is said that this chemical made its way onto the Spotless land thereby causing that land to be polluted.[134] The suggested mechanism for this migration is that the PCE was present in the perched aquifer towards the northern boundary of the Premier land and that, following a failure of the storm water drain which runs parallel and near to that boundary, escaping storm water caused the aquifer to be recharged and flow in an easterly direction to the Spotless land.[135] In this way, then, Spotless and Spotless Services caused or permitted the groundwater or the sediment on the Spotless land to become polluted so that statutory liability arose.
119 The defence of the Spotless Parties to these pleadings pre-dates the latest amendments. Nevertheless, it is not difficult to see from the Spotless Parties' pleadings that they join issue on the factual assertions and allege, further, that the statutory claims are not available against a company which is only said to have vicarious or derivative liability for the acts or omissions of a subsidiary company.
120 For some years prior to 1999, there were legislative and administrative provisions in place to ensure that suitable environmental standards were observed when land which had previously been used for a less sensitive use was to be used for a more sensitive use, in this case residential use.
121 Under the Moreland Planning Scheme which was in force at the time of Premier's purchase of the Premier land in November 1999, that land was zoned Extractive Industrial Zone. There is also evidence that it was then zoned Light Industrial, perhaps under a local section of the planning scheme but nothing turns on this for residential use was not permitted under either zoning. Historically, the Premier land had been used for a variety of industrial purposes including that of wholesale food storage and distribution from 1987 and, prior to that, since at least 1978 and 1979, by the Spotless Group for its dry cleaning and laundry operations.
122 The following account of the statutory regime is a summary of the evidence on the matters which are of particular relevance to this trial given by the expert planners. These were Lewis Maxwell Sayer, Phillip Paul Borelli and Stephen Sabbatucci who gave evidence as independent experts, and of the lay witnesses, Michael John Stafford Collie and Mr Keen who possess expertise in this field. There was, not surprisingly, little dispute between them as to these essentially background matters.
123 At the time of the purchase by Premier of the Premier land, Moreland Council had prepared a new planning scheme in conformity with the Victorian Government's Victorian Planning Provisions of 1996. When the new planning scheme was exhibited in late 1997, the Premier land was proposed to be retained within an Industrial 3 zone. As a result of urgings of local residents and the recommendations of the Independent Panel and Advisory Committee convened by the Minister for Planning,[136] Moreland Council, in October 1999, adopted its new planning scheme including the Premier land in a mixed use zone with an environmental audit overlay. There remained, then, the requirement that the Minister give his approval to the new planning scheme. This was done and the new Moreland Planning Scheme was gazetted on 4 May 2000. On that date the new zoning, including the overlay, came into force. A mixed use zone is primarily a residential zone but one where some industrial uses are permitted.
124 The Minister's Direction No 1, published on 14 May 1992, deals with amendments to a planning scheme which might affect the permitted use of potentially contaminated land. By s. 12.2(a) of the Planning and Environment Act 1987 a planning authority must have regard to such a direction in preparing its planning scheme. The effect of the direction, in a case such as the proposed zoning of the Premier land, was that Moreland Council was obliged to satisfy itself that the environmental conditions of the subject land are or would be suitable for the proposed residential use. It was required to achieve this objective either as part of the amendment process or at a later time, before the use or development commences. In either case it must be satisfied that a certificate of environmental audit or a statement of environmental audit has been obtained.
125 When the second course is adopted, that is, the certification process is deferred, this objective is achieved by imposing on the zoning of the land an environmental audit overlay. Pursuant to the overlay an obligation is imposed upon the landowner to satisfy the authority of the environmental suitability either "before the sensitive use [that is, the residential use] commences or before the construction or carrying out of buildings or works in association with the sensitive use commences".[137]
126 It is at this point that I turn to the statutory certificate of environmental audit about which so much was said at trial. The scheme of the Environment Protection Act, at least since 1989,[138] was that the actual work of certifying that a parcel of land was free of contamination was done, not so much by the EPA itself, but by appointed environmental auditors. These persons are suitably qualified environmental scientists whose function it is to carry out an independent evaluation of the land. In carrying out these functions, the auditor must comply with EPA Guidelines and is assisted by assessments and testings carried out at his or her direction as part of the audit process.
127 At the conclusion of the audit, the auditor must prepare and submit to the EPA an environmental audit report[139] and must issue either a certificate of environmental audit or a statement of environmental audit pursuant to s. 57AA.[140] In performing this function the auditor is directed by sub-s.(3) to have regard to:
(a) any guidelines issued by the Authority for the purposes of this section; and
(b) the beneficial uses that may be made of the relevant segment of the environment; and
(c) any relevant State environment protection policy or industrial waste management policy. [141]
By issuing a certificate the auditor certifies that the segment of the environment, the subject of audit, "is not or is not potentially detrimental to any beneficial use of that segment".[142] "Segment" is defined in that Act but it is not necessary that I consider this definition. Before me, the parties accepted, as do the EPA Guidelines, that in this case the segment of the environment was a piece of land and that this was, of course, the Premier land. The definition, however, includes a reference to beneficial use which is also a defined expression in s. 4:
"beneficial use" means a use of the environment or any element or segment of the environment which -
(a) is conducive to public benefit, welfare, safety, health or aesthetic enjoyment and which requires protection from the effects of waste discharges, emissions or deposits or of the emission of noise; or
(b) is declared in State environment protection policy to be a beneficial use;
The reference in part (b) of this definition and in sub-s. 57AA(3)(c) to a State Environment Protection Policy ("SEPP") gives rise to a complication, as I have been referred to two such SEPPs, the SEPP (groundwater)[143] and the SEPP (land).[144] It will be recalled that in this case it is said that the activities for which the Spotless Parties are responsible contaminated the soil in the Premier land and also the groundwater. Since the SEPPs are expressed in different terms it is necessary to identify precisely how the element or segment of the environment is affected by the contamination.
128 Groundwater is classified in SEPP (groundwater) by reference to its total dissolved solids ("TDS") expressed as mg/l. The provisional[145] view of the EPA is that the groundwater in this case should be generally classified "C" within the meaning of Table 2 of this SEPP, that is, it contained between 3,501 and 13,000 mg/l TDS. Dr Drew, Premier's environmental consultant, agreed but would be inclined to take the more conservative approach that the groundwater lay between classification A2 and C. Accepting, for present purposes, the EPA classification, the beneficial purposes of the groundwater on the Premier land are maintenance of eco-systems, stock watering, industrial water use, primary contact recreation (eg bathing, swimming) and buildings and structures.[146] These are the uses to which the certifying auditor must have regard. Given the small quantity and great stability of this groundwater, my impression is that it is difficult to see that these beneficial uses are jeopardised by the PCE and white spirit contamination here discovered or that they are likely to be jeopardised in the near future. But I was told by witnesses that any assessment must look far into the future.
129 The beneficial uses of the land are classified in SEPP (land) by reference to the use of the land.[147] The relevant use for the residential development contemplated by Premier is High Density Sensitive Use. The beneficial uses under this classification are highly modified eco-systems, human health, buildings and structures and aesthetics.[148] Of these, the most important for my present purposes is human health and, to a lesser extent, aesthetics, assuming this includes the smell which PCE and white spirit might emit.
130 In any event, these, as well as the more general matters listed in part (a) of the statutory definition of beneficial use[149], are the matters to which, by s. 57AA(3), an auditor must have regard in deciding to issue a certificate or statement.
131 I have made reference to a certificate of environmental audit. If, after the audit is complete, the auditor is of opinion that the condition of, in this case the land, is not or is not potentially detrimental to human health or any other beneficial use, it would seem[150] they must issue a certificate of environmental audit and forward a copy to the EPA.[151] For practical purposes this is an official statement that the land is relevantly free of contamination.
132 Where the auditor is not then of that opinion, they must refuse the issue of a certificate.[152] It would seem that, in such a case, the auditor must issue a statement of environmental audit. Such a statement must deal with two matters. The auditor must state that the condition of the land is or is potentially detrimental to any beneficial use and, where appropriate, that its condition is not or is not potentially detrimental to another particular use.[153] And so, a statement may be seen as a qualified official statement that the land is relevantly free of contamination.
133 Returning to the circumstances of this case, the imposition of the environmental audit overlay meant, in effect, that, before construction of the flats or before their use for residential purposes, an environmental auditor had to carry out an audit and issue a certificate that the Premier land was uncontaminated or a statement that any contamination was such as did not preclude the proposed residential use.[154]
134 The next statutory step in the process is the obtaining of a planning permit for the residential development. Pursuant to cl. 15.06 of the State Planning Policy Framework, the planning authority should, where the land in question has been used for industry, require the applicant "to provide adequate information on the potential for contamination to have adverse effects on the future land use". I am here concerned with an application for a planning permit affecting the Premier land not the Spotless land.
135 Moreland Council was entitled to, and did in fact, issue a planning permit for the proposed development subject to a number of conditions. These conditions concern such matters as the aesthetics of the building, its functionality, the amenity of its occupants and of neighbours, the parking of motor vehicles and bicycles, the payment of money to Moreland Council for it to carry out landscaping and to provide traffic management devices off site and for an open space contribution. One of the conditions also directed the applicant, Premier, to procure the issue of a certificate of environmental audit or a statement of environmental audit "prior to the commencement of any works, use or development, and prior to any certification or issue of a statement of compliance under the Subdivision Act 1988 for the use hereby permitted".[155] The planning permit expired if the development was not commenced within 12 months so that the applicant had that period to obtain the required certificate or statement.
136 The next relevant administrative step in the process is the issue of the building permit by a building surveyor pursuant to Part 3 of the Building Act. It was suggested that the surveyor issuing this permit ought to have inserted in the permit a condition similar to condition 28 in the planning permit.[156] I shall return to this contentious issue.[157]
137 After the apartments are completed it is necessary that the building surveyor issue an occupancy permit under Part 5 of the Building Act. Such a permit was required in the case of the apartments on the Premier land because the building permits so required them.[158] The issue of an occupancy permit is prohibited unless the building is suitable for occupation. No such permit was issued in the present case.
138 Finally, as part of the process of obtaining titles for the apartments under the Subdivision Act, the developer has to obtain from the planning authority a statement of compliance under s. 21. Such a statement is to the effect that all planning requirements have been satisfied. In the present case Moreland Council was asked to issue such a statement in late 2002. It was its requirement that Premier prove that it had complied with condition 28 of the planning permit which exposed the whole question of the non-issue of the certificate of environmental audit.
139 The chemicals in question in this litigation are described as white spirit and PCE. They might typically be found in one or more of three forms or phases: non-aqueous phase liquid (NAPL), aqueous phase and vapour phase. They do not, generally speaking, readily dissolve in water: they tend to remain in their NAPL phase. Where, and to the extent that, they dissolve in water they are said to be in their aqueous phase. Their vapour phase, as the name suggests, occurs when they form part of the air.
140 When a chemical in its NAPL phase becomes dissolved in water it will move with the groundwater of which it is now a part: this is called advection. As it advects, the chemical tends to disperse so that the plume of contaminated groundwater becomes more dilute. Other processes which may lead to a reduction in the concentration of a chemical component of a plume of groundwater include adsorption in the grains of the soil, volatilization and biodegradation. The chemical is said to volatilize or vaporise when, in the presence of air, it leaves the water in vapour form. Biodegradation, caused by microbial activity, breaks down the chemical itself. The consequence of this is that the concentration of the chemical tends to reduce as it is more remote from the source. A further consequence, which is of great importance in this case, is that, where concentration of the chemical in its aqueous phase is observed, this admits an inference as to the presence and location of the chemical in NAPL form, the concentration diminishing in the direction of the groundwater flow from the NAPL itself.
141 White spirit is a lighter than water oily liquid which does not mix freely with water. It is also called Stoddart Solvent or Varsol. It is less dense than water[159] and, for that reason, in its NAPL phase, is referred to as light non-aqueous phase liquid (LNAPL). It is essentially a petroleum hydrocarbon which contains a mixture of compounds including toluene, xylene, naphthalene and 1, 2, 4 trimethylbenzene. In the presence of groundwater these compounds will dissolve out of the LNAPL and into the groundwater in their aqueous phase. Furthermore, in the presence of air they have the potential to volatilize from both the LNAPL and groundwater into soil gas, giving rise to the vapour phase contamination. In each of these phases white spirit and its component compounds, if present in a concentration above a given level, are considered harmful to the environment and to health.
142 PCE is the abbreviation for the chemical tetrachloroethene which is also known as tetrachloroethylene or perchloroethene. It is relatively non-soluble in water[160] and is more dense than water.[161] It is therefore referred to as a dense non-aqueous phase liquid (DNAPL). In its aqueous phase, PCE will biodegrade to its daughter chemicals trichloroethylene (TCE), its granddaughters cis-1, 2-DCE and vinyl chloride, and to its more remote descendants ethane and ethene. Furthermore, in the presence of air, DNAPL vaporization might occur. PCE and, especially its derivative, vinyl chloride, are considered to be toxic and suspected carcinogens and are therefore of concern to environmental protection authorities.
143 In its NAPL phase, PCE is difficult to observe and extremely difficult to remove. Bernard Helmut Kueper, a professor in the Department of Civil Engineering at Queen's University in Kingston, Ontario, Canada, who has carried out research relating to the fate, transport and remediation of organic contaminants in soil and groundwater for the past 18 years was an important witness on this topic. He also acts as a consultant and the list of his refereed publications on this topic since 1988 occupies four pages. Professor Kueper, whose work on this topic was generally accepted by the environmental witnesses, spoke of the DNAPL migrating in the soil both vertically and laterally, depending upon available pathways. Residual DNAPL in the form of small disconnected blobs or ganglia is formed at the trailing end of the migrating DNAPL body. This residual DNAPL will remain both above and below the water table within the pores of the soil or bedrock. The process of dissolving this residual material where it is below the water table in a hydrogeological environment such as that on the Spotless land and the Premier land, is slow: it may require decades or even centuries. Where it is located above the water table and therefore exposed to air and infiltrating water, the degradation process may involve vaporisation as well as dissolution. Where the PCE is vaporised, it has the possibility of diffusing laterally and vertically in the soil beyond the area affected by the DNAPL itself.
144 In the present case, investigations have disclosed the presence of PCE as vapour and as residual DNAPL, but not as a pool comprising a large accumulation of the product. A pool of DNAPL has a limited capacity to move - only to about three times its own length - because, as it moves, it becomes dissipated into residual blobs. Moreover, its direction of movement depends upon the geological structure of the soil and not necessarily upon the flow of groundwater in the soil. These residual blobs of NAPL, however, tend not to move in the soil. The position may be otherwise for the chemical in its aqueous phase where the host groundwater might itself move and disperse the plumes of contaminant.
145 All of this makes it very difficult to draw inferences as to the location of the source of the contaminant. The presence of residual blobs of DNAPL may be seen as clues as to the trail which leads back to the source, but the contaminant in this form is rarely observed in monitoring wells and has not been observed on the subject sites. The observed presence of the contaminant in its aqueous phase in the groundwater, however, can permit an inference that the dissolved product has found its way into the groundwater somewhere up stream from the observation point.
146 This means that, when environmental scientists speak of an area as being contaminated by the presence of a DNAPL chemical, they are referring, in truth, to an area in which they infer the presence of the DNAPL from observations of the presence elsewhere of the chemical in its aqueous phase. As a rule of thumb, it was accepted by the environmental experts that the presence in a particular location of the chemical in its aqueous phase at a concentration in excess of 1% solubility is an indication of the presence of the chemical in its NAPL phase in the vicinity of that location, hydraulically upstream of that location.
147 But this, too, is but an indication of the source of the contamination. The DNAPL in question may have become dissolved at a particular location in the groundwater when it was in a pool or as a residual blob left by the migration of the pool. Moreover, the pattern of the migration of DNAPL is a matter of great uncertainty.
148 The experiments spoken of by Professor Kueper show that much depends upon the volume and manner of the discharge of the DNAPL into the soil. An important factor in its dispersal and migration is the orientation and nature of the bedding structures of the soil itself and the available pathways in the host material. In short, it is difficult to predict its migration pattern and, for the same reason, to identify the point of discharge of the chemical into the environment by following pathways back from an observed or inferred location of the DNAPL. The inevitable uncertainties, and even differences of opinion, that this inferential process involves are important in this case.
149 In terms of its toxicity, PCE is treated as an unacceptable contaminant in all phases. It is not possible to remove all DNAPL from the subsurface where it is known to be present. Indeed, Professor Kueper said that he is not aware of any site which had significant quantities of DNAPL below the water table which had been cleaned up to drinking water standards.
150 This part of my judgment is concerned with the ambit and source of the contaminants on the two sites. There was a large number of expert witnesses called as to these matters and, for the most part, there was little disagreement between them as to the principles of their disciplines. Likewise, there was agreement as to the investigations and testing which had been carried out on the sites and their surroundings and as to the results of these investigations and testing. There was, however, a serious disagreement as to the application of the facts to these principles and, as a consequence, as to the conclusions which I am required to consider.
151 The principal parties engaged firms of environmental engineers to assist them in preparing their cases and representatives of these firms gave evidence. In some cases, the firms had actually been involved in the site investigations and the various remediation proposals. The firms in question were:
152 Upon the topic presently under consideration, the principal ITE witness was Wayne Murray Drew, an environmental consultant chemist and chemical engineer specialising in the identification, characterisation, categorisation and remediation of land, groundwater or other bodies of contamination. Dr Drew is also an environmental auditor appointed under the Environment Protection Act. He was in fact engaged by Premier in February 2003 to carry out an environmental audit of the Premier land and performed the functions of auditor until he withdrew in September of that year. Thereafter, he acted as project director of the ITE team which was acting as consultant for Premier. He was the principal Premier witness from ITE on the disputed topics, although he was supported by other team members.
153 Dr Drew was assisted by the two ITE project managers who were responsible for the investigation and assessment work and were involved with satisfying the requirements of the EPA. These were Luke Anthony Cattlin who acted as such from October 2003 to August 2005, and Ivan Steven Devcic who took over Mr Cattlin's position after August 2005. Also involved was ITE hydrogeologist, Neville Edward Green.
154 The principal witness from URS was John Stephen Hancock. Mr Hancock is a senior principal and director of URS with qualifications in geology and hydrogeology. He, like Dr Drew, has been an appointed environmental auditor with extensive experience in identifying, assessing and remediating contamination of various sorts.
155 The witness from HLA was Patrick Charles Clarke, a geological engineer and an appointed environmental auditor with many years of experience in areas of contaminated site assessment contaminant hydrogeology and remediation.
156 Roger John Parker, a geotechnical and environmental engineer, is a principal of Golder Associates and an appointed environmental auditor. When McMullin Nominees withdrew from the trial Mr Parker was called as a witness by North Suburban.
157 Another witness in this area of expertise, called by Premier, was Professor Kueper, whom I have already mentioned. He was called as the first expert witness on this topic and his evidence, at least on the theoretical bases of his opinions, was generally accepted by those that followed.
158 The principal witnesses called by the main protagonists in this area of the trial were Dr Drew and Mr Hancock. Following my direction, they met in conclave on 10 November 2006 and produced a very helpful report setting out the points of agreement and disagreement. This document became Exhibit 49. They disagreed upon the subject-matter of this part of the judgment. With respect to the source of the contaminants, Dr Drew's position was that the likely source of the contaminants present on the Premier land was a discharge on the Spotless land; Mr Hancock was of opinion that the evidence did not warrant such a conclusion. He also said, as to the white spirit, that the source was likely to be somewhere to the east of the Spotless land.
159 Notwithstanding their qualifications, I approach the evidence of these two important witnesses with a good deal of caution. They were each subjected to criticism for want of independence and, in my opinion, the criticism was well-founded.
160 In the case of Mr Hancock, it emerged in the course of his evidence that he had been asked on behalf of the Spotless Parties to express an opinion with respect to the potential sources of the contamination on the Premier land, a topic upon which he offered his opinion as mentioned above. He had previously denied receiving such an instruction. The witness, nonetheless, had gathered information and he set out his opinions on this topic in a substantial volume of some 220 pages entitled Summary of Data and Observations. It emerged in cross-examination that his instructions to investigate the source of the contamination were withdrawn some time after March 2005 before his investigations were complete. He said that a relevant line of inquiry as to the source of the contaminants present on the Premier land included the activities involved in those chemicals on the Spotless land. He said that in 2005 he was asking about the dry cleaning and laundry operations which his client had conducted on the Spotless land but that he received insufficient information. In fact, the information he had as to his own clients' activities was less than he was able to obtain about the activities of others on adjacent sites and upon which he relied in reaching his conclusions as to the source of the contaminants. He told me that when he received no information in response to his requests he just stopped asking.
161 And then, in the middle of the same year, he had a meeting with Brian Stuart Blythe, a director of Spotless, who told him, when asked about the activities of the Spotless group on the Spotless land, that he was unable to assist Mr Hancock in this regard. Mr Blythe, a principal executive officer of Spotless from 1978 to 1995, had been a director of that company from 1978 and a director of Spotless Laundry from 1978 to 2001.
162 And when Mr Hancock enquired of Freehills, the solicitors for the Spotless Parties, as to the degree which he should be informed as to the nature of the Spotless dry cleaning operations, he was told that this was not relevant to his brief. Mr Hancock said that the withdrawal of his instructions to investigate the source of the contaminants would have occurred shortly thereafter.
163 This is, to my mind, a very surprising and somewhat disquieting piece of evidence. Mr Hancock disclosed none of this in his evidence-in-chief. Indeed, he then professed to the Court his opinions as to the likely source of the contaminants without qualification or reservation. For my present purposes, it leads me to conclude that Mr Hancock is a very compliant expert witness. A witness with a greater concern for their professional integrity would not have permitted themself to be dealt with in such a way.
164 I should add, too, that, although litigation is an adversarial exercise, the role of the expert witness is not that of an advocate. Such a witness is permitted to give opinion evidence to assist the Court in discharging its function. Like any witness, an expert witness is to tell the truth and the whole truth. The expert is, likewise expected to give an opinion which is genuinely held after making all due and proper enquiries and to disclose any qualifications to the opinion and any shortcomings to those enquiries. The Expert Witness Code of Conduct[162] and in particular paragraph 3(h), requires no less.
165 The attack on the independence of Dr Drew arose in a different and more complicated way. Dr Drew had in February 2003 been retained as environmental auditor of the Premier land. It was suggested that he terminated this retainer on 5 September 2003, not for the reason given, but in the expectation that it would be more profitable for ITE if he acted as an investigator or assessor than as an auditor. He rejected this suggestion, adding that, at the time of the termination of the audit he had no expectation whatsoever of any future involvement. As will appear, this was not true.
166 The witness said that the reason for his termination was that he was unable to complete the audit because he had, by 12 August 2003, formed the provisional view that the Premier land was not suitable for any beneficial use due to contamination and that he was unable to form a final opinion as to this or as to the practicability of its removal. He said this at the time and, further, that he was unable to complete the audit without substantially more information, much of which related to off-site areas.
167 Principal among those off-site areas was the Spotless land which was then owned and occupied by North Suburban. The evidence of David Geoffrey Phillip Knight, a director of North Suburban, was to the effect that access was never refused. The cogency of his evidence, however, is somewhat diminished by the fact that a court order was required to obtain access to the Spotless land in October 2003. Mr Knight dismissed this as "solicitors' overkill".
168 At a meeting held on 22 July 2003, Dr Drew is recorded as considering his termination of the audit in order for ITE to carry out the clean up. Dr Drew denied making such a statement. The fact that he did make a statement to this effect is recorded in the notes of the meeting prepared by the EPA's Venetia Stewart and by those taken by ITE's own Vanessa Bryant. Neither of these women was called to give evidence but the arrangements under which documents of this kind were tendered in evidence were such that I am able to treat the notes as proof of the fact that these matters were discussed.
169 I conclude that Dr Drew had in mind as early as July 2003 that ITE might terminate the audit and undertake the more lucrative work of assessor. I do not accept his denials of that fact or his denial of the allegation that he mentioned this at the meeting. I am mindful of the seriousness of this finding and do not make it lightly. The role of environmental auditor is a delicate one. They may be retained by the property owner who may have a commercial interest in the results of the audit. Nevertheless, the auditor must act with independence and this is acknowledged by the EPA Guidelines,[163] a fact which was brought to Dr Drew's attention on 8 August 2003 by Paul Moritz of the EPA.[164]
170 Quite frankly, I found Dr Drew's explanation for terminating the audit unconvincing. If it be the case that his work was impeded by a lack of cooperation on the part of North Suburban as owner of the Spotless land, there is abundant statutory power to overcome this obstacle.[165] His decision to terminate the incomplete audit, too, put his client to the added expense of having to engage a fresh auditor; it certainly did not advance the object of the audit which was to identify and remove the contamination. If, as appears to have been the case,[166] his decision to terminate attracted the support of his client, Premier, this ought not to have been a significant consideration. I put to one side for the moment the suggestion offered by counsel for the Spotless Parties that the termination was part of a tactic by Premier to maximise its recovery under s. 62A of the Environment Protection Act.
171 There is one further matter which I mention in passing as an indication of the lack of independence of Dr Drew. On 6 October 2005 there was held a technical workshop at the offices of the EPA at Southbank. By this time, this proceeding was on foot and the lines of battle had been drawn. It is apparent that, as solicitors for Premier, Baker & McKenzie were attempting to manoeuvre events to their client's advantage. It would seem that the concern of the EPA and the purpose of the workshop was to discuss a program for the collection of further data and to discuss clean up options. Baker & McKenzie had managed to exclude the Spotless Parties from this meeting. This is regrettable; the minutes confirm, that the meeting was intended to be a forum for constructive discussions of a technical nature. The minutes also record that the discussions were to be on a without prejudice basis.
172 When Dr Drew received the agenda and target outcomes from the EPA on 3 October 2005, he sent it on to Ms Moon of Baker & McKenzie with the following:
And on the morning of the meeting, the expert received lengthy instructions from the solicitor. I can accept that as a non-lawyer he might properly seek some direction as to his use of possibly confidential information, but these instructions dealt with matters which were more properly within his expertise.
173 This has caused me to examine with care whether this witness exhibited the independence which the Court expects from an expert witness. I have looked carefully at the many examples to which my attention was drawn, examples of this witness modifying his opinion, or more correctly, the reasons for his opinion, when the factual basis for this opinion was exposed as fragile. As with Mr Hancock, I approach the evidence of this witness with considerable caution, particularly where it is at variance with those witnesses who appear to be more independent.
174 It is convenient at this point that I say something about the two sites. They are both flat and generally rectangular, each with a frontage of about 34.5 m to Barkly Street extending to the north to a depth of about 92.5 m. For ease of reference I attach, as annexure 1 to these reasons, a sketch of the two lots showing on the Premier land the footprint of the apartment block. The area bounded by the broken line shows also the extent of the underground carpark. The sketch is overlaid with gridlines which I shall use to identify the location of various features to which I shall refer in this judgment.
175 The two sites have been the subject of extensive borehole investigation. In total, some 50 bores have been sunk on the Premier land for the purpose of sampling the groundwater and the soil and a like number on the Spotless land. The results of these and other samplings and investigations have been tabulated in a document which became Exhibit 20. The accuracy of the content of Exhibit 20 was accepted by all parties.
176 I now summarise what is known to the geology of the Premier land and the Spotless land which adjoins it. The topmost layer is of imported fill comprising a mixture of soils and other materials. The permeability of this layer is varied, reflecting the variable composition of the fill. This fill layer appears from the cross sections to extend to about one to two metres below ground level. On the Premier land most of the fill to the south of grid C3 to grid G3 has been removed to a depth of over 2 m, by excavation for the underground carpark.
177 Beneath this fill at about 4 m below ground level there is an unconsolidated layer of silty clay and clayey silt. Underlying this is the Silurian siltstone bedrock, sometimes referred to as Melbourne mudstone. This siltstone becomes harder with depth at about 6 m to 7 m below ground level. This harder substance is fractured and the surface level of this Silurian siltstone is variable. Of particular interest, for my purposes, is the presence of a depression in this layer in the form of a well close to the northeast corner of the Premier land at grid H3. At this point the surface of the siltstone drops by about 2 m to about 7 m below ground surface. There is a similar and perhaps lower depression at the northeast corner of the Spotless land at about grid N4.
178 The geologists have sought to plot the contours of the Silurian siltstone from the borehole investigations carried out on the two sites. There was only a very general agreement about these contours. It was, however, accepted that they were inferred from readings from the bores and that, given the occasional difficulties of reconciling the logs and the assumptions as to the underground conditions between them, there was considerable room for professional disagreement. And this proved to be the case. The pictures presented by David Lam, an engineer who was formerly state director of ITE and now a principal with Coffey Environments, by Mr Cattlin, by Mr Parker and by Mr Hancock are significantly different. As to this, I accept Mr Lam's interpretation as the true position. He explained how and why the contours shown in Mr Parker's report do not accurately depict the Silurian siltstone surface. Mr Parker pointed, too, to the fact that Mr Hancock deleted some bore readings which he had found difficult to interpret. The correct profile, as I find, is that the surface had a peak at AHD 40.5 in the middle of the north part of the Spotless land at about grids K5, K6 and K7, from which there was a relatively steep fall to the northeast and also to the northwest so that there was a ridge between these valleys running north north east from grid L7.
179 As to the hydrogeology, the experts were agreed that, at the northern part of the two sites, there were both a perched water table and a lower permanent water table. This lower table is situate at the level of the Silurian bedrock and is sometimes referred to as the Silurian water table or aquifer. According to ITE, the perched water table was to the north of a line, broadly speaking running between grid J7 and grid P6. URS, on the other hand, would have it extending further south to a line broadly speaking between grids I13 and N12. They were, however, agreed that it was about 1 m below the surface at its southern extremity and about 1 m lower than this at the northern boundary. This water table has been removed on that part of the Premier land where the building has been constructed, and no witness sought to fix its earlier position on this part of that land. The groundwater in this water table was said to move generally in a northwest direction from a point at about grid L7.
180 The permanent water table was located about six metres below ground level below the surface of the Silurian siltstone. Although the precise detail differed between the experts, I accept their evidence that the flow pattern was complex and would vary over the decades. They said that the level of this water table fell generally in a north westerly direction from a high point at grid K11. The groundwater here was estimated to move from this high point towards the northwest to about grid H8 and then in a northerly direction along the boundary between the two sites to a point about level with the northern boundary. From there it moves on towards the northeast.
181 The expert witnesses applied the rule of thumb to which I have referred[167] in order to determine the presence of PCE in NAPL phase on the two sites. The application of this rule means that the inference of the presence of the DNAPL is available where the sample of groundwater from a given borehole contains 2 mg/l of PCE or more, for TCE, 11 mg/l or more, for DCE, 35 mg/l or more and, as to vinyl chloride, about 5 mg/l or more.
182 A number of things should be noted about this rule of thumb. Although it has a very respectable provenance and was accepted by the expert witnesses, it is no more than a rule of thumb. The application of the rule does not mean that the DNAPL contamination is present or that the area of this contamination can be precisely determined. Professor Kueper's description of the elusive nature of DNAPL explains this and the variety of the bore hole groundwater readings demonstrates it. Moreover, given the fact that the chemical reading is that of its concentration in its aqueous phase, the inference is properly directed to the presence of NAPL upstream of the bore hole. Finally, Mr Parker appeared to accept that readings of even less than 1% solubility may be used to infer the existence of the aqueous chemical plume. I accept this to be the case.
183 Professor Kueper, whose evidence on these matters I accept, expressed the view that the presence of DNAPL in a location is not to be inferred only by reference to this rule of thumb. Rather, the inference is to be drawn from an examination of a number of lines of evidence of which the rule of thumb is but one. These other lines include the fact that the chemicals are known to have been used in a particular location. The assumption here must be that where chemicals are used or stored at a location, they may well be introduced into the ground at that location. Other lines of evidence which he mentioned are the inferences to be drawn from the pattern of concentrations of the chemical in the groundwater, from the concentrations of the chemical in the soil itself, from the variability of groundwater concentrations with depth at a particular location, from the observed presence of the chemical in its vapour phase and from the presence of the contaminants in hydrogeologically anomalous locations.
184 A further consideration which the professor mentioned in his witness statement and which he explained in his oral evidence, was the inference to be drawn from the fact that the plume is still attached to the source area. Where, some years after the likely discharge, there remains an aqueous plume of contaminant in the vicinity, this permits an inference that the DNAPL still exists, providing a continuing source for the dissolved contaminant.
185 I accept that the presence of DNAPL which is not observed may be inferred from all or some of these lines of evidence and that the inference requires that some regard be had to all of these matters where they exist.
186 A good deal of attention was directed to the readings of the concentrations of PCE in the groundwater. The readings of significance, in terms of the rule of thumb to which I have referred, were located towards the northern boundary of the two sites, that is, to the northeast and northwest of the Spotless land and to the northeast of the Premier land. The samples were taken from the perched aquifer and from the deeper permanent aquifer. The monitoring wells at which readings of significance of PCE and its derivatives, in terms of the rule of thumb, were recorded, in the three years since they were first reported after March 2003, are the following:
Of these wells, MW18 and MWITE5 showed by far the highest readings.
Of these wells, the highest reading was recorded in well MWITE6 at about 5.6 m below ground level.[178]
187 Given the known flow of the aquifers and the difficulties of identifying the presence of DNAPL, these readings, together with those which reported less significant readings, led Professor Kueper to plot areas of contamination. He concluded that, at the level of the perched aquifer, the area in which the presence of DNAPL should be inferred was that bordered by a line from grid G3 running east along the north boundary of the two sites to grid N3 and thence south to grid N5 and west to grid G4 and then back to grid G3. The witness concluded, too, that an area encompassing this, but extending east to the eastern boundary of the Spotless land and south to a line running from grids N7 to G6 should be considered the inferred area of the PCE contaminant plume in its aqueous phase. These are the areas marked on Figure F18 to his witness statement.
188 At the level of the permanent water table the area of inferred presence of DNAPL was that commencing at grid H3 and running in a south easterly direction to a point at or near grid K4, with a separate area in the vicinity of grid N4. The plume is inferred to extend over an area from vertical grid line D in the west at least to the eastern boundary of the Spotless land and as far south as horizontal grid line 7. This is shown in Professor Kueper's Figure 19.
189 These areas are not identical with those plotted by ITE and were somewhere greater than those plotted by URS, but I prefer the evidence of Professor Kueper on this matter. In my assessment, his expertise in this area of environmental science is greater than that of the other witnesses; he displayed a greater degree of independence; he explained in a more comprehensive and sophisticated way his conclusions and the process which led him to them; and his reasoning survived a searching and skilful cross examination. The evidence showed, too, that it is unlikely that the area of contaminant has changed over the past few years.
190 I conclude that the areas which Professor Kueper identified are the areas presently affected by the PCE contamination in its NAPL and aqueous phases and that the areas of particular concentration are at the north east corner of the Premier land and the north east corner of the Spotless land at the perched aquifer level and that the area of particular concern at the deeper permanent water table level is that running from grid L5 to grid G3.
191 White spirit in its non-aqueous phase is lighter and far less soluble in water than PCE. Being lighter than water it tends to float on top of the aquifer. Like PCE, this contaminant may be found as a pool or as a residue. The pooled NAPL will make its way into a monitoring well where the geology around the well permits this. As a residue, NAPL white spirit will not enter the well. The presence and volume of the NAPL is measured by recording its thickness floating on the water in the well. Professor Kueper pointed out that a reading of this thickness does not entitle one to conclude that there is an equivalent thickness of the LNAPL in the soil. Nevertheless, there is a relationship between the two. With respect to this contaminant, attention was focussed on its presence in the deeper Silurian aquifer. The logs recorded the thickness of white spirit in the samples of the groundwater from this aquifer. Again, it will be noticed that the readings vary from time to time and between wells which are located close together. A thickness reading of more than 1 m was considered significant by ITE and a reading of 0.01 m to 1 m to be a reportable reading. In some wells the LNAPL was visibly present but of insufficient thickness to measure. A thickness of less than 0.01 m would be reported as "sheen".
192 The logs showed a reading of 1 m or more in the permanent aquifer in the following wells: MW11 (grid H9), MWITE4 (grid K13), MWITE19 (grid I7) and MWITE51 (grid N12). In addition, MWITE18 (grid H11) showed a reading of nearly 1 m.
193 Readings of less quantity were returned in wells MW2 (grid H3), MW8 (grid E8), MW9 (grid E12), MW10 (grid H4), MW12 (grid G12), MW14 (grid H7), MW15 (grid H4), MWITE2 (grid L15), MWITE11 (grid K3), MWITE13 (grid I5), MWITE41 (grid K5) and MWITE42 (grid J7).
194 The evidence showed that this white spirit is now stable in the sense that migration has now ceased. It exists in pools at depths up to approximately 15 m below ground surface.
195 Professor Kueper plotted the extent of the inferred presence of this LNAPL in his Figure 17. He was of opinion that the area affected by the pooled LNAPL covered the whole of the Spotless land from the north boundary to a line running east west at about horizontal grid line 16. On the Premier land, the affected area ran from a north south line at vertical grid line F down to horizontal grid line 14. He said, too, that it is likely that residual LNAPL exists in the ground beyond this area. Different views as to this were presented by Mr Hancock of URS and by Mr Devcic of ITE. For reasons already expressed, I will prefer the conclusions of Professor Kueper, bearing in mind his observations as to the likely extent of the residual LNAPL and also bearing in mind the sheen observed in MW8 (grid E8).
196 Of particular significance were the very high readings of the LNAPL at MWITE51 (grid M12) at about 4 m depth below well casing and, to a lesser extent, at MWITE18 (grid I11) and MWITE19 (grid I9) both at about 6 m depth below well casing.
197 I find, therefore, that there is white spirit on both sites in its aqueous phase in the deepwater table and also in its NAPL phase. The area of contamination is that identified by Professor Kueper.
198 In this part of the judgment, I am concerned to identify the source of the chemicals which are now present in the two sites. There are two aspects of this enquiry which are relevant for my purposes. The first is to identify when and where the chemical was released into the ground. The second is to determine how and when the chemical made its way from the point of release to its present location. They are related aspects because the migration pattern was used both to fix a suggested point of release and to challenge that suggestion.
199 The first task is complicated both by the long interval of time which has elapsed from the time of the alleged releases in the 1960s and the 1970s and by the lack of direct evidence of this release. In the same way as the presence of the NAPL is seen by a process of inference, so, too, is any conclusion as to the point of release. The case of Premier, and to some extent that of North Suburban, was to invite the Court to conclude from a number of facts that the white spirit and the PCE were released on the Spotless land. The Spotless Parties did not offer an alternative release scenario; they contended that, seen in its totality, the evidence before the Court does not on the civil standard entitle such a conclusion to be reached. The facts relied upon by Premier are the following:
(1) Both white spirit and PCE were stored and used on the Spotless land.
(2) The evidence of the hydrogeologists, the geologists and the chemists shows that the Spotless land is the likely point of release.
I shall approach each of these facts in turn and then consider the approach offered by the Spotless Parties.
200 There is no evidence of the use of PCE on the Spotless land before the ALMI machine was introduced there in mid-1977. According to Brendon Paul Ryan, an electrician who assisted with the installation of the ALMI machine on the Spotless land and later on the Premier land, the installation on the Spotless land had to be completed before the end of the financial year 1977 and this was achieved.
201 The witness located the position of the machine on each of the sites. On the Spotless land he located it as being close to the west boundary and towards the north boundary. In terms of the gridlines, I fixed this location by reference to this evidence in the area covered by grids I6, J6, I7 and J7.
202 Mr Ryan also located the ALMI machine on the Premier land as being a little further to the north and close to the eastern boundary. Its location falls within grids F4, G4, F5 and G5.
203 He said that the machine was very substantial and that it was mounted on a concrete floor. He described the concrete upon which the machine stood on both sites as being sound but accepted the possibility that there may have been hairline cracking.
204 He said that the ALMI machine was used for cleaning rental garments. He described the use of PCE in this process. There was a quantity of the chemical in the work tank which was pumped to the operating machine for the purpose of the cleaning operation. When this was complete the garments were spun dry. The used PCE was pumped into a distillation process from which it was returned to the work tank for re-use in due course. The garments then moved into a drying cycle which was achieved by pumping hot air through the clean garments. The vapour from this which included a component of PCE passed from the dryer through a condenser which cooled the vapour. The condensation of the vapour produced a liquid comprising water and PCE which passed then to a water separator. This, as the name suggests, separates the PCE from the water. The PCE then passed to the tank for clean PCE. The waste water which still contained "small amounts of PCE" was "manually drained through a valve into a bucket or a container and then disposed of. Mr Ryan had no knowledge of how this waste water was disposed of.
205 The witness also spoke of a reserve tank of PCE which was used to retain a quantity of the chemical for topping up the work tank. He said that this tank and the work tank were made of stainless steel and held perhaps 1,000 gallons of PCE. He said that they were located at the rear of the machine. I understand this to mean that they were located, on each site, close to the machine and to the north of it.
206 The witness was asked by counsel on behalf of North Suburban about the mode of delivering PCE to the storage tanks. He said that he had never seen a delivery take place but surmised that it would have been in bulk and delivered from the alley between the buildings on the Spotless land and the Premier land. He did not discount the possibility that the deliveries took place on the Spotless land so that the product was either carried or pumped to the location of the reserve tank.
207 I have set out Mr Ryan's evidence in a little detail, not only because he spoke of matters which he observed and, not only because he impressed me as an honest witness who was doing the best he could to recall, fairly, events which he had seen decades before, but because his evidence was not challenged by cross-examination on behalf of the Spotless Parties. No evidence as to these matters was offered by the Spotless Parties.
208 It would seem from Mr Ryan's evidence and from that of Gary William Hartigan, a man of long experience in the dry-cleaning industry but who had not seen the Spotless ALMI machine, that the ALMI machine was designed to operate without releasing the chemical. Nevertheless, it produced by-products which included a component of PCE: the dirty liquid extracted after the work cycle which passed to the distillation process; the vapour from the distillation process and the solid residue from the still, which was described as "a black sludge"; and the waste water from the water separation process which was said to contain small quantities of PCE.
209 Mr Ryan said that the still residue and the waste water are today collected, treated and disposed of by a waste contractor. He said nothing of their disposal in 1978 and 1979.
210 It was put on behalf of the Spotless Parties that this evidence provides no basis for a conclusion that PCE, in fact, escaped from the ALMI process into the environment, and I was invited to look elsewhere for a source of the PCE contamination. Or, more correctly, they did not invite me to look elsewhere for they offered no alternative source; for their purposes it was sufficient that I conclude that I was unable to identify a source.
211 On behalf of Premier and North Suburban the escape of the PCE was explained in all or some of the following ways:
212 Interpreting the literature produced by Mr Hartigan and Robin John Ormerod, an air quality and meteorological consultant engaged by the Spotless Parties, observed that the consumption of PCE for a machine of the type used on the Spotless land was at the rate of 82 lbs per 1,000 lb of garments. This means that 20.5 lbs, or 9.3 kg, of PCE is consumed per 250 lb load. The EPA assessment undertaken in November 1977 concluded from this that the machine discharges PCE in its vapour at the rate of 22.73 kg/hr. Upon the basis that the carbon filter fitted to the exhaust system retrieved 95 per cent of this PCE, the quantity of PCE discharged into the air from the ALMI machine through a seven inch square vent (32.5mm square) at the rate of 1.14 kg per hour and 3.16 g/m3 at a temperature of 47 degrees.
213 The EPA inspection record of 8 December 1977 shows that the discharge was horizontal and it was through such a vent located about four metres above ground through the west wall of the factory on the Spotless land and a little south of the area of greatest concentration of PCE. The vent discharged into the alley or open space between this wall and the east wall of the building on the Premier land. The EPA note also records a strong PCE odour in the space between the buildings.
214 Mr Hartigan concluded that the PCE content of this vapour discharge would condense in that space between the two buildings and fall upon the ground at about grid H6. Notwithstanding that the machine operated two shifts per day the EPA assessment shows that the emission occurred for only 3.3 hours per week so that a total of 3.7 kg per week would be admitted into the atmosphere.
215 Mr Ormerod was called to respond to Mr Hartigan's conclusions. He approached this by analysing the EPA assessments in light of his expertise. It seems that he was provided with no material from the Spotless Parties as to the nature, quantity and quality of the vapour emissions from the ALMI machine. He worked, as I have said, only from the EPA assessments. Unlike Mr Hartigan, he professed no expertise in the actual use of or emission rates from dry-cleaning machines. His evidence was directed to an analysis of the EPA records only. He opined that, when the vapour containing PCE left the vent it would, in all probability, not condense into a visible form, nor would it then condense into heavier than air droplets and fall to the ground. Mr Ormerod's conclusion was that it would remain in a vapour state and dissipate in the atmosphere. It is not clear to me how this might be consistent with the reports of the strong odour in the vicinity of the vapour discharge.
216 Mr Ormerod's conclusions were not seriously challenged and I accept them as they stand. They are, of course, only as good as the assumptions he makes are valid. In particular, it was accepted by him that his conclusions depend upon the continuing efficient operation of the carbon filter but there was no evidence as to the operation of that filter or as to the quality of its maintenance. Notwithstanding some encouragement from counsel for Premier and North Suburban, based on the detected PCE odours, I do not find that the vapour emission from the ALMI machine was a source of the PCE pollution on either site.
217 There was no evidence offered as to the disposal of the accumulated sludge which was the residue of the distillation process. It was pointed out that this absence included evidence from any Spotless personnel who may be presumed to know how this residue was dealt with. A former Spotless employee, Leonard Arthur Retallick, was called as a witness by Premier. He said that he installed and maintained laundry and dry cleaning equipment at the Barkly plant from 1961 when it was first established until April 1978. He said that, in his time at Barkly Street, the white spirit sludge was put in a bin and taken to a tip or poured down the sewer. His observations were made over the period to 1978 when he performed maintenance and installation work at Barkly Street, but not when the ALMI machine was in operation. There is no evidence that the disposal practices which he observed over some 25 years were changed with the introduction of the new ALMI machine. If that practice was continued, it is likely that the disposal would have been achieved by putting the sludge into the effluent pits which are at about grid 05. This is very close to MWITE5 which is one of the two bore holes where the highest readings of PCE and its breakdown products were detected.[179] It is true that Mr Hancock said that the composition of this sludge, mixed as it was with carbonaceous material, would be such that PCE would not be released readily into water. But, again, the factual basis for this does not exist. There is no evidence of the composition of the sludge other than it contained PCE.
218 I will not dwell long upon waste water from the ALMI machine as a source. Nothing is known about its PCE concentration. Even if it were saturated with PCE and were discharged onto the soil, Professor Kueper said it would not be sufficient to explain the concentrations which have been measured. His opinion was that the discharge required would have to be of neat DNAPL. I do not accept therefore that waste water is a source of the present PCE pollution.
219 There was evidence that PCE was used in the laundry operations at the north of the Spotless land. A product used in this process was that called Solex and which might have had a 5% component of PCE. The evidence of Professor Kueper to which I have just referred puts paid to this explanation as a source of the PCE contamination and I do not accept this as a source.
220 As might be supposed, counsel for the Spotless Parties dismissed this as mere speculation. They said, correctly, that there is no evidence of any spillage or leakage of PCE. I make no finding of any such incident. I shall return to this.
221 There was a good deal of evidence offered to show how the PCE might have arrived at its present locations. It will be recalled that these principal locations for the DNAPL are in the perched aquifer in a swathe running along the north of the two sites from vertical gridline G to vertical gridline N, with a particular concentration at the western end. In the deeper aquifer the area is from grid L5 to grid G3 which is also close to the north boundary of the Spotless land.
223 The contention offered on behalf of the Spotless Parties was that, if the ALMI machine be considered as the likely culprit, the sub-surface conditions were against a conclusion that the chemicals migrated from the two locations of the machine to the area of greatest concentration of the DNAPL. In particular, it was said that the geology meant that the Silurian groundwater would not move towards the contaminated area to the north east corner of the Spotless land.
224 I am here concerned with the movement of the PCE in its NAPL phase. This, I accept will not necessarily move with the groundwater; it finds its own way. It moves in mysterious paths. It is apparent, however, that the area of greatest concentration of inferred DNAPL is to the north of the two sites, relatively close to where the ALMI machine was operated and where the PCE tanks were located and, where Mr Ryan surmised the delivery of PCE might have occurred. Moreover, for what it is worth, the Silurian bedrock and the deep groundwater both ran in the same direction to the point of greatest concentration where there is a depression in the bedrock which was described as a well.
225 In their cross-examination of Professor Kueper, counsel for the Spotless Parties put to the witness a series of soil vapour readings and a number of undisputed observations about the stormwater drain which runs along the north border of the two properties. Attention was directed to that part of the drain which runs between a west pit which is at the western boundary of the Premier land and pit B which is situated at about grid N2. Some 12m to the west of pit B is pit A which is located on the Spotless land at about grid K2 south of the boundary between the two properties to the north which front Weston Street. These two properties were referred to by the name of their occupants, KE Optical and Mamma Lucia's. This drain running between west pit and pit B was graded so that the fall was from both the east and the west towards pit A. From this point the drain and the flow ran in a northerly direction on Mamma Lucia's, parallel and close to the boundary of that property and EK Optical. This drain, when investigated recently, had a number of fractures so that storm water running in it might escape at about grid G2, H2 and grid L3. The drain was blocked a little west of the west pit and 14m north of pit A, on its way towards Weston Street.
226 It was suggested, on behalf of the Spotless Parties, that the PCE might have made its way into the drain, or perhaps into the disturbed fill surrounding the drain, and then escaped from this or been carried by recharged water escaping from the drain so that it ended up in the locations where it is now found. This, it was said, may have occurred over a long period of time or, more recently, when the excavation and construction was carried out on the Premier land in and after 2001. This was accepted as plausible by the experts subject only to identifying the source of the PCE entering into the drain or its surround in the first place. No source was ever identified.
227 In considering any or all of these hypotheses, I must bear in mind, too, Professor Kueper's observation that, in its NAPL phase, PCE has very limited mobility. If it is in a pool it may move, but even this will be a very short distance. In any event, there is no evidence of the existence of such a pool of PCE. I draw from this two related conclusions: first, that the source of the inferred PCE NAPL is close to its present location; second, a theory which presupposes extensive movement of the DNAPL should be rejected. If more extensive migration of PCE is supposed it must be migration of the PCE in its aqueous phase borne in and with the groundwater movement, if any.
228 It is at this point that I underline a point made most powerfully by counsel for Premier. It is apparent from the evidence of Mr Hancock that no effort has been spared to track down the source of the PCE and also of the white spirit which was outside the Spotless land. In his evidence Mr Hancock spoke of a number of possibilities; but they were no more than that. Nowhere did he identify a commercial or other operation which used the contaminants in the quantities sufficient to produce the known pollution on the two subject sites. No witness spoke of PCE in its NAPL phase travelling the distance required if the source were off-site. No hydrogeological or geological analysis points to a particular location from which the chemicals might have migrated to the subject sites. And so, counsel for Premier and, to a lesser extent, counsel for North Suburban, concluded that there is a known potential source to be found in the Spotless operations; there is no known alternative culprit. Why, then, should the Court not draw the obvious inference, that these operations were, on the balance of probabilities, the source of the contamination? And, further, they said, if the Court was taken by this argument only to the point of concluding that these facts could lead to such a conclusion, why should it not take the extra step when the Spotless Parties, which are the only parties who had knowledge of how these operations were conducted, chose not to lead evidence that the operation did not cause any escape of the chemicals?
229 This is perhaps a less subtle variation of what Professor Kueper called his "bottom up" approach to the identification of the source of a known pollutant. Describing himself as "a subsurface person" the witness said that his approach is to examine the soil readings which show the presence of the contaminant under the surface, note that this contaminant is known to have been used or stored in the vicinity on the surface and to conclude that the use or storage is likely to be the cause of the subsoil condition. He contrasted this scientist's approach to that which was put at the trial. This was to look at the storage and use above ground with a view to identifying how the contaminant might have escaped and made its way to the known subsurface locations. Counsel for the Spotless Parties submitted that the bottom up approach is not appropriate for the Court because it leads to a link between the subsurface condition and the above ground activity which is only a possible link. It was said that one cannot jump from a possibility to a probability.
230 Let me say immediately that, as a matter of logic, I see no difficulty in moving from the possible to the probable. This is, after all, the essential feature of the inferential process of reasoning. As the number of indicators of a possible relationship between A and B becomes greater and the number of indicators against the relationship including indicators pointing to other possible relationships between A and X or Y or Z, becomes lesser, so too a relationship between A and B may ripen from the possible to the probable.
231 It is fair to say that all the environmental experts, even Mr Hancock, approached the question of identifying the source in much the same way as Professor Kueper.
232 My conclusion from all of this is that the ALMI machine and the activities associated with it are the likely source of the PCE contamination which is now on the two sites. It is not possible for me, on the evidence, to determine whether this was due to spillage or leakage, to a malfunction of the machine or to dumping of PCE or to some other act of one of the persons operating the machine or delivering PCE to the machine. I find on the balance of probabilities that the source of the PCE contamination is the leakage or spillage from or from an activity associated with this machine. I find that this was the source when the machine was on each of the Spotless land and the Premier land.
233 Between 1961 and 1978 the Spotless organisation occupied the Spotless land and used it for its dry cleaning and laundry operations, as well as for its administration. It also occupied a number of surrounding properties. These are the properties known as 223 and 221 Barkly Street, which adjoin the Spotless land to the east, and numbers 19 and 19A Ewing Street. These last-mentioned properties abut the rear of number 221 Barkly Street to the east. It seems that these properties were integrated into the Spotless commercial operations. Mr Retallick, who visited the Barkly Street plant about every week during between 1961 to 1978 said that the Ewing Street property was used for the boilers and compressors and that 221 Barkly Street was used for the suede and leather cleaning operations.
234 Four other witnesses gave evidence of the dry cleaning operations which were carried out on the Spotless land during the period prior to 1977 when they ceased using white spirit. They are Martin William Murphy, the Spotless factory manager at Geelong between 1961 and 1964 and who visited the Barkly Street every Tuesday during this period; Robert John Hunter who worked there as a presser for 12 to 18 months from 1963 or thereabouts; George Clifford Garrett who worked as a manager in the laundry department from 1963 to 1968; and Andreana Balliro who also worked as a presser from 1970 to 1973. These four witnesses were, like Mr Retallick, called by Premier and, like him, their evidence was not challenged by cross-examination.
235 Mr Retallick said that white spirit was used in the dry cleaning operations which were conducted on the Spotless land in an area which he located at about grids J13, K13 and L13. He said that, in an area to the east of this, white spirit was stored in above ground and underground tanks which were connected by piping to the dry cleaning machines. He located one of the underground tanks at about grid M12. Mr Retallick said that he thought that this tank had a capacity of 1,000 gallons (4,500 l) and that it was used to store clean white spirit. This would appear to be the tank described as a 6000 gallon furnace oil tank and referred to as UST2 on the layout of the Spotless land. He said that there were also two above ground tanks for storing dirty white spirit. These, he thought, had a capacity of 300 to 500 gallons each and were located within the dry cleaning area. He spoke, too, of a larger underground tank of 10,000 gallon capacity which was used to store diesel fuel oil for the furnaces. This oil tank he located to the north of UST2 at about grid O8. This would appear to be the tank described as a 3000 gallon steel furnace oil tank and referred to as UST 11 on the Coffey layout of the Spotless land.
236 I consider Mr Retallick to be a reliable witness. Notwithstanding that he was speaking of events some 30 years past, his evidence was in many respects confirmed by contemporary records and by other evidence which I accept. I am not troubled in reaching this conclusion by the imperfections in his recollections of the capacity of some of the tanks.
237 There was produced in evidence documentation which showed that planning permission was sought and obtained in 1971 for the installation of UST2. The application shows that it was to have a capacity of 6000 gallons and that it was for the storage of furnace oil. This, together with the results of analysis of the content of this UST which was sampled in April 2004, encouraged counsel for the Spotless Parties to contend that this tank had not been shown to have been used for the storage of white spirit.
238 According to Mr Clarke the analysis of the sample from UST2 undertaken by HLA, showed that it was a mixture of white spirit and a heavier hydrocarbon which probably included fuel oil. This was much the same conclusion as that reached by Michael Xavier Wright, an environmental chemist and a director of MGT Environmental Consulting Pty Ltd, who was called on behalf of Premier. This witness was unable positively to identify the heavier hydrocarbon as fuel oil. He did, however, agree with the proposition that it was possible that the sample from UST2 was not a mixture of white spirit and some heavier hydrocarbon, but rather a sample of a single product which incorporates as a component white spirit or some product with a white spirit-like fingerprint. Mr Wright accepted this as a possibility, acknowledging that this was not a matter which he had been asked to consider. The matter is made a little complicated by the evidence of Mr Retallick that the furnace was in fact fuelled by diesel and that this fuel was stored during his time, not in UST2, but in UST11.
239 Faced with this possibility offered on behalf of the Spotless Parties and the evidence of the analysis of the content of UST2, I will act upon the evidence of Mr Retallick. I am concerned with probabilities. I am faced with the evidence of a reliable unchallenged witness. I bear in mind that no contradictory evidence was called by the Spotless Parties. No evidence was led from that quarter that none of their employees and managers during the period prior to 1997 is available or able to give evidence of what use was made of UST2. I find that UST2 was used during some or all of the period up to 1978 for the storage of white spirit which was used in the Spotless dry cleaning operations. The evidence showed that white spirit was not used for dry cleaning after mid-1977 so that this finding might be restricted to the period to that date. What use was made of UST2 thereafter is not known.
240 Mrs Balliro spoke of the chemicals used in the dry cleaning operations being delivered by truck. She referred to these chemicals as being "like rust remover, spotting solutions and ammonia", but the evidence from all sources is that the principal chemical was white spirit. Mr Retallick said that UST2 was topped up with white spirit roughly once a month.
241 Mr Retallick went on to describe the operations of the white spirit dry cleaning machines from the time the white spirit was pumped from the holding tank. At the end of the operation, the dirty white spirit was drained or pumped to the dirty white spirit tank from which it passed through a distillation process to clean it and it was then recycled to the dry cleaning process. The dry cleaning operation also left a sludge of dirty mud in the dry cleaning machine. This, he said, was dug out, usually on a Saturday morning, and it was "usually put in a bin and taken outside". The distillation process also produced a residue which was dealt with in the same way as the sludge. The witness said that it either went to the tip or was poured into the sewer.
242 Mr Retallick said that he was not aware of any occasion that UST2 leaked but that the position was otherwise with the piping: this leaked and required maintenance from time to time. On these occasions and when the pump was dismantled, white spirit would spill on the floor although, he said, they would usually put garments or overalls there to catch any spillage.
243 In the soil contamination assessment report prepared by Petrotest in February 1994, there is mention made of underground tanks on the Spotless land in these terms:
Council records also document the existence of three underground tanks holding 'white spirits', two for their storage holding 3,000 and 4,600 gallons (13,500l and 20,700l respectively)[182] and one for waste white spirits holding 1,000 gallons (4,500l). These tanks were reportedly installed in the seventies. The planned white spirit tank has apparently been replaced by a series of waste pits.
244 Much of what I have written in respect of PCE has application to my present task of identifying the source of the white spirit contamination which is now found on both sites.
245 There are, however, some special features of the task insofar as it concerns white spirit. I will simply list them for they have, for the most part, been discussed elsewhere:
246 Approaching the question from a bottom up perspective, as Professor Kueper favoured, all of the environmental scientists, even Mr Hancock, saw UST2 as a likely source of the present white spirit contamination. Dr Drew, however, expressed the chance of the white spirit source as being the tanks on the Spotless land as compared to a source somewhere to the east of the Spotless land, as 50:50. The difficulty with taking this matter further is that there is no identified usage of white spirit to the east.
247 Professor Kueper's interpretation of the data relating to the white spirit was that the likely source was leakage from the underground tanks or lines at a location where the downward flow of the white spirit was not interrupted by a watertable. It then descended to the bedrock and spread from there in different directions, including to the west. In this way it migrated to the Premier land and, generally, to those places on both sites where it is now to be found.
248 I accept Professor Kueper's analysis. I conclude on the balance of probabilities, that white spirit was released into the soil after 1971 from UST2 or from lines or connections associated with that tank. It is this spillage or leakage which is the source of the present contamination of white spirit on the two sites.
249 The events attending and following the purchase by Premier of the Premier land were, in some respects, uncertain but, generally, not in dispute. I now set out my findings in chronological order. It is convenient to consider these events by reference to a number of critical milestones.
• End February 2000 - the receipt of the Kilpatrick report
• August 2001 - the Stage 1 building permit; work commences
• September 2002 - the Stage 2 building permit; Moreland Council requires the certificate of environmental audit
• March 2003 - the Stage 3 Building Permit; the existence of the contaminants exposed.
250 The early history of the Premier land is of no particular interest other than to record that it was, in the early 20th century, used as part of the brickworks associated with the quarry to the west where Barkly Square and its car park are now located. From about the 1930's it was used for various warehousing commercial purposes. Investigations as to the history since that date show that it was owned by a succession of companies which held planning permits for its use as a warehouse. One of these companies, Nellor Investments Pty Ltd, which was owner between September 1964 and 27 October 1988, leased the land to an unidentified Spotless company for a term expiring on 30 August 1988 with a five year option. Babka, which also used the land as a foodstuff warehouse, became owner on 5 August 1997. It does not appear that any use, other than that by the Spotless company, might have involved the use of the contaminants.
251 I shall commence with some general observations regarding the principal witnesses for this part of the case. They are Richard John Evans, the Premier director who had prime responsibility for the project and Paul William Simmonds, his co-director, the estate agent, Nicos Artemis Joakim, the conveyancer, Anne Elizabeth Lane and the planner, Mr Keen. Other persons who played a role were not called, but I draw no adverse inference from this, as it was not demonstrated that they were in the camp of any party. The absent witnesses were the Macquarie Bank officer, Darren Ward and the Moreland Council planning officer, Lorraine Marie Dowsey.
252 Mr Evans gave evidence over six days. It was apparent that the whole experience of the Barkly Street project has had a devastating effect upon him and his family, financially and otherwise. At times during his lengthy cross-examination, he appeared mentally and physically exhausted. I have had regard to this in assessing his reliability as a witness. To my mind, his attitude was powerfully demonstrated in an outburst from him relatively early in his cross-examination. There he accepted that he was naïve in failing to appreciate that he had to have a certificate of environmental audit before the building work started and that he had sold for a pittance the protection afforded by special condition (4) of the Contract of Sale. He accepted that he was ultimately responsible for the disaster that lay with him and his company. But, he said, he had surrounded himself with a team of more experienced and technically minded people who also failed to see his mistake and who failed to warn him of the dangers which lay ahead. He mentioned some of these persons and it appears that there may have been others who, having an interest in Premier obtaining a certificate of environmental audit, knew or ought to have known that no certificate was ever obtained or, at least, had no reason to believe that it had been obtained before construction commenced. Mr Evans mentioned Macquarie Bank whose loan requirements included the provision of a statement that the Premier land was not contaminated; he mentioned his planning consultant, Mr Keen, and he mentioned the building surveyor, McKenzie Group.
253 My impression of Mr Evans, however, is that he is not as naïve as he made out. At the end of 1999, he had extensive experience in buying and selling real estate and some experience as a developer. The picture which emerges from the evidence is that of a man who is essentially an optimist; a man who presses on with a project so as to reap the profit which he is confident awaits him; a man who is concerned with the big picture rather than the detail; and a man who concentrates on the matter which commands his attention, but who brushes aside difficulties which do not require an immediate response. This meant that he acted in this development on his own relatively uninformed judgement that any contamination of the Premier land was minimal and in the hope that the problem would just disappear as the development proceeded. The Barkly Street project was the third project in which at that time he had had an involvement in which a requirement for an environmental audit had been imposed. From November 1999 to the date of the commencement of the development, his company was involved in five more such projects. Such experience as he had, however, was limited to sites where the contamination was by petrochemicals from underground storage tanks. If he was as ignorant or uncertain, as he claimed, of the implications of a requirement that he obtain a certificate of environmental audit, which I do not accept, he did not trouble himself to enquire further. And when, in 2002, his difficulties became acute, he was prepared to mislead Moreland Council, perhaps in the hope that its planners would take pity on him and relieve him of the now costly burden of obtaining the necessary environmental certificate. This attitude lead him in much of his evidence to seek refuge from the cross-examiners in asserted ignorance of facts and correspondence put to him, in reconstruction and in seeking to cast part of the responsibility for his misfortunes on others. In short, I approach his uncorroborated evidence with a good deal of caution.
254 His co-director, Mr Simmonds was, by background, a motor mechanic but he appeared to have a good grasp of financial matters. In 1997, some two years before the purchase of the Premier land he had been engaged in property development, first in a small way and, then, in more ambitious projects. The Barkly Street project was the largest to that date. He told me that he had had no previous experience with environmental problems, but this may not have been correct. He presented as a forthright and intelligent witness but had little involvement in the Barkly Street project.
255 I pass over Ms Lane, the conveyancer, and Mr Joakim, the estate agent. Their evidence was relatively uncontroversial. Each of them joined the legion of witnesses who should have known better - those who claimed to have had little or no expertise in or familiarity with the implications of a requirement that a site be the subject of an environmental audit.
256 The final principal witness in this part of the case was the planner, Mr Keen. He holds the degree of Bachelor of Applied Science (Town Planning) obtained from RMIT in 1984. He had worked as a planner with three municipal councils for some 10 years before joining Collie Planning as a project director in 1996. During his time with that organisation he did a good deal of work for Premier and appears to have become friendly with Mr Evans. When he left Collie Planning in June 2000 to start on his own, Mr Evans offered him rent-free accommodation in Premier's office. Although he was then in business as an independent consultant it seems that he had an easy, close and informal relationship with Mr Evans and Premier. Notwithstanding his extensive experience as a municipal and a private planner, Mr Keen professed a surprising ignorance of the environmental aspects of town planning and of the EPA audit requirements which had been introduced by legislation as long ago as 1989. He said that his familiarity with this was limited to a general understanding of what such an audit required. He said that, prior to the Barkly Street project, he had had no involvement in projects on land with an environmental audit overlay, a planning feature which had been introduced by legislation in late 1997. He appears to have shared the informal and optimistic attitudes of Mr Evans in environmental matters as they affected this project. He, too, was prepared to mislead Moreland Council in late 2002 with a false assertion that his client's failure to comply with the environmental requirements of the overlay and the planning permit was due to a mistaken belief that the Kilpatrick report of January 2000 was a certificate of environmental audit.
257 I should say at this point that the evidence at the trial, naturally enough, focussed on the environmental aspects of the planning and land development processes. These were not at the time, it seems, of significance to any of the parties, Moreland Council included, since there was not, until early 2003, any reason for them to suspect that these aspects involved anything more than dealing with localised contamination caused by leakage or spillage from the underground storage tank which was known to exist in the southern part of the Premier land. In the three years before early 2003, the only fact which, if known, might have given rise to a suspicion that there was a possibility of more serious contamination was the fact that dry cleaning and laundry operations had been conducted on the Spotless land and the Premier land in the decades prior to 1994. Prior to January 2003 an investigation of the history of the two sites which would have disclosed this fact was never undertaken. I put to one side, for the moment, the criticisms which were directed, particularly at Mr Keen, for not undertaking, or suggesting that there be undertaken, such an investigation. In my assessment of the conduct of the developers and their consultant, I am conscious of the need to avoid hindsight.
258 I turn now to the events attending and following the purchase by Premier of the Premier land.
259 In late 1999 Mr Joakim introduced Mr Evans to the Premier land, saying that it was then in the course of a rezoning process under Moreland Council Planning Scheme. At that time, the land was used as a warehouse by AK Foods and was zoned Industrial 3 (also referred to as Extractive Industrial Zone). Moreland Council was then considering amendments to its planning scheme and there was some pressure from residents in Barkly Street to change the zoning for the Premier land to a zone which might permit residential use. The council was sympathetic to this proposal and its planners were recommending that the zoning for this site be either Mixed Use or Business 3. In each case, they proposed an environmental audit overlay because there was a possibility that the prior industrial use might have caused some contamination.
260 Mr Evans made two visits to the site. On the first occasion he was accompanied by Mr Simmonds. The two men inspected the land without entering into the brick warehouse which occupied 85% to 90% of the land. They told me that they observed filling caps on the front apron of the property which led Mr Simmonds to infer the presence of an underground storage tank. From previous experience, the two developers understood that such a tank might well indicate contamination of the soil around it from leakage or spillage. This, they knew, would involve EPA requirements as to disposal of the contaminated soil and possibly as to remediation measures for the land which remained. Mr Simmonds also inferred that the roof was probably asbestos and that its removal would also involve dealing with harmful materials.
261 Mr Evans returned to the site early in November and inspected the interior of the warehouse.
262 Mr Evans discussed the property further with Mr Joakim and with a friend, Mr Ward who was an employee of Macquarie Bank. Mr Evans gave an account of his conversations with Mr Ward who was not called as a witness. He said Mr Ward suggested that, if the bank was to fund the purchase, the purchase contract should be expressed to be subject to rezoning and to an environmental audit. When Mr Evans enquired about this he was told by his friend that this was in case the "soil is contaminated and we have to spend a lot of money cleaning it."
263 On 9 November 1999, Mr Evans submitted to Mr Joakim a written offer to purchase the land for $2.4M. This offer is in brief terms and I set it out in full (omitting formal parts):
We refer to our discussions regarding the above site and our Offer is as follows:
Subject to: 1. Satisfactory exchange of Section 32 Statement
264 On 10 November Mr Evans was sailing on Port Phillip Bay with Mr Ward when he received a call from Mr Joakim. In short, Mr Evans said he was told that the vendor, Babka, had agreed to sell the Premier land for $2.5M, a price that Mr Evans was prepared to pay. Mr Evans discussed the matter further with Mr Ward who again emphasised that the contract should be expressed to be conditional and said that Macquarie Bank would provide the funds.
265 On that day, Mr Joakim wrote out a sale note at his office in the presence of Mr Simmonds. Mr Simmonds said he took the terms of the special conditions from Mr Evans by telephone and dictated them to Mr Joakim. According to Mr Evans, the terms were dictated by Mr Ward by telephone direct to Mr Joakim in his presence. Mr Joakim, for his part, said that Mr Evans asked that conditions be put in the contract. This conflict was said to be significant because Mr Evans maintained that he was unfamiliar with the expression "certificate of environmental audit" which appeared in the special condition as, indeed, it had in the written offer of 9 November 1999. If it is necessary to do so, I would prefer the version of Mr Simmonds. For reasons which I have set out, I assess Mr Evans as a person whose recollection of details unsupported by contemporaneous document is not good.
266 The sale note was executed by Mr Simmonds on behalf of Premier and by Kyriakos (Ken) Skoullos on behalf of Babka on the same day. The price was $2.5M payable by a deposit of $250,000 and the balance of the price on 10 November 2000. There are three special conditions which I set out in full:
(1) This contract note is subject to the said property herein being rezoned to allow the purchasers to redevelop the land for residential purposes.
(2) The vendor agrees to furnish the purchasers with a certificate of environmental audit at his cost within 30 days after the rezoning has been granted by the relevant authorities.
(3) The balance of deposit will be paid in the following. A further $105,000 within 45 days from date of acceptance by the vendor and the balance of $125,000 on the approval of the rezoning.
267 I pause at this significant point in the transaction. Both Mr Evans and Mr Simmonds had suspicions that the premises which they were buying were contaminated by material from the underground storage tank and by asbestos. They knew that a certificate of environmental audit would have to be obtained and understood that this would be a certification of the absence of contaminants on the site. They knew, too, that the responsibility for obtaining this certificate had been imposed by the contract of sale upon the vendor, Babka, which must bear the cost of this. The sale was also conditional upon rezoning. The date of the rezoning was important, for the vendor had to have the certificate of environmental audit within 30 days after that date and the purchaser had to pay the balance of the deposit within 45 days after that date.
268 Mr Evans thereupon retained to do the conveyancing work the conveyancing firm Management and Conveyancing Co Pty Ltd whose principal, Ms Lane, handled the matter.
269 On or about 24 November 1999 Mr Evans retained Collie as planning consultant and the file in that office was handled by Mr Keen with whom Mr Evans had had previous dealings. At the time of this engagement, Mr Evans told Mr Keen that the vendor had to provide "an environmental clearance for the site". Also, about this time, Mr Evans appointed Goodison & Associates as land surveyors and Caulfield Krivanek & Sugar Pty Ltd as architects.
270 In late December 1999 and January 2000, there were discussions regarding the execution of a formal contract of sale and regarding the terms of the special conditions to be inserted. Drafts were exchanged between Ms Lane and the solicitors for Babka and the Macquarie Bank. By the end of January 2000 a second version of the special conditions had been agreed, although they were not executed and incorporated into the contract of sale until 22 February 2000. The terms of this version were as follows:
(2) This contract is subject to the said property herein being re-zoned to allow the purchaser to redevelop the land for residential purposes. In the event the purchaser is not notified by the vendor or its solicitor by the 10th November 2000 that the re-zoning has been advertised in the Government Gazette then this contract shall be at an end at the option of the purchaser.
(3) The vendor shall be responsible for the costs incurred in obtaining the re-zoning application.
(4) The vendor at its own cost agrees to provide the purchaser with a Certificate of Environmental Audit prior to settlement or not later than 30 days from the date of approval of the re-zoning application by the relevant authorities whichever date is the earlier. The purchaser acknowledges that it shall be responsible for complying with any or all matters required by the Certificate of Environment Audit in order for the development of the property.
(6) The balance of deposit namely $230,000.00 shall be paid within seven (7) days of the vendor's solicitor notifying the purchaser's representative of the re-zoning application being advertised in the government gazette.
271 It will be seen that, under the new special condition (4), the vendor is still obliged to provide a certificate of environmental audit prior to settlement which is still to take place on 10 November 2000 (or earlier by agreement) or 30 days after the rezoning, whichever might first occur. The purchaser, however, now assumed responsibility for the cost of complying with matters required by the certificate of environmental audit. Mr Evans explained that, at this stage, he had no reason to think that the possible contamination was anything more than due to some leakage from the underground storage tank and the presence of asbestos. Each of these matters would be attended to as part of the development: the removal of asbestos in the course of demolition and the removal of any contaminated soil when the basement car park was excavated to a level of about 2.5 m below surface. Mr Evans' only concern with this was the likely cost of cartage and disposal of the contaminated soil, for this, as contaminated material, had to comply with EPA requirements. As will be seen, he knew little about the volume of the soil or its degree of contamination. Mr Evans and his co-director were unaware of the presence on the Premier land or the likely presence of the contaminants of interest in this litigation. They were unaware, too, of the fact that, for some decades up to 1994, a dry cleaning and laundry factory had been operating on the next door property, on the Spotless land.
272 Meantime, Babka, on or about 1 December 1999 retained Kilpatrick to carry out some environmental investigation of the Premier land. The field work for this was carried out on 10 December 1999 and the report is dated January 2000. This report is the subject matter of the Premier claims against Kilpatrick and I shall return to it in some detail later. What is surprising about this document, given the contractual obligations of Babka to provide a certificate of environmental audit, is that the work of Kilpatrick at this time was, on one view, not apparently directed to this objective. Nor was it given to Premier upon its receipt by Babka. This meant that, at the end of January 2000, when Premier and Babka agreed that Premier should assume the cost of remediation as required for the audit, Babka, but not Premier, had in its possession such information as the Kilpatrick report provided about the contaminants in the soil.
273 In February 2000 it appears to have occurred to Mr Evans that version 2 of special condition (4) was unachievable. A certificate of environmental audit cannot issue until remediation is complete and the site is relevantly free of contamination. Under special condition (4) this had to be done shortly after rezoning and well before settlement. This meant that the warehouse would have to be demolished and the land excavated by the vendor before settlement. This was not the wish of the parties and Premier wanted to control the timing of this work. If there were delays in starting the development, Premier preferred to retain the warehouse on the land as this might be used to produce rental income.
End February 2000 - The Receipt of the Kilpatrick Report
274 At some stage in February Mr Joakim received a copy of the Kilpatrick report. He was not sure of the date but said he passed it to Mr Evans within a day or two. Mr Evans confirmed that he received the report from Mr Joakim. He then gave it to Mr Simmonds' wife, Gillian Simmonds, who was working in the office, and sent a copy to each of Ms Lane, Mr Ward at Macquarie Bank, Mr Keen of Collie Planning and the builder. Mr Simmonds, too, saw it at this time. Mr Evans, however, is uncertain when he received the report. He said, variously, that it was in late January or early February, early February and late February. The correspondence relating to the report suggests that it was not in the hands of Mr Ward on 21 February 2000 and that, by 24 February it was with Ms Lane. I conclude that it was in late February, after 21 February, that the report was received by Mr Evans and immediately passed on to those whom he mentioned.
275 Mr Evans said that when he received it, he scanned certain parts only of the Kilpatrick report. These parts were the executive summary, the introduction and the conclusions. Mr Simmonds, likewise, read parts only of the report. They both passed over the technical information and paid no heed to the detail or qualifications which accompanied the conclusions. They saw only what they expected and wanted to see - that the contamination of the soil was low level, which they read as minor, and that it was found only in certain areas where boreholes had been sunk. This confirmed their observation made at the time of purchase that contamination was not likely to be a problem on this project. Their only concern was with the cost of disposal of the low level contaminated soil.
276 At the time that Premier received the Kilpatrick report the contractual obligation of Babka was to obtain a certificate of environmental audit. Despite some evidence from him to the contrary, I find, too, that when Mr Evans received the Kilpatrick report he understood, correctly in my view, that it was not a certificate of environmental audit. At best it was a step in the direction of obtaining such a certificate.
277 About this time, special condition (4) was revisited. Ms Lane adopted a new and third version proposed on 28 February by Mr Ward and this was agreed to by Babka on 17 March. It is in these terms:
The Vendor has at its own cost and expenses provided to the Purchaser a Soil Contamination Assessment dated January, 2000, prepared by Kilpatrick & Associates, Reference No. V7850. The Vendor agrees that all future Consultants required to obtain a Certificate of Environmental Audit for the proposed Residential development of the property will be commissioned by the Vendor at its own cost and expense.
The Vendor will agree to provide and assign its interests in all reports and certificates to the Purchaser.
The Purchaser acknowledges that it shall be responsible for complying with all physical works required by the Environmental Auditor in order to obtain a Certificate of Environmental Audit at its own cost and expense.
278 It was accepted by Premier, Kilpatrick and Collie Planning, as the only parties interested, that under this version of special condition (4), the obligation to obtain a certificate of environmental audit still lay with Babka. What had changed was the financial burden of obtaining the issue of this certificate. I am content to proceed on this basis without expressing any view as to this construction of the special condition. Babka's financial obligation was now only to pay for the further consultants who may be required for the obtaining of the certificate. The other burdens and costs with respect to obtaining the certificate now passed to Premier. Premier's acceptance of this change is hardly surprising, given its belief that contamination was not likely to be a problem and, further, given its concern to control the timing of the demolition and excavation. The state of ignorance of Premier as to the true nature and extent of the contamination which is now known, remained unchanged.
279 On 4 May 2000 the Premier land was rezoned Mixed Business with an environmental overlay. Following the rezoning of the land, Mr Joakim contacted Mr Evans to ask that the deposit be released so that he could be paid his commission. Mr Joakim explained that since rezoning had occurred and the Kilpatrick report had identified only low-level contamination there was no reason why Premier should not release the deposit. Mr Evans then contacted Ms Lane who informed him that the deposit could not be released until Babka had fulfilled its obligations under special condition (4). By this time, special condition (4) offered little by way of protection to Premier and Mr Evans agreed to waive it in exchange for $5000, being the estimated cost of engaging future environmental consultants.
280 Meantime, on 18 May 2000, Premier appointed Mr Joakim as the exclusive agent for the sale of apartments to be constructed on the Premier land. Soon after this, Mr Joakim informed Mr Evans that he may have a purchaser, Lifestyle Brunswick Pty Ltd, willing to pay between $3 and $3.5 million for the re-zoned property. This offer which provided the prospect of a quick profit of about $1M was attractive to him. And so, on 26 May 2000, when Lifestyle Brunswick made a formal offer to purchase the property for $3.4 million Mr Evans instructed Ms Lane to prepare a contract of sale.
281 In early June 2000, Mr Keen decided to leave Collie Planning and to start his own planning business. Mr Evans offered Mr Keen assistance for this by way of rent-free office space in Premier's offices in Beach Road Sandringham. On 30 June 2000, Collie's retainer was terminated. On the same day Mr Keen resigned from Collie and shortly thereafter established his own company, Keen Planning, operating out of Premier's offices and immediately continued work on the Barkly St project on Premier's behalf.
282 This is a significant date because it marks the end of the period when the conduct of Collie Planning is under attack by Premier and the beginning of the involvement of Keen Planning. It is, however, a rather blurred milestone because the work which is the subject of complaint was at all times carried out by Mr Keen. All that happened from his point of view was that he changed his livery.
283 Also at this time, on 20 June 2000, Mr Evans and Mr Simmonds signed a contract for the sale of the Premier land by Premier to Lifestyle Brunswick. Special condition (10) of this contract of sale made the purchase subject to a town planning permit for the construction of no less than 50 dwellings and 81 car spaces. On the same day, the agent received from Lifestyle Brunswick a cheque for $50,000, being the preliminary deposit for the purchase of the land.
284 Two days later, on 28 June, Premier informed Babka that it agreed to waive special condition (4) in exchange for the return of $5000 from their deposit. This meant that all future costs related to obtaining a certificate of environmental audit would now be borne by Premier. At this time it would have been understood by Premier that the burden of these costs would pass to Lifestyle Brunswick upon settlement of the purchase.
285 On 3 July 2000, the Lifestyle Brunswick cheque for the preliminary deposit was returned by the bank due to insufficient funds. Notwithstanding this, on 7 July, Premier's deposit was released and Babka paid or allowed Premier $5000 in consideration for the waiver of special condition (4). On 21 July, Premier terminated the contract of sale to Lifestyle Brunswick and authorised another agent to sell the Premier Land for $3.4 million.
286 During this time, on 13 July 2000, Keen Planning lodged a planning permit application with Moreland Council for the construction of 50 apartment dwellings. The documentation lodged in support of the application made no reference to the requirements of the environmental audit overlay. Ms Dowsey telephoned Mr Keen on 25 July 2000 saying that the council required a certificate of environmental audit as soon as possible, preferably prior to or with any development application. Mr Keen told Ms Dowsey that the steps necessary to obtain environmental clearance would be attended after demolition and excavation. Mr Keen told me that he discussed this request with Mr Evans who said he would obtain "an audit statement". Mr Evans, for his part, denied this conversation. I prefer the evidence of Mr Keen on this point. What is very surprising however, is that each of the two men told me that they had at the time a very rudimentary understanding of what was involved. The planner said that he was not fully aware of the requirements necessary to obtain an environmental clearance other than it involved testing the soil and cleaning it of contaminants before construction commenced. He was, however, still comforted by the statement made by Mr Evans at the time of his first involvement, that the vendor was to provide this clearance for the site and his confidence in the ability of Mr Evans to achieve this. He had not been told of the modifications made to this aspect of the Babka contract of sale. He was satisfied, too, that the procedures necessary for the obtaining of this environmental clearance would be attended to after the warehouse on the Premier land was demolished and the excavated soil removed.
287 Mr Keen telephoned Ms Dowsey on 1 August and told her that his client had "a soil report indicating low levels of contamination" and she asked that a copy be provided. At that time Mr Keen was aware of the general import of the Kilpatrick report but he had not seen it. Somehow he obtained a copy and on 4 August 2000 he delivered it to the council officer. Moreland Council appeared to accept that this satisfied its requirement for the production of a certificate of environmental audit, at least, for the moment.
288 The processes toward the grant of the planning permit proceeded over the next few months. There were objections received from local residents and meetings with them were held. Mr Keen on behalf of Premier took an active part in these processes. The council documents produced at this time showed that, among the many matters which had to be done, council included a requirement that there be obtained, before residential use commenced, a certificate of environmental audit. Mr Keen was aware of this before the council meeting of 18 December at which the permit was finally agreed to but he took no particular notice of it because of his confidence that this matter would be attended to after demolition and excavation of the site and because this was not a matter which was likely to be contentious at the meeting. Mr Evans and Mr Keen attended the council meeting at which the decision to grant the planning permit was made. The minute of the council resolution includes among many conditions only a shorthand reference "Environmental Audit En1".
289 On 21 December, Moreland Council issued a notice of decision to grant a planning permit for the construction of 49 apartments on the Premier land. This document which was issued to Keen Planning on 28 December contained a significant omission. Moreland Council had decided to attach a number of conditions to the permit. Among these was condition 28 apparently relating to environmental audit which was, in the notice, incomplete. It read simply :
school (sensitive use) commences or before the construction or carrying out of buildings or works in association with a sensitive use commences, the owner must provide to the responsible authority: ...
290 Mr Keen appears not to have noticed the defect in the notice. He passed a copy to Mr Evans who said he read it but just skipped over condition 28 as it meant nothing to him. In January and in the months following, the attention of Mr Keen was focussed on the appeal to VCAT brought by an objector resident. This was settled on 19 April 2001 with an agreement to modify the conditions of the permit in a manner which is not here relevant.
291 Meantime, on 15 January 2001, Ms Dowsey had written to Keen Planning to inform it of an amendment to condition 28 of the planning permit. The new condition was to read as follows:
(a) A certificate of environmental audit must be issued for the land in accordance with Section 57AA of the Environment Protection Act 1970, or
(b) An environmental auditor appointed under the Environment Protection Act 1970 must make a statement in accordance with Section 57AA(5)(b) of that Act that the environmental conditions of the land use is suitable for the sensitive (residential) use.
(c) Three copies of the certificate of environmental audit and or statement, complete audit report and audit area plan must be submitted to the Responsible Authority.
(d) The use and development, buildings and works allowed by this permit must strictly comply with the directions and conditions of the Environment Protection Act 1970 Section 57AA certificate or statement of environmental audit issued for the land.[183]
(e) A section 173 Agreement under the Planning and Environment Act 1987 may need to be entered into with the Responsible Authority depending on the conditions of the Statement of Environmental Audit. Any amendments to the development plans must be approved by the Responsible Authority prior to the commencement of any works, use and development and may require further environmental assessment of the land.
(f) Prior to the use of the land permitted by this permit, issue of a certificate of occupancy under the Building Act 1993 and certification/issue of a statement of compliance under the Subdivision Act 1988 a letter must be submitted to Council prepared by an Environmental Auditor appointed by the Environment Protection Authority under the Environment Protection Act 1970 to verify that the conditions of the statement of environmental audit issued for the land have been satisfied.
(g) A copy of the certificate or statement of environmental audit issued for the land must be provided to each owner, under a covering letter which draws attention to any conditions or directions on the certificate or statement of environmental audit.
(h) Any handling or disposal of site soil must be in accordance with the requirements of the Environmental Protection Authority and the Environment Protection Act 1970.
(i) The land owner and all its successors in title or transferees must, upon release for land sale of each of the lots, created by the subdivision, include in the Vendor's Statement pursuant to Section 32 of the Sale of Land Act 1962, annexed to the contract of sale for the sale of land, a copy of the Planning Permit and Certificate or Statement of environmental audit for the land.
292 Mr Keen claims to have personally handed Mr Evans a copy of this letter and briefly described its contents to him. Mr Evans said he had no recollection of ever seeing the letter. At this time Mr Keen was working out of Premier's premises and an easy relationship existed between the two men. Mr Evans, when pressed with Mr Keen's recollection, frankly accepted that an explanation for the conflict might be that the letter was given to him, but that he did not recollect this. Mr Simmonds, too, said that he did not see the Moreland Council notice of decision; he saw only the permit which later issued in April. He did not see the January letter. Faced with this conflict, I prefer the evidence of Mr Keen. I have expressed my reservations about the general reliability of Mr Evans' recollections. This is a case where he saw the letter of 15 January as being of no immediate consequence. He received it but did not consider that it required his immediate attention. It therefore did not register in his recollection.
293 On 24 April 2001, Moreland Council issued the formal planning permit, but, notwithstanding its letter of 15 January, it was in the erroneous December 2000 form. Condition 28 remained incomplete. Mr Evans received a copy of this planning permit from Mr Keen and read the conditions, including the incomplete condition 28. He told me that he was aware that condition 28 was incomplete and that he did not understand it. He was, nevertheless, not concerned as he thought it did not apply to the development.
294 For reasons which are not relevant to this case, the Babka contract was not settled until 23 April 2001, the necessary funds being provided by the National Australia Bank. Possession was given to Premier at the end of June 2001.
295 Work on the project proceeded. A building contract had been signed on 28 March 2001 and McKenzie Group was retained by the builder as building surveyor. At this time, too, the units were being sold off the plan. The schedule of sales produced by Ms Lane shows that most of the units were sold in the early months of 2001.
296 Meanwhile the incomplete permit apparently went unnoticed by Moreland Council until 28 May, when the Moreland Council officers and Keen Planning were alerted to the erroneous condition 28 by the planners for the objector. About this time the drawings for the construction were being revised to include the council planning requirements and Mr Keen was aware that condition 28 would require amendment so that it accorded with the Council letter of 15 January. He brought this to the attention of Mr Evans who told him that he need not follow this up.
297 On 3 August 2001, Moreland Council issued to Keen Planning an amended planning permit reflecting certain construction changes which had been introduced as a result of the appeal and including corrections to condition 28 in terms of the 15 January letter. Mr Evans claims he was unaware of the existence of the amended planning permit until November 2002.
298 Condition 28 of this planning permit is in these terms:
A. (1) A Certificate of Environmental Audit for the land must be issued in accordance with Section 53Y of the Environment Protection Act 1970; or,
b (2) An Environmental Auditor appointed under Section 53S of the Environment Protection (Liveable Neighbourhoods) Act 2001 must make a Statement in accordance with Section 53Z of that Act that the environmental conditions of the land are suitable for the use and development that are the subject of this permit.
Note: Where a Statement of Environmental Audit issued for the land contains conditions that the Responsible Authority considers to be unreasonable in the circumstances, the Responsible Authority may seek cancellation or amendment of the permit in accordance with section 87 of the Planning and Environment Act 1987.
299 The circumstances of the issue of this planning permit were that Mr Keen had it collected from the council offices by courier together with the endorsed drawings. His account of this in his witness statement is vivid. The documents arrived at the Premier office with the permit wrapped around the drawings. He gave them to Mr Evans. Mr Evans, who was eager to receive the drawings had them copied. Both Mr Evans and Mr Simmonds said they did not see the permit. Some doubt as to these denials was raised by the production of a "with compliments" slip from Keen Planning to Mr Evans and Mr Simmonds which apparently accompanied the permit. Mr Evans said that he did not remember seeing this document but accepted that it was discovered by Premier. The conditions of the permit other than condition 28 had been the subject of some negotiation with the council officers and the amended permit also contained a number of design changes dealing with those matters. At this stage of the project these design matters were the matters which required Mr Evans' attention. I accept the evidence of Mr Keen.
300 On 3 July 2001, Australian Building Permits issued a permit for the demolition of the warehouse on the Premier Land. Sometime in July or August 2001, A R Dalton carried out demolition works and removed asbestos from the site.
301 On 17 August, McKenzie Group issued a stage 1 building permit for the bulk excavation of the site and the underground carpark. At this stage. Mr Evans claims that he was unaware of the requirement that a certificate of environmental audit be issued prior to the commencement of any construction. Both Mr Evans and Mr Simmonds insist that had they known that a certificate of environmental audit was required prior to construction they would have ensured such a certificate was obtained.
302 By the end of August 2001 funding for the development was being obtained from Colonial First State. It appointed RJ Vaughan & Associates as its quantity surveyor to verify the claims for payment which would be made against the facility. In September the builder lodged its first claim. Upon investigation, the quantity surveyor drew attention to the requirement that there be issued a certificate of environmental audit or a statement of environmental audit before the commencement of construction. On 19 September the mortgage broker passed this information to Mr Simmonds with a request that he advise if either of these documents had been issued and seeking a copy of them. Mr Simmonds referred this enquiry to Mr Evans who told him that the excavation was complete, the UST had been removed and the soil taken away from site. Having received this information Mr Simmonds' response to the broker by fax dated 20 September 2001 is significant:
The Environmental Audit and Site Conditions are referring to a low level contamination that has now been addressed by Tony Goss of [the builder]. This entailed the removal of soil from the site and inspection of this and compliance with the Auditor and the issuing of a Certificate of Compliance by the Environmental Auditor.
Tony Goss is currently in receipt of this certificate and will forward to your office in the next couple of working days.
303 The builder provided a copy of a further letter from Kilpatrick dated 14 September 2001 which spoke of an inspection, which took place on 13 and 14 September, of the exposed soil. It is clear from this letter that attention was primarily directed to the area to the south of the site where the UST had been. Nevertheless, Kilpatrick reported in its letter of the condition of the soil over the whole site. It included, based on the report of January 2000 and the recent site inspections, that "the remaining soils across this site would be classed as fill material". I shall return to consider the accuracy of this conclusion. For present purposes this documentation together with a certificate attesting the removal of the UST appeared to satisfy the quantity surveyor's query and, ultimately, the finance providers. The payments to the builder were authorised so that construction work proceeded.
304 The excavation works were completed on or about 19 September 2001 and the UST was removed from the Premier land the following day and destroyed in compliance with EPA guidelines. The construction of the basement carpark including the ground level slab was completed by mid-February 2002.
305 On 12 April 2002, Premier was issued with a stage 2 building permit allowing for the commencement of structural works. On 26 July 2002, Tanya Pearson of the builder wrote to Mr Keen to advise that Moreland Council would require a certificate of environmental audit prior to the issue of an occupancy permit. Mr Keen says that he showed the letter to Mr Evans who replied to the effect that he had overlooked the need to obtain the certificate. Mr Evans denied this. Mr Keen said that he was instructed by Mr Evans to see what was required. On 29 July he spoke with David Raymond of Kilpatrick and received advice as to what might be involved and the likely cost. This advice included a recommendation that Jonathan Crockett of GHD Pty Ltd would be an appropriate auditor: Mr Crockett had acted as environmental auditor on another project for Premier at Oxford Street Collingwood. This was reported to Mr Evans who said that he would take this matter up with Mr Crockett.
306 On the same day, 29 July 2002, Mr Keen wrote to the builder a letter which included the following response to the Moreland Council request for a certificate of environmental audit:
We have spoken to David Raymond of Kilpatrick and Associates Pty Ltd who are providing further advice on requirements to obtain an Environmental Audit. Preliminary advice is that further investigations/soil tests will be required.
307 Mr Evans flatly denied that he saw the builder's letter or had any of the conversations described by Mr Keen. In cross-examination, he appeared far less confident. He agreed that Mr Keen was then having discussions with the builder but he thought that this was about changes to the building design. In this contest, I prefer the evidence of Mr Keen, supported as it is by his contemporaneous notes. I conclude that, at least in July 2002, Mr Evans was aware that Premier was obliged to obtain a certificate of environmental audit and further that he did not yet have such a certificate. He was then aware of the need to retain an environmental auditor. That he took no steps to do so, I attribute to his general attitude of addressing only those matters whose urgency demanded his immediate attention.
308 At around this time, on 24 July 2002, North Suburban, as part of the process of an evaluation of the Spotless land engaged Kilpatrick to provide an environmental assessment of this land. Subsequently, on 23 September 2002, North Suburban submitted an application for a planning permit for the construction of a mixed use building comprising offices and dwellings. The draft planning permit dated 7 November 2002, prepared by Moreland Council, which is in evidence, is expressed to be subject to a certificate of environmental audit.
309 By September 2002 all 49 apartments on the Premier land had been sold. As at October 2002 the completion of the apartments was programmed to occur by 28 March 2003.
310 On 18 November 2002, Moreland Council wrote to Mr Keen, yet again seeking the production of a certificate of environmental audit. The letter explained that failure to produce the certificate within 14 days would result in the matter being referred to the Urban Planning Investigations Officer to commence enforcement proceedings pursuant to the Planning and Environment Act.
311 This letter is of considerable significance, not only because it brought the question to a head, but also for the light it sheds upon the attitude of the two Premier witnesses. I will, therefore, deal with it and its aftermath in a little detail. The first observation is that notwithstanding all that had gone before, no step had been taken by Premier to obtain the required certificate. Mr Keen took the council letter to Mr Evans saying that he thought that Mr Evans was contacting an environmental auditor. His account of Mr Evans' response is as follows:
I cannot remember Evans' exact response but I believe that he said he was unable to contact the auditor and he had then forgotten. I recall that Evans appeared exhausted and he mumbled something like this was another problem that he would have to fix.
Mr Evans in his evidence challenged part of Mr Keen's account of this meeting, but not the passage I have quoted.
312 Mr Simmonds said that he spoke with Mr Keen on this date about the council letter and that he, Simmonds, replied:
We have got the report. All you need now is the various certificates to come together (or words to that effect). I do not recall any other details of this investigation.
Mr Keen denied any such conversation with Mr Simmonds.
313 Mr Keen then set about finding and engaging an auditor and he drafted the letter in response to Moreland Council demand. Its contents were discussed with Mr Evans before it was sent. The letter which is dated 12 December contains the following statement with respect to condition 28 of the planning certificate:
Our client was under the misapprehension that this condition had been fulfilled due to reports obtained from Kilpatrick and Associates Pty Ltd and works completed during construction in accordance with this report.
314 Mr Keen says that it is a false explanation and that he knew this, but that he sent it to help Premier out of its difficulties. Mr Simmonds in his witness statement says, rather cautiously, that he believed that the Kilpatrick report could form the basis of a certificate of environmental audit and that no one told him that it was not such a certificate.
315 Mr Evans in his witness statement says that, upon reading the Kilpatrick report in February 2000, he realised that it was not a certificate of environmental audit. He says, too, rather inconsistently, that the Keen Planning letter to Moreland Council is accurate.
316 I conclude from all of this that the state of mind of Mr Evans and Mr Simmonds at that time was that each of them knew that no certificate of environmental audit had issued and that the Kilpatrick report was not such a certificate. They believed, however, that, after excavation of the soil, the site was free of contamination so that the issue of the certificate was little more than a formality. It should be added that this was, in the circumstances then existing, not an unreasonable assumption. I return now to the narrative.
317 In late November, Mr Keen organised for Dr Fouad Abo of GHD Pty Ltd to be appointed as auditor of the property. On 5 December, Dr Abo submitted a proposal for further testing on the Premier land, but Mr Evans was immediately resistant to this. He was not concerned with the possibility of contamination on the site but rather with the delay, inconvenience and cost which further testing would cause to the project at such a late stage in the development. Despite his reservations, Mr Evans formalised Dr Abo's appointment as auditor on 9 December 2002. His appointment was, however, short-lived as Mr Evans grew increasingly uncomfortable with the extent of testing required by Dr Abo and the consequent cost. On 19 February 2003, Dr Drew of ITE was appointed as the new auditor of the site. Dr Abo's appointment was terminated the following day.
318 On 12 March 2003, McKenzie Group issued a stage 3 building permit, the final permit required for the completion of the project. During this time, ITE carried out testing of the Premier land. On 17 March, Dr Drew wrote to Mr Moritz of the EPA alerting him of a "potential imminent environmental hazard." In that letter, Dr Drew indicated that the groundwater of the Premier land was contaminated with PCE. The following day, on 18 March 2003, Kilpatrick sent a letter to Mr Evans informing him of the presence of serious contamination.
319 By this time, the construction and fit out of the apartments was near completion. According to the quantity surveyor, Mr Vaughan, the superstructure of the building was 99% complete on 26 March 2003. Work entirely ceased some time between his inspection of 7 July 2003 and 15 August 2003.
320 The investigations carried out on the Premier land thereafter revealed progressively the seriousness of the contamination and the prospect that considerable and costly remediation work would be required. The EPA became involved and issued clean up notices on 18 November 2003, 27 February 2004 and 10 March 2006. Meanwhile, Premier, the EPA and, to some extent the Spotless parties, became embroiled in discussions as to what remediation was appropriate. The end result of it all is that some four years have passed and no remediation has been achieved.
321 In August 2003, the purchasers of the units were advised by Ms Lane that the land was contaminated and that the environmental auditor was not expected to issue a certificate of environmental audit in the foreseeable future. Over the next 12 months all of the purchasers elected to avoid their contracts. The project had effectively collapsed.
322 One final development should be recorded at this stage. In December 2006, in the course of the trial, Premier put the Premier land to sale by tender on an "as is" basis so that remediation would become the responsibility of the purchaser. I was told that the property was sold and that the sale price achieved was $5M plus GST and that the purchaser was Taylors Two Two Seven Pty Ltd, a Spotless subsidiary.
323 This part concerns the position taken by the Spotless Parties that, even if the pollution of which Premier and North Suburban complain was caused by the dry cleaning and laundry activities conducted between 1975 and 1982 on the Spotless land, they were, nonetheless, not liable. This is because none of the Spotless Parties conducted these operations; the operations were conducted by Spotless Laundry, or Spotless Services, both of which companies have been wound up and deregistered. It should be emphasised at the outset that it was not suggested that the deregistrations were achieved in order to avoid liability for their conduct now complained of and I do not so find; the deregistrations were part of a reorganisation of the Spotless corporate structure undertaken, presumably for good commercial reasons.
324 In essence, what the Spotless Parties, and in particular, Spotless, say is that while it was content as holding company to enjoy the fruits of the commercial operations conducted by these subsidiaries at its direction, it should not have to bear the adverse consequences of these commercial operations because it, as holding company, decided for its own purposes to restructure the operations and cause the two subsidiaries to be deregistered. Let me say immediately that this is a surprising position for a well known and respectable commercial enterprise and a listed public company to take. It is one that reflects no credit on the commercial morality of those whose decision it was that this position be adopted. I have been moved to make this observation lest my silence be understood as an indication that I, as a judge of this Court and the Principal Judge in the Commercial and Equity Division, should be seen as compliant, approving or even complicit in this decision. That said, I emphasise that this is not a court of morals. This case, like any other, will be decided according to law.
325 In their pleadings, Premier and North Suburban allege and the Spotless Parties admit that in the following periods the business of laundry and dry cleaning was conducted on the Spotless land by the following companies within the Spotless Group.
326 It is then said one or other of the companies within the Spotless Group who owned and controlled these operating companies is liable on a vicarious or derivative basis for the operations carried on by the operating companies.
327 Of these operating companies Spotless Laundry and Spotless Supply are deregistered and not parties to these proceedings. Ensign Aust is still in existence and is a party to the proceedings. Premier and North Suburban seek, therefore, to attach liability for their common law and statutory claims upon the holding companies, Spotless and Spotless Services. They seek to achieve this in one of three ways: that the operating company performed the functions in question as agent for the holding company; that the acts of the operating company were performed as part of a common enterprise with the holding company; and, with respect to the s. 62A claim, that the holding company itself caused the pollution. This last way, which does not involve fixing the holding company with vicarious or derivative responsibility for the acts of the operating company, is dealt with elsewhere in this judgment.[187] In this part of the judgment I am concerned with the first and second ways in which the contention was advanced.
328 The two ways in which Premier and North Suburban seek to attach liability to the holding companies for the wrongful acts of the operators: by an application of the principle pertaining to principal and agent and by that pertaining to persons engaged in the common enterprise are, as a matter of legal analysis, very different.
329 The first accepts that the corporate actor has a separate existence from its holding company but says that there exists between them an agreement whereby the actor is acting as agent for the holding company or that the law will impute such a relationship.[188] In such an event, the independent existence of the two companies remains intact, just as it does between two natural persons who enter into such a relationship.
330 The second treats the two parties as joint venturers so that each is responsible for the acts of the other performed in the course of the venture. Again, this does not involve an attack upon their separate corporate identity but it does allege that, from a commercial point of view, their identities are interrelated. Again, the analogy with two natural persons who are partners or joint venturers is instructive.
331 This is no mere quibble because the common use of the image of lifting the corporate veil in each case suggests that what is proposed is more revolutionary than it is in fact.
332 The questions which I am now to address were raised in circumstances where the companies in question were, in the strict sense of the word, companies within a group corporate structure. There is here present the required common or interlocking shareholdings and a unified capacity in the holding company to control the operators.[189] Furthermore, it is necessary to underline that the questions arise in circumstances where a third party seeks to recover compensation from the holding company for wrongful acts performed by its corporate subsidiary actor. I mention this because it may be that the exercise which I am to undertake may differ depending upon the circumstances in which the question arises.[190] The cases to which I was referred covered a number of these circumstances: questions as to compensation payable to a holding company for the acquisition of a subsidiary's assets, in insolvency law, in taxation law and claims against a holding company for acts of its subsidiary committed in breach of contract or in breach of tortious or other duties. It may be also relevant to know whether the relationship between the companies is that of members of a corporate group and the nature of their relationship within that group. This is because the courts have been, naturally enough, ready to look behind the corporate structure where this structure has been established merely to avoid liability of the non-actor, to interpose a straw company between a claimant and a wrongdoer, where the corporate structure is a mere sham or where it has been established in circumstances where the public has been misled as to what legal person they were dealing with. I should again emphasis that, in this case, it was not suggested that the corporate structure of the Spotless Group was brought into existence for any of those reasons.
333 There is, of course, in these proceedings, no express appointment by the holding company of the operator as its agent. Agency, therefore, must be inferred if it is to exist. The basis for such an inference in a case such as the present will usually be evidence that the operator carried on its business for and in accordance with the direction of the holding company rather than for itself. The difficulty which immediately arises is that, to a greater or lesser extent, this is a feature of the relationship of every holding company and its subsidiary. Profits of the subsidiary will often pass by way of dividend to the parent and the possession of voting power at shareholder and director level is an inevitable consequence of the relationship of a company and a wholly owned subsidiary. It is well-established that the directors of the subsidiary must, even so, exercise their powers in the interests of the subsidiary, not in the interests of the parent, [191] but it may be that the interests of the subsidiary, like those of a natural person are bound by an agency agreement to those of the principal.
334 A decision which is cited as a high point of the agency cases is Smith, Stone & Knight Ltd v Birmingham City,[192] a case much relied upon by counsel for Premier and North Suburban. The matter arose from an application to set aside an award upon a preliminary question determined by an arbitrator. The arbitration concerned the compensation payable by the city for the acquisition of land owned by Smith Stone and held by Birmingham Waste as its tenant on a yearly tenancy. Birmingham Waste was effectively a wholly owned subsidiary of Smith Stone and was said in the Smith Stone claim to carry on business as a separate department and agent for Smith Stone. As a yearly tenant, Birmingham Waste, however, could not seek compensation. The question was whether, as a matter of law, the parent company could claim compensation for disturbance to the business carried on at the acquired premises. The arbitrator's award answered this in the negative. Under the procedures then available to challenge an arbitrator's award, Smith Stone applied to set aside the award on the ground of technical misconduct.
335 Notwithstanding the procedural limitations which may have arisen, Atkinson J appears to have undertaken an examination of the question whether, on the facts found by the arbitrator and after rejecting certain conclusions of fact which were unsupported by evidence, Smith Stone was in fact the real owner of the business and was therefore entitled to compensation for its disturbance.
336 The case is, however, of interest for my purposes because his Lordship set out six questions which are often referred to as being relevant to determine, as a question of fact, whether the subsidiary was carrying on its parent's business or its own. These are:
(1) Were profits of the subsidiary treated as the profits of the parent company?
(2) Were the persons conducting the business appointed by the parent company?
(3) Was the parent company the head and brain of the trading venture?
(4) Did the parent company govern the adventure, decide what should be done and what capital should be embarked on the venture?
(5) Did the parent company make the profits by its skill and direction?
(6) Was the parent company in effectual and constant control?[193]
Indeed, if ever one company can be said to be the agent or employee, or tool or simulacrum of another, I think the Waste company was in this case a legal entity, because that is all it was. There was nothing to prevent the claimants at any moment saying: "We will carry on this business in our own name". They had but to paint out the waste company's name on the premises, change their business paper and form, and the thing would have been done. I am satisfied that the business belonged to the claimants; they were, in my view, the real occupiers of the premises. If either physically or technically the Waste company was in occupation, it was for the purposes of the service it was rendering to the claimants, such occupation was necessary for that service, and I think that those facts would make that occupation in law the occupation of the claimants.[194]
This case has been applied or referred to without disapproval in Australia in Griffiths Hughes Pty Ltd v FCT; [195] Hotel Terrigal Pty Ltd (in liq) v Latec Investments Ltd (No. 2);[196] Wanless v Brisbane City Council;[197] Spreag v Paeson Pty Ltd;[198] Linfa Pty Ltd v Citibank Ltd;[199]and Century Medical Inc v THLD Ltd.[200]
338 It must be acknowledged, however, that the decision in Smith Stone appears to rest upon an analysis of the relationship between the company and its members similar to that adopted by Vaughan Williams J at first instance in the leading case of Salomon v Salomon and Co Ltd[203] which was abandoned in that case before the Court of Appeal and rejected in the House of Lords.[204] It may be that these compensation cases are not helpful as a guide to the resolution of the issue which I am required to address.[205] In any event, subsequent cases suggest that the value of the Smith Stone case as a general precedent is doubtful.[206] The context in which the question here arises is that of a claim in tort brought against the holding company where it is said that the acting party was the subsidiary.
339 As a starting point, it is clear that the mere fact that the holding company is the sole shareholder in the subsidiary does not warrant a finding of agency.[207] Nor is there any presumption in favour of such a finding.[208] Such a relationship may suggest that the holding company is in a position to exercise control over the activities of its subsidiaries, but, even so, the fact of control will not alone suffice.[209]
340 In Tate v Freecorns Pty Ltd[210], Burt J declined to infer a contract of agency from the mere fact that the company whose tort caused the injury to the plaintiff was a wholly owned subsidiary of the defendant. This decision was upheld on appeal[211], with Hale J observing that "although sociologically it might be desirable for parent companies to be responsible for the acts of and defaults of wholly owned (or effectively owned) subsidiary companies, the authorities preclude its existence".[212] In Briggs v James Hardie and Co Pty Ltd, [213] Rogers AJA expressed the same view and reached the same conclusion, namely, that the application of the principle of corporate identity, particularly in cases where, within a corporate group, a company is a wholly owned subsidiary of another, flies in the face of corporate reality as a general principle but that it represents the law. One must look further. But, accepting that the application of a principal and agent relationship between the two in certain circumstances is possible and has been found to exist in certain authorities, it is not possible to derive from the decided cases any clear line as to when that principle can apply.[214] To the same effect may be the conclusion of the full Federal Court in Dennis Wilcox Pty Ltd v Federal Commissioner of Taxation,[215] a tax case where Jenkinson J, speaking with the concurrence of the other members of the Court said this:
Neither the circumstance that a company is completely subject to the ownership and the direction of another person, nor the circumstance that that other person exercised a directorial control of the activities of the company in ways which minimise the manifestations of the company's separate legal identity will justify, in my opinion, a conclusion that acts in the law formally done by the company are to be regarded, for the purposes of the kind here in question in relation to Australian income tax law, as acts in the law done by that other person.[216]
341 As a judge at first instance, I see in these observations the path that I must follow. In order to discover the existence of a principal and agent relationship between the holding company and the operator in this case I must first establish whether there is a parent and wholly owned subsidiary company relationship between them, the extent of the power of the holding company to exercise control and its exercise of such control, and any further indication that the subsidiary has so abandoned its independent commercial existence that I might conclude that it has no independent commercial existence; it is but the tool of the parent and labouring for the benefit only of the parent. If this were to be the case, it might be said that agency has been found to exist.
342 It is not altogether clear what this expression means in the pleadings and in the submissions of Premier and North Suburban. In the DHN Food case,[217] Lord Denning MR spoke of the members of a corporate group as if they were partners.[218] In Pioneer Concrete Services Ltd v Yelnah Pty Ltd,[219] Young J adopted the same partnership image.
343 Bluecorp Pty Ltd (in liquidation) v ANZ Executors & Trustee Co Ltd[220] was a claim by a liquidator as to the ownership of a vessel arising from the Qintex collapse. Part of the confusion as to the title to the vessel was caused by the fact that there were a number of interlocking companies pursuing common or parallel objectives and, with, to a large extent, the same directing agencies driving and controlling them. The expression "common enterprise" which was used in the judgment was, however, not used by the Court to pierce or put aside the corporate veil in that case, but rather to explain the relative informality of the inter-company dealings.
344 Perhaps an associated concept is that which was used in this area of law in the United States - the single business enterprise analysis. This prescribes that "when corporations are not operated as separate entities but rather integrate their resources to achieve a common business purpose, each constitute corporation may be held liable for debts incurred in pursuit of the business purpose".[221] A feature of this analysis, and perhaps of those to which I have referred under this heading of joint enterprise, is that focus is placed not so much on the dealings of the constituent companies with third parties but on the relationship between them and their contribution to the common commercial objective.
345 Another feature which distinguishes this analysis from that of principal and agent is that the latter analysis focuses on two companies, usually a holding company and a subsidiary, so that the finding, when it is made, is that the holding company is acting as principal and the subsidiary as agent with respect to a transaction or group of transactions and the principal is responsible for its agent's acts. Where a group enterprise is identified, all members of the group are treated as partners or co-venturers irrespective of their place in the shareholding hierarchy and their responsibility extends to all acts and omissions done in the course of the enterprise.[222]
[Counsel] suggested beguilingly that it would be technical for us to distinguish between parent and subsidiary company in this context; economically, he said, they were one. But we are concerned not with economics but with law. The distinction between the two is, in law, fundamental and cannot here be bridged.
This passage was quoted with approval in Adams v Cape Industries Plc.[225]
347 In short, I conclude that, even if I were to find the existence of a common enterprise between the holding companies and the operating company it is not open to me, as a matter of law, to ignore their individual corporate existence as counsel for Premier and North Suburban would have me do.
348 Such evidence as there is of the activities of the Spotless Group in the 15 years after 1963 is to be found mainly in the annual reports. It appears from the brief company history in the 1971 report that the business was established in 1946 as the business of what was called in the language of the day, "apparel cleaning". Over the next 15 years it expanded into associated activities such as laundry, garment and shoe repairs and linen and uniform rental. In 1961 Spotless became a public company.
349 The 1963 report shows that the group then comprised Spotless and 22 subsidiary companies. In 1969 the group took its first step in diversification into the food industry when it acquired two Kentucky Fried Chicken franchises. In 1970 this continued with the opening of five Red Barn outlets. In 1972 the group moved into hot bread retailing and into an altogether new field of plastic injection moulding. At the same time, it was reducing its dry cleaning outlets and developing the business of rental and supply of garments and linen. In 1973 the Red Barn and hot bread businesses were discontinued.
350 In 1975, when the white spirit nuisance is said in the pleadings to have commenced, the business was described in the annual report as being conducted in four divisions: dry cleaning, which then represented only 44% of operating profit and declining; plastics 20.3%; industrial work wear and linen rental 22.6% and increasing; and Kentucky Fried Chicken 13.1%. The rental division would also have involved cleaning the garments and linen after use. This trend away from retail dry cleaning continued. In 1976 the contribution of the dry cleaning division dropped to 26.1% of operating profit. In the 1976 report, too, the nature of Spotless Laundry which had previously been shown as laundry, became administration. That of Spotless Supply is there shown as linen and garment rental, as it had in earlier years. In the annual report for the following year, 1977, the activity of Spotless Supply is unchanged but that of Spotless Laundry is shown as premises leasing.
351 By 1978 the report shows that the Spotless Group had ceased to engage in retail dry cleaning. In this year, too, the report speaks of the acquisition by Spotless Laundry of a major shareholding in Ensign Holdings Ltd, which changed its name in 1986 to Spotless Services and the sale of the shares held by Spotless in Spotless Supply to Spotless Services. The acquisition of this majority holding in Spotless Services took place on 10 November 1977. It appears that Spotless Supply continued its operations in linen and garment hire thereafter as a wholly owned subsidiary of Spotless Services.
352 The 1981 report records that in that year, Spotless Laundry acquired the balance of the shares in Spotless Services. In the reports prior to this, the majority shareholding of Spotless Laundry in Spotless Services is shown as being beneficially held by Spotless.
353 This brief history is of interest for my purposes for it shows how the Spotless Group diversified its activities during the period of the alleged pollution. It also confirms the analysis of the accountant Michael J Smith, a director of Horwath Corporate Advisory (Vic) Pty Ltd, in his written statement as to the change in corporate structure.
354 This is the period in which Spotless Laundry as operator carried on the business of laundry and dry cleaning on the Spotless land. The evidence showed that period should be taken as ending in June 1976, rather than 1978 as appears in the pleadings.
355 During this period, Spotless Laundry conducted its commercial activities as a wholly owned subsidiary of Spotless. In the whole of this period Spotless Laundry had four directors, Alan Bruce McMullin, Ian Godfrey McMullin, Ernest Wolfgang Barr and Graham Ronald Downing, all of whom, except Mr Barr, were then directors of Spotless. Moreover, as holders of all of the shares in Spotless Laundry, Spotless was in a position to appoint and remove directors of its subsidiary. In these circumstances, Spotless was in the position to control and direct the activities of Spotless Laundry. The question is, to what extent it did so.
356 Let me say, at the outset, that I see as having no significance that there appears in the annual reports for Spotless references by the managing director and the chief executive to "our business" and the like. This is not surprising in the circumstances of their reporting on the group activities.
357 Next, in respect of the period of the suggested pollution, the commercial activities were not limited to dry cleaning, laundry and associated activities. I have mentioned the linen and clothing hire business, the food business and the plastics business. Furthermore, these activities were conducted on an Australia wide basis. This would mean that the senior managers at the ultimate holding company level had many things other than the dry cleaning operations at Barkly Street to occupy their attention.
358 A further general observation which covers the whole of the period up to late 1988 is that the Spotless Group administration was situate on the Spotless land in the offices above the retail premises to the south of the site. It would, therefore, be difficult to conclude that higher management, if interested in the dry cleaning and laundry activities being conducted in the factory to the north or in the condition and operation of the plant, did not have ready access to these and to the production staff. There is, of course, no evidence that they availed themselves of this opportunity other than that given by former Spotless employees, Patrick Franklin, Marlene Elizabeth Fisher and Geoffrey Ian Stammers, to the effect that, during their time with Spotless, Mr IG McMullin was "a hands on" director.
359 In the context of the inter-relationship between the holding companies and the operators, counsel for North Suburban and Premier placed a good deal of reliance upon the absence from the witness box of any of the Spotless Group directors, managers, secretaries or, indeed, anyone who doubtless had the capacity to shed some light on these matters by clearing up obscurities in the corporate records or by giving their own recollection of what happened in these decades. No explanation was offered for the non-production of these witnesses who were in the Spotless Parties' camp and who were not shown to be unavailable to give evidence. A long list of these absent witnesses was provided but it is sufficient that I mention only the most glaring examples. Mr Blythe who became Manager, Commercial Services in 1973, Mr IG McMullin, Mr AB McMullin and John Hale, who was described in the correspondence as being factory manager at Barkly Street in 1978 and Spotless processing manager in 1976. I accept from my reading of the annual reports that the three directors might have been able to give evidence on matters relevant to the inferences which I am invited to draw from the scant evidence before me. I conclude that the evidence which these men might have given would not assist the cause of the Spotless Parties. I hear the warnings of counsel for the Spotless Parties to be wary of the encouragements of counsel for Premier and North Suburban, that I should not engage in a process which is speculative rather than inferential and that I not use the absent evidence to fill gaps in the evidence of those parties. I am mindful, too, that the ultimate burden of proof lies on Premier and North Suburban but, of course, this is the civil burden.
360 My attention was drawn to the fact that dealings with these authorities throughout this period appeared to have been conducted by Spotless and not Spotless Laundry. The correspondence in evidence shows this. This was dismissed by counsel for Spotless as merely the use of the wrong letterhead. They pointed out that the Trade Waste Licences and the Permit to Construct Underground Tank in 1964 were in fact held by Spotless Laundry. Of particular significance in the present context is the fact that it was Spotless which, in 1962, when the premises on the Spotless land were first being established, was the applicant for the building permit. This permit was for work which is there described as for "storage of furnace oil and white spirit". Again in 1966 it was Spotless and not Spotless Laundry which applied for a building permit to install an underground storage tank for white spirit and petrol. To the same effect is a letter from Jennings & Perry Pty Ltd, which seeks from Spotless payment for the building of extensions on the Spotless land in 1967. The inference which I draw from this letter is that the building contract was entered into with Spotless. The significance of this, however, is somewhat diminished by the fact that documents show that it was the landlord, McMullin Nominees, which made the certified payments. These observations, however, must be understood in the light of the fact that the annual report in that year does not record the expenditure involved for plant as bearing upon the assets of Spotless.
361 The annual accounts show that during the period to 1976 Spotless did not own the plant which was used on the Spotless land.
362 It was contended on behalf of Premier and North Suburban that Spotless Laundry had no bank account and that its expenses and outgoings incurred in the conduct of its operations were in fact paid by Spotless.
363 In the Horwath report, Mr Smith asserts that there was no separate general ledger for Spotless Laundry and that it had no separate bank account, and he went on to conclude that the running expenses of Spotless Laundry were paid by Spotless. Counsel for the Spotless Parties challenged those assertions. Given the agreed limitations upon the evidentiary value of the Horwath report,[226] I consider that the only conclusion I can reach from these assertions is that Mr Smith, who has examined the discovered accounting records, found nothing warranting a conclusion that Spotless Laundry had a bank account or a general ledger. Counsel for the Spotless Parties told me in final address that there was no evidence to support a conclusion that there was no bank account. When asked, they could not point to any evidence that there was a bank account.
364 This is perhaps an insignificant matter in itself, but it illustrates the difficulties created by the attitudes of the parties to the Horwath report. The question arises elsewhere in other contexts and it is convenient that I record here my approach to this evidentiary difficulty.
365 First, Premier and North Suburban bear the ultimate onus of proving the fact that there was no bank account. Second, it is a negative fact, so that I must approach it as a process of inference. Third, Mr Smith examined the available accounting records and found nothing. His evidence as to this was not challenged. As an experienced accountant, he would know where to look for it. He said nothing of any uncertainty as to his conclusion in the light of gaps in the accounting records or for any other reason. I conclude from this that there is a basis which would warrant my drawing the inference that there was in fact no bank account. I then look to what is offered against such an inference. The Spotless Parties offer nothing. They called no witness, such as Mr AB McMullin, who was a director at the time. They did not cross-examine Mr Smith with a view to demonstrating the falsity of or any uncertainty in his conclusions. In particular, nothing was put to him from the material to suggest that his conclusion was erroneous. I am, in the circumstances, encouraged to draw the suggested inference. I conclude that Spotless Laundry had no separate bank account in the period in which it operated the commercial dry cleaning and laundry business on the Spotless land. I add, before leaving this digression, that the position may be significantly different in the case of a positive fact where the process may not be one of inference. In such an event, there may be direct evidence for and against the existence of the asserted fact.
366 I conclude, therefore, that Spotless acted as banker for Spotless Laundry, paying its bills and receiving its takings. These amounts were then brought to account in its loan account of the books of Spotless. Whether this was done by ledger, journal or otherwise, is of no immediate concern.
367 In particular, Spotless paid for the white spirit which was then used in Spotless Laundry's dry cleaning operations. This appears from the Spotless general ledger. The monthly records show this chemical was being consumed in these operations at the rate of about 58 l per 100 kg of garments in October and November 1976.
368 Very little is known of the actual decision-making processes during this period to the end of 1976. The correspondence in evidence shows that there were management staff who were concerned with operations and maintenance of the plant. It would seem that strategic decisions, including budgeting, would have been made by the board, presumably wearing their Spotless Laundry hats, but doubtless aware of the overall group strategies.
369 I do not conclude that there was between Spotless Laundry and Spotless, as its holding company, the degree of commercial intimacy which would warrant a conclusion that the operator was acting any less independently than a wholly owned subsidiary within a group, passing on to its parent most, if not all, of the fruits of its operations and achieving all of this through a loan account structure. There is here no relationship of principal and agent between Spotless and Spotless Laundry.
370 Nor do I find the commonality of the respective roles of Spotless Laundry and its holding company to be such as to warrant the conclusion that they were both conducting the one business. It is, of course, true that the activities of the operator fulfilled the commercial strategies of the holding company and that its commercial success enured for the benefit of the holding company, as it was for the Spotless Group as a whole.
371 During this period the laundry and dry cleaning operations on the Spotless land and the Premier land were conducted by Spotless Supply and, perhaps, by Ensign Vic. The period commences in June 1976 when the assets of the business were transferred from Spotless Laundry to Spotless Supply and concludes when the textile rental business of Spotless Supply was sold to Ensign Aust on 1 March 1982. Other assets of Spotless Supply had previously been transferred to Ensign Vic in July 1979, these assets, too, were at this time transferred to Ensign Aust.
372 Spotless Supply had been incorporated in 1963 as a wholly owned subsidiary of Spotless. In 1978, Spotless sold its shares in Spotless Supply to the ninth defendant, a company which later became renamed Spotless Services. Thereafter, Spotless Supply was a wholly owned subsidiary of Spotless Services. Spotless Laundry at that time and up to 1981 held 50.03% of the shares of Spotless Services and was itself at all times a wholly owned subsidiary of Spotless. The consequence of this is that, throughout the period 1976 to 1982, Spotless was the grandparent or the great-grandparent of Spotless Supply and was in a position to appoint its directors. It will be recalled that Premier alleges that Spotless Supply conducted its operations at that time on behalf of Spotless or Spotless Services.
374 During this period Spotless Supply had five directors, Ronald Barry Evans, Mr I G McMullin, Mr Blythe, Mr AB McMullin and Mr Downing, all of whom were then directors of Spotless. Moreover, three of them, Mr AB McMullin, Mr IG McMullin and Mr Downing, were at the same time directors of Spotless Laundry. Spotless Supply's secretary, Graham Ernest Hotton was also secretary of Spotless throughout this period.
375 Spotless Supply maintained its own set of accounts with a general ledger. This was separate from the Spotless ledger. Nevertheless, in their written submission, counsel for North Suburban have identified a large number of accounts and wages apparently associated with the dry cleaning and laundry operations of Spotless Supply in which accounts and wages were paid by Spotless.
376 As with Spotless Laundry, the licences during the period were held in the name of Spotless Supply but correspondence relating to them appeared to pass to and from Spotless.
377 This period is, for my purposes, characterised by four important decisions: first, that to transfer the Spotless Laundry business to Spotless Supply; second, that to change from a white spirit based dry cleaning process to one using PCE in 1977; third, that to transfer shares of Spotless Supply to Spotless Services; and, fourth, that to expand the dry cleaning operations onto the Premier land.
378 Nothing is made of the decision to transfer the dry cleaning and laundry business from Spotless Laundry to Spotless Services. It is not mentioned in the reports to shareholders in the 1976 and 1977 annual reports. The transfer has been fixed by reference to the accounts as occurring in June 1976. The assignment of the lease over the Spotless land however, from Spotless Laundry to Spotless Supply was not effected until 30 June 1978. The decision to transfer its business may have been a consequence of the decision of Spotless some years previously to move away from retail dry cleaning and laundry. This meant the disposal of a number of outlets and subsidiaries of Spotless. This strategy led to an increased emphasis on the linen and garment division which had been the special activity of Spotless Supply. It may have been logical for Spotless Supply, therefore, to have resumed control of the cleaning of the rented garments and linen.
379 It may be assumed that these decisions were made by the Spotless board and implemented by Spotless Laundry upon a direction from its parent.
380 The second decision, to change the dry cleaning plant on the Spotless Land to a PCE based ALMI machine is reported in the 1977 annual report as part of the implementation of a strategy to increase the profitability and capacity of the linen and garment rental operation. The decision to make the change was one which the annual report proudly attributes to the board of Spotless. It was not suggested before me and I am aware of no document which attributes it to a decision of Spotless Supply.
381 The cost of the ALMI machine was in the order of $250,000 and is not shown in the Spotless balance sheet. Indeed, no plant is shown as an asset on that balance sheet during this period. The time of installation of the ALMI machine on the Spotless Land would appear to have been sometime in late 1976 for the January monthly review speaks of the use of PCE in October and November 1976. Sometime prior to 9 July 1979 the machine was taken out of service and was not thereafter used in Barkly Street. On 31 July 1979 it was sold by Spotless Supply to Ensign Services Vic, another company within the Spotless Group. I infer from this that the machine was then owned by Spotless Supply and that it was probably at all times so owned since its purchase in 1977.
382 The third decision was that of Spotless to sell its shares in Spotless Supply to Spotless Services. This decision was made and implemented to rationalise the operations of the group and to bring together the commercial activities of Spotless Supply with those of the newly acquired Ensign organisation.
383 The next decision in this period was to expand the dry cleaning laundry operations carried on on the Spotless land to the adjoining Premier land. This was also done in 1978, perhaps as part of the relocation of Ensign Aust's linen cleaning operations to Barkly Street. The precise date of this decision is uncertain. A letter from McMullin Nominees dated 3 July 1978 gives the landlord's consent to the construction of an access between the Spotless land and the Premier land. It would appear that the expansion occurred shortly prior to that time. It is not clear which company within the Spotless Group was the lessee. It may well have been Spotless Services because there is a minute of a meeting of the board of Ensign Aust of 12 May 1982 which speaks of an assignment of the lease from Spotless Services to Ensign Aust. This decision also involved relocating the ALMI machine from the Spotless land to the Premier land. This relocation was said in an internal Spotless memo of September 1978 to have been then completed. This decision, too, would have been made at Spotless board level because its implementation involved a number of companies within the Spotless Group.
384 Finally, reliance was placed upon the decision to transfer the assets of the industrial division at Brunswick, notably those at Barkly St, from Spotless Supply to Ensign Vic in July 1979. This transfer was effected at the written down book value of the assets in question. Thereafter, until the transfer of these assets to Ensign Aust in 1982, the beneficial owner of the business conducted at Barkly St was Ensign Vic. This transfer to Ensign Vic appears to have been the result of a strategic decision at head office. It appears, too, that, from the point of view of its customers, the business appeared to have been conducted, as before, by Spotless Services up to 1980 and the income brought into the accounts of Ensign Vic by inter-company note. By a memorandum of 16 December 1980 the Spotless Group accountant, Mr G E Hotton, issued instructions to remedy this. And then, as from 1 March 1982, the assets of the business were again transferred, this time to Ensign Aust. The point made from all of this, by counsel for Premier, was that these vital commercial and legal decisions were made by head office, namely by Spotless, and that the subsidiaries simply did what they were told.
385 Again, I consider that these matters do not establish a relationship of principal and agent between Spotless Supply and Spotless or between Spotless Supply and Spotless Services. There is nothing to show a relationship beyond that of a parent and subsidiary within a corporate group. Nor am I satisfied that there is sufficient evidence to support a conclusion of common enterprise so as to attach liability for any polluting acts or omissions of Spotless Supply to its parents', Spotless or Spotless Services.
386 During the period 1982 to 1987 when it conducted the Spotless Laundry operation on the Spotless land and on the Premier land, Ensign Aust was a wholly owned subsidiary of Spotless Services which in this period had become the wholly owned subsidiary of Spotless Laundry which was itself a wholly owned subsidiary of Spotless. Accordingly, Spotless was its great-grandparent and in the position to appoint its directors.
387 As at 1 March 1982, Spotless Supply and Ensign Vic sold certain assets to Ensign Aust.[227] From this time, the Spotless laundry operations continued on the Spotless land and there are entries in the Spotless general ledger which indicate that this continued until June 1986. Correspondence with the M&MBW suggests that there were plans to vacate both the Spotless land and the Premier land in October 1989 and it may be that the use of these sites terminated about this time.
388 During this period prior to 1986 the directors of Ensign Aust were Mr Blythe, Mr Evans and John Joseph Bongiorno, and its secretary was Mr Hotton. In 1986 three extra directors were appointed, Jeffree Timothy Davis, Wayne Douglas McDonald and Desmond Patrick McNamara. Mr McNamara and Mr Bongiorno retired in 1987 and 1990 respectively. During the period under consideration, each of these directors, other than Mr McDonald and Mr McNamara held the same office with Spotless. Following the retirement of Mr IG McMullin, Mr Barr and Mr Downing in 1985, Mr Blythe and Mr Evans held two of the three seats on the board of Spotless Laundry. Mr Hotton was at all times the secretary of each of the three companies.
389 It is clear that management control of the commercial activities of Ensign Aust during the period vested in the board of Spotless and such material as was available suggests that the Spotless board exercised that control.
390 The analysis of the Spotless accounts undertaken by Mr Smith shows that the monetary activities and the accounting records of Ensign Aust were maintained during the period 1982 to 1987 by Spotless. He records that Ensign Aust did not maintain a separate bank account or general ledger. This may not be correct, however, because there were gaps in the material available to him and the account to which he did have access tended to break up the commercial activities of the members of the Spotless Group by divisions and profit centres rather than by corporate identity. It seems that the Barkly St industrial laundry operations at this time were dealt with as division 1, profit centre E04.
391 The accounts also show that income received by Ensign Aust from these operations passed from the division into a head office finance centre from which creditors of Ensign Aust and other companies within the group were paid. It should be immediately noted that there is nothing remarkable about this. As Mr Smith observes, this is a common business practice within a corporate group. The point here, however, is not as to its propriety but whether it points to a conclusion that the accounting arrangements in place within the Spotless Group at this time were such as to lead to the conclusion that the there was a relationship of principal and agent between the parent and the subsidiary or whether there was a common enterprise.
392 As before, I consider that these matters do not establish such a relationship between Ensign Aust and Spotless. There is nothing to show a relationship beyond that of a parent and subsidiary within a corporate group. Nor am I satisfied that there is sufficient evidence to support a conclusion of common enterprise so as to attach liability for any polluting acts or omissions of Ensign Aust to its parent Spotless.
393 I conclude from all of this that Premier has not made out a case that liability for the acts or omissions of the operating companies within the Spotless Group should be visited upon Spotless, as the ultimate holding company, or upon another holding company within the group.
7. Nuisance Claims against the Spotless Parties
394 Premier's primary claims against the Spotless Parties were put in nuisance. Two separate nuisances are alleged. These are referred to in the statement of claim as "white spirit nuisance" and "PCE nuisance".
395 White spirit nuisance concerns the contamination of the Silurian bedrock with white spirit as a consequence of the release of this chemical from underground storage tanks or waste pits or both on the Spotless land, which chemical migrated to the Premier land.[228] The causes of action are asserted against Spotless, Spotless Services and Ensign Aust. It is said that each of them is liable for causing the white spirit nuisance and continuing it.
396 Against Spotless it is put that it created the white spirit nuisance on dates unknown, but after the installation of the tanks on the Spotless land in or about 1975. In the particulars given under paragraph 10A of the statement of claim it is made clear that this liability depends upon the attribution to Spotless of responsibility for the conduct of the laundry and dry cleaning business conducted on the Spotless land by Spotless Laundry between about 1968 and about 1978,[229] by Spotless Supply between about 1978 and about 1982,[230] and by Ensign Aust between about 1982 and about 1987.[231]
397 Against Spotless it is also alleged that, from at least 1987, it knew or ought to have known of the white spirit nuisance but failed to bring it to an end or to abate it.[232]
398 Having regard to the conclusions which I have reached on the corporate identity issue[233] the claims against Spotless for creating the white spirit nuisance must fail. Nevertheless, in deference to the other submissions bearing on these claims, I will shortly state my conclusions as to the more significant of them.
399 Counsel for the Spotless Parties presented submissions which depended upon the fact that, until its rezoning on 4 May 2000, the Premier land was within an industrial zone. This meant that it could not be used for residential purposes. It was then said that the presence of the white spirit in the Silurian rock would not prevent the owner of Premier land from using it for a purpose permitted by the industrial zoning.[234]
400 The gist of private nuisance is the interference with the plaintiff's use and enjoyment of its land or the interference with some right in connection with the land. The cause of action might also lie where the activity of the defendant is noxious[235] but Premier did not put its claim on this as a separate basis. I have concluded that the white spirit found its way into the soil underlying the Spotless land following some leakage or spillage from or in the vicinity of UST2.[236] I make no finding as to the date of this other than that it must have occurred after the installation of that tank which was in 1971 when Spotless Laundry was the operator of the laundry and dry cleaning business. It may well have occurred between that date and 1977, for it was after mid-1977 that the dry cleaning solvents used in the Spotless processes were changed from white spirit to PCE. Thereafter, and up to 1989, the use of white spirit was limited to the laundry process. It does not appear upon what date or within what period the white spirit so released made its way onto the Premier land. If it be assumed that this occurred prior to the sale of the Spotless land to Burkett in September 1992, the evidence does not disclose that its presence on the Premier land to that date interfered with its use and enjoyment by the then owner. Indeed, the owners from time to time of the Premier land were unaware of the presence of white spirit until early 2003. Equally, it was not established that, prior to the rezoning at least, the presence of the white spirit interfered with any right over or in connection with the Premier land. It follows from this that the claim against Spotless of creating the white spirit nuisance must fail.
401 I reject the further submission offered on behalf of the Spotless Parties that the claim for creating the white spirit nuisance should fail because of a want of actual or constructive foreseeability of the relevant nuisance sustained. As a matter of law, foreseeability may be an ingredient of the requirement that damage be not remote from the acts of the creation of the nuisance;[237] it is not otherwise a necessary element of the cause of action. In any event, I would accept as a fact that a person releasing white spirit into the soil would foresee or should be taken to foresee that the chemical might migrate to adjoining properties and that, wherever it was encountered, it would limit the uses to which the land might be put without endangering health.
402 Finally, if the chemical had already migrated to the Premier land and if this was known, there was nothing that Spotless or the operator could do to retrieve the situation. The construction of a barrier might prevent further migration to the Premier land, but the chemical on the Premier land could not be removed by any act on the Spotless land.
403 The other basis proposed for the liability of Spotless is that it continued the nuisance. This, too, must fail. It is not altogether clear whether this liability is put on the basis that Spotless is responsible for the failure of the operators to put an end to the white spirit nuisance. If it is, it too fails on the corporate identity issue. Furthermore, Spotless was never in occupation or possession of the Spotless land.
404 It must fail, too, on the basis that it has not been demonstrated that any of Spotless or the operators was aware or ought to be taken to have been aware of the existence of the white spirit nuisance and that they failed to take reasonable steps to remedy or abate it. I am unable to conclude that Spotless should be taken to be aware at all material times that white spirit had been released onto the Spotless land. Further, and in any event, I am unable to conclude that, at any time when it was in occupation or control of the Spotless land, Spotless knew or had the means of knowledge of the existence of the fact that the white spirit had migrated to the Premier land. In these circumstances it cannot be liable in nuisance for permitting it to continue.[238]
405 These claims must fail for substantially the same reasons. Spotless Services was never in occupation or possession of the Spotless land. The nuisance creation claim arises from the conduct of the laundry business by Spotless Supply on the Spotless land between 1978 and 1982.[239] I do not find that Spotless Services is responsible for the acts and omissions of Spotless Supply. I do not find that the owner of the Premier land at this time suffered any loss or enjoyment of that land or that any right over or in connection with that land was interfered with.
406 The continuing nuisance claim must also fail for want of the necessary knowledge of the existence of the white spirit nuisance and because there was nothing that Spotless Services could then have done to remedy the existing pollution to the Premier land.
407 Ensign Aust was the company within the Spotless Group which was in possession and occupation of the Spotless land when it conducted the laundry business there between 1982 and 1987.
408 The allegation of nuisance creation is that, during this period, Ensign Aust used solvent emulsifiers such as Solex in its laundry operations.[240] It was asserted that Solex contained a substantial component of white spirit. The evidence in support of that was contained in a series of documents produced by Henkel Australia Pty Ltd which were tendered by consent as Exhibit 101. My reading of the exhibit does not disclose the presence of white spirit as an ingredient of Solex. In any event, I do not find that the white spirit on the Premier land originated from this product or from those laundry activities. This claim must fail at this early point.
409 It fails, too, as do the other nuisance creation claims, for the further reason that no loss of enjoyment or infringement of right has been established in this period.
410 The continuing nuisance claim also fails for want of knowledge as to the existence of the white spirit nuisance and because there was nothing which Ensign Aust might reasonably have done to remedy the existing pollution of the Premier land. I am unable to find that the migration of the white spirit was then continuing, so that this is not a case where this ongoing process might have been arrested.
411 This nuisance is said to arise from the existence of PCE in the unconsolidated sediments and in the Silurian aquifer on the Premier land.[241] I have found that there are two sources for this contamination: the activities associated with the operation of the ALMI machine on the Spotless land in 1977-8 and those associated with the operation of the same machine on the Premier land in 1978-9. It is not possible to identify which of these sites is the source; it may be one or other or, more likely, both.
412 This raises a fatal difficulty for all the nuisance claims which depend upon a finding that the only source of the PCE contamination was the ALMI machine on the Spotless land. I make no such finding. Accordingly, all the PCE nuisance claims whether they be based on nuisance creation or continuing nuisance, must fail.
413 Claims for nuisance creation are made against Spotless and Spotless Services in terms rather similar to those made against those parties for the creation of the white spirit nuisance. Insofar as they depend upon a conclusion that Spotless and Spotless Services are responsible for the acts and omissions of the operators, these claims must fail for the further reason that I have rejected Premier's corporate identity contentions.
414 A further reason for the failure of the white spirit nuisance creation claims is also applicable to defeat these PCE nuisance creation claims. I refer to the failure of Premier to establish that there was any loss of enjoyment of the Premier land or interference with legal rights.
415 Further, the claims against Spotless and Spotless Services based on continuing PCE nuisance fail for the same reasons which are fatal to the similar white spirit nuisance claims.
416 Against Ensign Aust, there is a claim based on the creation of the PCE nuisance arising from its use of Solex in its laundry operations. The information contained in the Henkel documents[242] shows that Solex contained a 5% component of PCE. Given my findings as to the source of the PCE contamination, Solex cannot be identified as the vehicle for the introduction of this chemical into the soil of the Spotless land. This claim against Ensign Aust must therefore fail. In addition to this it must also fail for the reasons mentioned in respect of the other PCE nuisance creation claims.
417 Finally, a claim is made against Ensign Aust for continuing the PCE nuisance from 1982 or from 1987. These are the dates upon which it commenced and ceased the conduct of the Spotless Laundry activities on the Spotless land and some four years after the ALMI machine was moved from that land. Its knowledge of the existence of the PCE nuisance is said to arise from the fact that two of its directors at this time were Mr Blythe and Mr Evans, each of whom was a director of Spotless at the time the ALMI machine was in operation on the Spotless land.[243] The knowledge of these men, or indeed that of Ensign Aust, as to the existence of this nuisance, that is, that PCE had migrated or was migrating to the Premier land, has not been demonstrated. Nor do I find that they ought to have known of it.
418 In short, all of the Premier nuisance claims against the Spotless Parties must fail.
8. Negligence Claims against the Spotless Parties
419 Premier alleges that Spotless, Spotless Services and Ensign Aust breached their common law duties of care owed to current and subsequent owners of the Premier land and, therefore, to Premier itself. As pleaded, the duties alleged are five-fold.
(a) To take reasonable care with the conduct of the laundry and/or dry cleaning operation conducted on the [Spotless land];[247]
(b) To take reasonable care with the underground storage tanks and the storage of White Spirits in the underground storage tanks below the [Spotless land];[248]
(c) To take reasonable steps to investigate the environmental conditions of the [Spotless land] and/or remove to the extent practicable the chemicals used in the laundry and dry cleaning business including White Spirit and PCE from the subsurface of the [Spotless land];[249]
(d) To take reasonable steps to investigate and eliminate the risk of the chemicals used in the laundry and dry cleaning process including PCE and White Spirit migrating from the [Spotless land] to the properties adjoining and/or surrounding the [Spotless land];[250] and
(e) To take reasonable steps to ensure that Spotless Laundry (deregistered), Spotless Supply (deregistered), Spotless Services and Ensign [Aust] took reasonable care with the laundry and/or dry cleaning operations.[251]
421 It will be recalled that for approximately a 12 month period in 1978-9 the ALMI machine was used on the Premier land. It is further alleged by Premier that Spotless and the tenant, Spotless Services, owed to current and future owners of the Premier land a duty -
(a) To take reasonable care with the conduct of the dry cleaning operation on [the Premier land]; and
(b) To take reasonable steps to investigate the environmental conditions of [the Premier land] upon cessation of dry cleaning operations thereon and/or vacation of [the Premier land] and/or remove to the extent practicable any contamination of [the Premier land] to unsafe levels and caused by the dry cleaning operations thereon.[252]
422 The existence of such duties is put in issue on a factual basis as well as on legal bases. Issue is also joined as to the breaches and consequential loss and damage.
423 The breaches alleged mirror these duties. In final address, counsel for Premier put negligence claims under three heads:
(1) During the period to 1989 when they were in occupation of the Spotless land, especially during the 1980s, the Spotless Parties became increasingly aware of the contamination risks associated with the activities they had carried on there in the preceding decades. Nevertheless, they made no enquiry as to whether these activities had in fact caused contamination and took no steps to clean it up.
(2) Ensign Aust was in occupation of the Spotless land between 1982 and 1989 and of the Premier land between 1982 and February 1988, at least. During these periods, Ensign Aust became increasingly aware of the existence of the environmental risks imposed by the operation of ALMI machine and the storage of white spirit in underground tanks. Notwithstanding this, it took no step to investigate whether contamination of either site had occurred and took no step to clean up the sites.
(3) This depended upon an assertion that the Spotless Parties were lessees of the Spotless land and of the Premier land at the time the contamination occurred. What is said is that a lessee owes to the lessor a duty to deliver up the demised premises in the same condition as at the commencement of the term. If during the term the lessee was responsible for contamination of the premises, then the lessee owes a duty of care to warn the lessor of this danger or to abate it in some way.
424 Let me say immediately that the negligence claims, however put, face insuperable difficulties. Insofar as the negligent act or omission was that of Spotless Laundry or Spotless Supply, I do not accept that any of the Spotless Parties is liable for them. Insofar as the claims are based upon the release of chemicals into the Spotless land, there is no evidence as to how this, in fact, occurred or by whose act or omission it occurred. There was a late attempt by counsel for Premier to put a case in res ipsa loquitur but this was never pleaded and the necessary factual basis for it was not made out. Insofar as the gist of the negligence claim is a failure to clean up existing contamination, there is some evidence that the Spotless Parties were aware of the dangerous nature of the chemicals and of the need to be careful in handling them, but not that they were aware that there had in fact been a release of the chemicals or release of a sufficient quantity to cause concern.
425 I will not burden this judgment with a detailed analysis of the alleged breaches of duty by Spotless and Spotless Services. In the statement of claim they occupy some seven pages. The thrust of them appears to be, first, that the operation of the laundry and dry cleaning activities using white spirit and PCE inevitably involves a risk that these contaminants might be released into the land upon which the activities are conducted. Let this be accepted. The allegation is that in some unspecified way this occurred and, further, that it should have been prevented. Since the evidence did not reveal how it occurred, I am unable to make a finding that this negligence is made out. An associated allegation made against Spotless and Spotless Services directly is that they failed to take any or any reasonable step to ensure that the operators took reasonable care in carrying out their operations with reasonable care. The evidence did not support this allegation. There was, as I have mentioned, no evidence which established a breach of a duty of care by an operator and also no evidence to establish a breach of some supervisory duty of care in Spotless or Spotless Services.
426 The second group of allegations focussed upon a failure to investigate the Spotless land for contamination, to discover it and to remediate it. The evidence showed that these failures all occurred. What is missing is evidence suggesting that circumstances existed which rendered this failure a breach of some duty of care.
427 This brings me to the three ways the case was put by counsel for Premier in their final address. The first two ways were essentially variants on the second group of allegations above. Like that group, these allegations fail at a factual level for I am not satisfied that there was in Spotless or Spotless Services knowledge of the existence or likely existence of contamination in the Spotless land or in the Premier land. I accept that the Spotless Parties had knowledge of the dangers of PCE and white spirit and of the risks of contamination associated with their use. The next step in the argument, that they had knowledge of or reason to believe that contamination in fact existed or might exist, involves speculation.
428 The third way the case was put suffered from an even greater number of infirmities. Putting to one side the fact that it was not pleaded, the evidence does not establish that Spotless was at any time a lessee of the Spotless land or the Premier land. Spotless Services, likewise, was not a lessee of the Spotless land at any time; it was lessee of the Premier land from about 1978 to 1982 as tenant of Nellor Investments. In early 1982 this lease was assigned to Ensign Aust which remained a tenant of Nellor Investments until 1988. The Spotless land was, at all material times, owned by McMullin Nominees but there were intermediate leases of this land from time to time. The consequence of this, for present purposes, is that any obligation to report the contaminated condition of each site or to remediate it was owed by the tenant to Nellor Investments or to McMullin Nominees or to the intermediate lessor within the Spotless Group. It was not owed to Premier. In any event, absent some provision in the lease imposing an obligation to take such a positive step, I was not referred to any authority supportive of the suggested duty of care. I would myself not be prepared to impose such a duty upon a tenant, at least in favour of a future owner of the land.
429 This is sufficient to explain why I reject all of the claims based on negligence. It is not, therefore, necessary for me to examine whether duties of care as alleged are owed to the successive owners of the Premier land and whether or how such a duty might be affected by the fact that the contamination of the Spotless land did not have an immediate adverse impact upon the owner of the Premier land or its successors, at least until a residential use was contemplated. It is not necessary for me to examine the impact on this duty of the fact that, when Premier became the owner, it was not vulnerable to the risk of contamination inasmuch as it was protected by the terms of its contract of sale.
430 For the same reasons, I will not enter upon a consideration of the further contentions offered on behalf of the Spotless Parties which I have listed above.[253]
431 The negligence claims against the Spotless Parties are rejected.
9. Premier's Statutory Claims against the Spotless Parties
432 Premier also brings claims against the Spotless Parties under s. 62A of the Environment Protection Act and under s. 15 of the Water Act.
The Environment Protection Act s. 62A Claim
433 Section 62A, so far as is relevant, is in these terms:
(1) Notwithstanding anything to the contrary in this Act, the Authority may by notice in writing direct-
(a) the occupier of any premises upon or from which pollution has occurred or been permitted to occur;
(b) the person who has caused or permitted the pollution to occur;
(c) any person who appears to have abandoned or dumped any industrial waste or potentially hazardous substance; or
(d) any person who is handling industrial waste or a potentially hazardous substance in a manner which is likely to cause an environmental hazard-
to take the clean up measures as specified in the notice.
(2) On the application of the occupier of any premises which is the subject of a notice, a court of competent jurisdiction may order that the person described in sub-section (1)(b), (1)(c) or (1)(d) compensate the occupier for any costs incurred by the occupier which the court is satisfied are reasonable and were incurred in good faith in complying with the notice ...
434 There was some debate as to whether VCAT was a court of competent jurisdiction for this purpose. It is not necessary that I resolve this because the claims are made in the Court as well as in VCAT. It was not disputed that this Court is a court of competent jurisdiction. I shall therefore deal with this claim in the litigation.
435 It was argued on behalf of the Spotless Parties that liability under s. 62A(2) should not be imposed upon persons against whom it was alleged that they had caused or permitted pollution prior to the commencement of the provision on 1 July 1984,[254] and that the imposition of this liability ought not to be retrospective.
436 Section 62A has been much amended since it was first enacted in 1984; it assumed the form it had at the commencement of this proceeding by the amendments of 1989.[255] Mention was made, too, of s. 14 of the Water Act which makes specific provision for the application of liability under s. 15 in respect of pollution which had occurred prior to its commencement.
437 The liability to an order for compensation under s. 62A(2) depends upon the giving of a clean up notice to the claimant and its having incurred costs complying with it. This is a case where Parliament has imposed statutory rights and obligations upon various persons where land is polluted. It could hardly be said that, for example, the occupier of land has a right to assert an exemption from these provisions so that the land remains indefinitely in a polluted state. And so, a clean up notice might be given requiring remediation where the land happens to be polluted on the date of the notice, notwithstanding that this condition predates the commencement of s. 62A. And so, too, the person responsible in terms of the statute may be called upon to compensate the remediator. This liability arises from and upon the implementation of the statutory procedures and obligations. It is not a case for the operation of the presumption against retrospectivity.[256]
438 Although the statute does not specify, it seems clear enough that Premier, as claimant, must first establish that pollution occurred on the Premier land. This must follow from the fact that the liability of the polluter depends upon their having been given a clean up notice the subject of which is the pollution of premises of which Premier is occupier.[257]
439 Pollution exists on the Premier land. This is due to the presence of the contaminants in the northern part of that land having an effect on the soil and on the groundwater. This effect, as I find, is of a kind which is described in s. 45(1) and s. 39(1) of the Environment Protection Act respectively. No argument was put that the terms of the statutory definition of "pollute" had any bearing on this case. Although the fact of pollution was put in issue by the defence of the Spotless Parties, I have found that the Premier land is polluted, the nature and extent of which I have set out above.[258]
440 I have concluded that the white spirit emanated from the Spotless land, more particularly from leakage or spillage from or in the vicinity of UST2.[259] I have concluded that the PCE presently on the Premier land has as its source leakage or spillage from the ALMI machine, or from activities, involving that machine, which were conducted on the Spotless land and on the Premier land.[260] These sources both contributed to the PCE pollution of the Premier land in proportions which I am unable to determine.
441 In considering this part of the claim it is necessary to bear in mind a number of things which were perhaps obscured at trial by the mass of other issues which were, perhaps, more pertinent to Premier's common law claims.
442 First, the abiding concern in this statutory claim is the existence of pollution on the Premier land and the consequences of this. Hence it is correct to allege as appears in paragraph 139B of the Statement of Claim that the Premier land is property upon which pollution has occurred or been permitted to occur. It is not to the point that the Spotless land also may be polluted.
443 Second, s. 62A(2) fixes liability upon the person who has caused or permitted the pollution to occur. Again, attention is focussed on the pollution on the Premier land. Also, it is of no consequence how, when or where this pollution occurred otherwise than for the purposes of determining whether a suggested polluter caused it or permitted it to occur within the meaning of s. 62A(1)(b). Doubtless, this will be the subject of inquiry when that allegation is investigated or tried, but this is but a means to that end - the determination of the issue whether one or other of the Spotless Parties caused or permitted the pollution to occur.
444 Third, s. 62A(1) is expressed in very general terms. It is not concerned with identifying the products that constitute the pollutant. It is sufficient that the land be polluted. This state of being polluted may be the product of a number of acts of pollution by different persons at different times and with differing pollutants. The section, not surprisingly, is concerned only with the end result of this. This point is of particular significance in this case, for I have found that the present polluted state of the Premier land is the product of the ingress of the two chemicals which I have called the contaminants. Furthermore, it would seem that these chemicals were released into the environment at different times and perhaps by different persons. In such a case, it would not be open for one of two alleged polluters to seek to avoid being characterised as the person who caused the pollution by asserting that the other was also a contributor to the present polluted state of the Premier land. Likewise, it would not be open for a sole alleged polluter to seek to avoid this characterisation altogether by saying that another person, too, was responsible for the pollution. It would be necessary in such a case for the Court to determine whether the contribution of the alleged polluter was of such little consequence that it was not in fact a cause of the pollution. A further aspect of this is that, even in a case of one act of pollution, there may be a number of persons who caused or permitted it to occur.[261] Take the case where the pollution arises from the discharge of a quantity of a noxious chemical from a tank. The person who actually opened the valve is, obviously enough, a person who caused the pollution. So too, may be the person who directed the other to open the valve. A manager with authority to stop the discharge, who just stood by and watched it happen, might also be a person who permitted the pollution to occur. Any or all of those persons would be liable to receive a clean up notice under s. 62A(1) and it is not at all surprising, given the nature and purpose of the legislation, that any or all of them might be called upon pursuant to s. 62A(2) to compensate the occupier of the polluted land who has incurred the cost of compliance with a clean up notice served upon him or her. The legislation does not, however, address how their respective responsibilities should be reflected in the compensation order.
445 Mindful of this, counsel for North Suburban in formulating and presenting its s. 62A claim against the Spotless Parties, focussed on the simple question - whether the suggested company of the Spotless Parties caused or permitted the pollution affecting the Spotless land to occur. In so doing, they pushed into the background the allegations which formed a large part of both the North Suburban statement of claim and the Premier statement of claim which were directed to the objective of "lifting the corporate veil".
446 Having pleaded, opened and then closed their case on the basis that the Spotless Parties, other than Ensign Aust, were liable for the acts of the operating companies within the Spotless Group, counsel for Premier in reply picked up the allegations made by North Suburban and embraced them as their client's own. It was no surprise that this evoked from counsel for the Spotless Parties a protest which referred to this as an impermissible mutation in the Premier pleaded case. It was certainly a mutation, and an opportunistic one, but I am unable to ignore it. The factual basis was fully explored. I heard full argument for and against the North Suburban contention in submissions presented on its behalf and on behalf of the Spotless Parties who followed. In the circumstances of the joint trial such as this, I see no injustice to the Spotless Parties in permitting counsel for Premier to press this contention; I see a serious prospect of injustice for Premier if I should refuse.
447 I turn now to consider the contention put on this, the central issue in the claim presently under consideration. The question has recently received the attention of the House of Lords in Environment Agency v Empress Car Co (Abertillery) Ltd[262] a case on appeal from a conviction for an offence under s. 85(1) of the Water Resources Act 1991 (UK). The section was in these terms:
A person contravenes this section if he causes or knowingly permits any poisonous, noxious or polluting matter or any solid waste matter to enter any controlled waters.
The circumstances were that the company maintained a diesel tank in a yard which was drained into the controlled waters. The tank was surrounded by a bund to contain spillage from flowing into the yard. The company, however, had fixed an extension pipe from the tank leading to a drum which was in the yard, but outside the bund. The diesel in the tank could be permitted to flow through this pipe to the drum by opening a tap. On the occasion in question, a person unknown entered the premises, opened the tap which then permitted the contents of the tank to flow into the drum which overflowed into the yard, permitting the diesel to flow into the controlled waters. In these circumstances, the company was convicted of causing the pollutant to enter the waters. Its only act was to bring the diesel onto the land adjoining the waters and to establish the system which I have described.
448 The Lords pointed out that the legislation addressed the case where the polluter caused the pollution by some act or knowingly permitted it to occur by some omission. In this respect, it resembles s. 62A(1)(b). In the case before the Lords, the company performed an act by bringing the diesel onto the land and storing it there. Again, it may be said to resemble the facts of the present case where this was done by the various operating companies within the Spotless Group. They brought chemicals onto the Spotless land and used them there. In the case of white spirit, they stored it in a number of identified USTs.
449 Next, their Lordships underlined that the liability under s. 85(1) is strict. It does not depend upon mens rea, foreseeability of discharge or negligent discharge. This is the case under s. 62A.
450 The case before their Lordships then moved to a consideration of cause. Did the act of bringing the diesel onto the land as the company did, cause the diesel to enter the waters? Their Lordships made the point that "cause" in this context requires a common sense approach which will depend upon the context in which it operates. This context will involve a legal consideration of the scope of the rule in question,[263] and of the nature and object of the duty imposed by the statute.
451 At this point, I return to s. 62A. It is necessary to observe, first, that the expression, a person who caused pollution to occur, is used by Parliament in two quite different but related contexts. In sub-s. (1) it identifies a person who might be the subject of a clean up notice and in sub-s. (2) it identifies a person who might be obliged to bear the cost of compliance. In sub-s. (1) four different classes of person are referred to, including the occupier of the land upon which the pollution occurred. So, in the present case, a notice might have been given under s. 62A(1)(a) to the occupier of the Premier land, as the polluted premises, and to the occupier of the Spotless land, as "the premises ... from which pollution has occurred or been permitted to occur". In the latter case, the occupier might receive a notice without any regard for its responsibility of the condition of the polluted premises. Unlike the other three classes, membership of the first class requires of the person nothing more than occupancy. The other three classes comprise persons who have done something which has or might cause pollution or an environmental hazard or, in the case of a person who has abandoned or dumped waste or a potentially hazardous substance, a person who appears to have done so.
452 The definition of "clean up" in s. 4[264] means that a person in receipt of a clean up notice can be required by its terms to do things other than clean up the existing polluted premises. Prior to the 1988 amendment, the notice was in truth a notice to clean up or remove pollution and, pursuant to the predecessor of the present s. 62A(2), a compensation order might be made only "against any person proved to have caused the pollution". By the 1988 amendment, the person against whom such an order might be made was identified by membership of one of the three classes of persons to which a clean up notice might be directed, other than the occupier.
453 While it may be said that the three classes of persons identified in paragraphs (b), (c) and (d) of s. 62A(1) are those who bear responsibility for the pollution to be remediated by compliance with the clean up notice, it is not inevitably so. The class identified in paragraph (c) includes a person who merely appears to have dumped noxious material, whether or not it has actually done so. Even so, such a person is at risk of a compensation order under s. 62A(2).
454 I return to the Empress Car Co case. The Lords there were concerned with the case where the act of an unknown third party led to the discharge of the pollutant into the waters. Their Lordships acknowledged the difficulty of fixing the company with a conviction for an offence in the nature of a public nuisance where it has done nothing more than create the situation where a third party has acted to create the nuisance. Nevertheless, they accepted that the mere creation of such a situation might, notwithstanding the deliberate intervention of the third party, warrant a finding that the company caused the discharge. This is the case whether or not the intervention was foreseeable. Lord Hoffmann, with the concurrence of three of the other members of the House put it this way:
The true common sense distinction is, in my view, between acts and events which, although not necessarily foreseeable in the particular case, are in the generality a normal and familiar fact of life, and acts or events which are abnormal and extraordinary. Of course an act or event which is in general terms a normal fact of life may also have been foreseeable in the circumstances of the particular case, but the latter is not necessary for the purposes of liability. There is nothing extraordinary or abnormal about leaky pipes or lagoons as such: these things happen, even if the particular defendant could not reasonably have foreseen that it would happen to him. There is nothing unusual about people putting unlawful substances into the sewage system and the same, regrettably, is true about ordinary vandalism. So when these things happen, one does not say: that was an extraordinary coincidence, which negatived the causal connection between the original act of accumulating the polluting substance and its escape. In the context of section 85(1), the defendant's accumulation has still caused the pollution. On the other hand, the example I gave of the terrorist attack would be something so unusual that one would not regard the defendant's conduct as having caused the escape at all.[265]
455 His Lordship concluded by summarising the effect of his conclusions which I venture to quote in full:
(1) Justices dealing with prosecutions for "causing" pollution under section 85(1) should first require the prosecution to identify what it says the defendant did to cause the pollution. If the defendant cannot be said to have done anything at all, the prosecution must fail: the defendant may have "knowingly permitted" pollution but cannot have caused it.
(2) The prosecution need not prove that the defendant did something which was the immediate cause of the pollution: maintaining tanks, lagoons or sewage systems full of noxious liquid is doing something, even if the immediate cause of the pollution was lack of maintenance, a natural event or the act of a third party.
(3) When the prosecution has identified something which the defendant did, the justices must decide whether it caused the pollution. They should not be diverted by questions like "What was the cause of the pollution?" or "Did something else cause the pollution?" because to say that something else caused the pollution (like brambles clogging the pumps or vandalism by third parties) is not inconsistent with the defendant having caused it as well.
(4) If the defendant did something which produced a situation in which the polluting matter could escape but a necessary condition of the actual escape which happened was also the act of a third party or a natural event, the justices should consider whether that act or event should be regarded as a normal fact of life or something extraordinary. If it was in the general run of things a matter of ordinary occurrence, it will not negative the causal effect of the defendant's acts, even if it was not foreseeable that it would happen to that particular defendant or take that particular form. If it can be regarded as something extraordinary, it will be open to the justices to hold that the defendant did not cause the pollution.
(5) The distinction between ordinary and extraordinary is one of fact and degree to which the justices must apply their common sense and knowledge of what happens in the area.[266]
456 Much reliance was placed by counsel for the Spotless Parties upon a decision of this Court in Window v The Phosphate Co-Operative Co of Australia Ltd.[267] The company was charged in the Magistrates' Court that it did "cause the atmosphere to be polluted", contrary to s. 41(1) of the Environment Protection Act. The Magistrate, at the end of the prosecution case, ruled that the company had a case to answer, a ruling which the company sought to review. Murphy J made an order absolute and dismissed the information. And so the question arose in circumstances very favourable to the informant, since any available inference from the evidence would be drawn in his favour.
457 The circumstances were that the company had brought sulphur onto its premises and stored it there in a pit in the ground for use in its manufacturing processes. On the date in question, a fire commenced in the pit and the burning sulphur emitted smoke which polluted the atmosphere. The cause of the fire was unknown. The evidence showed that sulphur can self-ignite at 232°C but it may occur at other temperatures if impurities exist.[268]
458 His Honour, after considering the authorities in some detail, put the question this way: Did the company cause the pollution in this context? The act of the company which is said to have caused the pollution was that of bringing the sulphur onto the land and storing it there in a pit, that is, the creation of the situation in which the fire occurred. The question whether this act caused the pollution must, his Honour said, be addressed in terms of whether the fire, with the consequent release of gases into the air, was a natural consequence of this act. His Honour considered analogous situations where it might be suggested that the mere presence on land of a thing might amount to an offence where the thing caught fire. It is clear from this that his Honour was approaching the question in much the same way as did Lord Hoffmann 15 years later in the Empress Car Co case.[269] His Honour concluded, inevitably, given the evidence as to the combustibility of sulphur and the total absence of any evidence of the actual event that produced the fire, that the fire was not a natural consequence of the company's act in bringing the sulphur on to the land. His Honour might have used Lord Hoffmann's expression and concluded that the fire was not a usual or normal or ordinary occurrence where sulphur was brought on to land and stored in a pit. Accordingly, the no case to answer submission had been made out.
459 Applying these principles to the present case, I must ask what act it is said was performed which caused the discharge of the chemicals onto the Spotless land? The answer given on behalf of Premier and North Suburban is the bringing of the contaminants onto the land, storing them there and using them in the dry cleaning and laundry activities. Next, it was said that the evidence shows that normal or ordinary consequence of those acts is that there will be spillage and leakage so that the contaminants will make their way into the soil.
460 On the evidence before me, I would find the second proposition has been made out. The experience of witnesses such as Mr Cattlin and Mr Lam was that 99% of underground storage tank systems leak. Mr Retallick also spoke of leakages which were common with underground tanks containing liquid. The evidence of the presence of white spirit in the ground in the vicinity of UST2 was taken by the experts as an indication of leakage from that tank or from plant associated with it.
461 There remains, however, the first proposition. Can it be said in the circumstances of this case, that the holding companies, Spotless and Spotless Services, brought the chemicals onto the Spotless land and stored and used them there? This is a question upon which none of these pollution cases sheds any light because, in each case, the identity of the person which did the things which were said to have created the situation giving rise to the pollution was known.
462 The answer offered on behalf of Premier and North Suburban was that the operations of the operating companies were so intertwined with those of the holding companies and that the direction and control over their activities by the holding companies was so absolute that I should conclude that, as a matter of ordinary English usage, the holding companies in fact caused the events which these operations brought about. By way of illustration, I return to the situation which I posed at the commencement of this discussion.[270] Suppose the manager directed the workman to open the valve. In such a case the manager would fall into the class of persons who caused the pollution. This is not by reason of the application of any legal principle such as vicarious responsibility for the acts of the agent, but because, in ordinary usage, the expression "a person who caused the pollution" would include the person who directed the act which led to the pollution.
463 In the light of the principles set out by Lord Hoffmann, this submission, in the present case involves, first, a determination of the acts which are said by Premier and North Suburban normally to lead to the spillage or leakage and, second, a consideration of the question whether Spotless and Spotless Supply at the times alleged did those acts. The acts, as I have mentioned, are the bringing onto the Spotless land of white spirit and PCE, storing it there and using it there in the dry cleaning and laundry operations. So far as the holding companies are concerned, what is put is that each of them was involved in the performance of those acts and directed them so that the holding companies themselves should be seen as having caused the consequences of those acts. Counsel for the Spotless Parties, on the other hand, contended that the involvement and direction by the holding companies in and of the acts of these subsidiaries was nothing more than was usual in the case of a holding company and a wholly owned subsidiary within a corporate group situation. They contended that the principle of corporate independence meant that the acts of the operating company should not be attributed to its holding company. This comment, it seems to me, misses the thrust of the argument. What is contended for here is not that the holding company is responsible for the acts of its subsidiary, but rather the holding company is responsible for its own acts which brought into existence circumstances which would normally lead to the spillage and leakage.
464 I turn now to the evidence. This has been discussed in some detail elsewhere.[271] As to the bringing onto the Spotless land of white spirit and its use, there is really no firm evidence as to the involvement of Spotless. It may be assumed that, when the Spotless land was first leased from McMullin Nominees and the building erected on it in the early 1960s, this decision was made at the level of the ultimate holding company, Spotless. I know, too, from the evidence of Mr Retallick that in approximately 1965 dry cleaning was commenced on the Spotless land. Beyond this, it was said on behalf of the Spotless Parties, I venture into the forbidden landscape of speculation. I am therefore unable to conclude on the evidence that it was Spotless which decided in 1965 or thereabouts to establish a dry cleaning operation on the premises and to use in that process white spirit. I am therefore unable to conclude that Spotless decided to store white spirit on the Spotless land. UST2 which I have found to be associated with the principal source of the spillage and leakage of white spirit was installed pursuant to a building permit granted to Spotless on 30 September 1971 for the storage of furnace oil. I have found that it was used for the storage of white spirit. Whether it was ever used for furnace oil in these early years and, if so, when its use for the storage of white spirit commenced is not known.
465 What was relied upon in support of the claim of Premier and North Suburban was that the activities of the operator were in every way directed and controlled by Spotless, so that there was evidence which entitles me to infer that the decision, whenever it was made, to do whatever was done by Spotless Laundry in bringing white spirit onto the Spotless land and by using it, was the decision of Spotless itself. This decision was an act which brought into existence the circumstances of which spillage and leakage were the normal or natural consequence. Accordingly, Spotless caused this consequence. And I was urged to reach this conclusion the more readily because the Spotless Parties led no evidence upon these matters.
466 I have examined the evidence as to the involvement of the Spotless Parties in the activities of its subsidiary Spotless Laundry. I will not rehearse it here. It is sufficient that I record my conclusion that the control of Spotless was absolute and that it exercised this control widely; it made decisions as to operational matters, directly or through its budgeting decisions or through the involvement of its own senior managers and employees in the operation of the subsidiaries and their plant including the maintenance of the plant. While I do not conclude that every delivery of white spirit to the Barkly Street factory was the result of a specific decision by Spotless, I find that orders for this chemical were placed with suppliers, that deliveries were made and paid for and that it was used in the laundry and dry cleaning operations on the Spotless land - all of these matters were the direct consequence of the decisions by Spotless, and that the implementation of those decisions was reported to, and monitored by, the parent company.
467 I therefore conclude that Spotless caused white spirit to be brought upon the Spotless land in 1965 and thereafter and that it caused white spirit to be stored there and used in the dry cleaning operations conducted there by its subsidiary Spotless Laundry. And, having concluded that a normal consequence of this state of affairs is that the chemical will leak and spill into the soil, I conclude therefore that Spotless caused this white spirit pollution.
468 The position with respect to PCE is much more straightforward. The decision to use the ALMI machine and PCE was that of the Spotless board for which Spotless claims credit in its report to shareholders, and I accept that this was the case. This decision involved the installation and operation of the ALMI machine on the Spotless land from about mid-1977 to about September 1978 and on the Premier land from about September 1978 to about June 1979. It involved, inevitably, that PCE was delivered to and stored on site for use with the machine.
469 I conclude from this that the decisions in 1977 or thereabouts to establish the new dry cleaning activities at Barkly Street were made at the level of the ultimate holding company. I conclude that Spotless caused the PCE to be brought onto the Spotless land and later onto the Premier land and to be stored and used there. I conclude also, from the fact that leakage and spillage were the normal consequence of this, that Spotless caused the PCE pollution on each site.
470 Having regard to the evidence of the place of Spotless Services in the Spotless Group structure and to its role in the activities of the subsidiaries, I do not find that the decisions which I have referred to were its decisions, except insofar as it made decisions to implement those of the ultimate holding company. I do not find that Spotless Services caused the PCE pollution during the period that it was the parent of the operator.
471 These conclusions mean that the Court may order that Spotless make compensation to North Suburban and Premier as occupiers of the Spotless land and the Premier land respectively pursuant to s. 62A(2). I will make such an order. The amount of this compensation is the amount of costs incurred by each of them complying with the clean up notices. I shall return to this.[272]
472 This claim is brought in VCAT. The reasons which follow are the reasons for my decision upon this claim given as a Tribunal member.
473 Just as the Environment Protection Act defines pollutants in terms of pollution of water,[273] the air[274] and land[275] each with its own part in the statute, so, too, the Water Act contains its own definition of pollute[276] and, in s. 15, its own compensation regime. These provisions are in the following terms:
(a) less fit for any beneficial purpose for which it is, or may reasonably be expected to be, used; or
(i) the health, welfare or safety of human beings; or
(ii) animals, birds, wildlife, fish or other aquatic life; or
(c) pollutes water, whether or not authorised to do so; or
and by that act causes injury to any other person or damage to the property (whether real or personal) of any other person or causes any other person to suffer economic loss is liable to pay damages to that other person in respect of that injury or damage.
474 It will be noted that liability attaches to a person who pollutes water, not a person who causes or permits pollution to occur, as is the case in s. 62A. This is the expression which, in the context of atmospheric pollution, was considered in the Window case.[277] Furthermore, the liability is to pay damages for damage to property of the claimant or economic loss of the claimant.
475 The first point taken on behalf of the Spotless Parties was that provisions of s. 15 should be read down to the extent that s. 62A of the Environmental Protection Act provides a remedy. The submission was that the particular compensatory regime conferred by s. 62A should prevail over the more general provisions of s. 15.
476 There is no substance in this threshold point. The two compensation regimes operate in different situations. Section 62A may be seen as passing the burden of compliance with EPA requirements. It is probable, but not inevitable, that this burden might be seen as damages for loss caused by the polluting act. But s. 62A is wider, since it fixes liability on a broader class of persons and, further, since the amount of compensation is determined by different criteria. Moreover, it would be very improbable that Parliament intended the two remedies to be true alternatives; this would be productive of sterile debate as to whether a particular claim under one provision was competent. And these jurisdictional issues would carry the added difficulty that a claimant is required in each case to bring the claim in a different forum.
477 The factual preconditions of the Premier claim under s. 15 are the following:
(c) the act of pollution caused the claimant to suffer economic loss; and
478 The Spotless Parties challenged the Premier claim at each of these levels. The pollution alleged is the pollution of the groundwater in the perched watertable and that in the deeper Silurian watertable. The pollutants are, of course, white spirit and PCE.
479 The conclusions which I have reached are that there is PCE in its aqueous phase in the groundwater in the northern parts of both sites. This is in the perched aquifer and in the deeper Silurian aquifer.[278] This groundwater is affected by the inferred presence of DNAPL in the areas identified by Professor Kueper. There is also white spirit in the deep aquifer on both sites[279] in the areas identified by Professor Kueper. The presence of these chemicals in the groundwater means that its physical and chemical properties have been altered. The definition of pollute, however, requires proof that this alteration makes the water less fit for a beneficial purpose, or harmful or potentially harmful in terms of parts (a) and (b) of the definition, respectively. Turning first to part (a), beneficial purpose is not defined in the Water Act. It may be that the intention was to call up an analogous concept which is to be found in the Environment Protection Act, but this concept is there called "beneficial use". There seems to be no warrant to assume that the Water Act in 1989 had in mind to pick up the expression "beneficial use" which had been defined in 1970 in the Environment Protection Act. The parties, however, appeared to treat the two concepts as the same and I shall proceed on that basis without expressing any concluded view on this matter.
480 The expression "beneficial use" in s. 4 of the Environment Protection Act[280] calls up the provisions of the SEPPs. SEPP (groundwater) was not gazetted until 17 December 1997, a fact which intrudes a further complication in a case such as the present where the suggested acts of pollution occurred a decade or more previously.
481 I have referred to the relevant provisions of SEPP (groundwater) and expressed my impression that it is difficult to see that the beneficial uses there specified are jeopardised by the presence of PCE or white spirit in the sites presently under consideration.[281] As to the position in the future, no witness has expressed a view as to the potential jeopardy. The principal area of concern among the various beneficial purposes referred to in the SEPP appears to be building and structures. It is not altogether clear how it may be that polluted groundwater might be less fit for building and structures. If, as appears to be the case with the PCE contamination, there is a release of noxious vapours, this fact may bear upon the question. But it is not necessary to venture further because the evidence shows that PCE in its vapour phase is considered harmful and these vapours have been detected on the heavily contaminated north-east corner of the Premier land. The requirements of part (b) of the definition of "pollute" in the Water Act are satisfied.
482 On the other hand, the thrust of the evidence which I accept is that the groundwater containing white spirit in its present location is not presently harmful or less fit for any of the SEPP (groundwater) beneficial purposes. As to whether it is potentially harmful in terms of part (b) of the definition, the matter is not so clear.
483 Important evidence in this regard was given by Stuart James McConnell, the director of Science and Technology at the EPA. He said that he was aware of a body of expert opinion that the deep groundwater on the subject sites, contaminated as it is with white spirit, does not pose a health risk. A considerable part of his cross-examination and part of the evidence at trial of other witnesses was directed to cl. 18 of SEPP (groundwater). Under this provision, NAPL in groundwater must be removed "unless the [EPA] is satisfied that there is no unacceptable risk posed to any beneficial use by the non-aqueous phase liquid". The evidence of Mr McConnell showed that the EPA has not been asked to form a view about this and that it has not yet done so.
484 In terms of my current concern, and assuming that the SEPP beneficial uses are to be adopted for the purposes of the Water Act, this debate is of no significance. I am not concerned with clean up obligations; rather with the compensation obligations of the polluter. A compensation obligation may arise where there is pollution of the groundwater, as defined, whether or not the EPA exercises its power under cl. 18.
485 The deep groundwater contaminated with white spirit in its present location is not now used for any purpose; nor is it reasonably expected to be used for any purpose. Mention was made of the changing environment which might, in the future, mean that groundwater which would not be considered for any use now might in the future, perhaps the distant future, be called upon. That may be so. I am, however, concerned to determine whether there are purposes for which the contaminated groundwater "may reasonably be expected to be used". I am unable to be so satisfied. It follows that the contamination of the groundwater in the deep Silurian aquifer by white spirit is not pollution within part (a) of the statutory definition.
486 Part (b) of the definition of "pollute" raises a rather different question. This is whether the water, as contaminated, is harmful or potentially harmful to the health, welfare or safety of human beings or other life there specified. The question here is whether the water is harmful or potentially harmful. I am not required to consider the possibility or expectation that some person might in fact come in contact with it and suffer harm. It is sufficient if the water be harmful. So expressed, the question admits only one answer. The water in the deep aquifer is harmful or potentially harmful.
487 I conclude, therefore, that the introduction of PCE and white spirit into the groundwater on both sites is pollution within the meaning of the Water Act.
488 This raises a difficulty which I have considered in the part of this judgment which is concerned with corporate identity. I have concluded that, in each case, the holding company has no vicarious or derivative liability for the acts of the operating companies. It follows that, even if the operating companies performed the polluting act, none of the holding companies is a person who polluted the groundwater. The terminology of the Water Act differs in this respect from that of the Environment Protection Act. At this level, the water claim against Spotless and Spotless Services must fail.
489 With respect to Ensign Aust, the claim must also fail because I do not find that its activities in the period in which it was the operator polluted the water. No use of PCE has been proved in this period otherwise than as a component of Solex. I have concluded that this is not a source of the present PCE pollution of the Premier land.[282] There is no basis for me to conclude that Ensign Australia used or stored white spirit during this period otherwise, perhaps, than a small quantity for spotting. The s. 15 claim against this party must also fail.
490 The Water Act s. 19(9) requires the Tribunal to apply to questions of causation and remoteness of damage in this claim the same tests as would apply in an action based on negligence. I approach this task on the assumption, contrary to my conclusion, that the acts of the Spotless Parties polluted the water on or in the Premier land. I am here concerned with acts which produced a release into the soil of white spirit on the Spotless land which then migrated to the Premier land and acts of pollution which produced a release of PCE into the soil of the Spotless land which also migrated to the Premier land and acts of pollution which produced a release of PCE into the soil of the Premier land itself. In each case, the groundwater in the Premier land is polluted.
491 Applying the ordinary causation principles laid down by the High Court for negligence cases, it must follow that these acts logically led to the existing state of pollution of the Premier land. The consequence of this is that Premier, as owner of the land, suffered actual and future economic loss. The actual loss must be the diminution of the value of the land upon discovery of the pollution. The land which had been bought for residential development could not now be used for this purpose or, at least without incurring remediation costs.[283]
492 This raises the practical difficulty for Premier that, when it made the purchase, it agreed to buy an uncontaminated site; it was for Babka to obtain a certificate of environmental audit. At the time of purchase its only loss by reason of the latent pollution would have been the delay to the project while Babka carried out remediation or, perhaps, a loss of the purchase itself if remediation were not undertaken and the project was abandoned or Premier determined the contract. There may be other possibilities but none of them mean that Premier would face the whole cost of remediation and, certainly, not the cost of carrying it out on a site which had been partly developed.
493 As a consequence of the sale of the Premier land in the course of the trial, the nature of this economic loss has in part changed. Premier has no longer the prospect of carrying out remediation, but it has suffered a capital loss in selling the land in a polluted condition. The losses in the nature of holding costs and work done to date for remediation still remain.
494 But the principle remains the same. Premier's economic loss, or most of it, has been due to its own decision to relieve Babka of the burden of delivering up a clean site. Leaving aside how this decision is to be characterised, it remains the fact that, had it not been made there would have been no economic loss. In that sense, the pollution has not caused the loss. I bear in mind in this context that, although I am required to apply principles of the law of negligence, they must be applied in circumstances where the palliative influences of contributory negligence and apportionment of liability among concurrent wrongdoers have no role to play. The s. 15 claim must nevertheless fail at this point also.
495 I shall consider in part 18 the question of measure of damages in the event that this decision should not be sustained.
496 With a grandiloquent gesture that harked back to his opening flourish on 5 October 2006, senior counsel for North Suburban, a little over five months later,[284] dismissed the Premier claims against his client and invited me to do the same: "It was a hopeless case when first brought, it was a hopeless case when opened by Mr. Burnside . . . The claim has not improved over the course of this trial." And he proposed, as he handed up a 31 page written submission, not to waste the Court's time with oral submissions. And having considered what these submissions contained and what was said on behalf of Premier's claims, and the evidence which has been given - having considered all of these things, I agree. That is, I agree that the claim should be dismissed.
497 I shall now essay to set out my reasons for this conclusion with as much brevity but with, I hope, a little more moderation.
498 The Premier claims against North Suburban are put on four bases:
(1) From or about 2 February 1994 or from about 5 January 1995 North Suburban, knew or ought to have known of the white spirit nuisance and the PCE nuisance and failed to abate them; it continued the nuisances.[285]
(3) North Suburban, as a person which caused or permitted pollution to occur, is liable pursuant to s. 62A of the Environment Protection Act to compensate Premier for expenses incurred in complying with the EPA clean up notices. This claim is made in the litigation and in the Premier VCAT proceeding.
499 North Suburban is, of course, the owner of the Spotless land. The relevant chronology concerning this land after it was vacated by the Spotless Group is as follows:
McMullin Nominees leased the land to a third party which did not use it for dry cleaning or laundry purposes and did not engage in any activity involving use of the contaminants.
The Spotless Group vacated the land and there were discussions regarding its sale.
Burkett obtains a preliminary site assessment from Petrotest which discloses an area of contamination at the north part of the land.
North Suburban buys the land from Burkett at a time when it was zoned for industrial purposes. The s. 32 statement provided to North Suburban included the Petrotest report. The building on the land is refurbished and used as a textile warehouse.
North Suburban considers seeking the re-zoning of the land with a view to its development.
North Suburban is advised of the possible existence of PCE and white spirit contamination on the land.
500 This claim is based upon an assertion that North Suburban has, since it commenced occupation of the Spotless land in January 1995, continued the nuisances. Liability for this kind of nuisance arises where the occupier has actual or constructive notice of the existence of the nuisance and fails within a reasonable time to take reasonable steps to remedy or abate it.[288]
501 In order to make out its claim, therefore, Premier must prove that, since January 1995, or perhaps since March 2003, the contaminants on the Spotless land have migrated to the Premier land and that North Suburban knew or ought to have known this.
502 There is no doubt that, in late March 2003, David Jeffrey Phillip Knight, a director of North Suburban, became aware that the Spotless land was contaminated. At a meeting with Mr Simmonds and Dr Drew, the environmental auditor of the Premier land at the time, this was explained to him and he was told that they believed that the contamination on the Premier land had come from the Spotless land.
503 I have no doubt that this meeting took place and that the discussion included a mention of the fact that the likely cause of the contamination, on the Spotless land, was the dry cleaning operations which had been conducted those some decades previously. These operations and their possible implications were known to Dr Drew and Mr Knight at that time.
504 There is equally no doubt that North Suburban has, since early 2003, carried out its own investigations into its own contamination problem using a succession of environmental consultants and that, apart from the removal of UST2 in accordance with a direction of the EPA, it has not undertaken any remediation. It has not taken any step to stop the migration of the contaminants to the Premier land, if indeed there was any migration at that time.
505 At the time of purchase in July 1994, Mr Knight read the soil contamination assessment prepared by Petrotest for Burkett in February of that year. The Petrotest report shows that eight bores were sunk to depths of up to 4.5m below the slab on ground. At three bore holes Petrotest reported a noticeable odour of organic solvents, such as those used in dry cleaning fluids. These were BH2 (grid L3, close to UST2), BH5 (grid M8) and BH6 (grid N4). The last of these bores was taken down to 3m and a sample from the soil was taken at 2.5 - 3m depth. It was in this bore hole that the odour was strongest but it appeared to diminish at approximately 2.5m depth. BH6 was located in the vicinity of the waste pits at the rear of the Spotless land, and in the vicinity of ITE bore holes MWITE 5 and MWITE 6 which recorded PCE, TCE, DCE and vinyl chloride in both the perched aquifer and the permanent aquifer.[289] A sample taken at one metre depth in this bore hole, BH6, also recorded low levels of TCE.
506 The conclusions contained in the report are remarkable in the light of the information which later investigations have disclosed. Given the criticisms from so many witnesses about the inadequacies of the Kilpatrick testing program carried out in December 1999, it is worth noting that no bores were sunk in the vicinity of UST6 and UST7, which were known to Petrotest to have been used for the storage of white spirit. BH1 was sunk close to UST1 and UST3. UST3 was then known to Petrotest to have been used for the storage of used white spirit.[290] Not withstanding this, the samples taken from the BH1 were tested for heavy metals only. For present purposes, however, it is sufficient that the Petrotest investigations in 1994 produced no findings suggestive of severe PCE or white spirit contamination. Indeed, the first conclusion expressed in part 9 of the report is in these terms:
The results of this investigation show detectible levels of potential contaminants in most samples tested. However, most levels were below the EPA guideline limits for further investigation and would effectively comply with the criteria for residential use.
However, from the results of this investigation, being limited in extent, it is not possible to exclude the presence of additional pockets of high contamination in the fill beneath the site.
507 The principal area of concern reported was the presence of heavy metal contamination, lead and copper, in BH6. Otherwise, the subsurface was reported to comply with soil quality criteria for industrial use. The recommendations in part 10 conclude with the following:
Considering the site-specific subsurface conditions and the continued industrial use of the land, the health and environmental risks associated with the "hot spot" are considered negligible, there is no immediate requirement for clean up.
However, should any future alterations to the building, concrete removal or redevelopment occur, this contamination should be taken into account and, as deemed necessary, be investigated further, and or/remediated.
508 In my opinion, the information there available to Mr Knight provided no basis for him, or a reasonable person in his position, to be aware of the contamination the subject of present concern. I accept his evidence that, prior to March 2003, he was unaware of this contamination. Moreover, he did not know or foresee the possibility that contaminants were or would be migrating to the Premier land. Nor is there any basis for fixing him with constructive knowledge of this.
509 Counsel for North Suburban also contended that I should not be satisfied that the contaminants which were found to be on the Premier land in 2003 and thereafter emanated from the Spotless land. I am satisfied for reasons set out above[291] that the source of the white spirit was in fact the Spotless land. With respect to the PCE contamination, I have found that it emanated from leakage or spillage from, or from an activity associated with, the ALMI machine both on the Spotless land in 1977-8 and on the Premier land in 1978-9.[292]
510 The further question is whether the nuisance was in fact continuing during the period since North Suburban became occupier of the Spotless land. This is a difficult question because the possibility of the release of contaminants on the Spotless land from the Spotless operations ceased 25 or 26 years before North Suburban became the occupier of that land. I have found that the white spirit emanated from a location at or in the vicinity of UST2.[293] It appears from the analysis of the residue in this tank, from the fact that this chemical was not used for dry cleaning operations after 1977 and from the fact that its use in the laundry operation thereafter was minimal and, in any event ceased in 1989, that it is probable that the tank was not used as a white spirit storage tank after 1989 at the latest. I am not satisfied that any leakage of white spirit from this source which occurred after that date made its way onto the Premier land. I am mindful that the evidence that the white spirit was located in the deep or Silurian aquifer and the underlying bedrock whose relative impermeability meant that the white spirit in its NAPL phase and its aqueous phase was relatively static. The presence today of this contaminant on the Premier land is likely to have been the result of migration many years previously. The position with respect to PCE in the perched aquifer is to the same effect. The evidence of the mobility of PCE or its lack of mobility in NAPL phase and the long period of time since its use ceased, make it very unlikely that any of this contaminant now affecting the Premier land made its way across the boundary during the period of occupancy of North Suburban.
511 In short, I reject Premier's continuing nuisance claim because North Suburban did not have the required knowledge until March 2003 and because I am not satisfied that the contaminants were still migrating from the Spotless land after that time.
512 These findings also put paid to the Premier claim in negligence, about which little was said on behalf of Premier. Let it be accepted, without my deciding it, that North Suburban owed a duty of care to its adjoining land owner, as alleged, to take reasonable steps with respect to the underground storage tanks and the storage of white spirit in those tanks, to investigate and remove dry cleaning chemicals from the Spotless land and to investigate and eliminate the risk that those chemicals might migrate onto the Premier land.[294]
513 The essential feature of such a duty must be that it is owed with respect to a condition of which North Suburban was aware or ought to be aware. This feature is not present in this case.
514 The position, as I find it, is that North Suburban became aware of the contamination on the Spotless land which might affect the Premier land only after Premier itself became aware of it. To charge North Suburban with negligence for failing to take steps to prevent further migration of the contaminants ignores entirely the fact that Premier itself might have taken steps to protect its own land from this danger. After March 2003 it was not vulnerable to the risk of contamination from this source.
515 I have already discussed aspects of this cause of action as it affects Premier's claim against the Spotless Parties.[295]
516 The central element in this cause of action is that North Suburban caused the pollution now present on the Premier land or permitted it to occur.
517 It cannot be correct to say that North Suburban caused the pollution. The case pleaded was that it knew or ought to have known that the Spotless land was the source of the contaminants on the Premier land and, presumably, that it did nothing to stop the continuance of that state of affairs.[296]
518 The allegation that North Suburban permitted the pollution to occur rests upon the proof that it had actual knowledge that the contaminants were migrating to the Premier land. I have found that North Suburban had no such knowledge, at least until March 2003. By that date, and certainly by 1 May 2003, there was a basis for a belief that this might be the case. It then set about making its own enquiries. I do not find that the contaminants now on the Premier land came there after this time. The failure of North Suburban to then take steps such as the erection of a barrier to protect the Premier land was not such as to amount to permitting the migration to occur. This claim, too, must fail.
519 About this claim, too, little was said by counsel on behalf of Premier. I have already dealt with aspects of a claim of this kind in my consideration of the like Premier claims against the Spotless Parties.[297]
520 The fundamental proof required to make out this claim is that North Suburban has polluted water. The allegation is that North Suburban polluted the deep aquifer with PCE and white spirit and the shallow aquifer with PCE on a number of dates from its acquisition of the Spotless land, in July 1994, and from March or May 2003 when it received notice of the contamination, and from 18 February 2004 when it received its first EPA clean up notice.
521 This raises the question whether a person can pollute water by failing to prevent pollution which has been caused by others. It was said on behalf of North Suburban that "pollute" involves a positive act[298] and that this is confirmed by the further provision "and by that act causes injury ..." in s. 15(1).
522 Reliance was also placed upon the differing terminology between this section and s. 62A(i)(b) of the Environment Protection Act which draws a distinction between a person who has caused pollution and one who has permitted pollution to occur. This contention, moreover, derives some support from the fact that the expression in s. 62A(i)(b) "or permitted", was introduced into the Act by an amendment in 1989,[299] in the same year as the amendment of the Water Act.[300]
523 Given that I did not have the assistance of any submission on behalf of Premier on this matter and that I did not have the opportunity to explore the propositions in oral argument with counsel for North Suburban, I should prefer not to express any concluded view upon this question. It is not necessary that I do so given my findings that North Suburban did not cause or permit that pollution to occur.
524 Accordingly, this, and all of the claims by Premier against North Suburban in the litigation and in the Premier VCAT proceeding must fail.
525 The case against Kilpatrick turned upon the report which it prepared for Babka in January 2000 and upon its letter of 14 September 2001 written following its visual inspection of the Premier land after excavation had been complete.
526 The general circumstances attending the purchase of the Spotless land by Premier are dealt with elsewhere.[301] It will be recalled that, under the contract note dated 11 November 1999, the Premier land was to be rezoned to permit residential development prior to settlement and the vendor, Babka, was to provide a certificate of environmental audit within 30 days after rezoning. The town planning implications of these obligations are described elsewhere.[302] Broadly speaking, these obligations remained with Babka, at least until the rezoning was gazetted on 4 May 2000.
527 The Kilpatrick report which is the subject of these claims was prepared and delivered to Babka in the first weeks of January 2000. The Kilpatrick invoice is dated 17 January 2000. Little is known about the circumstances of its production for neither Mr Skoullos of Babka nor Steven Zmack of Kilpatrick, who appears to have been responsible for the report, was called to give evidence. The involvement of Kilpatrick was the consequence of a contact by Mr Joakim, the selling agent. He was, of course, aware that the sale note of 10 November 1999 contained special condition (2) which obliged Babka to obtain a certificate of environmental audit of the Premier land.[303] He recalled that somebody suggested to him that he contact Kilpatrick and that he did so. The person at Kilpatrick with whom he spoke was not identified although, surprisingly, he did recall that it was Mr Evans who requested that a report be obtained. Mr Joakim said that he told the Kilpatrick representative that "we needed to get a report relating to the level of contamination for an industrial property that was being sold and might be rezoned for residential purposes". He emphasised under cross-examination that, notwithstanding that he had no knowledge of the existence of any contamination, what was required from Kilpatrick was a report as to the level of contamination on the site.
528 There is no evidence of any further communication at this time between Mr Joakim and Kilpatrick. Mr Evans said he never spoke with anyone from Kilpatrick at any stage.
529 Mr Zmack on 1 December 1999, then, submitted to Mr Skoullos a proposal to undertake "an environmental soil contamination assessment" of the Premier land for $4,930 and on 9 December a job sheet was raised for the work. On this job sheet somebody has written in the area entitled "work required" the following, "site contamination assessment - info on off-site disposal reqd". The site work was carried out the following day, 10 December 1999.
530 Given that the obligation of Babka was to produce a certificate of environmental audit, it may be supposed that the retainer of Kilpatrick in early December would be for the purpose of taking the first step in this process by obtaining an environmental assessment of the site. What is curious is that a careful reading of the report which was produced suggests that it was prepared for an entirely different purpose, namely, to assess the soil which would be excavated and disposed off site, as the note on the job sheet records. It is surprising that Babka would be interested in the condition of this spoil. This was, after all, Premier's responsibility as part of the construction process. It was not suggested to Mr Evans or Mr Joakim that the terms of the Kilpatrick retainer were varied by them and I make no such finding. Furthermore, notwithstanding that Babka had, until late June 2000, an obligation to provide Premier with a certificate of environmental audit shortly after the rezoning was complete, an event which was expected to occur in the early months of 2000, Babka took no further steps towards the obtaining of such a certificate. Nor, if they were aware of this inactivity, does it appear that Mr Evans or Mr Simmonds were concerned about this. There is no evidence as to why and in what circumstances Mr Joakim obtained a copy of the Kilpatrick report and delivered it to Premier in late February 2000. Mr Joakim himself said that he did not recall.
531 All there is, then, is the fact that the report was delivered to Mr Evans by Mr Joakim soon after 21 February 2000[304] and that the two men discussed it in general terms. Mr Joakim said that he read in the report that the contamination was low and that he told Mr Evans that what it said was not really damaging. He told me, too, that he added that Premier should make its own assumption as to whether it was good or bad. Mr Evans' recollection was not dissimilar.
532 The case of Premier is that this report was prepared negligently[305] and that it contained representations which were misleading and deceptive in contravention of s. 52 of the Trade Practices Act.
533 The first question is whether Kilpatrick owed a duty of care to Premier in its preparation of the report. It is at this point that the lack of firm evidence of the circumstances attending the production of the report becomes important. Insofar as it is relevant, no witness was called to speak of what use Kilpatrick foresaw would or might be made of its report or as to any qualification or limitation upon its retainer. Indeed, the terms of its retainer itself are not clear: the Kilpatrick retainer proposal letter of 1 December which speaks of Kilpatrick "undertaking an environmental soil contamination assessment" of the site appears to contemplate a different and perhaps more comprehensive investigative task than that of merely assessing soil for disposal purposes. The letter included the following statement:
The comprehensive assessment programme outlined above is consistent with the requirements of a Statutory Environmental Audit, though an additional allowance to procure the services of an Environmental (Contaminated Site) Auditor would be required.
But there is no evidence that this letter was ever seen by any person other than, perhaps, its addressee, Mr Skoullos.
534 The negligence claim against Kilpatrick is one for pure economic loss caused by a negligent misstatement. In paragraph 100 of its statement of claim, Premier sets out a number of matters which Kilpatrick knew, or ought to have known, and which provide the basis for a duty of care. First and foremost among these is that the Kilpatrick report of January 2000 would be relied upon by the purchaser and developer of the Premier land when deciding whether the land was suitable for residential development, whether it was not contaminated to an unacceptable level, and whether, as a consequence, to purchase the land.[306]
535 While the legal requirements for liability in negligence for an erroneous unsolicited statement which causes economic loss have evolved over the past few decades, it is still possible to say with some confidence that foreseeability of harm is a necessary ingredient. The matter was considered by the High Court in 1997 in Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (Reg).[307]
The uniform course of authority shows that mere foreseeability of the possibility that a statement made or advice given by A to B might be communicated to a class of which C is a member and that C might enter into some transaction as the result thereof and suffer financial loss in that transaction is not sufficient to impose on A a duty of care owed to C in the making of the statement or the giving of the advice. In some situations, a plaintiff who has suffered pure economic loss by entering into a transaction in reliance on a statement made or advice given by a defendant may be entitled to recover without proving that the plaintiff sought the information and advice.[308] But, in every case, it is necessary for the plaintiff to allege and prove that the defendant knew or ought reasonably to have known that the information or advice would be communicated to the plaintiff, either individually or as a member of an identified class, that the information or advice would be so communicated for a purpose that would be very likely to lead the plaintiff to enter into a transaction of the kind that the plaintiff does enter into and that it would be very likely that the plaintiff would enter into such a transaction in reliance on the information or advice and thereby risk the incurring of economic loss if the statement should be untrue or the advice should be unsound. If any of these elements be wanting, the plaintiff fails to establish that the defendant owed the plaintiff a duty to use reasonable care in making the statement or giving the advice.[309]
Toohey and Gaudron JJ approached the question in terms of reliance by the representee or an assumption of risk by the representor:
The decided cases also acknowledge two other situations which may result in liability for economic loss resulting from negligent statements. The law has not yet developed to a point permitting precise definition or description of those situations. However, the cases acknowledge that in some situations there may be liability even though the statement in question is neither made with the intention that it should be acted upon nor pursuant to a professional or contractual obligation. And it seems that, in those situations, or at least some of them, liability may arise whether or not the recipient requested the information or advice. Secondly, the cases allow that there may be liability where, as here and as in Hedley Byrne, the information is conveyed or becomes available to some person other than the person who requested it, whether or not the original request arose out of a professional or contractual relationship. It is convenient to refer to these situations compendiously as situations involving the voluntary provision of information or advice.
The decided cases do not identify precisely what it is that results in liability for economic loss suffered in consequence of the voluntary provision of information or advice. However, common sense requires the conclusion that a special relationship of proximity marked either by reliance or by the assumption of responsibility does not arise unless the person providing the information or advice has some special expertise or knowledge, or some special means of acquiring information which is not available to the recipient. Moreover, ordinary principles require that the relationship does not arise unless it is reasonable for the recipient to act on that information or advice without further inquiry. Similarly, ordinary principles require that it be reasonable for the recipient to act upon it for the purpose for which it is used. That is not to say that a special relationship of proximity exists if these conditions are satisfied. Rather, it is to say that the relationship does not arise unless they are.[310]
537 McHugh J also accepted that, in such a case, there must be an assumption of responsibility to those persons who are members of the class of persons whom the representor knows or ought to know will rely upon the statement[311] or some intention on the part of the representor to induce them to rely upon the statement.[312]
538 Very recently the Court of Appeal in Victoria has set out its understanding of these principles in the following passage:
The categories of case in which a duty of care with respect to pure economic loss is to be found are properly to be seen as special. Foreseeability of loss, and an unbroken chain of causation, are necessary elements, but by themselves are not sufficient. An additional element which must be present has been variously described as involving one or more of known reliance or dependence of the plaintiff; the assumption of responsibility by the defendant; or the control exercised, or exercisable, by the defendant over the circumstances affecting the plaintiffs interests. What ultimately determines whether a duty of care arises is the character of the relationship between the plaintiff and defendant. Matters such as those which we have just mentioned, and others, bear upon the resolution of that question in the particular circumstances of particular cases; though not all of those matters will be at the forefront in every case. The question to be answered is whether, having regard to the salient features of the particular case, the connection between the parties is sufficiently close - though not necessarily physically close - as to give rise to a duty of care. When the defendants acts or omissions arise in connection with the discharge of statutory duties or the performance of statutory functions, the statutory framework is itself a salient feature to which consideration must be given. [313]
539 The evidence shows that there were meetings and discussions prior to 1 December 1999 between Mr Skoullos of Babka and Mr Zmack of Kilpatrick. There was also a discussion between Kilpatrick and Mr Joakim but nothing is known of what was discussed. Absent any Kilpatrick witness, there is no direct evidence as to its state of mind; for this I must rely upon inference. Some clues can be gathered from the letter of 1 December and from the terms of the report itself. In drawing inferences from these facts, I was invited to approach the task in the light of the principle of Jones v Dunkel.[314] I accept this invitation. Mr Zmack is within the Kilpatrick camp and might be expected to have given evidence, given the way the trial was conducted. I infer that such evidence as he might have given would not have assisted the cause of Kilpatrick. Mr Skoullos was opened by counsel for Kilpatrick as being on its witness list, but he was not called. I draw the like inference with respect to his absence.
540 I therefore draw the following conclusions as to the state of mind of Kilpatrick when the report was prepared by it:
541 The report itself recites, as a fact present in the mind of Kilpatrick, that the Premier land "may be redeveloped in the future to accommodate residential premises, solely or within a mixed use setting". The report also draws attention to the fact that the proposed development "would require the provision of a certificate or statement of environmental audit to be issued for the site, with the preparation of a planning scheme amendment". It contemplates, too, that "the initial findings [presumably findings in the report] may be incorporated in a subsequent assessment".
542 I return, then, to consider the pleaded allegations as to what Kilpatrick knew, or ought to have known, when it carried out its field tests and prepared its report. My summary of the background to the purchase of the Premier land shows that by January 2000, Premier had decided to purchase the land and had bound itself to do so, subject to the terms of the contract of sale; it had decided to develop the land for residential purposes and it suspected that there was some contamination on the land. These decisions had been made by 10 November 1999. It cannot, therefore, be said that Kilpatrick in December 1999 or January 2000 foresaw that these direct decisions, which had already been made, would be made in the future in reliance upon the report it was then preparing. The allegations pleaded in paragraphs 100(a), (b) and (c) have not been made out.
543 It may be said, however, that Kilpatrick, at that time, foresaw or ought to have foreseen that its report might affect a decision by Premier to withdraw from the Babka contract if that was an available option or to modify or abandon its right to insist upon the vendor obtaining a certificate of environmental audit. The difficulty with such a contention, however, is that there is no evidence that Kilpatrick then knew or ought to have known the terms of the Premier purchase or anything about the dealings between Premier and Babka between December 1999 and June 2000.
544 Applying these principles to the facts as I find them, it is clear that Premier has not demonstrated an acceptance of responsibility in Kilpatrick at the relevant time or any intention on its part that a purchaser should act upon its January report as Premier alleges.
545 Before I leave this topic, I should record my conclusion that there is also absent another element which might give rise to a duty of care, vulnerability. It is clear that, far from being vulnerable in the sense that this expression is used in this area of the law,[315] Premier was not, at the time the Kilpatrick report was prepared, at any risk in the event that Kilpatrick failed to discover and report the contamination of the Premier land which then existed. Under its contract with Babka, this was the vendor's problem.
546 It follows that this cause of action must fail at this first point. I find that Kilpatrick did not owe to Premier a duty of care in the performance of its site investigations or its January 2000 report.
547 This conclusion means that I need not pursue this cause of action further. Nevertheless, I will briefly mention my views upon the other aspects of this claim.
548 The question of breach of duty of care was contested by Kilpatrick on the basis that the purport of the report was as to the quality of the soil which was to be removed in the course of the excavation for the car park. Kilpatrick accepted that, if the report was, in truth, a site assessment for the purposes of an environmental audit, the report fell short of what was required.
549 Notable among its inadequacies was the failure to carry out any investigation of the history of the usage of the Premier land and the lands surrounding it. Such an investigation would have disclosed that dry cleaning activities had been carried out on both the Premier land and on the Spotless land adjoining it. The evidence showed that this would have alerted a competent and careful environmental engineer to the possibility that contamination from this source might affect the land.
550 Furthermore, the site investigation was inadequate. Nine soil tests were undertaken by hand auger of which only four were taken to a depth greater than 1m below the surface of the slab which covered most of the site and none below 1.6m. No explanation for this was forthcoming. Accepting for the moment that the purpose of the investigation was to form a view of the condition of the soil to be removed in the course of excavation of the basement, this would have required excavation to 2m or more below the surface. It was suggested that there were difficulties of access but I am not satisfied that this was the case. A truck-mounted drill rig was on site but this was used to drive one only bore hole at about grid E6, and this to a depth of 3.3m only. The bore logs show that measurements of soil vapour were taken at each location using a photo ionisation detector (PID). Each sample produced a nil result. The environmental auditor, Peter John Ramsay, said that this, of itself, is suggestive of some malfunction or incorrect calibration of the detector. He also observed that it was not good practice to take only one sample per hole and to take samples at a relatively shallow depth. These deficiencies in the sampling appear from the bore logs.
551 The debate therefore shifted to the proper construction of the report. Should it be read as a report limited to the issues which counsel for Kilpatrick identified, namely, to the environmental quality of the spoil or was it to be read as an opinion as to the environmental quality of the soil on the site generally?
552 The report is a substantial document of some 40 pages and divided into 8 sections as well as an executive summary. Thirty of the pages are devoted to technical analysis and bore logs. It was prepared for Babka which was not known to be an organisation with technical resources; it was to be read by a layman.
553 In section 7 it is said that the report should be read in its entirety and that its application should be consistent only with its aims.
554 Turning to section 1, Introduction, the report describes the investigation upon which the report is based as a "soil contamination assessment" of the Premier land. It records Kilpatrick's understanding that the site is to be redeveloped for residential purposes or within a mixed use setting and that there may be excavation for an underground car park. Then follows what is described as the scope of the investigation which the reader might understand as an indication of its aims -
The scope of the soil contamination assessment was to:
I interpolate that the appropriate environmental guidelines mentioned in the second scope item are those set out in section 6 of the report. Then follows the next sentence:
It is anticipated that the projected development would require the provision of a Certificate or Statement of Environmental Audit to be issued for the site, with the preparation of a planning scheme amendment. A Certificate or Statement of Environmental Audit is outside the scope of works of this assessment, however, depending upon the proposed development, it is anticipated that the initial findings may be incorporated into a subsequent assessment.
555 The report also notes the presence of an underground storage tank towards the southwest corner of the site. This tank which is located as being at about grid D17 is evidently of interest as a likely source of contamination and was known to Mr Evans from his pre-purchase inspection.
556 Mr Evans said that he read the executive summary and the conclusions. As a layman this is not surprising and it would have been foreseen by the author that a lay reader would do so.
557 There, he read that "a total of fourteen soil samples were collected within 0.15-1.6m soil horizon". In fact the logs record only 11 and only one sample from below 1m.
558 The reader would have been comforted to read the low degree of contamination which is reported in the following passage which appears in the executive summary to the report:
Concentrations of contaminants indicative of low level contaminated soil were identified within the sandy fill samples collected at the following locations:
Based on results of analyses, it is recommended that the areas identified as hot spots (ie, AH2, AH6 and AH7) be excavated during the preliminary demolition works associated with the proposed redevelopment. Offsite disposal of such soil should be as low level contaminated soil in accordance with the Environment Protection (Prescribed Waste) Regulations 1998. Following excavations of these soils, subsequent samples should be collected from the base and walls of the excavations and validate soil remaining in-situ, prior to offsite disposal.
559 The reader would have been comforted to note, too, that no contamination was recorded at AH1 which was the auger hole at the site of the underground tank. They may have been a little less comfortable had they noted from the table on page 5 that one sample only, E9046, was taken from this location and at only 0.3-0.4m depth.[316] These concerns would not be diminished if the reader noted that the samples from AH7 and AH8 were also erroneously described as sample E9046 in the bore log. They may not have noticed that E9046 was not the subject of an individual sample analysis, but was analysed as a composite with samples from bore holes AH4 and AH9 as well as from borehole AH1, a practice which was criticised by Mr Ramsay.
560 Having had their concerns about contamination from the tank allayed, the reader would have noted that low level contamination was recorded in the samples from AH2, AH6, AH7 and AH9. If they had looked at the site plan they would have seen that AH2 was in the southeast corner (grid F18), that AH7 was towards the western boundary about halfway to the north boundary (grid C8) and that AH9 was at the northeast corner (grid H4), an area where serious contamination is now known to exist. They would have looked in vain for the location of AH6 because this was inadvertently omitted from the site map. In fact, it is now known that AH6 was erroneously called AH7 on this map so that AH6 is in truth at grid C8. AH7 is in fact to the east of this at about grid G8, in an area now known to be affected by white spirit in the Silurian aquifer.
561 The reader would then have known that low level contamination was recorded in only four samples out of 14 (or perhaps 11) samples collected. This contamination was primarily zinc in AH2, PAHs in AH6 and TRHs in AH7 and AH9. An examination at page 4 of the report would disclose that PAHs are polycyclic aromatic hydrocarbons and that TRHs are total recoverable hydrocarbons. Mr Evans said that he did not know what PAHs and TRHs were. I was told by the experts that TRHs include white spirit.
562 I should mention that the analysis of the samples in the report included an analysis for volatile organics which include PCE, TCE and vinyl chloride. The presence of none of these chemicals is reported, not even in AH9 where two samples were taken in the now known contaminated area. What is said on page 6 of the report is that PID field screening did not detect the presence of "volatile organic hydrocarbons". As to the sufficiency of the PID screening, I refer to paragraph 550 above.
563 These conclusions were repeated in paragraph 6.3 of the report which is the other part which Mr Evans said he read. The report was subjected to a careful and rigorous analysis by counsel for Kilpatrick with a view to demonstrating that, properly understood by a person with familiarity with geotechnical concepts and the relevant EPA guidelines and Australian standards for investigation, it was really nothing more than an assessment of the condition of the soil for removal in terms of the EPA standard for the classification of wastes to determine appropriate disposal methods. I accept that this demonstration has been successful.
564 I find, however, that a reasonably intelligent layman who has no information about the investigation other than what appears in the report would not so understand it. I find that such a person would understand it to be a report on the question whether the soil on site was contaminated. And, mindful that excavation was contemplated, the report on this question addressed the impact of the EPA off-site disposal requirements. This reader would, reasonably, not have understood the report to be limited to that matter. Such a reader may well not have been aware of the EPA processes for obtaining a certificate of environmental audit. Indeed, this was beyond the expertise of some of the expert planning witnesses, including Mr Keen. The reader may not have been aware that these processes will normally call for a preliminary site investigation/assessment, a detailed site investigation/assessment and for the involvement of an environmental assessment consultant and an environmental auditor. This reader would, however, reasonably have concluded that a professional environmental consultant would have assessed the soil on site and concluded that it was subject to low level contamination and that this assessment may be incorporated in a subsequent assessment which would be expected to lead to the issue of a certificate of environmental audit in due course.
565 If there be any doubt about this conclusion as to the impact of the report upon such a reader, it receives powerful support from the fact that so many persons involved in this project other than Mr Evans and Mr Simmonds, each with a different background and perspective, drew such a conclusion from it. I mention the estate agent Mr Joakim, the planner Mr Keen, the financiers, the Moreland Council officers in July 2000, the quantity surveyor Mr Vaughan[317] and the builder.[318]
566 The next point taken by Kilpatrick was the want of any reliance. It is self-evident that a plaintiff who claims to have suffered loss by a negligent statement must show a causal link between the two. This will normally be provided by proof of reliance upon the statement. In the case of the claim against Kilpatrick, Premier alleges that, in reliance upon the conclusion stated in the Kilpatrick report or upon the failure of the report to disclose the existence and nature of the contaminants:
(a) Premier settled the purchase of [the Premier land];
(b) Premier proceeded with the construction and development;
(c) Premier entered into financial arrangements for the purchase of the [Premier land] and the construction and development of the apartments and underground car parking spaces;
(d) Premier did not obtain a certificate or statement of environmental audit; and
(e) Premier waived special condition (4).[319]
567 It is necessary to mention again the significant dates relating to this aspect of the matter:
In essence, what is put on behalf of Premier is that, if the Kilpatrick report had disclosed the presence of significant contamination on the Premier land, Premier would have, in late February 2000, abandoned the project of developing that land for residential purposes; it would have withdrawn from the Babka contract of sale or sold the land off on an "as is" basis. That Premier did not pursue either of these courses was due to its reliance upon the comforting conclusions expressed in the Kilpatrick report.
568 I am not at all confident that these two propositions are truly two sides of the same coin. In the typical case of reliance upon a statement, the recipient either shifts position because of information received in the statement or does nothing; it persists with a decision already taken. In order to satisfy the requirement of reliance in the latter circumstance, the recipient must establish that the erroneous information acted upon its mind to produce the result that a change of course then under contemplation was not undertaken or that the failure to make any decision to change course was due to the information provided. In the present case Kilpatrick, acting without negligence, might have concluded in its report that the site was contaminated or it might have expressed the conclusion which is set out in the report but at the same time making it clear that no opinion was being expressed as to the broader issue of site contamination. In the latter event, which was not addressed by counsel for Premier in argument, I would conclude that Premier would not have been diverted from its pursuit of the residential development project. Nor am I satisfied that, in such an event, Premier would not have acted after February 2000 in the way that it did.
569 Counsel for Kilpatrick presented an analysis of the evidence as to the present condition of the Premier land with a view to demonstrating that, had the field work with respect to the ten bore holes been conducted as Premier's experts recommended, the sampling would not have disclosed the now known contamination. I do not propose to embark upon a consideration of this. It is sufficient for my purposes that counsel for Premier have not established that, had investigation been conducted carefully and the report expressed with care, their client would have been distracted from its decision to pursue the project.
570 In short, I am not satisfied that Premier acted to its detriment in reliance upon the Kilpatrick report.
571 The claim based on deceptive and misleading conduct depends upon two statements which are said to be contained in the Kilpatrick report:
(1) that Kilpatrick had undertaken a soil assessment of the Premier land in accordance with AS4482.1-1997; and
(2) that concentrations of contaminants indicative of low level contaminated soil were identified within the sandy samples collected at AH2, AH6, AH7 and AH9.[320]
These statements which were made in trade and commerce were false and Premier acted in reliance upon them and thereby suffered loss. Issue is joined by Kilpatrick with respect to most of these allegations.
572 First, it is said that the first statement is not to be found in the report. The report says, not that the assessment was undertaken in accordance with the standard but that the sampling was undertaken in accordance with the standard. The standard is referred to in three places in the report: the Introduction, and in paragraphs 3.1 and 4.2. These latter paragraphs appear under the headings, 3. Field Investigations, 3.1 Methodology, 4. Laboratory Analysis, and 4.2 Quality Assurance/Quality Control, respectively. A closer reading of the paragraphs shows that the standard was said to have been adopted as a basis for soil sampling techniques, for quality control for the performance of equipment decontamination during soil sampling and for the implementation of appropriate chain of custody procedures. In the introduction, the scope of the assessment is said to include sampling consistent with the methodologies and sampling density requirements of the standard. The standard deals with a number of other aspects of investigation of potentially contaminated soil. It cannot, therefore, be said that the first statement is to be found in the report.
573 The second statement appears in the executive summary of the report.
574 As to falsity, it was not demonstrated that the first statement was false inasmuch as it is restricted to the parts of the report where it appears. In its pleading, Premier's allegations of falsity are rolled up with those statements and those said to be contained in the Kilpatrick letter of 14 September 2001. There is in fact no allegation of falsity made in respect of the second statement. In any event, so far as this statement goes, it was not shown to be false.
575 The reliance allegation in paragraph 132 of the statement of claim also faces formidable difficulties. As to the first statement, the evidence is that neither Mr Evans nor Mr Simmonds read the detail of the report. They did not read paragraphs 3.1 or 4.2. In any event, the statements would have been meaningless to them as laymen without a familiarity with the standard itself. They certainly read the summary where the second statement appears. They were always aware that the Premier land was probably affected by some contamination. The fact that only low level contaminants were found in samples from four sites would not have worried them at all. Five specific acts of reliance are alleged.[321] The first three are to the effect that Premier proceeded with the project. The decision of Premier to proceed was not influenced by either of the two statements. The fourth is that Premier did not obtain a certificate of environmental audit. There are many reasons why Premier did not obtain such a certificate at various stages up to the commencement of the excavation in July 2000, when it ought to have done so, and thereafter. Fifth, that Premier waived the protection of special condition (4) of the contract of sale. None of them could fairly be said to be a reliance upon the correctness of either of the two statements.
577 By the first week of September 2001 the project was underway. A planning permit had been obtained. On 28 March 2001, Premier entered into a building agreement with the builder for the construction of the apartments, but not for demolition. A building permit for demolition was issued on 3 July 2001 and this work was completed by another contractor prior to 30 August 2001. On 17 August, a stage 1 building permit was issued. This covered excavation and construction of the underground car park up to and including the ground floor slab. The building work commenced at the beginning of September and, according to Mr Evans, excavation was complete on 19 September 2001.
578 In the course of excavation, the underground tank was removed and this was disposed of by 20 September. Prior to this, on 13 and 14 September, Kilpatrick inspected the excavation. Not surprisingly, focus was on the soil in the vicinity of the tank and following investigation no sign of hydrocarbons was detected. This is recorded in the Kilpatrick letter of 14 September which contains the following conclusion:
Based on the findings of both the Soil Contamination Assessment (December 1999) and recent site inspections, the remaining soils located across the site would be classified as fill material.
579 It is perhaps a coincidence that, about this time, on 19 September 2001, the agent for the financier of the project, Darren Smith of Balmain NB, wrote to Mr Simmonds drawing attention to the fact that the original quantity surveyor had noted the presence of "low level soil contamination" on the Premier land, presumably from his reading of the Kilpatrick report. Mr Smith enquired whether a certificate of environmental audit or a statement of environmental audit had issued and, if so, he sought a copy. Mr Simmonds responded the following day by letter which included the following:
The Environmental Audit and Site Conditions are referring to a low level contamination that has now been addressed by Tony Goss of [the builder]. This entailed the removal of soil from the site an inspection of this and compliance with the Auditor and the issuing of a Certificate of Compliance by the Environmental Auditor.
Tony Goss is currently in receipt of this certificate and will forward to your office in the next couple of working days.
Please note that in respect of Compliance certificates, Audit certificates etc the work must be completed prior to issuing of the certificate, consequently [the builder] must complete the work prior to the issuance and therefore requires payment for completion of the work prior to certificate can be produced."
580 On 20 September the builder sent Balmain a 17 page fax. The coversheet describes the enclosure as the soil contamination assessment relating to the above project and concludes:
It should be noted that site excavation was completed yesterday, and consequently there is now NO contamination left on site.
The Kilpatrick letter of 14 September is in two pages. It does not appear what might comprise the remaining documents included in the builder's 17 page fax.
581 A point taken by counsel for Kilpatrick was that there is no evidence that this letter of 14 September ever came to the attention of Premier. It was addressed to Premier's builder and it was sent to the builder.[322] No Premier witness spoke of having seen it or of acting upon it. I am unable to find in these circumstances that the Kilpatrick letter was passed to Premier so that any claim based on Premier's reliance upon its content must fail at the outset.
582 As to the accuracy of statements contained in the letter, there is an erroneous statement appearing twice in the letter which refers to the results of the Kilpatrick report. There it is said that in the investigations of December 1999 samples from the underlying naturally occurring silty clay reported concentrations below the EPA maximum fill material criteria. No samples from the silty clays were reported in the Kilpatrick report. Furthermore, the conclusion which I have set out above[323] is incorrect unless the reference to "the remaining soils located across the site" is to be read as the remaining soils to be removed rather than to the soils remaining after excavation is completed. It seems likely that the conclusion in the former sense was provided by the builder to satisfy the EPA requirements for disposal, but that it was provided by the builder in the latter sense to satisfy the concerns of Balmain. An accurate response to the Balmain enquiry would have been that nothing was known of the soils remaining after excavation.
583 Little, if anything, was said in final address in support of a claim for breach of duty of care based on this 14 September letter. This is not surprising given the stage the project had reached at this date. All that was put was that this letter reinforced the inaccurate impression given in the Kilpatrick report. I, too, will not say anything further. If it still remains as a separate negligence claim I reject it for want of reliance.
584 I will not dwell long on the misleading and deceptive conduct claim based on the 14 September letter. Three statements are relied upon as having been made in this letter.
(a) Based on the findings of both the soil assessment and the visual inspection, the remaining soils located across [the Premier land] would be classified as fill material;
(b) No contaminated soils remained on [the Premier land] following excavation; and
(c) Following excavation [the Premier land] was no longer contaminated.[324]
585 The first is certainly contained in the conclusion of the letter. As I have mentioned,[325] the difficulty here arises from the expression "remaining soils located across" the Premier land. If this is a reference to the site after excavation, it is incorrect; if it refers to the spoil which remained to be carted away, falsity has not been demonstrated.
586 The second statement is not contained in the Kilpatrick letter. It appears to be a reproduction of the statement made by the builder to Balmain in its letter of 20 September which I have set out above.[326] It now appears that this statement was false.
587 The third statement, too, is not to be found in the Kilpatrick letter of 14 September. Events have demonstrated that such a statement, if made, would have been false.
588 Again, Premier faces very strong problems in establishing that it acted in reliance upon these statements. The first is that there is no evidence that it received the Kilpatrick letter. The second requires an examination of the acts of reliance which are asserted in paragraph 132 of the statement of claim.
589 The first three acts of reliance are that Premier proceeded with the purchase, proceeded with the construction work and entered into financial arrangements for the construction and development. The first and third allegations are chronologically untenable. Settlement of the Babka contract of sale had occurred some months earlier and the finance was put in place on 14 September 2001. As to the second statement, it is correct to say that the project would have stopped, at least temporarily, if the true position about contamination was disclosed at this time. But the project would have gone ahead in the event that Kilpatrick had said nothing to Mr Evans or Mr Simmonds about the site being free of contaminated soil. It cannot therefore be said that Premier relied upon the truth of the statement, assuming they received it, to press on.
590 The fourth act of reliance cannot be correct. The obligation of Premier to obtain a certificate of environmental audit was contained in the planning permit and Mr Evans knew this in September 2001. He could not be relieved of that obligation by anything Kilpatrick may have said in a letter.
591 The fifth act of reliance, that of waiving special condition 4 of the Babka contract of sale, must also fail. This had occurred some 15 months earlier.
593 The claims against Collie Planning are for breach of its retainer and for a breach of its common law duty of care. It is common ground that Collie Planning was in fact retained by Premier from about 26 November 1999 until about 30 June 2000. The terms of the retainer are, for the most part, in writing and are accurately set out in paragraphs 73 and 74 of the statement of claim. The tortious duty of care is denied.
594 The duty of care is described in the pleading as "a duty to take reasonable care in respect of undertaking all of the tasks of and incidental to the Collie retainer".[327] Such a plea risks confusing the contractual duty to perform with the tortious duty to perform carefully. This confusion may then be carried into the allegations of breach for it may be assumed that non-performance is equivalent to negligent performance or negligent non-performance. A moment's reflection, however, will demonstrate that this is not necessarily so. In the past, this may have been seen as a mere quibble and likely to cause little difficulty if attention was focussed on the true issues. But in the modern environment, when negligent performance or non-performance is an apportionable claim but mere non-performance is not,[328] the procedural consequence of the allegation may be serious for the claimant.
595 In any event, the nature of the duty of care and its ambit will often be affected by the terms of the contractual arrangements in place between the parties.[329] Mr Keen said that, at the time of the retainer, he was aware from his discussions with Mr Evans that the sale was conditional upon the land being rezoned to permit residential use. He knew, too, that Moreland Council had decided to change the zoning to mixed use with an environmental audit overlay but that the rezoning had not yet been finally approved by the Minister. Notwithstanding his professed ignorance of environmental aspects of land use, I find that Mr Evans was at least aware that such an overlay would mean that the site would have to obtain some kind of environmental clearance. And so, under the sale note which at that time regulated the dealings between Premier and the vendor, it was the responsibility of the vendor to obtain a certificate of environmental audit. In his early discussions with Mr Keen, Mr Evans told the planner that the vendor had to provide what he described as an environmental clearance.[330] This was understood by Mr Keen to mean that he was not required to concern himself with satisfying any environmental requirements of the overlay. This was not part of the work Collie Planning was retained to carry out. I am satisfied that this communication had this legal consequence. For reasons which will appear, however, I do not accept that this had the further consequence that Collie Planning had no responsibility for any environmental aspect of the project.
596 Relations between Mr Keen and Mr Evans were very comfortable in November 1999. Mr Keen was persuaded by Mr Evans, if persuasion was required, to increase the Collie Planning estimated fee from $12,000 to $15,000 without any enlargement of the work to be performed. Furthermore, it seems that, some six months later, Mr Evans was content that Mr Keen become, in effect, part of the Premier land development team, working out of the Premier office. This easy relationship has two consequences which are relevant for my purposes. First, it makes it more likely that communications between them might not be formally documented and, second, that unstated understandings might exist between them.
597 A surprising aspect of this case is the repeated assertion by Mr Keen of his ignorance of environmental aspects of the planner's task. Accepting that he may not have a comfortable familiarity with the detail of environmental auditing, I am unable to accept that he was as ignorant of these matters as he professed. And if he were so ignorant, it would not, in my view, relieve him as a professional planner from the obligations of a planner to have regard to environmental legislation and regulations, EPA requirements and environmental matters generally insofar as they might impinge upon his client's use of land. In short, I find that Mr Keen knew or ought to have known in November 1999 that, when rezoned as expected, the Premier land would be subject to a requirement that an environmental audit take place and that a certificate of environmental audit issue at some time before his client's intention that the land be used for residential purposes could be realised.
598 I find, too, that Mr Keen did not see the contract of sale in its original form or, indeed in any amended form. He was not told by Mr Evans of any of the changes to special condition (4) which were agreed prior to the end of June 2000.
599 At the time of the Collie Planning retainer, there was little further to be done to progress the rezoning. The matter was, or was shortly to be, with the Minister. The retainer letter makes no specific reference to the performing of work with respect to rezoning. Collie Planning's principal function was to prepare and submit the planning application. This was lodged with Moreland Council on 13 July 2000. Mr Keen said that he commenced preparing the planning permit application in the preceding week and he said later that this was when the formal part of the application was prepared. I do not understand the witness here to be saying that no work had been done by Collie Planning in preparation for the planning application. Collie Planning rendered four invoices for its work performed prior to the termination of its retainer on or about 30 June. The amounts claimed in these invoices total over $12,500, which represents a considerable portion of the fee of $15,000 which was to cover the work to be done up to the Moreland Council decision upon the application. The work described in the first invoice, dated 28 March 2000, includes the following:
file/report/plan review, research review of planning controls/ policies ... .
600 I accept the evidence of Mr Sayer and Mr Sabbatucci that an application for a permit for residential use and development of land such as Premier's land must address environmental requirements and research the site. Mr Keen knew or ought to have known that cl. 9.12 of the Minister's Direction required that a certificate of environmental audit would have to be issued before the rezoning was effective or before the residential use commenced or before the commencement of building or works associated with the residential use.[331] It is probable that he knew that no such certificate had issued in May 2000 when the land was rezoned. It would be reasonable to inquire about this from his client or to observe this upon inspection of the land. This would not, however, have been a matter of concern because he might reasonably have assumed that the certificate was not required before the building work commenced.
601 I turn now to the alleged breaches of retainer. They are set out in paragraph 110 of the statement of claim. It is alleged that Collie Planning:
(a) did not review the Council's planning scheme and legislative provisions applicable to Premier's Property;
(b) did not advise Premier of all the steps necessary for Premier to undertake in order to comply with the Council's planning scheme and legislative provisions;
(c) did not advise Premier that under the Mixed Use Zone within an Environmental Audit Overlay zoning, Premier must obtain a Certificate or Statement of Environmental Audit prior to commencing the development and construction of the apartments and underground car parking spaces;
(d) did not advise Premier that the Kilpatrick Report was not a Certificate or Statement of Environmental Audit;
(e) did not advise Premier that Council must ensure that a Certificate or Statement of Environmental Audit was issued for Premier's Property prior to the re-zoning of Premier's Property from Industrial Extractive to Mixed Use Zone within an Environmental Audit Overlay;
(f) did not inform Premier of all the steps necessary to undertake in order to comply with the Council's planning scheme and legislative provisions and project manage such steps;
(g) did not ensure that Premier had undertaken all the steps necessary to comply with the applicable planning scheme and legislative provisions;
(h) did not include in the general works program to guide the planning process all steps necessary to comply with the applicable planning scheme and legislative provisions; and
(i) did not review Council's planning scheme provisions and relevant policies for the area in which Premier's Property was located. [332]
602 It will be seen that these allegations are of considerable generality. Given the nature of the retainer, what is here complained of is, for the most part,[333] that Collie Planning ought to have advised its client about the legal requirement that a certificate of environmental audit be issued before building work commenced and that the client should take steps that this requirement be complied with. I accept that no such advice was given. I am not, however, persuaded that this amounts to a breach of a retainer which terminated before the planning permit was lodged and well before the certificate had to be issued.
603 There are also two allegations of failing to review the Council Planning Scheme and legislative provisions. I am not satisfied that these breaches have been proved. The Collie Planning March invoice asserts that a review had taken place and the evidence does not lead to a different conclusion.
604 Finally, there is in paragraph (d) the allegation that Collie Planning failed to advise Premier that the Kilpatrick report of January 2000 was not a certificate of environmental audit. The short and compelling answer to this is that Collie Planning did not see this report and had no reason to think that Premier, prior to 30 June 2000, considered it to be a certificate of environmental audit.
605 The duty of care asserted is a duty to perform its contractual obligations with due care.[334] This was challenged by counsel for Collie Planning but, given the limitation to its contractual obligations, I would accept that such a duty arose. The suggested breaches of duty of care are as follows:
(a) Failure to ensure that a Certificate or Statement of Environmental Audit had been issued for Premier's Property prior to 4 May 2000, that is, the date of re-zoning;
(b) Failure to advise Premier that under the Mixed Use Zone within an Environmental Audit Overlay zoning, a Certificate or Statement of Environmental Audit was required before the commencement of the construction and the development of the apartments and the underground car parking spaces;
(c) Failure to advise Premier that a Certificate or Statement of Environmental Audit was required prior to a Statement of Compliance under the Subdivision Act 1988 or a Certificate of Occupancy under the Building Act 1993, could be issued in respect of Premier's Property and/or the apartments and underground car parking spaces; and
(d) Failure to advise Premier that the Kilpatrick Report was not a Statement of Environmental Audit.[335]
I mention in passing that these suggested breaches are not expressed in terms of the duty which is said to have been breached. This reflects the confusion between the contractual and tortious duties to which I have referred.[336] It would be possible for Collie Planning to commit any of these breaches but without being in breach of a duty of care.
606 Particular (a) was not pressed. Particular (d) must fail for the reasons already set out. As to particulars (b) and (c), the evidence shows that on 26 November 1999 and on 28 April 2000 Mr Collie provided Mr Evans with documents from Moreland Council which made it clear that the rezoning would be accompanied with an environmental audit overlay but it does not appear that he explained the significance of this. The allegations are, therefore, true in fact but I do not conclude that they amount to breaches of the duty of care owed by Collie Planning, bearing in mind that the question of the requirement of a certificate of environmental audit had not yet arisen when the Collie Planning retainer was terminated.
607 This is sufficient to dispose of the Premier claim against Collie Planning. There is, however, a further point which is fatal to it. In its statement of claim, Premier sets out three respects in which it acted in reliance upon the wrongful conduct of Collie Planning. The first depends upon the no longer pressed contention that, as a matter of law, the certificate of environmental audit had to be issued prior to rezoning.[337]
608 The second is that Premier, being ignorant of the requirement that a certificate of environmental audit issue before the commencement of construction, did not itself obtain a certificate but continued with the preparatory steps for construction.[338] Let it be assumed that, by 30 June 2000, Premier was ignorant of these matters. This was, nevertheless, not a reason for its failure to obtain a certificate of environmental audit at that time or at any time prior to the commencement of construction in 2001. There were, then and later, many reasons for its failure to do this. At this stage of the project it would have been considered by Mr Evans to be premature. There was no certainty that planning permission would be granted; and the obtaining of the certificate would have involved the demolition of the existing warehouse and the loss of rental income, a result which Mr Evans did not want. Finally, Mr Evans' general attitude was not to anticipate expected difficulties and not to incur expense needlessly or before it was required. This was demonstrated, for example, in his reaction to the request of Moreland Council for the production of a certificate of environmental audit as early as July 2000.[339] It was not until late 2002, when construction was well advanced, that he seriously addressed the requirement of which he had been long aware, that a certificate of environment audit was required.
609 The third suggested consequence of the breach depends upon the failure of Collie Planning to advise Premier that the Kilpatrick report was not a certificate of environmental audit. It is said that, absent this advice, Premier believed that the report was a certificate and that it took no step to obtain a certificate of environmental audit and that it agreed to the waiver of special condition (4) of the Babka sale contract and that it pressed on with the project. There is no evidence that Premier thought that the Kilpatrick report was such a certificate. Certainly, Mr Evans later asserted that this was his belief but I have concluded that this assertion was false. It is, of course, correct as a fact that Collie Planning did not advise its client that the Kilpatrick report was not a certificate. But I find that, prior to 30 June 2000, Mr Evans did not turn his mind to the question of the need at any time for a certificate of environmental audit. It was, if anything, tomorrow's problem.
610 His decision to waive special condition (4) was likewise not affected by any misapprehension about the nature of the Kilpatrick report. He had by that time given the report a very cursory review and this confirmed his impression that contamination was not likely to be a problem with the Barkly Street project. He was content to waive the special condition so that the deposit might be returned to the agent. He believed that the project had been sold to Lifestyle Brunswick at a handsome profit with the consequence that any contamination was no longer his concern. Finally, he was pleased to receive $5,000 in exchange for the waiver.
611 I conclude for these reasons that the Premier claims against Collie Planning must fail.
13. Premier's Imputed Claims against Keen Planning
612 Following the settlement of Premier's claims against Keen Planning, its allegations against Keen Planning were picked up and pursued by Collie Planning and Kilpatrick, each of which filed a statement of claim against Keen Planning. Keen Planning filed a defence to the Kilpatrick statement of claim but not to that of Collie Planning. In terms of my direction,[340] this had the consequence that Keen Planning was at liberty to participate at the trial to resist the Kilpatrick apportionment allegation, but not to resist the Collie Planning allegation. Happily, I was not required to sort out this consequence because Keen Planning did not play any further role at the trial; it called no witness, cross-examined no witness and presented no argument in final address. The consequence of this is that I must determine the Premier imputed claim against Keen Planning on the basis of the responses of Keen Planning in its pleading and assume that the same responses would be made to the claim brought by Collie Planning. It was not submitted on behalf of Collie Planning that I should approach its imputed Premier claim in any other way notwithstanding the absence of any defence.
613 As I have mentioned,[341] the claims of Collie Planning and Kilpatrick are that Keen Planning was in breach of its contractual duty to Premier and in breach of a tortious duty of care also owed to Premier. These appeared to have been transcribed from the withdrawn Premier pleading against Keen Planning and they suffer from this, inasmuch as they are required to operate in the rather different Wrongs Act apportionment environment. In particular, apportionment is not available where the cause of action in contract is brought otherwise than as a claim arising from a failure to take reasonable care.[342] Accordingly, I put to one side as irrelevant for my purposes, the imputed claims that Keen Planning was in breach of its retainer.
614 The cause of action in negligence depends upon the existence of a duty of care which is expressed in each case rather unhelpfully in general terms as "a duty to take reasonable care in respect of undertaking all of the tasks of and incidental to the Keen retainer"[343]
615 Where a person enters into an agreement to perform work involving expertise there is, in addition to the contractual obligation to perform the work, an implied obligation to perform it with due skill and care.[344] There may be also a tortious duty to perform the work with reasonable care but the existence and extent of such a duty may be affected by the terms of the contract. This is a difficult area upon which I did not have the benefit of full adversarial argument. I shall proceed on the basis that such a duty exists.
616 Breaches of duty are in each case[345] taken directly from the former Premier pleading. They are the following:
(a) Failure to advise Premier that under the Mixed Use Zone within an Environmental Audit Overlay zoning, a Certificate or Statement of Environmental Audit was required before the commencement of the construction and the development of the apartments and the underground car parking spaces;
(b) Failure to advise Premier that a Certificate or Statement of Environmental Audit was required prior to a Statement of Compliance under the Subdivision Act 1988 or a Certificate of Occupancy under the Building Act 1993, could be issued in respect of Premier's Property and/or the apartments and underground car parking spaces; and
(c) Failure to advise Premier that the Kilpatrick Report was not a Statement of Environmental Audit.
(d) Failure to advise Premier that condition 28 of the Notice of Decision, original planning permit and amended planning permit required that a Certificate or Statement of Environmental Audit be obtained prior to the commencement of the construction and development of the apartments and the underground car parking spaces;
(e) Failure to make any or any reasonable enquiries with the Council in respect of the terms of Condition 28 in the Notice of Decision and the Original Planning Permit; and
(f) Failure to address in the planning permit application the issue of how Premier intended to satisfy the requirements of the Environmental Audit Overlay.
These breaches are put in issue by Keen Planning but it is not necessary that I determine the issues because the pleading in each case does not take them further[346] except for the breaches set out in parts (c) and (d). It is to these that I now turn.
617 The first is a failure to advise Premier that the Kilpatrick report was not a certificate of environmental audit. It is difficult to see this as a breach of a duty in Keen Planning to perform its contractual obligations with reasonable care. If there was a contractual duty in Keen Planning to give this advice and it did not do so, this was not due to negligence.
618 It is, of course, indisputable that the Kilpatrick report is not a certificate of environmental audit. On the evidence, it seems, too, that Mr Keen did not tell Mr Evans or Mr Simmonds that the report was not such a certificate. In any event, I am satisfied that neither Mr Evans nor Mr Simmonds at any time thought that the Kilpatrick report was such a certificate. This conclusion follows from the experience which these men had with environmental matters on earlier projects, from the terms of the Kilpatrick report itself which they read, from the events of July 2000 at the time of the planning application,[347] from the events of September 2001,[348] from the events of December 2002[349] and from the evidence that they did not believe otherwise.
619 I mention, too, in this regard, Premier's answer to interrogatory 2.7 sworn by Mr Simmonds on its behalf. In this answer, Mr Simmonds swears that in November 2002, when Moreland Council was pressing Premier for a certificate of environmental audit, "Richard Evans of the Plaintiff at the time gave Bruce Keen the report of Kilpatricks to forward to the City of Moreland believing that the Kilpatricks report was the Certificate or Statement required" and, later, that Premier then "for the first time, become aware that it did not have an environmental statement or certificate complying with the requirements of the City of Moreland". I am satisfied from the evidence given by Mr Simmonds that the answer to this interrogatory is false. Both Mr Simmonds and Mr Evans were, at all times from February 2000 when they first saw the Kilpatrick report, aware that it was not a certificate of environmental audit. I am satisfied that from July 2000 when he received a copy, Mr Keen, too, had the same belief and, further, that he knew that this was the belief of the Premier directors. In these circumstances, Keen Planning is not in breach of any duty by failing to tell its client what the client already knew.
620 The second suggested breach of duty which Premier claims to have relied upon is in paragraph (d) set out above.[350] This is, that Keen Planning failed to advise its client that condition 28 of the planning permit required that a certificate of environmental audit be issued before construction commenced.
621 It is necessary to remember in this context that Keen Planning did not undertake work on behalf of Premier until after 30 June 2000 when the Collie Planning retainer was terminated. Mr Keen continued to perform Collie Planning's duties and, of course, he was aware of what had occurred before the file passed to his company.
622 In any event, the breach here in question could not occur before the planning permit was issued. I have set out the rather complicated events which passed between 21 December 2000 when Moreland Council issued a notice of decision to grant the permit and 3 August 2001 when the permit finally issued in its amended form including condition 28.[351] This account includes my findings that in January 2001, Mr Keen handed to Mr Evans a copy of the council letter of 15 January 2001 which included the full terms of condition 28,[352] that in May 2001 the two men discussed the need to amend the permit which had been issued on 24 March with an incomplete condition 28[353] and that a copy of the amended planning permit was given by Mr Keen to Mr Evans soon after it was issued in August 2001. Furthermore, the requirement that a certificate issue prior to construction was raised by the mortgage broker on 19 September 2001.[354] While there may be a dispute as to whether Mr Simmonds and Mr Evans believed that they had complied with or could easily comply with the requirement, there can be no doubt that they were aware of the requirement that a certificate issue prior to construction.
623 In these circumstances, it cannot be said against Keen Planning that it failed to advise its client of the provisions of condition 28 of the planning permit. Having had his attention drawn to this condition, Mr Evans would have appreciated that a certificate was required before work commenced. And if he did not fully understand what was involved in obtaining a certificate, he does not appear to have been unduly concerned. To my mind his failure to respond to this requirement is a product, not of ignorance, but of his confident expectation that the contamination which he then suspected had been or would be removed during excavation.
624 I conclude that Premier did not act to its detriment as alleged in the pleading or at all. The imputed Premier claims have not been made out so that Keen Planning is not a concurrent wrongdoer.
14. Premier's Imputed Claims against McKenzie Group
625 This claim, as I have mentioned,[355] was instigated by Keen Planning and picked up by Collie and Kilpatrick following the settlement of the Premier claims against Keen Planning. Premier has never asserted that McKenzie Group is liable to it. In essence, what is put against McKenzie Group is that it is in breach of a contractual duty, a statutory duty and a tortious duty of care owed to Premier. The breaches are that it issued three building permits which were inconsistent with condition 28 of the planning permit or without regard to that condition or without regard to whether the condition had been complied with and, further, that McKenzie Group failed to advise Premier that "it would be prudent to ensure that condition 28 had been complied with prior to the commencement of the development".[356] The position of McKenzie Group, put shortly, was that it was not retained by Premier and had no contractual or tortious relationships with it and that condition 28 and its compliance were not matters relevant to its functions as building surveyor.
626 The facts underlying the claim are set out above.[357] They were not in dispute. Again, it is convenient that I set out a brief chronology:
Moreland Council issued the planning permit with an incomplete condition 28.
McKenzie Group is retained to provide building, surveying services.
McKenzie Group issued stage 1 building permit for excavation and car park.
Excavation and construction of basement on Premier land commences.
McKenzie Group issued a stage 2 building permit for structural works.
Moreland Council insisted on production of certificate of environmental audit and Premier set about obtaining it.
McKenzie Group issued stage 3 building permit for architectural services.
The terms of condition 28 which are set out above[358] required issue of a certificate of environmental audit "prior to the commencement of any works, use or development".
627 The first issue is whether Premier retained McKenzie Group as is alleged in the statements of claim. The matter is a little complicated because, under s. 17 of the Building Act, an application for a building permit must be made by or on behalf of the owner of the land. In this case the applications were lodged by the builder as agent for Premier and the permits were issued to Premier as owner of the land.
628 Under s. 78, a person entitled to apply for a building permit may appoint a private building surveyor to issue the permit. Accordingly, it is pleaded that it was Premier who appointed Peter Eyers to issue the stage 1 permit,[359] Joe Zita to issue the stage 2 permit[360] and Vince Pannucio to issue the stage 3 permit.[361] These allegations are not admitted by McKenzie Group in its pleadings. There was no direct evidence of these appointments.
629 Mr Evans and Mr Simmonds said they had no dealings with the building surveyor. The McKenzie Group fee proposal of 3 April 2001 was addressed to the builder, but there was no evidence as to who paid the building surveyor's fees. Surprisingly, the witnesses from McKenzie Group did not shed any further light on this question.
630 On this slender evidence I am unable to conclude that there was a contract between Premier and McKenzie Group for the performance of the building surveyor's work. On the balance of probabilities, I find that its retainer was with the builder. This means that the Premier claims based on breach of contract must fail.
631 The second cause of action is for breach of statutory duty inasmuch as McKenzie Group issued the permits even though they were inconsistent with the planning permit. This is not an apportionable claim within the meaning of Part IVAA of the Wrongs Act since the claim, as pleaded, does not arise out of a failure to take reasonable care. I need say nothing further about it.
632 The third cause of action is based on an alleged breach of a tortious duty of care to:
(a) Ensure that the building and surveying services provided by [McKenzie Group] to Premier were carried out:
(ii) in a manner which complied with the Building Act.
(b) inform or warn Premier that the planning permit contained extant conditions to be completed prior to the commencement of the development.[362]
The particulars of breach, in essence, allege[363] that McKenzie Group failed to review the conditions of the planning permit and, in particular, condition 28, before issuing the building permits; issued the building permits which were not consistent with the planning permit and that it:
Failed to inform or advise or warn Premier that it would be prudent to ensure that condition 28 had been complied with prior to the commencement of the development.[364]
633 It is clear enough that McKenzie Group did not, prior to issuing any of the building permits, enquire about compliance with condition 28 or its performance and it did not insert in the building permits any requirement that this condition be completed before the work was commenced; it did not insert a condition in the building permits, if this be lawful, that they were not to be effective until condition 28 had been complied with. McKenzie Group gave no advice to Premier as alleged in the third of the breaches summarised above.
634 Indeed, it should be noted that, when the stage 1 permit was applied for, part of the work permitted under the planning permit, namely the excavation work, was well underway. Premier was already in breach of condition 28.
635 The position taken by McKenzie Group was that matters such as that in condition 28 were not matters for which it properly had any concern as building surveyor. It was put that the legitimate areas of concern of a building surveyor in the exercise of the functions of considering an application for a building permit are, what might be described as construction matters, and not planning matters, unless these planning matters impinged upon the construction matters. This was a point upon which, I was told, there is no judicial authority.
636 For the functions of a building surveyor who is considering an application for a building permit, the starting point must be the provisions of the Building Act. First, the surveyor must issue the permit within the prescribed time, otherwise the application will be taken to have been refused.[365] By s. 18, schedule 2 of the Act applies. This schedule is concerned, so far as is here relevant, with reports from those reporting authorities which must be consulted and which may provide a report. It would seem that Moreland Council is a prescribed reporting authority[366] but no argument was presented to the effect that this fact bears upon the question presently under consideration. The surveyor must also have regard to Ministerial Guidelines which have been issued with respect to the functions of the surveyor.[367] I shall return to these.
637 Apart from these matters, the scheme of the Act is not to prescribe the matters which the surveyor must or may have regard to; it is rather to specify the matters which must cause the surveyor to refuse the permit application. These prohibiting provisions are found in s. 24, to which I shall return; in s. 24A, which requires the surveyor to refuse a permit unless satisfied that the builder and the architect are appropriately registered and insured; and in s. 29A, which requires refusal where there is no report and consent from the responsible planning authority for certain demolition work. It is of significance that in s. 24(2) and s. 29A(2) the power to refuse is expressed to be limited to the situations there set out. The implication must, then, be that the surveyor's primary obligation is to issue the permit unless there is a statutory or ministerial prohibition and to do so timeously. And even in the case of Ministerial Guidelines the direction contained in s. 188(7) is for the surveyor to "have regard to" them, not to comply with them. In most cases this will be a distinction without a difference because a surveyor would not lightly fail to comply. But the distinction shows that a guideline is not a ministerial regulation; they are guides to direct the surveyor's attention to matters which they must address in performing functions under the statute and to advise the surveyor how they might address these matters. But, underlying all of this is the surveyor's obligation to issue a permit unless s. 24(1) or some other provision of the Act dictates that a permit not issue.
(1) Subject to Section 24A and Division 4, the relevant building surveyor must not issue a building permit unless he or she is satisfied that -
(a) the building work and the building permit will comply with this Act and the building regulations; and
(b) any consent of a reporting authority required under this Act or the regulations or under any other Act or regulations is obtained or deemed to have been obtained in accordance with Schedule 2; and
(c) any relevant planning permit or other prescribed approval has been obtained; and
(d) the building permit will be consistent with that planning permit or other prescribed approval.
(2) Subject to Section 24A and Division 4, the relevant building surveyor must not issue a building permit that imposes on the applicant lesser or greater standards or requirements than those prescribed by this Act or the building regulations, unless permitted to do so by this Act or the building regulations.
(5) If an amount of community infrastructure levy is payable under Part 3B of the Planning and Environment Act 1987 in respect of a development for which building work is required, the relevant building surveyor must not issue a building permit in respect of that building work unless he or she is satisfied that -
(a) that amount of levy has been paid to the relevant municipal council under that Part; or
(b) an agreement to pay that amount of levy has been entered into under that Part.
639 It will be seen that what may be referred to as construction matters are mentioned in s. 24(1)(a). Sub-section (2), however, makes it clear that these construction matters represent a code which the surveyor must apply.
640 The remaining provisions of s. 24(1) and s. 24(5), however, oblige the surveyor to be satisfied about matters which might generally be seen as planning matters. In particular, paragraphs (c) and (d) require the surveyor to be satisfied that a relevant planning permit has been granted and that the permit to be issued is consistent with it. Section 24(5) requires the surveyor to be satisfied that any community infrastructure levy payable in respect of the development has been paid or agreed to be paid. Such a levy is payable where a planning scheme under Part 2 of the Planning and Environment Act includes a development contribution plan which provides for the imposition of the levy.[368] The levy is therefore truly a planning matter. Section 460 of the Planning and Environment Act requires the applicant for a building permit to have paid, or agreed to pay, the levy before the permit is issued. This matter must therefore be the subject of enquiry by the surveyor under s. 24(5) of the Building Act.
641 It follows from this that, as a general principle, it is not correct to say that the building surveyor is concerned only with building matters when considering a permit application. It is more correct to say that the building surveyor is required to have regard to matters which, under the Building Act, must be had regard to and that, while most of these matters will be construction matters, there are some which are not.[369]
643 The word "consistent" is found in the clause "the building permit will be consistent with that planning permit". This means more than that works for which the permit is to issue are works which are permitted by the planning permit. Such a requirement is probably covered by s. 24(1)(c). The surveyor is required, therefore, to be familiar with the detail of the planning permit and to be satisfied that the building permit to issue is not inconsistent with it.
644 As is usual, the planning permit in this case permits the residential development in accordance with the endorsed plans and subject to a number of conditions. These nine sheets of drawings set out in greater or less detail the envelope, layout and location of the proposed buildings. The drawings and other documentation submitted to the surveyor contain a great deal more detail, sufficient for the surveyor to assess the design and to determine conformance with the Act and the Building Regulations as is required under s. 24(1)(a). It is common ground that s. 24(1)(a) requires the surveyor to be satisfied that this detailed material depicts a building which is not inconsistent with the building which is the subject of the planning permit. And, when so satisfied, then, subject to compliance with other statutory requirements, the surveyor must issue a permit to carry out the building work. This permitted work was, in this case, described in the drawings, computations and other approved documents listed in the permit.
645 To my mind, this requirement of consistency is not a requirement that the building depicted in the two sets of documents be identical; it is that they not be inconsistent. This requirement is satisfied where a building constructed in accordance with the approved documents listed in the building permit would not contravene the terms of the planning permit where the development is permitted "in accordance with the endorsed plans" and upon terms that "the development as shown on the endorsed plan must not be altered unless with the written consent of the responsible authority".[372]
646 So much, I think, was not in dispute. What was put in the mouth of Premier by counsel for Collie Planning and Kilpatrick was that the requirement as to consistency extended to other matters which were contained in the planning permit; in this case with condition 28.
647 By s. 62 of the Planning and Environment Act, a responsible authority may include in a planning permit conditions dealing with a number of matters. These include matters which are not concerned with the physical construction of the permitted development. For example, the imposition of a development infrastructure levy under s. 46N or, as in the present case, the satisfaction of EPA requirements.
648 Evidence was led by counsel for McKenzie Group from experienced building surveyors as to the way a competent surveyor would approach the task of determining a building permit application. This is, of course, of no assistance to me in construing the statute. It may be admissible on the different question of a breach of duty of care and I received it on that basis.
649 The Ministerial Guidelines published on 1 November 2000, five months before the amending statute was assented to, likewise, cannot be used as an aid to the interpretation of the section. They demonstrate how the Minister intends surveyors to act when they perform their functions under the Act; the guidelines provide a convenient check list for surveyors when undertaking these tasks under the various paragraphs of s. 24(1).
650 Guideline 4 which is directed to the task under s. 24(1)(d) provides, naturally enough, that the surveyor should first obtain a copy of the planning permit in order to determine the consistency question. Guidelines 4(1) and 4(2) provide as follows:
(1) If a planning permit is required for the proposed building work and has been obtained, the relevant building surveyor should obtain copies of the following:
(b) the plans endorsed by the responsible authority as part of that planning permit; and
(c) any documents referred to in the planning permit (including plans, reports, drawings, plans of subdivision or agreements under section 173 of the Planning and Environment Act 1987).
(2) In determining whether the building permit will be consistent with the planning permit, the relevant building surveyor should -
(a) compare the plans lodged with the application for the building permit with those plans endorsed by the responsible authority as part of the planning permit and any documents referred to in the planning permit that have a direct bearing on the proposed building permit, to ensure that they are consistent; and
(b) confirm that all planning permit conditions relevant to the building permit that are required to be completed prior to commencement of the development have been complied with.
(3) The relevant building surveyor's assessment of consistency between the building permit and the relevant planning permit should include (but not be limited to consideration of):
(a) the height, area, form and configuration of the proposed building work or any part of the building work;
(b) the location of the proposed building on the land, including setbacks from boundaries;
(c) the location of windows, doors, and privacy screens;
(d) any conditions of the planning permit that have specific construction requirements or that require specification construction details; and
These, then, are the matters which the surveyor must have regard to. They were relied upon by McKenzie Group as showing in paragraph 4(3) that the question of consistency is directed to construction matters. Counsel for those parties urging Premier's claim pointed to the parenthesis in paragraph 4(3) as showing that the list was not exhaustive and to paragraph 4(2)(b) regarding the applicant's compliance with planning conditions.
651 The evident intention of s. 24(1)(d) is to avoid inconsistency between a planning permit and a building permit. Such inconsistency can lead to difficulty because the person carrying out the building work is guilty of an offence by doing so otherwise than in compliance with a building permit[373] and the developer and others are guilty of an offence for proceeding with a development otherwise than in compliance with a planning permit.[374] The Minister, Mr Thwaites, introducing the legislation in Parliament, identified this objective in his second reading speech.
652 In the light of this, I return to the text of s. 24. I bear in mind that the objectives of s. 24(1)(d) is the avoidance of inconsistency; it is not, as it were, an indirect method of enforcing compliance with planning conditions. The question is whether the two permits are inconsistent, that is, can the one be acted upon in accordance with its terms without a contravention of the other? If it can, then the obligations imposed by each must be satisfied and there is no inconsistency. This, to my mind, is the test which the statute requires.
653 Applying this test to the present case, it is clear that there is no inconsistency between the planning permit and the building permits. Whether Premier complied with its planning obligations condition 28 or not, it was possible for it, without a contravention of the building permit, to construct the building. The position would be otherwise if the planning permit had directed that a building permit be not applied for or granted until a certificate of environmental audit had issued or, if this be possible, that the building permit itself included such a requirement.
654 It follows from this that the building permits issued by McKenzie Group did not contravene s. 24(1). It was therefore not inappropriate for them to issue and for them to contain no reference or condition as to the obligations of the developer with respect to a certificate of environmental audit.
655 The remaining allegation of failing to inform or advise Premier that it would be prudent to ensure that planning condition 28 had been complied with prior to commencement of the development can be dealt with shortly. First, the development had already been commenced. Second, this was not a matter relevant to the performance of the surveyor's function. Third, there is no evidence that McKenzie Group was aware that a certificate had not been issued.
656 The contention of Collie Planning and Kilpatrick that McKenzie Group is a concurrent wrongdoer has not been made out.
15. North Suburban's Claims against the Spotless Parties
657 North Suburban brings claims in the litigation and in the North Suburban VCAT proceeding against the Spotless Parties asserting entitlements under s. 62A of the Environment Protection Act and under s. 15 of the Water Act. For reasons which I have set out, I shall entertain the s. 62A claim in the litigation and the s. 15 claim in the VCAT proceeding.[375]
The s. 62A Claim
659 North Suburban, as occupier of the Spotless land, has received three clean up notices in respect of that land, dated, respectively, 18 February 2004, 28 September 2004 and 9 March 2006. Its claim under s. 62A is for compensation for expenses incurred in compliance with these notices and for declaratory relief to establish the liability of the Spotless Parties to pay compensation for the costs of the remediation work to be undertaken in the future.
660 North Suburban claims compensation from Spotless on the basis, first, that it caused or permitted pollution on the Spotless land to occur and, second, that it appeared to have abandoned industrial waste or potentially hazardous substance.[377] Its claims against Ensign Aust and Spotless Services are on the same two bases.[378] The factual bases are the release on the Spotless land of the PCE and white spirit. In addition, the claim against Spotless includes an allegation that the pollution of the Spotless land was caused by the release of PCE on the Premier land in 1978 and 1979, which PCE migrated to the Spotless land.
661 The findings which I have made in my consideration of the Premier s. 62A claim are that Spotless, from 1965 to 1977, caused white spirit to be brought onto the Spotless land and to be stored and used there, that in 1977 and 1978 it caused PCE to be brought onto the Spotless land and stored and used there and that in 1978 and 1979 it brought PCE onto the Premier land and stored it and used it there. It follows from this and from my conclusions as to the meaning of the words "caused pollution to occur" and that leakage and spillage is a normal and usual consequence of the storage and use of such chemicals, that Spotless caused the pollution in each case to occur. I make no such finding against Spotless Services. I make no such finding against Ensign Aust as it has not been established that these chemicals were used during its time as operator otherwise than in insignificant quantities.
662 This provides the basis for me to conclude, as I do, that Spotless caused to occur the pollution which is now known to exist on the Spotless land. It is not necessary for me to enter upon the question whether some of the PCE pollution was caused by the ALMI operations conducted on the Premier land.
663 The alternative claim is based upon abandonment by the Spotless Parties of white spirit in the USTs on the Spotless land. It is said that I should find that when the Spotless Group left the Spotless land on 28 February 1987 there was left behind a quantity of white spirit. Evidence shows that UST1, UST2 and UST3 were on 27 April 2004 emptied and their contents were subjected to analysis. There is a surprising disconformity of detail between the expert reports of Mr Clarke and Mr Parker as to the quantities. This is of no moment for present purposes. The results were as follows:
664 When subjected to an ullage test UST2 and UST3 failed. UST1 passed the test.
665 The conclusion which I am asked to draw from this is that in February 1987 the Spotless Group left an unknown quantity of white spirit in the tanks and that white spirit pollution of the Spotless land was caused or contributed to by leakage from these tanks.
666 Such a conclusion must address a number of difficulties. Generally, nothing is known of the content of the tanks in February 1987. First, it seems that UST1 when emptied 17 years later was nearly full. Prior leakage from this tank is therefore unlikely. The content of UST2, when tested, comprised a product of which white spirit was not a major component. This tank which failed the ullage test is the likely source of prior white spirit contamination. UST3 which might be a likely source is located some distance to the south of the place where heavy white spirit contamination is now observed. I decline to draw the suggested conclusion from the evidence before me.
667 I conclude, nonetheless, that Spotless as a person which caused the PCE and white spirit pollution to occur is liable to a compensation order under s. 62A(2) in favour of North Suburban. The power to award compensation is expressed to be permissive. There being no countervailing considerations proposed, I will make the orders sought. The quantum of compensation to be included in this order is to be deferred.
668 Counsel for North Suburban also seek declarations establishing their client's entitlement to compensation for expenses yet to be incurred. I shall deal with this when I consider the orders to be made.[379]
669 I have concluded that Premier's claim for statutory damages for pollution of the groundwater must fail. I have found that the groundwater on the Spotless land is polluted but that this was the consequence of no act of pollution by any of the Spotless Parties. These findings must also apply to the North Suburban s. 15 claim, which must likewise fail at this point.
670 If, however, this conclusion is not correct, the next step in the North Suburban claim is for it to demonstrate that the polluting acts, assuming them to have been performed by one or other of the Spotless Parties, have caused it economic loss. I would have no difficulty in so concluding. North Suburban has incurred the costs of dealing with the requirements of the EPA. The value of the Spotless land as a consequence of the discovered pollution has been diminished inasmuch as it cannot be used for residential purposes without incurring the expense of remediation. Such a purpose might otherwise be an available use having regard to the location of the site and to the apparent attitude of Moreland Council as responsible authority. I do not here determine the amount of this loss.
672 In this part I am concerned with the quantification of the losses suffered by Premier and North Suburban, whether these be, technically speaking, damages or not. There is also one matter which is not a true damages issue, but which I shall deal with in due course.[380] This is the application by North Suburban for orders which establishes its entitlement to payment pursuant to s. 62A for costs yet to be incurred in complying with the EPA clean up notices.
673 The causes of action asserted by Premier against the differing parties are various and it is necessary that I deal with each in turn. In its particulars of loss and damage dated 23 February 2007, Premier says that there is a degree of overlap between the losses said to flow from these causes of action. In some cases, too, the parties were agreed that I defer the quantification of certain items and I shall do so pursuant to R. 47.04. I shall identify these deferred questions when I deal with them.
674 All of the claims made by Premier and North Suburban, other than those brought under s. 62A of the Environment Protection Act, have failed. Nevertheless, in deference to the submissions presented and in case the matter might go further, I shall briefly venture my views upon the losses alleged to have been suffered. Given the multiplicity of the bases upon which these claims were put this may be an impossible task. I shall, however, do the best I can.
675 As with so much of this trial, I have had the assistance in determining the quantum issues from the evidence of a number of expert witnesses, this time in two areas of expertise - valuation and forensic accountancy. There was a good deal of controversy between counsel for the various parties as to the proper approaches which should be adopted in fixing damages but, subject to that, there was substantial agreement between the experts as to matters within their disciplines.
676 There were two valuers: Leslie James Brown who was retained by Premier, and Thomas Scott Keck of Charter Keck Cramer who was retained by the Spotless Parties. The valuers met in conclave and produced a very useful summary of points of agreement and disagreement which became Exhibit 136.
677 Four of the parties called a forensic accountant. The witnesses were Anthony D'Aloia who was retained by Premier; Colin Stanley Wight, who was retained by the Spotless Parties; Gregory Pollard Meredith, who was retained by Moreland Council but who was called by Kilpatrick following the withdrawal of Moreland Council from the trial; and Robert Matija Kus, who was retained by both Collie Planning and Keen Planning but was called by Collie Planning. A difficulty for these witnesses was caused by the late changes to Premier's approach to quantum. I refer not only to the change necessitated by the sale of the Premier land. The version of Mr D'Aloia's report which was the basis of his evidence and of this judgment is that dated 23 February 2007. The accountants met in conclave shortly prior to the delivery of this report and the report as to their agreements and disagreements dated 20 February 2007 became Exhibit 157.
678 The suggested wrongful conduct of the various defendants was said to impact on the project at two points: first, upon the decisions to purchase the Premier land in November 1999 and to complete the purchase in April 2001, and, second, upon the decision to proceed with the construction of the apartment building, which decision might be fixed at about March 2001 when the building contract was entered into.[381] Counsel for Premier then put its claim for damages against the Spotless Parties and against North Suburban on the basis that, without their wrongful conduct, Premier would not have decided to purchase or to complete the purchase of the land. Against Keen Planning and Collie Planning, Premier sought to recover its losses flowing from the decision to proceed with the development. For completeness, I should add that its imputed claims against Keen Planning and McKenzie Group must be taken to fall into that group of losses.
679 As a consequence of these ill-fated decisions, it is apparent that Premier has suffered considerable loss. The project was brought to halt in mid-2003 so that holding costs and interest on finance were incurred. It has expended considerable sums investigating the contamination and its land must be remediated at substantial cost. In a practical sense, these costs are inextricably intertwined as a consequence of the two decisions. Premier's solution is to say that, of its total expenditure on the project, 24 per cent was incurred to purchase the land and 76 per cent to construct the apartments. Accordingly, it divided, in the same proportions, the components of its loss which represented a loss for the whole project. Accepting the logical infirmities of this approach to allocation of the loss, all parties, except Kilpatrick and North Suburban, appeared to accept that this approach should be adopted.
680 Having allocated its losses in this way, Premier, in its particulars of special damage, presented its loss in two alternative scenarios: first, on the basis that it was reasonable to sell the development unremediated and, second, on the basis that Premier incurred the expense of remediation and then sold the development as a finished project with 48 units fit for habitation. In February 2007, before the trial was finished, Premier sold the land and buildings on an "as-is" basis to a company within the Spotless Group for $5m plus GST. This had the consequence that the second scenario was no longer apposite.
681 The quantum of Premier's claim, as it appeared at the end of the trial,[382] was based upon the sale which had then occurred. This meant that the debate about future remediation works and their cost moved into the background. What was now claimed was a sum of about $10.9m against the Spotless Parties and North Suburban and a sum of about $14.9m against Kilpatrick and Collie Planning. As will be seen, the former sum was said to be that attributable to the Premier decision to purchase the land and to the latter to the losses associated with the development. But there is a degree of overlap.
Premier's Common Law Claims against the Spotless Parties
682 Notwithstanding the essential differences between the various nuisance claims and the negligence claims put against the Spotless Parties, Premier asserts the same loss. In essence, what is alleged is that it is entitled to recover from those parties its losses incurred by reason of its decision to purchase the Premier land. If the Spotless Parties had not breached these common law duties, Premier would have had an uncontaminated site. As things turned out, the contaminated condition of the land has meant that Premier has incurred the capital loss of owning a much less valuable asset which has now sold at a loss and, further, it has incurred costs in investigating the position and holding the land pending the sale. Accordingly, Premier says, all of these losses are recoverable whether its claim be put in negligence or in nuisance.
683 The logic behind the claim for $10.9m is that Premier's decision to make the purchase of the land or, perhaps its decision to complete the purchase, was the consequence of the breaches of the various obligations owed to it by the Spotless Parties and North Suburban. Accordingly, it is said, Premier should be placed in the position it would have had if the breaches had not occurred.
684 I confess to great difficulty with the fundamental premise underlying this logic. First, the decision to purchase was unaffected by any of the suggested breaches. When Premier bound itself to make the purchase in November 1999, the Premier land was already seriously contaminated by PCE and white spirit. This, however, was unknown to Premier and North Suburban and there is no evidence that the Spotless Parties were then aware of it. It is from this point that the difficulties attending the attempt by Premier to fix this as the act precipitating the loss for all of the breaches begin to pile up.
685 A fundamental difficulty is that the same single measure of loss is laid at the feet of the Spotless Parties and North Suburban for very different causes of action. The negligence claim against the Spotless Parties, for example, would produce a different measure where the negligent act is the release of the contaminants, the failure to investigate and detect the existence of the contaminants and clean them up or, to prevent the contaminants from adversely affecting the neighbouring land. The loss to Premier from the third and unpleaded basis upon which the negligence claim was put[383] is even more problematic. What might McMullin Nominees have done had its tenant brought to its attention the presence of the contaminants on the demised Spotless land upon the termination of the lease? The date of this was sometime after the Spotless activities on the Spotless land had ceased in or about February 1989.[384] It may well be that, by that time, the contaminants had already migrated to the Premier land. Likewise, the measure of loss flowing from the nuisance claim may differ depending upon whether the claim is based on causing the nuisance or continuing it.
686 Moreover, on all of these dates, the permitted use of the Premier land did not include residential use. I have concluded that, prior to the rezoning, the then owner of the Premier land suffered no loss of enjoyment of that land or of any interference with any right over the land. If that finding should be reversed and a finding of nuisance substituted, the question for the purposes of damages might arise as to the date upon which this has occurred.
687 The next difficulty raised by counsel for the Spotless Parties depends upon the legal conclusion that the measure must be examined when Premier became the owner of the Premier land. This may be taken to be 11 November 1999, the date of the contract which conferred upon it equitable rights, or on 23 April 2001 when the contract was settled. If, as was generally assumed at the trial, the former date is to be preferred, the position as to the right to develop the land for residential purposes, subject to planning approval, was that of an expectancy. The rezoning did not occur till May 2000. At the time of purchase Premier had an expectancy that rezoning would take place and that residential development of some kind would be permitted, but it also had a contract under which the responsibility for the rezoning and environmental matters remained with the vendor. There is no evidence to warrant a finding that the Spotless Parties did or might reasonably have foreseen all of this at the time of the release of the contaminants or at the time they vacated the Spotless land.
688 I was referred to the decision of Lord Lloyd in Hunter v Canary Wharf Ltd & London Docklands Development Corporation[385] as to the proper measure of damages for nuisance. His Lordship was there of opinion that the proper measure is the diminution of the value of the land by reason of the nuisance. This is no warrant for a measure of damages which indemnifies the landowner for all of the costs of the purchase of the land affected by the nuisance. In the context of the present case, this diminution may be seen as the cost of remediation, for it was accepted by the expert witnesses that the diminution in the value of the land represented, in principle, the cost of remediation together with what was called a stigma factor. To this may be added any loss of use of the land while the remediation measures were identified and put in hand.
689 Having made these general observations, I turn now to the particular items of loss alleged in Premier's particulars.
690 In essence, this item represents the interest paid by Premier to its finance provider in order to purchase the land. In fact, it does not represent the totality of the interest paid because the calculation is made only of the interest paid to Colonial First State which did not provide finance until September 2001, well after the purchase of the land and when construction was about to commence. It was at this time that the loan obtained from the National Australia Bank for the purchase of the land was paid out. Mr D'Aloia, in Annexure A to his report, undertook a reconciliation of the Premier account with Colonial First State, allocating the facility between that for the purchase of the land, that for the development and that for the engineering and consultancy costs. The amount here claimed in respect of the purchase of the land is $1,127,829.10, which represents the total amount of interest and charges as at 20 February 2007 imposed on the advance of $2.1m made in September 2001 to refinance the purchase of the land. The account shows that the balance was adjusted to include interest upon monthly rests until January 2004 when interest began to be calculated on a simple interest basis.
691 The accountants were agreed that the interest paid to Colonial First State on the $2.1m totalled the sum claimed and I so find.
692 Premier's claim for this item is $5.5m or $4.565m These figures were calculated by Mr D'Aloia in his report as follows. The cost of remediating the land with the building on it is taken to be between $4,349,935 and $4,914,292. From this he deducted $348,911 being the extra remediation cost to be incurred because of the increased difficulty of working around the existing apartment block. The remediation cost attributed to the land, therefore, is between $4m and $4.56 million.
693 This appears to be based upon information ultimately provided by ITE. Mr D'Aloia notes that Mr Brown has valued the land on the basis that it is uncontaminated and otherwise in its condition as at November 1999, the date of purchase. Mr Brown's value as at 22 December 2006 is $3.5m not including GST. Mr Brown concluded from this that the partially developed land had a negative value of about $1.4m. Mr D'Aloia preferred to treat this as an additional cost. Mr D'Aloia then adopted the higher land remediation figure of $4.56m and concluded that the purchaser of the land only (but in its contaminated state) would expect to receive from the vendor both the land and a payment of between $1.065m and $2m. The lower of these figures represents the difference between the value of $3.5m and the land remediation cost of $4.56m. Mr D'Aloia rounded this figure up to $2m to allow for risks involved for the purchaser. This, together with $3.5m being the underlying value of the land, gives the upper limit of the $5.5m loss claimed. The lower limit is arrived at by adding to this underlying value the lower figure of $1.065m to be paid to the notional purchaser of the unremediated land.
694 This conclusion was challenged on a number of grounds. I accept the evidence of Mr Keck that the true value of the Premier land, as at the date of purchase, was $2.5m and that this figure included a condition that the rezoning would take place and that the vendor assumed responsibility for any decontamination which may be required. The evidence showed that there was a high probability that the Minister would approve the rezoning, so that the first condition was not of great consequence. Mr Keck's value of the land on an unconditional basis was $2m. This places a rather high price on the environmental condition but I accept that this is so. The consequence of this, however, is that the underlying value of the land is $2m rather than $3.5m as Mr D'Aloia has assumed. This may make little difference, however, because it increases the negative value of the land if ITE remediation costs remain unchanged. It does, however, show that Mr D'Aloia's view is to be preferred to that of Mr Brown when he, D'Aloia, says that the loss under this head should be characterised as the cost of remediation. It may well be that this diminution in the value of the Premier land is the cost of remediating it.
695 This exposes the real nature of Premier's claimed loss. It is that it has paid too much for the contaminated land and has incurred consequential costs as a result. It exposes, too, the difficulty which Premier must address. It paid a premium for the land because the vendor assumed the risk that the rezoning would not be approved and, more importantly that the land was required to be decontaminated. The first condition was fulfilled. Premier's decision to abandon the second was not something which can be laid at the feet of either the Spotless Parties or North Suburban. I cannot see a basis upon which this item might be recovered as a consequence of the decision to make the purchase of the Premier land.
696 These represent the cost to Premier of investigating the contamination and complying with the requirements of its environmental auditors and consultants. These total $3,122,220 and the figure is not in issue. The item, however, represents the loss consequent upon Premier's acceptance of responsibility for any contamination of the land. I would, therefore, not treat it as a loss flowing from the decision to purchase.
Direct financing costs of the engineering consultancy costs
697 This item represents the interest paid to Colonial First State upon the engineering and consultancy costs which it paid by way of advance to Premier between June 2003 and February 2007. The mathematics are not in issue. What was put on behalf of the Spotless Parties was that this, too, should be disallowed for the same reason that the engineering and consultancy costs themselves should be disallowed. I agree.
698 By selling the Premier land on an "as-is" basis, Premier passed to the purchaser the risk of the cost of remediation. It is common ground that the costs of the sale were $171,824.66.[386] I was told, too, that there was an extra 1 per cent commission payable to the agent. If this be the case, this $50,000 should be added, making the total expenses $221,824.66. I have inspected the agent's authority dated 23 November 2006 which is Annexure 4 to Mr D'Aloia's report. This leads me to the conclusion that the extra 1 per cent is in fact included in the $80,000 mentioned in Exhibit 179. I shall leave this to the parties to resolve. For present purposes I proceed on the basis of the figures contained in Exhibit 179. Twenty-four per cent of this selling cost is $41,237.92. The amount claimed, however, is only $30,341. It seems likely that there is an error in Premier's claim. In its particulars of loss and damage, the item is shown as $18,341 plus 1 per cent. The notes to the particulars disclose that the total selling costs were expected to be $44,315 for marketing and an agent's fee of $30,000, a total of $74,315. Twenty-four per cent of this produces $17,835.60. It would seem that the figures in Exhibit 179 represent the true position as things turned out.
699 Two things need to be said about this item. No allowance in the commission component is made for GST. Indeed, I was told at one stage that the sale price of $5m was also ex-GST. I do not know if an adjustment should be made for this.
700 Second, the cost of resale can be justified on the basis that this resale should be seen as an attempt by Premier to mitigate its loss. Another way of looking at it is as a sum to be deducted from the present value of the development in order to give its true present value to Premier. The land was purchased for resale so that its value should allow for this among other costs of development. If the claims under this head are valid, contrary to my conclusion, I would include such an item.
701 This is an item upon which there was some debate as to whether I should undertake the task of quantification. I decided that I would do so to the extent that the evidence permitted. The total costs claimed are $356,265 of which the 24 per cent allocated to the land purchase is $87,926. This represents the costs incurred by Colonial First State as mortgagee in enforcing its security. In accordance with the terms of the security, these costs are payable to the mortgagee by the mortgagor, Premier. So much was not in dispute.
702 The area of conflict under this item was whether these costs should be included at all in the assessment of damages. To my mind, they are not consequential upon any of the breaches alleged against the Spotless Parties or North Suburban. They are a result of the parlous financial state in which Premier found itself. I would not allow this item.
703 The total costs as they appear in the mortgagee's certificate dated 22 December 2006, are made up of three components:
704 Having looked at the material offered in support, I am unable to determine whether the legal fees incurred relate solely to the enforcement of the security. If it is thought desirable to determine this item, it must be deferred for later determination.
705 Between 30 April 2003 and 30 November 2006, Premier incurred costs totalling $31,682. The detail of these costs which appears in Annexure 12 to Mr D'Aloia's report, shows them to be for water rates, security fencing and electricity charges. The period claimed commences at about the date when the apartments were expected to have been transferred to the purchasers. They are therefore akin to holding costs and the same comments apply to them.
706 The amount claimed for the land component is, as before, 24 per cent of the total costs. I would, in principle, allow this item. I do not understand that the mathematics are in issue.
Premier's Statutory Claims against the Spotless Parties
707 These are the claims brought under s. 62A of the Environment Protection Act and s. 15 of the Water Act. Premier says that the measure of its Water Act damages should be the same as its common law damages, for s. 15 uses the terminology of "damage to property" and "economic loss" and "damages". Moreover, by s. 19(9) it imports the common law concept of causation. The significant requirement, however, is that the event which may bring about a compensable loss is the act of polluting groundwater.
708 Accepting, as I do for present purposes, that the groundwater is polluted and that this is the consequence of the act of one or other of the Spotless Parties, the loss for which Premier is entitled to recover statutory damages is the same as that flowing from the common law claims based upon its acts of releasing the contaminant into the Spotless land. Broadly speaking, having regard to ordinary rules of causation and remoteness, these would be the consequent diminution in the value of the polluted land. Another way of approaching this might be the cost of investigation and remediation together with ancillary costs such as any losses due to the loss of use of the land which was precluded by these activities. Since the land was purchased for development and resale, these figure ought to be approximately equivalent. These are the items for which Premier is entitled to damages pursuant to s. 15 of the Water Act.
709 The Premier claim under s. 62A has been made out against Spotless. The parties are agreed that the assessment of the compensation payable under this head should be deferred.
710 Again, the claims are put in nuisance and negligence and under s. 62A of the Environment Protection Act. The claim against North Suburban highlights the difficulty in seeking to attribute to different causes of action the same losses. Against North Suburban the loss offered by Premier must, at best, be that suffered as a consequence of the failure of North Suburban to put an end to the nuisance which was occurring in 1994 or 1995 when North Suburban became the owner of the Spotless land. I have found that the contamination of the Premier land was, in part, due to the release of PCE from the ALMI machine in 1978-1979, the period it was operated on the Premier land. North Suburban cannot be responsible for this. The evidence shows that North Suburban was unaware of the contamination of the Premier land until 2003. Even if that finding should not stand, I have difficulty in accepting that a proper measure of Premier's loss attributable to the breaches alleged against North Suburban should be approached on the basis that it be relieved of the consequences of its decision to purchase the land and further recover consequential loss. This makes it difficult, if not impossible, to attempt any quantification of Premier's loss which may be attributed to the acts or omissions of North Suburban.
711 In their final submissions on this aspect of the case, counsel for Premier put its case rather differently from what had been particularised. In the particulars, no distinction is drawn for this purpose between the position of North Suburban and the Spotless parties. In final address, attention was focussed upon the need for the construction of a substantial barrier to prevent further migration of contaminants of the Spotless land to the Premier land. Now, of course, the decision and the cost as to this lies with the purchaser of the Premier land. And so, counsel for Premier now say that this purchaser must have made allowance for the cost of the construction of this wall in fixing its price. The cost of the wall is estimated at $512,301. That the purchaser included this expense in its calculation is a matter of speculation and I will not act upon it. Then, bravely, counsel for Premier add that North Suburban has taken no step to abate or terminate the nuisances since it became aware of them, at latest when it received its first clean up notice from the EPA on 18 February 2004. Accordingly, it is said, North Suburban should bear a proportion of Premier's loss. I am not at all confident that I understand why this conclusion follows. It appears to require a finding that the present contamination of the Premier land is, in part, due to the migration of contaminants from the Spotless land since 2004 or perhaps since mid-2003. I make no such finding. Nor could I determine what is a proper proportion of the loss on the evidence before me.
712 I am unable to take this matter further. Premier has not demonstrated any loss attributable to the common law allegations against North Suburban.
713 The Premier s. 62A claim raises different questions. I assume, contrary to my conclusion, that North Suburban is a person which caused or permitted pollution of the Premier land to occur. Section 62A(2) then exposes it to the order for compensation for costs incurred by Premier as owner of the polluted land in complying with the EPA clean up notices. Section 62A does not, in terms, deal with the case where there are a number of persons who fall within s. 62A(1)(b), (c) and (d), and who are therefore liable to a compensation order under sub-s. (2). The sub-section gives some discretion to the Court inasmuch as the statute confers power to order compensation. Perhaps this entitles it to apportion responsibility between the persons liable. On the other hand, it may make each of them wholly liable, leaving it to them to sort out their individual shares. No argument was directed to this. It appeared that Premier seeks the total costs against both Spotless and North Suburban. It is neither necessary nor desirable that I take this matter further.
714 The calculation of Premier's costs of compliance for the purposes of s. 62A(2) are deferred.
715 The claims against Kilpatrick are for negligent misrepresentation and for misleading and deceptive conduct in making a false representation. In each case, two representations are said to have been made. The first is the Kilpatrick report, which was prepared for and delivered to Babka in January 2000. The second was in a letter dated 14 September 2001 sent to Premier's builder.
716 In its particulars, Premier alleges that as a consequence of these false representations it suffered losses totalling about $14.9m, which are the losses concerning the development. In their final address counsel for Premier put their client's position shortly: it would not have settled the purchase but for Kilpatrick's misleading conduct. And, later, "it would not have settled the purchase of the land; it would not have incurred the expenses associated with the acquisition and development of the land". Notwithstanding this, the figures proposed in final address totalling $4,848,306 appear to be restricted to development losses. This must be correct. It is common ground that, when the Kilpatrick report came into the hands of Premier, Babka remained responsible for obtaining a certificate of environmental audit but, under the third version of special condition (4), the time for this had been removed and Babka's financial responsibility was only for the costs of the consultants required.[388] This version of the special condition was accepted by Premier as being in force at the time the Kilpatrick report was received, notwithstanding that the amendment was not signed off until mid-March. It is by no means certain that, under such a condition, Premier could have withdrawn from the contract of sale if it had learnt from the Kilpatrick report that the land was heavily contaminated.
717 The position is even clearer in September 2001 when the second suggested false statement was made. At that time, the contract of sale had been settled and demolition of the existing warehouse was complete. If the letter had disclosed the presence of severe contamination, the options available to Premier were to press on, to sell the vacant land or to develop it for a purpose which did not require an environmental audit. The first option, that which was in fact adopted, was not legally available because the terms of the planning permit would require an environmental audit before construction commenced.
718 It would seem that the damages claim for the first suggested false statement presupposed the same three options. Ignorant of their true position, Premier pressed on with the development in March 2000. This course, however, would not have been capable of pursuit had Premier complied with the terms of the planning permit. This non-compliance cannot be laid at the feet of Kilpatrick.
719 In any event, I accept the criticism of Premier's quantum methodology advanced by counsel for Kilpatrick. Returning to the position as it stood at the end of February 2000, Premier owned land which is now known to have been heavily contaminated. Let it be supposed that the Kilpatrick report had disclosed this fact. The loss of Premier then must be the extent to which it is worse off by pressing on in ignorance compared with its position had it adopted one of the other options I have mentioned or some other course which is not readily apparent to me. The methodology adopted by Premier of seeking a portion of its loss from the whole project by comparing the profit it expected had the site been uncontaminated with the loss it actually incurred is inappropriate. The fact is that the land was never uncontaminated and this is not attributable to any act or omission of Kilpatrick.
720 Putting to one side disputes about detail, the expenses incurred by Premier in the Barkly St project and the monies received by it upon the sale in February are known. These produce a negative balance. What is not known is the figure with which this balance is to be compared. Premier never addressed this matter other than by asserting that it would not have completed the contract. If this is seriously advanced as an option the financial implications are not known. For example, if Premier had declined to complete the contract Babka might have sued for damages for loss of the contract seeking the difference between the purchase price of $2.4m and the true negative value of the land. The measure of such a claim might depend upon the version of special condition (4) which was applicable at the time of breach. Other possibilities suggest themselves.
721 If one then turns to the position as it stood in September 2001, the option of withdrawing from the contract was no longer available. As with the earlier representation, the available options would have to be canvassed. They were not.
722 It is sufficient, then, that I reject the methodology of Premier. I am unable to assess the quantum of its loss whether this be at common law for negligence or pursuant to the Trade Practices Act.
723 Notwithstanding that the case against Collie Planning was fundamentally different, Premier in its claim for damages treats this defendant as it does Kilpatrick.
724 The important differences are that the case against Collie Planning is put in breach of contract and in negligence for its deficient performance of its planning duties. In each case the acts or omissions occurred prior to 30 June 2000 when the Collie Planning retainer passed to Keen Planning.
725 Moreover, the losses claimed must be related to the breaches which are alleged. I have already discussed these in some detail and have rejected them.[389] I now assume that some of them have been established. The central thrust is that Collie Planning did not advise Premier that a certificate of environmental audit would be required prior to commencement of the development and of the implications of this requirement.
726 Much of the discussion of Premier's quantum claim against Kilpatrick is here relevant. An important difference, however, is that, at the time Collie Planning ceased to be involved in the project, the issue of the planning permit with its requirement for a certificate of environmental audit was many months away. It cannot be accepted that, if Collie Planning had given Premier the advice which is referred to in the pleading, Premier would had declined to settle the contract of sale. Mr Evans said in evidence that if he had had this advice he would have set about getting the certificate. I have no doubt that this is what he would have done, but only at a time when it was necessary that it be done. This means that, if Collie Planning had given the suggested advice prior to its departure on 30 June 2000, nothing would have been done for a year or so at the earliest. It would certainly not have been seen by Mr Evans as necessary, at least until the planning permit had been granted; perhaps some time later, as events showed.
727 No other realistic option has been suggested on behalf of Premier. I find that no loss has been suffered by Premier, assuming that the pleaded breaches of contract and duty of care and reliance upon them had been established.
Premier's Imputed Claims against Keen Planning
728 The relevant claims are those for breach of duty of care owed by Collie Planning to Premier. The claim against keen Planning is, of course, not pursued by Premier following its settlement with this defendant; it is pressed by Kilpatrick and Collie Planning with a view to attracting to Keen Planning some responsibility for the loss of Premier for the purposes of the Wrongs Act Part IVAA apportionment regime.
729 Pursuant to s. 24AE I am required to assess the quantum of Premier's loss and then to give judgment allocating this quantum among the concurrent wrongdoers in terms of their responsibility for the loss. My present task is to quantify Premier's loss for which Keen Planning bears some responsibility.
730 It is necessary to underline that the involvement of Keen Planning in the Barkly Street project post-dated that of Collie Planning. Keen Planning took over the role of planning consultant following the termination of the Collie Planning retainer on 30 June 2000. Keen Planning was the Premier planning consultant at the time of the Kilpatrick letter of September 2001 but not at the time of the Kilpatrick report.
731 Notwithstanding this, it is said that the losses flowing from the breach of duty of care by Keen Planning are the same as those claimed by Premier to be the consequence of the breaches by Collie Planning and Kilpatrick. In short, had Keen Planning fulfilled its obligations, Premier might have avoided all of the development losses and, perhaps, it would not have settled the contract of sale in April 2001.
732 Much of what I have written about the quantum methodology adopted by Premier with respect to its claims against Kilpatrick and Collie Planning is applicable here. In essence it is necessary to compare the position in which Premier now finds itself with the position in which it might have been had Keen Planning not committed the breaches alleged against it.
733 In short, the breaches put against Keen Planning are that it did not advise its client that a certificate of environmental audit was required before construction was commenced and of the implications of this. For present purposes, I assume that these breaches have been made out. Let it be assumed that this advice was given by Keen Planning in mid-2001 when the final terms of the planning permit were known. The existence of the contamination would then have become apparent at a time when no construction had been commenced, perhaps at a time when the warehouse still remained. The options then available would have been to sell the land as it stood or to have undertaken the necessary remediation to enable the development to proceed. Withdrawal from the then completed contract of sale was not an option. It may not be correct, as counsel for Collie Planning submitted in a different context, that the option of selling would produce a profit rather than a loss. This would depend upon the terms of any sale. If the land was sold as contaminated land the evidence of the valuers suggest that it would have been sold at a nil or a negative value.
734 As with the claims against Kilpatrick, the measure of damage on this basis was never explored and I am unable to make a finding as to quantum.
Premier's Imputed Claim against McKenzie Group
735 This claim is not made by Premier; like the claim against Keen Planning it is advanced by Kilpatrick and Collie Planning for apportionment purposes.
736 The thrust of this allegation is that McKenzie Group was in breach of a duty of care owed to Premier when it issued its first building permit on 17 August 2001 and, perhaps, also when it issued the two later permits on 12 April 2002 and 12 March 2003. The complaint here is that the permit ought not to have issued until McKenzie Group was satisfied that condition 28 of the planning permit had been complied with. This is the condition which required that Premier obtain a certificate of environmental audit before commencing the development. It also alleged that McKenzie Group failed to advise Premier that it would be prudent for it to comply with the terms of condition 28.
737 The position raises, once again, the point I have made with respect to the methodology of the claims against Kilpatrick, Collie Planning and Keen Planning. If it be assumed that McKenzie Group acted as alleged it ought to have acted, Premier would have undertaken a site investigation at a time when the Premier land had been cleared. This would have disclosed the serious contamination. It would then have had to address the available options of which withdrawal from the contract of sale was not one.
738 For the reasons already discussed, I am unable to undertake the task of confining Premier's loss on this basis.
North Suburban's Claims against Spotless Parties
739 These are statutory claims brought under s. 15 of the Water Act and s. 62A of the Environment Protection Act.
740 The quantum of North Suburban's compensation and of its damages, if they are to be pursued, are to be deferred.
741 It is convenient that I deal with an associated matter arising out of North Suburban's s. 62A claim. It is that s. 62A(2) is expressed in terms of "costs incurred" in complying with the clean up notice. This, I interpret as referring to costs which have been incurred in the past. These costs will be determined at a later date. The position, however, of North Suburban is that there is much investigation and remediation not yet undertaken. This means that North Suburban will have to return to Court from time to time and at the conclusion of the remediation to seek further compensation as the expenses are incurred
742 Faced with this prospect, counsel for North Suburban amended its claim to seek, in addition to compensation for past expenses, declarations of its entitlement to compensation so that future applications could be concerned only with the quantification of costs incurred in terms of s. 62A(2). Although the relief is sought in both the litigation and in the North Suburban VCAT proceeding, I am considering it in my capacity as judge, for it is in the litigation that I have dealt with these claims. It was not disputed before me that, as a matter of law, North Suburban might in the future return to Court to seek an order for costs incurred which are not the subject of the present proceeding, and I proceed on that basis.
743 The relief is resisted by the Spotless Parties on the basis that the declarations sought are in truth not declarations of right, but, rather, declarations as to findings of fact. Depending upon how the declarations are formulated, this cannot be correct. The entitlement of North Suburban to an order for compensation is a right which I have determined to exist having regard to my findings of fact and my conclusions of law. It is a right which arises from operation of the statute and the giving of the three clean up notices by the EPA. There is, to my mind no difficulty and a good deal of utility in declaring that this right exists so that any further costs of the kind contemplated in s. 62A(2) which may in the future be incurred might be the subject of a future award of compensation. I will therefore make a declaratory order.
744 Typically, contribution is considered after liability is established. Since all claims for damages have failed in this proceeding no question of contribution arises. Nevertheless, I would undertake this task, if it were possible, for the assistance of the parties in the event that all, or some of my conclusions rejecting the claims may be overturned. Unfortunately, there are very great difficulties in undertaking this task. I simply list them.
• It is necessary to determine what is the common damage suffered by the plaintiff for which the suggested contributors are responsible. In this case there are great uncertainties attending this task.
• It is necessary to determine who are the suggested contributors. This involves a consideration of the possibility that some or all of the claims which I have rejected might be made out.
• It is not possible for me to determine degrees of responsibility for the loss of Premier in a vacuum.
745 The determination of responsibility under the Wrongs Act apportionment regime or the Trade Practices Act apportionment regime raises even greater difficulties in a case such as the present where there are numerous parties and all claims have been rejected. These difficulties resemble those I have mentioned and then there are some more.
746 I will not, therefore, make any findings as to responsibility for the purposes of contribution or apportionment.
747 The end result of these lengthy proceedings, and the judgment which it has produced, may be shortly stated. The orders, other than costs orders, which I would propose are the following.
(1) Order that the following questions be determined after the hearing and determination of all other questions at the trial:
(a) In respect of the claim made by Premier pursuant to s. 62A(2) of the Environment Protection Act 1970 (Vic):
(i) whether the Engineering and Consulting Costs of $3,218,532 or any and what sum were incurred reasonably and in good faith in complying with clean up notices under s. 62A; and
(ii) whether the amount of the Direct Financing Costs (referable to Engineering and Consulting Costs) is $709,209 or any and what amount;
(b) In respect of the claim made by North Suburban pursuant to s. 62A(2) of the Environment and Protection Act 1970 (Vic) whether the amount of $231,888.49 or any and what sum was incurred by North Suburban reasonably and in good faith in complying with the following clean up notices issued under s. 62A.:
(c) What is the amount of economic loss suffered by Premier as a result of the pollution of the Premier land found to have been caused by Spotless insofar as that economic loss constitutes:
(i) Engineering and Consulting Costs incurred in respect of those clean up notices under s. 62A;
(ii) the amount of the Direct Financing Costs incurred in respect of those Engineering and Consulting Costs.
(d) Whether the amount of the Enforcement Costs is $87,268 or any and what lesser amount_._
(2) Declare that the firstnamed defendant is liable pursuant to s. 62A(2) of the Environment Protection Act to compensate the plaintiff for any costs incurred by it which are reasonable and which were incurred in good faith in complying with any or all of the following notices:
(3) Order that the question of the amount of such costs be referred to a Master for enquiry and determination.
(4) Order that the firstnamed defendant pay to the plaintiff the amount so determined.
(6) Otherwise there be judgment for each of the defendants against the plaintiff.
(7) Declare that the firstnamed defendant is liable pursuant to s. 62A(2) of the Environment Protection Act to compensate the secondnamed defendant for any costs incurred by it which are reasonable and which were incurred in good faith in complying with any or all of the following notices:
(8) Order that the question of the amount of such costs incurred to date be referred to a Master for enquiry and determination.
(9) Order that the firstnamed defendant pay to the second defendant the amount so determined.
748 I will hear counsel further as to whether proposed orders (1)(c) and (d) are appropriate as to the precise terms of the orders to be made to give effect to my conclusions generally and as to costs.
I certify that this and the 232 preceding pages are a true copy of the reasons for judgment of Byrne J of the Supreme Court of Victoria delivered on 5 October 2007.
[1] Fourth further amended statement of claim filed 29 January 2007, as amended by leave on 27 February 2007.
[3] Statement of claim para 3G, defence para 3G.
[7] Statement of claim para 7H; Spotless Parties defence filed 29 July 2005 para 7H.
[9] Wrongs Act s. 24AJ. See, too, Trade Practices Act s. 87CF.
[10] Premier's claims arising out of such conduct in contravention of s. 9 of the Fair Trading Act were abandoned on day 60 of the trial.
[12] Rule 9.11(3)(a). A proceeding against an added party commences on the date of the amendment of the originating process.
[14] Wrongs and Limitation of Actions Acts (Insurance Reform) Act 2003 s. 17.
[16] Building Act s. 131.
[17] Building Act s. 132.
[22] Premier Land - Notices dated 18 November 2003, 27 February 2004 and 10 March 2006. Spotless Land - Notices dated 18 February 2004, 28 September 2004 and 10 March 2006.
[24] Defence para 7B.1. Documents in evidence show Spotless Laundry as tenant of McMullin Nominees continuously until 30 September 1982 but nothing turns on this.
[26] Defence para 2.2(b). This may not be correct. In a letter dated 25 September 1989 McMullin Nominees speaks of Spotless Laundry as being its lessee.
[29] Fourth further amended statement of claim filed 29 January 2007.
[35] No allegation in terms is made in the statement of claim.
[36] Spotless paras 10B-10D (white spirit nuisance); Ensign Services paras 11B-11D (PCE nuisance), paras 11F-11G (white spirit nuisance); Spotless Services paras 10J, 10L, 10M (white spirit nuisance), paras 10K, 10L, 10N (PCE nuisance).
[37] Statement of claim paras 10A, 10E, 10I, 11A, 11E. It is not alleged that Spotless Services created the PCE nuisance.
[38] Statement of claim paras 10D, 10H, 10M, 10N, 11D, 11H.
[39] Statement of claim paras 27A, 27B.
[40] Statement of claim para 7B (Spotless Laundry); para 7E (Spotless Supply).
[41] Statement of claim para 7C (Spotless Laundry); para 7F (Spotless Supply).
[42] Statement of claim para 7I (Agent); para 7J, (joint enterprise).
[43] Statement of claim para 7E (Agent; para 7E (joint enterprise).
[51] Statement of claim paras 10J, 10L-10M.
[52] Statement of claim para 10K-10L, 10N.
[53] Defence filed 29 July 2005, para 9A.
[58] Statement of claim para 24A(a). Cf paras 24C(b) and 26(b).
[59] Statement of claim para 24A(b). Cf paras 24C(a) and 26(a).
[60] Statement of claim para 24A(c). Cf paras 24C(e) and 26(c).
[61] Statement of claim para 24A(d). Cf paras 24C(d) and 26(d).
[62] Statement of claim para 24A(e). The equivalent para 24C(c) departs somewhat from this. There is no equivalent in para 26.
[69] Statement of claim paras 139A - 141, 143B - 145.
[70] Further amended points of claim filed 12 May 2005.
[71] Points of claim paras 44 - 47, 52.
[74] Notice of claim filed 14 November 2006.
[77] Defence to plaintiff's third further amended statement of claim filed 2 August 2005.
[83] Statement of claim para 143A. VCAT points of claim para 49.
[87] Notices of claim filed 1 August 2005, 1 October 2005 and 1 October 2005 against the Spotless Parties.
[92] Statement of claim paras 129, 131.
[93] Statement of claim paras 130, 131.
[102] Defence paras 117(b)(i); 133(c).
[103] Not for the s. 52 claim. I & L Securities Pty Ltd v HTW Valuers (Brisbane)Pty Ltd [2002] HCA 41; (2002) 210 CLR 109.
[104] Defence paras 117(b)(ii); 133(e).
[111] This claim was eventually abandoned. See para [34] above.
[118] Defence filed 4 December 2006. Keen Planning filed no defence to Collie' s statement of claim.
[119] Collie Planning statement of claim para. 56; Kilpatrick statement of claim para 19.
[120] Defence to Kilpatrick statement of claim para 11.
[121] See Collie Planning statement of claim paras 65, 81; Kilpatrick statement of claim paras 37, 38.
[122] Collie Planning statement of claim para 111; Kilpatrick statement of claim para 47.
[123] Defence to Kilpatrick statement of claim para 28.
[125] Statement of claim filed 6 December 2006.
[126] Statement of claim filed 22 November 2006.
[129] Statement of claim para Annex A points of claim para 14.
[130] The demolition contractor was A R Dalton.
[131] Further amended statement of claim filed 14 December 2006.
[132] Further amended points of claim filed 14 December 2006.
[133] This allegation is implicit in the Premier statement of claim. See para [2.18] above.
[134] Statement of claim para 34A, points of claim para 33A.
[135] Statement of claim para 34C, points of claim para 33B.
[136] Pursuant to the Planning and Environment Act ss. 151, 153.
[138] See Guidelines for issue of Certificates and Statements of Environmental Audit, June 2002, issued by the EPA.
[140] This section has been repealed. References to the Act are to the Act as it stood at the time.
[143] State Environment Protection Policy (Groundwater of Victoria) gazetted on 17 December 1997
[144] State Environment Protection Policy (Prevention and Management of Contamination of Land) gazetted on 4 June 2002
[150] Although no express direction to this effect is contained in s. 57AA, it appears to be implicit from sub-s. (4).
[155] Condition 28. There is, as will be seen, some difficulty arising out of the terms of the permit which actually issued on that date, but this is not relevant for this statutory overview.
[160] Solubility limit 200 mg/l. or 200 parts per million.
[162] See RSC Ch I Form 44A and Rule 44A.03
[163] Guidelines for Issue of Certificates and Statements of Environmental Audit, 2002, para 6.3.
[164] And see Dr Drew's response to this of 12 August 2003.
[165] See, for example, Environment Protection Act s. 55.
[166] See ITE fax to Baker & McKenzie 18 August 2003.
Premier Building and Consulting Pty Ltd
Spotless Group Limited & Ors [2007] VSC 377
(2002) 210 CLR 109