Plaintiffs v Defendant

Plaintiffs v Defendant - [2006] VSC 15 - VSC 2006 case summary — Zoe

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INTRODUCTION

1 In the period 1982 until 2004, the plaintiffs were the owners of land situate in Springvale Road, Springvale ("the land"). At the time the plaintiffs acquired the land, it was leased to the defendant ("Mobil"). At this time, Mobil was conducting a petrol station business on the land.

2 Mobil continued to lease the land from the plaintiffs, and to conduct a petrol station business on the land, until the lease expired in November 2000.

3 The lease contained provisions which required Mobil, at the end of the lease, to clean up any contamination at the land in certain circumstances. It is common ground that, at the end of the lease, there was some contamination at the land.

4 The plaintiffs allege that the extent of that contamination was such as to oblige Mobil, under the terms of the lease, to clean up that contamination so as to permit the land to be used for any "as of right" commercial use ("commercial uses") permitted by a specified zoning under the Springvale Planning Scheme ("the applicable zoning"). Mobil contends that the relevant provision of the lease which requires clean up of contamination in certain circumstances is void for uncertainty. Alternatively, Mobil contends that the extent of the contamination at the land at the end of the lease was not of a level which required it to clean up that contamination.

5 To guard against the possibility that the relevant clean up provision of the lease is void for uncertainty, or that the extent of the contamination is not such as to require clean up under the lease, the plaintiffs have brought an alternative claim in nuisance.

6 The plaintiffs claim that, by reason of the failure of Mobil to clean up the contamination at the land as required by the lease, Mobil is obliged to pay them a licence fee for each day that Mobil failed to clean up, until the land was sold by the plaintiffs in November 2004. The extent of the licence fee claim is $575,735.99, together with interest thereon. Further, the plaintiff claims the difference between the price for which it sold the land in November 2004 and the value of the land at that time if it had been cleaned up by Mobil as required by the lease. The amount claimed in this regard is approximately $650,000.

7 In the event that the plaintiffs are able to establish a cause of action for breach of the lease, Mobil raises defences based upon breaks in the chain of causation, remoteness of damage and failure on the part of the plaintiffs to act reasonably in order to mitigate their damage. In addition, Mobil asserts that the plaintiffs' claims are claims for loss of opportunity, which opportunity should be discounted to a substantial degree having regard to a number of vicissitudes which may have operated to prevent the plaintiffs from fully realising the lost opportunity.

8 The openings and evidence in the proceeding occupied 11 days. Some 22 witnesses were called. Most of them provided detailed witness statements. Others attended pursuant to subpoena. There was an eight volume Court Book and other exhibits outside the Court Book were tendered, including voluminous technical guidelines, policies and standards relevant to contamination of land issues. There was lengthy cross-examination of many of the witnesses. Further, there was substantial objection taken to the admissibility of evidence, especially evidence contained in witness statements which had been served prior to trial. Notwithstanding this, there was little dispute as to the facts.

FACTS

9 For almost 20 years commencing in late 1981, Mobil operated a petrol station at the land. From 1982 until November 2000, it did so as lessee from the plaintiffs.

10 A lease from the plaintiffs to Mobil, which contained options for renewal, was due to expire on 12 November 1995. Under this lease, there was no provision which dealt expressly with Mobil's environmental clean up obligations on the expiry of the lease term. In the course of exercising Mobil's option for a further lease term of five years, Mobil's solicitors proposed some amendments to the existing form of lease, with the intent that these amendments be contained in the new five year lease to operate from 13 November 1995.

11 With respect to Mobil's clean up obligations at the expiry of the lease, Mobil's solicitors proposed a clause to cover this issue expressly. The proposal was, in summary, that Mobil's obligation would be limited to clean up to a level of contamination:

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20 It appears that by May 2000, Mobil had determined that it would not renew the lease when it expired on 12 November 2000. Accordingly, Mobil commenced preparing itself to hand back the land to the plaintiffs at the expiration of the lease. Mobil's preparations in this regard were coordinated by Gregory Bond, a Remediation Coordinator employed by Mobil. Mr Bond was the Mobil officer responsible for obtaining the Environmental Site Assessment ("ESA") required to be undertaken by Mobil pursuant to cl. 7(b) of the lease.

21 However, it would appear that Mr Bond paid no regard to the terms of cl. 7(b) of the lease in commissioning the preparation of the ESA. As a result, the design of the ESA ignored the terms of cl. 7(b) of the lease. Clause 7(b) of the lease is directed at a clean up of any contamination in the context of the future use of the land for commercial uses permitted under the applicable zoning. Notwithstanding this, Mr Bond frankly conceded that he sought and obtained the ESA on the express understanding that the land would continue to be used as a service station. Mr Bond said that he reached this understanding "right from the start" in May 2000 as a result of being so instructed by Hayden Burge, who was at that time the Mobil Real Estate Coordinator responsible for all matters relating to the purchase and leasehold of Mobil properties in Victoria.

22 Mr Bond invited Handex Australia Pty Ltd ("Handex") to submit a proposal for the preparation of the ESA. In an early proposal by Handex, 16 soil bores were recommended as part of the scope of work. However, Mr Bond requested Handex to revise its proposal, so as to provide for only 10 soil bores. Mr Bond said that he insisted that the number of soil bores be reduced because of his understanding of the Mobil Environmental Remediation Specifications. These are detailed specifications comprising some 161 pages including annexures. It is apparent that Mr Bond felt himself bound by these specifications in managing the remediation of petrol station sites being vacated by Mobil.

23 Mr Bond did not accept that cost was a main concern of his requirement that Handex reduce the number of soil bores to be drilled for the purposes of the ESA. He insisted that he was principally "following the spec". However, I am satisfied that cost was a significant factor in the decision of Mr Bond to limit the number of soil bores to be drilled by Handex as part of the ESA. I do not accept Mr Bond's attempts to downplay the significance of saving cost in his decision to limit the scope of works to be performed by Handex. Indeed, there is documentary evidence to this effect. In an internal Mobil e-mail dated 8 June 2000, Mr Bond stated in respect of quotations received by Mobil from Handex in respect of two sites, including the land:

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25 I am satisfied that, in commissioning the ESA, Mr Bond was careful to ensure that the ESA was limited to that required by the specification and no more. In doing so, he was significantly influenced by the desire to save costs. In this regard, I note that the difference between the Handex proposal which included 16 soil bores, and the Handex proposal which was finally accepted and which contained 10 soil bores, was only $4,000 or thereabouts.

26 It is also relevant to note that the commissioning of the ESA was in circumstances where Mobil had no record of any previous environmental investigation of the land. Prior to seeking a proposal from Handex, Mr Bond sought from the Mobil library copies of "any historical remediation data/reports in archives or in the library" for the land. He was informed that no previous reports existed. I note that this was after Mobil had been conducting a petrol station on the land for approximately 19 years.

27 The scope of the ESA was further limited by the election of Mobil to leave the tanks in the ground, rather than remove them and "make good" any damage to the land occasioned by their removal as required by cl. 4(b) of the lease. As appears hereafter, the continued existence of the tanks in the ground prohibited testing for contamination in the immediate vicinity of the tanks.

28 Mr Bond said that the decision to leave the tanks in the ground was based on the general practice of Mobil in respect of any lease hand back, especially one where it was assumed that the site would continue to be used as a petrol station. As a result of Mr Bond's understanding in this regard, he sought quotations for and subsequently commissioned Tanknology Australia to conduct a "tank and line condition report" in respect of the tanks. The testing was done on 5 and 6 July 2000 and the tanks were all reported as "tight". "Tight" means that the tanks were below specified leak detection criteria. The report from Tanknology concludes with the following statement:

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29 On 17 August 2000, Handex published the first draft of the ESA to Mobil. Thereafter, further drafts were sent to Mobil and were the subject of comment and input by Mr Bond. Each of the drafts disclosed that there was contamination of both soil and groundwater at the land. In general, Mr Bond's comments on the draft reports were directed at ensuring that the ESA did not describe the contamination which was found as significant, and towards reducing the scope (and therefore cost) of the further investigations recommended by Handex in the draft ESA reports.

30 By letter dated 24 October 2000, Mobil informed the plaintiffs that it would not be seeking an extension of the lease at its expiration on 12 November 2000. The letter was received by Mr Harry Flicker, a director of the first plaintiff and the representative of the plaintiffs who had all of the material dealings relevant to this dispute. The letter was signed by Mr Burge.

31 It was common ground that this was the first notice by Mobil to the plaintiffs that Mobil did not intend to renew the lease. Given that Mobil had determined this course by, at latest, May 2000, Mobil demonstrated an extraordinary lack of consideration for the commercial interests of the plaintiffs by giving them such late notice. Although nothing turns on this from a legal viewpoint, it is indicative of the arrogant and high-handed manner in which Mobil has treated the plaintiffs throughout the events material to this dispute.

32 Further in this vein, even though Mobil had commenced its preparations for vacating the land as early as May 2000, the ESA was not available to be provided to the plaintiffs at the expiration of the lease, as required by cl. 7(b). The finalisation of the ESA was delayed due to Mr Bond seeking to make amendments to it so as to alter its conclusions and recommendations. In fact, the ESA was not completed until 15 December 2000, more than one month after the expiry of the lease.

33 In the meantime, on 21 November 2000, Mr Burge wrote to the plaintiffs' real estate agent, George Kiper, by facsimile. Relevantly, the facsimile stated:

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35 It was common ground that there was no evidence that Mobil had taken any steps to render the tanks useless, as required by cl. 4(b). On behalf of Mobil, it was submitted that the plaintiffs did not plead any issue concerning a breach of cl. 4(b) of the lease. Accordingly, Mobil was not on notice that it needed to lead evidence on this issue. However, this submission ignores the overwhelming inference from the facts, and the primary position adopted by Mobil in its dealings with the plaintiffs. As I have said, Mobil sought and obtained the ESA on the basis that the land would be used in the future for service station purposes. With this in mind, Mobil sought and obtained a tank and line condition report to confirm that the tanks and lines were "tight". None of the experts who inspected the land and gave written reports or evidence made any reference to the tanks having been decommissioned in any way. Further Mobil participated in discussions with a proposed tenant of the land, Woolworths. Those discussions, which are referred to hereafter, were on the basis that Woolworths intended to use the tanks in the conduct of a petrol station business on the land by it. I find that the tanks were not rendered useless as required by cl. 4(b) of the lease.

36 The ESA was finally completed on 15 December 2000. Its author and project manager was Ross Amato. He was not called as a witness. The ESA was approved by Jason Lagowski, as acting managing director of Handex. Mr Lagowski did give evidence.

37 The ESA is a lengthy document with many annexures. It describes the results of field testing and analysis of soil and groundwater. Based on these results, the ESA contains an assessment by Handex of the risks associated with "the ongoing use of the site as a service station." The ESA contains no assessment by Handex of the risks associated with the future use of the land for the commercial uses permitted under the applicable zoning. This defect in the ESA is a direct result of the failure of Mobil to appreciate the extent of its clean up obligation under cl. 7(b) of the lease and instruct Handex to prepare the ESA accordingly.

38 The ESA is based upon the results of testing from 10 soil bores and five groundwater monitoring wells. I have noted above that the number of soil bores and wells was limited by the direction of Mr Bond.

39 The soil bores and groundwater monitoring wells installed by Handex were principally targeted around the underground petroleum infrastructure comprised by the tanks. As I have said, this infrastructure includes the associated pipes and fittings for the transfer of petrol from the underground storage tanks to the petrol bowsers. However, due to the continued existence of the tanks underground, none of the soil bores or groundwater monitoring wells installed by Handex is in the immediate vicinity of the tanks. As appears hereafter, this had the effect of preventing Handex from testing the soil and groundwater which was likely to be the subject of the greatest contamination.

40 From the first draft of the ESA, it was apparent that the results of soil testing from soil bore number S2G6 ("soil bore 6") established that soil at a depth of 2.5 metres was contaminated with benzene at a level which exceeds the minimum criterion for further investigation and assessment, on any view of the relevant or applicable environmental standards, guidelines or policies. This is significant, because benzene is a known carcinogen.

41 The ESA stated that the excessive contamination at soil bore 6 was the only soil sample which was detected to be above the contamination criteria adopted by Handex for the purposes of the ESA. Handex stated that:

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42 As appears hereafter, this statement by Handex as to the extent of soil contamination had the capacity to be misleading. In order to explain this, it is necessary to note that not all soil samples are sent for analysis. First, the soil which is extracted from a soil bore is subject to field testing at regular depth intervals. This field testing is conducted by a photo-ionisation detector ("PID") which gives a hydrocarbon reading in parts per million ("ppm"). Any PID reading in excess of 100 ppm is considered sufficiently high to justify sending a sample of soil taken from the soil bore at that depth to the laboratory for further analysis. In the case of the excessive contamination disclosed at soil bore 6 at a level of 2.5 metres, the PID reading was 950 ppm.

43 A soil sample from soil bore 5 taken at 5.1 metres yielded a PID reading of 1090 ppm. However, no sample from soil bore 5 at this depth was sent to the laboratory for analysis. As appears hereafter, Mobil was unable to explain this error by Handex in its testing procedures for the purposes of the ESA. As I have said, Mr Amato was not called to give evidence. Nor were the driller or geologist responsible for the field testing by Handex. I infer that their evidence would not have assisted Mobil's case.

44 I find that it is more likely than not that if a sample of the soil from soil bore 5 at a depth of 5.1 metres had been sent to the laboratory for analysis, a further area of excessive soil contamination would have been revealed. This should have been obvious to Handex and been referred to in the ESA.

45 The ESA records that initial sampling of groundwater indicated that the groundwater was contaminated. As a result, Handex recommended that two further groundwater monitoring wells be installed in November 2000. This was done. These additional groundwater monitoring wells were in the vicinity of soil bores 5 and 6. Having regard to the excessive contamination disclosed by analysis of the soil sample from soil bore 6, and the elevated PID reading from soil in soil bore 5, it would have been prudent to take soil samples at the time of installing these additional groundwater monitoring wells. There was no dispute between the experts as to the desirability of this occurring. However, Handex took no soil samples when it installed the additional groundwater monitoring wells in November 2000.

46 Notwithstanding that Handex found at least one example of benzene contamination of both soil and groundwater, Handex nevertheless concluded that there were "minimal risks associated with the ongoing use of the site as a service station". In reaching this conclusion, Handex was influenced by the fact that there was "considerable presence of sealed surfaces across the site (which) would be expected to limit risks posed by soil and groundwater contamination". As I have said, this conclusion was based upon the understanding of Handex, as instructed by Mobil, that the proposed use of the land was "as an ongoing petrol station". The ESA does not consider the suitability of the land for any other commercial use permitted by the applicable zoning, especially one which may involve the construction of commercial premises on the land.

47 Handex concluded the ESA by recommending that a further two groundwater monitoring events take place to ascertain whether the groundwater contamination was migrating away from the land and by noting:

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55 There is no doubt that Woolworths were very keen to lease the land, and to do so at the earliest possible time. In December 2000, Woolworths were in the midst of establishing itself as a major petroleum retailer in Victoria and elsewhere in Australia. At the time, Woolworths was expanding its network of "Plus Petrol" sites at a rate of approximately 10 to 15 outlets each year. Steve Webb, a project manager with Claremont Project Management assisted Woolworths in identifying and developing petrol station sites. He described Woolworths' attitude at the time as "go, go, go, go".

56 Further, the position of the land close to a Woolworths' "Safeway" supermarket suited the strategy of Woolworths to establish petrol outlets close to its supermarkets.

57 Woolworths' solicitor, Mr Dugdale, sent the first draft of an agreement for lease and lease to Mr Kiper on 15 December 2000. Mr Kiper provided these draft documents to the solicitor for the plaintiffs, Ashley West of West & Co. By letter dated 22 December 2000 from Mr West to Mr Dugdale, Mr West noted that Woolworths was already in possession of the ESA and sought to achieve the position whereby no agreement for lease would be necessary and the parties would proceed directly to a lease. On behalf of the plaintiffs, Mr West proposed that Woolworths would "take over the site as is, and as assessed in the ESA". This was unacceptable to Woolworths.

58 The urgency with which Woolworths approached the proposed lease of the land was further evidenced by the conduct of Mr Webb, the Woolworths project manager, seeking urgent advice from an environmental consultant over the 2000/2001 new year period. Mr Webb contacted Stephen Diomides on 30 December 2000 seeking an urgent "appraisal" of the ESA. Mr Diomides obliged. By letter dated 5 January 2001 to Mr Webb, Mr Diomides provided a report of his examination and review of the ESA. For present purposes, it is sufficient to note that Mr Diomides expressed the view in his report ("the Diomides report") that the conclusions stated by Handex in the ESA understated "the very high levels of contamination found." Mr Diomides recommended that the extent of the contamination revealed by the ESA be the subject of further investigation, accurate delineation and remediation by removal from the land.

59 On 19 January 2001, Mr Dugdale forwarded to Mr West a revised version of the agreement for lease and the proposed lease. It is apparent that Woolworths were extremely concerned by the comments in the Diomides' report. Accordingly, the draft agreement for lease contained a clause requiring the plaintiffs to complete "the Landlord's Works" within a 12 month period. In the absence of the Landlord's Works being performed within this period, Woolworths reserved to itself the option to either complete the Landlord's Works at the cost of the plaintiffs or to terminate the agreement for lease.

60 The Landlord's Works are described in the "First Works Schedule" of the draft agreement to lease. Clause 2.3 of that schedule relevantly provides:

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"Nature of Landlord's Works

2.3 The Landlord's Works comprise:

(a) testing or procuring the testing of the Premises (by soil tests and such other tests as the Tenant may reasonably require) for the presence of contaminants and contamination and for any breaches of Environmental Laws, and obtaining an environmental site assessment report.

(b) (if the environmental site assessment report obtained by the Landlord under clause 2.3(a) of this Schedule indicates that such works are necessary) removing or procuring the removal of all contamination from the Premises and remedying or procuring the remedying of all breaches of Environmental Laws in respect of the Premises so that the level of contamination at the Premises is in accordance with the Environment Protection Authority Victoria guidelines for the level of contamination at premises of the nature of the Premises and the requirements of all relevant Authorities, and so that there are no breaches of Environmental Laws in respect of the Premises; and

(c) (if any works are required under clause 2.3(b) of this schedule), then after such works are complete:

(i) testing or procuring the testing of the Premises (by soil tests and such other tests as the Tenant may reasonably require) for the presence of Contaminants or contamination, and any breaches of Environmental Laws; and

(ii) obtaining and giving to the Tenant a contamination report stating that the Premises comply with clause 2.3(b) of this schedule. If the Tenant does not elect to obtain a contamination report under clause 2.3(d) of this schedule, the report obtained under this clause 2.3(c)(ii) of this schedule. This report will be the Report to be attached to the Lease for the purposes of clause 17 of the Lease; and

(d) if the Tenant is not satisfied with the contamination report obtained under clause 2.3(c) of this Schedule, the Tenant may elect to obtain, at its own cost, a contamination report in relation to the Premises. If this contamination report reveals the existence of Contaminants or contamination or breaches of Environmental Laws that should have been remediated or rectified by the Landlord under clause 2.3(b) of this Schedule, the Landlord must comply with clause 2.3(b) and (c) of this Schedule as if the report obtained under this clause were the report obtained under this clause 2.3(d).[2] If there are any disputes regarding the report obtained under this clause 2.3(d) or a requirement to carry out additional works under this clause 2.3(d), the dispute must be referred to arbitration in accordance with clause 5 of this deed. If the Tenant obtains a contamination report under this clause 2.3(d) and the contents of this report are not rejected by an arbitrator pursuant to a dispute, this report will be the Report to be attached to the Lease for the purposes of clause 17 of the lease; and

(e) removing or procuring the removal of all improvements and other fixtures, fittings chattels, stock and things from the Premises other than the Improvements, and making good any damage caused by such removal; and

(f) ensuring that the Improvements are left on the Premises and are in good order and condition to the reasonable satisfaction of the Tenant. In particular, ensuring that the leaded petrol, unleaded petrol and LPG fuel tanks, pipes and lines forming part of the Improvements;

(i) are free from leaks, waste oil, kerosene, fuel or other liquid or other than water; and

(ii) contain sufficient levels of water so as to ensure that the tanks do not float out due to hydrostatic pressure from ground water; and

(g) if required by the Tenant, rectify any defects in the fuel tanks, pipes and lines disclosed by the testing of them by the Tenant as part of the Tenant's Works; and

(h) ensuring that the surface of the Premises is in good order and condition, compacted, level and sealed and otherwise to the Tenant's reasonable satisfaction;"

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61 From the plaintiffs' viewpoint, the requirement that they perform the Landlord's Works presented them with a difficult decision as to whether to execute the proposed agreement for lease. On the one hand, the proposed tenant Woolworths was insisting upon a new environmental site assessment report being prepared and the removal of contamination from the land to its satisfaction. On the other hand, Mobil was insisting that no clean up was required and was refusing to carry out any remediation works.

62 In substance, the plaintiffs were placed in the position whereby they were being asked to expose themselves to an obligation to pay for the clean up of the land in respect of any contamination identified in a further environmental site assessment to the satisfaction of Woolworths. In respect of this, Mr Flicker recalls a telephone conversation with Mr Diomides in which he was advised that the cost of such a clean up could not be estimated but it could be as much as $1,000,000, or even more. Further, the plaintiffs faced the risk that the cost of clean up might include the cost of reinstalling or replacing the tanks.

63 It was submitted on behalf of Mobil that I should not accept the evidence of Mr Flicker of the telephone conversation which he had with Mr Diomides in which he was advised of the potential cost of clean up. It was submitted that I should reject this evidence because it did not appear in Mr Flicker's witness statement, Mr Diomides gave no evidence about it and the telephone log kept by Mr Diomides, which was extensive, made no reference to such a telephone conversation. In my view, I should accept the evidence of Mr Flicker. I was impressed by Mr Flicker as an honest witness who was not given to reconstruction, exaggeration or evasion. Further, it accords with commonsense that, in the face of consistent refusal by Mobil to conduct any clean up at the land, Mr Flicker would give consideration to the cost to the plaintiffs of conducting a clean up themselves. This is especially so in circumstances where Woolworths had agreed in principle to lease the land on favourable commercial terms, subject to such a clean up taking place. The fact that there is no written record of the conversation with Mr Diomides is relevant but in no sense conclusive. It is likely that the gist of the advice given by Mr Diomides was enough to stifle any further consideration of the option of the plaintiffs arranging for the land to be cleaned up at their cost. In these circumstances, it is not surprising that there is no written record of the conversation.

64 A copy of the Diomides' report (with references to Woolworths masked) was provided to Mobil in February 2001. This did not cause Mobil to alter its position. As a result, a meeting was arranged between the parties and their consultants to discuss the issues and see if the matter could be progressed or resolved. That meeting was held on 20 March 2001 at the offices of Mobil. By the time of the meeting, the concern about identifying Woolworths as the proposed new lessee was resolved. Accordingly, the meeting was attended by representatives of the plaintiffs, Mobil and Woolworths. Mr Diomides attended in his capacity as environmental consultant to both Woolworths and the plaintiffs.

65 The 20 March 2001 meeting was attended by the following persons:

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76 Although the Mobil witnesses were given every opportunity to give evidence of an offer to remove the packing sand and any contaminated soil around the tanks, none of them could recall that the offer by Mr Burge extended to the removal of any sand or soil. In final submissions, it was submitted on behalf of Mobil that any offer to remove the tanks necessarily carried with it an offer to remove the packing sands and any contaminated soil in the immediate vicinity of the tanks. Reference was made to expert evidence of Mr Mirkov and Mr Hadwen. However, that evidence established only that, before commencing any construction of a commercial building, it would be necessary to remove the tanks and any immediate contamination around the tanks.

77 In my view, the discussion concerning the removal of the tanks did not amount to a formal offer by Mobil. My clear impression from the evidence was that the discussion concerning the removal of the tanks was one of a number of issues discussed in an endeavour to resolve the dispute between the parties as to whether Mobil had any, and if so what, obligation to clean up contamination at the site. In my view, it is more likely than not that the discussion about removing the tanks was in the context of the environmental consultants discussing the need for further testing in order to establish the level of contamination at the land. However, as Mobil placed great weight in evidence and in final submissions on these discussions concerning the removal of the tanks, and for convenience, I will hereafter refer to the statement by Mr Burge that Mobil would remove the tanks as "the Mobil tanks offer".

78 On 16 April 2001, Woolworths applied for and was granted a permit for "Plus Petrol" signage at the land in the event that it became the tenant.

79 By May 2001, the plaintiffs were becoming frustrated by the delays. Accordingly, the plaintiffs proposed that there be a statutory audit of the land under the Environment Protection Act 1970 (Vic) ("the Act"). By this time, Mr Diomides was actively giving advice to the plaintiffs. In order to obtain a statutory audit, he contacted Jonathan Crockett, an environmental auditor appointed under the Act.

80 It is apparent from the correspondence from Mr Crockett at this time that the plaintiffs were most concerned at the cost of a obtaining an environmental audit under the Act. Accordingly, in the first instance, Mr Crockett was engaged to review the ESA to advise whether it would be possible to complete a statutory environmental audit based upon the information contained therein. Mr Crockett advised the plaintiffs that the information contained in the ESA was insufficient to enable him to complete a statutory environmental audit.

81 In a report to West & Co dated 29 June 2001, Mr Crockett was critical of the level of investigation undertaken by Handex as to both soil and groundwater ("the Crockett report"). As to the assessment by Handex that "there appears to be minimal risks associated with the on-going use of the site as a service station", Mr Crockett disagreed and stated as follows:

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83 As appears hereafter, it was not until January 2003 that the EPA finally issued a clean up notice to Mobil in respect of groundwater at the land. This delay by the EPA was in the face of repeated approaches by or on behalf of the plaintiffs to have the EPA deal with the matter promptly.

84 In the meantime, another issue arose between the plaintiffs and Woolworths. The issue related to the tanks. By this time, it was apparent that the tanks may need to be removed in order to clean up the contamination at the land. Mr Flicker, on behalf of the plaintiffs, was concerned that this may expose the plaintiffs to the substantial cost of installing new tanks, or at the very least reinstalling the old tanks, in accordance with the draft agreement for lease. Accordingly, on 22 May 2001 the plaintiffs proposed to Woolworths that, if the tanks needed to be removed as part of the clean up of any contamination at the land, then the parties would renegotiate the agreement for lease. This was unacceptable to Woolworths.

85 However, as Woolworths was keen to secure the land, given its expansion plans for its Plus Petrol network and the desirable location of the land in the vicinity of a Safeway supermarket, Woolworths proposed that the draft agreement for lease be amended so as to provide that if the tanks were removed Woolworths would install new tanks at its own cost and, as a result, the annual rent payable under the proposed lease would be reduced by 9 percent of the total costs to Woolworths of installing the new tanks ("the Woolworths tanks offer"). The Woolworths tanks offer was initially put by Woolworths in an e-mail from Mr Dugdale to Mr West on 20 July 2001.

86 There was some delay by the plaintiffs in responding to the tanks offer. Mr Flicker and Mr West were cross-examined to the effect that this delay was because the plaintiffs were considering other opportunities to lease the land. They denied this and I accept their denial. The delay was caused, in part, by the fact that it was the practice of Mr Flicker to travel to Israel around the middle of each year and, in addition, Mr West took holidays in late August or early September. In any event, the issue was an important one from the viewpoint of the plaintiffs and they were entitled to give it detailed consideration. This is especially so when the question of whether the tanks would require removal was uncertain at this time. Woolworths were not insisting that the tanks be removed, only that they required the tanks to be reinstalled or replaced if they were required to be removed as part of the Landlord's Works under the proposed agreement for lease.

87 In the event that the tanks were required to be removed, the agreement for lease does not specify that the landlord must install new tanks. It appears from the proposed agreement for lease and correspondence that Woolworths may have been content for the landlord to reinstate the old tanks or tanks of similar quality without leaks or other defects. However, there is some cause to doubt this. After the meeting of 20 March 2001, Mr Webb telephoned Mr Diomides. Mr Diomides recorded in his phone log that he told Mr Webb that the tanks were 20 to 25 years old and may need to be replaced. Mr Diomides records that Mr Webb responded that Woolworths wanted to lease a complete service station with "viable tanks" and said words to the effect that a test which showed the tanks were "tight" today could show that the tanks were leaking tomorrow.

88 I infer from this that it is likely that, had the tanks been removed as part of a clean up of the land, Woolworths would have insisted that the plaintiffs install new tanks to replace them.

89 By 11 September 2001, it would appear that Woolworths was becoming anxious at the delay in finalising the agreement for lease. In an e-mail from Mr Dugdale to Woolworths, Mr Dugdale summarised the situation at this time:

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95 This was the last correspondence from Mr West to Mr Dugdale. It demonstrates that the plaintiffs were prepared to sign the draft agreement for lease, including the obligations to perform the Landlord's Works, subject only to amendment to deal with the situation if the tanks needed to be removed as part of the clean up of contamination at the land.

96 Mr Dugdale said that he received no further instructions from Woolworths in response to his e-mail of 10 January 2002. Mr Cloke said that, in response to Mr Dugdale's e-mail of 10 January 2002, he instructed him to stop negotiating with the plaintiffs because they had rejected the Woolworths tanks offer. Mr Dugdale did not recall this instruction. However, as late as 5 July 2002, Mr Kiper spoke with Mr Cloke and was told that the Woolworths' file for the land was still open and that Woolworths would like to be advised on the progress of the clean up of contamination at the land. Mr Kiper confirmed this conversation in a letter dated 5 July 2002 to Mr Flicker. Although Mr Kiper referred in evidence and in his letter to a conversation with "Mr Gary Cook, Property Manager at Woolworths" I infer that this was a mistaken reference to Barry Cloke. As I have said, Mr Cloke succeeded Mr Macmillan as the property manager at Woolworths responsible for the opportunity to lease the land. It is likely that Mr Kiper had not dealt with Mr Cloke before, and this explains his mistake. In my view, notwithstanding Mr Cloke's evidence, Woolworths did not lose all interest in leasing the land in January 2002. It is more likely that it chose to wait and see what action was taken by the EPA in respect of contamination at the land.

97 The evidence does not establish when Woolworths finally lost patience and determined to look elsewhere for a suitable site for a petrol station adjacent to its Safeway supermarket in Springvale Road, Springvale. However, it appears that when an alternative opportunity presented itself, Woolworths determined to proceed and accept that alternative opportunity. Mr Diomides learned of this when, in January 2003, he contacted Mr Webb to tell him that the EPA had finally issued a clean up notice.

98 In the meantime, the plaintiffs maintained their position that Mobil was obliged to clean up the contamination at the land. Mobil continued to deny any responsibility to do so. The plaintiffs, through Mr Diomides, continued to press the EPA to intervene.

99 In August 2001, Handex reported on the results of a groundwater monitoring event at the land in June 2001 ("the June 2001 groundwater report"). This monitoring event was in accordance with its recommendations in the ESA. The results revealed increased benzene contamination at monitoring well 2 ("MW2") from 800 μg/L in July and November 2000 to between 1500 and 2600 μg/L in June 2001. Despite this increase, Handex reported that "concentrations of groundwater contaminants observed at MW2 have remained approximately constant over the sampling events".

100 However, as with the ESA itself, the June 2001 groundwater report was the subject of significant input from Mr Bond of Mobil. In particular, a previous draft of this report had referred to there being "significant groundwater contamination" at the land. Mr Bond directed that this be removed from the final report. Handex complied.

101 On 22 August 2001, Mr Bond and Mr Lagowski met with representatives of the EPA. The EPA representatives raised a number of concerns about the contamination at the land. One of the EPA representatives at this meeting, and who had the conduct of the matter for some time thereafter, was Michael Rehfisch.

102 On the same day, Mr Rehfisch wrote to Mr Bond and summarised the concerns of the EPA, as expressed during the meeting. Although the focus of the EPA concerns was groundwater contamination, the letter referred to concerns about soil contamination also. In this regard, Mr Rehfisch stated in his letter:

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103 In oral evidence, Mr Lagowski acknowledged that there was discussion at the meeting with EPA representatives concerning soil contamination and, in particular, the failure of Handex to analyse the soil sample taken from soil bore 5 (S2G5) with a PID reading of 1090 ppm. As a result, Mr Lagowski made a note for himself to look at the field notes for soil bore 5 and investigate why the sample was not sent for analysis. However, Mr Lagowski said that he could not recall whether he in fact did so. The only evidence of the instructions given by Mobil to Handex in response to the EPA letter of 22 August 2001 is a facsimile from Mr Bond to Mr Lagowski of Handex. Mr Bond simply forwarded the EPA letter to Handex with the request to "please review their letter and formulate response".

104 Handex drafted the Mobil response to the EPA letter. That response ignored the EPA's expressed concerns regarding soil contamination and, in particular, concerning the failure of Handex to send off the soil sample taken from soil bore 5 for analysis. The response was prepared by Mr Hadwen. He said in cross-examination that the EPA's concerns about soil contamination were overlooked by him, given the focus of the EPA's concerns about groundwater contamination. In this regard, I note that it was accepted by the parties that this focus by the EPA on groundwater was not unusual given the capacity for groundwater contamination to migrate to other sites outside of the subject land.

105 Further, the Handex response was clearly directed towards the continuing use of the land as a petrol station site. It did not consider any other commercial use permitted by the applicable zoning. This is apparent from the terms of the response and was acknowledged by Mr Hadwen in cross-examination.

106 The Handex response concluded with a statement of intention on the part of Mobil to conduct further groundwater monitoring events and, depending on the results, "a site specific risk assessment for on-going service station use may be required". Further, the Handex response referred, for the first time, to the intention of Mobil to prepare a groundwater management plan to review "trigger scenarios" and "possible remedial options for long-term management of the groundwater at the site".

107 Handex concluded its response in the following terms:

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123 This summary by Mr Bond is indicative of his general approach to the issues concerning the land. As far as he was concerned, the ESA had been completed for the purposes of a "lease hand back" so that the land was "fit for ongoing use as a S/Stn". It is apparent that Mr Bond did not understand, or chose to ignore, the terms of cl. 7(b) of the lease which required Mobil to clean up the land so as to permit commercial uses under the applicable zoning. Further, as I have said, Mr Bond's summary establishes that he understood at all relevant times that Mobil wished to spend the minimum amount possible in relation to contamination issues at the land. The attempt by Mr Bond in cross-examination to explain his note "no funds available. Min spend criteria" as being limited to the need for his successor to apply for further funding, in accordance with Mobil internal procedures, was not credible and I reject it.

124 Finally, Mr Bond's summary is relevant because it records that, by August 2002, Mobil were seeking to engage another consultant to replace Handex. This would appear to be the result of Handex ceasing to be on the Mobil panel of preferred environmental consultants to perform environmental site assessments and related work. At about this time, I.T. Environmental (Australia) Pty Ltd ("IT Environmental") appear to have replaced Handex as a panel member to whom Mobil would direct such work. From this time on, IT Environmental advised Mobil concerning its environmental obligations in respect of the land.

125 It was not until 7 November 2002 that Mobil provided the plaintiffs with a copy of the Groundwater Management Plan. This was despite the fact that the plaintiffs had been asking for a copy of it for months. Mobil withheld the Groundwater Management Plan from the plaintiffs and their advisors for the stated reason that it was awaiting legal advice as to whether it should release it. This was typical of the shabby way in which Mobil treated the plaintiffs throughout the dispute. No justifiable reason for seeking legal advice on this issue was put forward. I infer that Mobil was looking for a legal reason to deny the plaintiffs access to the Groundwater Management Plan, because of the perception by Mobil that it may harm it in its dispute with the plaintiffs or that the plaintiff might use the Groundwater Management Plan to make further complaints to the EPA.

126 In particular, I infer that Mobil was concerned to withhold from the plaintiffs, if it could, the results of the qualitative risk assessment in the Groundwater Management Plan and the reference to trigger levels and contingency actions, as set out above.

127 In this regard, it must be recalled that Mobil is a member of a group of companies comprising one of the largest petroleum retailers in the world. It was dealing with two private companies which had invested in real estate for the purposes of obtaining an income. The plaintiffs had no expertise in petroleum contamination or environmental laws. The plaintiffs were in a position where they needed to engage expert advice at considerable cost to themselves in order to deal with contamination issues of which they had no understanding. This must have been obvious to Mobil.

128 Mobil's concerns that the plaintiffs would use the contents of the Groundwater Management Plan to Mobil's disadvantage were well founded. Within a week of receiving the Groundwater Management Plan, Mr Diomides spoke with Mr Rehfisch at the EPA and wrote to him by urgent facsimile dated 15 November 2002. In his facsimile, Mr Diomides was highly critical of the Groundwater Management Plan and, in particular, the lack of any specific remediation action plan in the event that groundwater contamination levels exceeded the trigger levels.

129 In December 2002, Michael Rehfisch handed over the EPA file on the matter to Jennie Slatter. Ms Slatter forwarded a draft clean up notice to Mobil for its comment. Pursuant to s. 62A of the Act, on 16 January 2003, the EPA issued a clean up notice to Mobil in respect of the land ("the clean up notice"). The clean up notice dealt with groundwater only. It made no reference to soil contamination. As I have said, this issue was ignored by Handex in its initial response to the concerns expressed by the EPA in August 2002, and the EPA seems to have failed to follow-up on its initial concerns in this regard.

130 In its covering letter by which it served the clean up notice on Mobil, the EPA stated:

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136 There are a number of things to note about the Mobil response. In the first place, the response continues to ignore the requirements of cl. 7(b) of the lease to clean up the land so as to permit ongoing use of the land for commercial uses within the applicable zoning. Secondly, the response ignores the fact that, absent complaint by the plaintiffs to the EPA, it is unlikely that there would ever have been a Groundwater Management Plan. The ESA did not provide for anything other than rudimentary ongoing monitoring of the wells referred to therein. As I have noted, Handex reduced its recommendation as to the number of monitoring wells for ongoing assessment of groundwater, following comments from Mr Bond. Thirdly, the response makes no reference to the fact that the ESA established that one area of soil was contaminated with benzene at levels above investigation levels, whichever levels are adopted. Fourthly, the response is completely silent as to the criticisms of the ESA concerning the failure to analyse the soil samples taken from soil bore 5 which field testing revealed had very high PID readings.

137 In light of the Mobil response, the plaintiffs determined to issue these proceedings. They were issued on 5 August 2003.

138 Whilst the possibility of leasing the land to Woolworths remained alive, the plaintiffs did not actively seek offers to lease or purchase the land. Mr Kiper said that he "did not actively push the property in the marketplace because I knew that the property had a contamination problem and that negotiations were on foot between the owners' solicitor and Mobil to resolve the problem". From the plaintiffs' perspective, it appears that they took the view that Mobil had breached cl. 7(b) of the lease and that, accordingly, Mobil was accruing a liability for licence fees under cl. 7(d) of the lease until the land was cleaned up.

139 In any event, in November 2003 Mr Flicker received an unsolicited expression of interest from the Victorian Government Property Group, on behalf of the Department of Treasury and Finance, for the purpose of identifying a suitable site in Springvale for the development of a new police station. Mr Flicker referred this expression of interest to Mr West. Mr West spoke with the representative of the Victorian Government Property Group and forwarded to him copies of all reports in the possession of the plaintiffs relating to the environmental status of the land. Based on these reports, including a draft of a groundwater monitoring report prepared by IT Environmental in respect of groundwater monitoring events at the land in late 2003, the Department of Treasury and Finance sought its own report from an environmental consultant. That report was prepared by Margaret Mazur of Connolly Environmental (Aust) Pty Ltd ("Connolly Environmental") on 13 August 2004 ("the Mazur report").

140 Ms Mazur was critical of the ESA and, after noting that the plaintiffs did not intend to clean up the site but wished to sell it in its current condition, concluded as follows:

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"Summary

Soils and groundwater at the site are impacted by petroleum hydrocarbons, with the uncertain extent of soil contamination. To render the site suitable for the proposed use as police station the service station would need to be decommissioned and the associated contaminated soils removed. Given the identified potential risk to human health due to inhalation of vapors from contaminated groundwater it is also possible that groundwater remediation or implementation of risk management measures would be required to reduce risks to acceptable levels. As the soil contamination is likely to represent a secondary source of groundwater contamination, which appears to remain the responsibility of Mobil, it is unclear who is responsible for clean up of this contamination.

The likely cost of site clean up to enable commercial use (based on remediation by excavation and off-site disposal) is in excess of $210,000 (excluding GST), excluding the cost of groundwater assessment and cleanup or soil cleanup below the groundwater table. If a Statutory Environmental Audit is required, we estimate that a cost of additional $100,000 may be incurred for further site assessment and documentation.

Any future occupier of the site would need to provide access for ongoing monitoring of groundwater and potentially remediation, if warranted.

We strongly recommend that any potential purchaser, in this case the Department of Treasury, be indemnified against future liability, and obtain legally binding assurances regarding responsibility for removal of the remaining sources of groundwater contamination and subsequent groundwater monitoring, management and clean up. In addition we strongly recommend that legally binding assurances be obtained that groundwater monitoring and management or clean up will not interfere with any possible future uses of the site. A meeting with EPA may be advantageous to discuss their views on the proposed development in the light of the existing clean up notice."

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141 Based on the Mazur report, the Department of Treasury and Finance did not proceed to consider the land as an appropriate site for the development of a new Springvale police station.

142 In July 2003, IT Environmental had performed works pursuant to the Groundwater Management Plan. Further works were performed in late 2003. A groundwater monitoring report dated 23 January 2004 was prepared ("the January 2004 groundwater report").[5]

143 The January 2004 groundwater report was written by a project supervisor employed by IT Environmental. It was reviewed and approved by Peter Mirkov, an employee of IT Environmental who is an environmental auditor appointed pursuant to the Act. The report states that Mr Mirkov was involved in the writing of the report and that he endorsed "the results as being derived utilising appropriate methodology and with the necessary QA/QC measures". Further, the report states that, although Mr Mirkov "has not written the entire monitoring report he has been intricately involved in the preparation of the report". The relevance of Mr Mirkov's involvement is that he was the expert witness upon which Mobil placed principal reliance. However, his position within IT Environmental demonstrates that he was in no sense an independent expert. Not only was IT Environmental Mobil's paid consultant in relation to the land, as successor to Handex, but IT Environmental was one of Mobil's preferred consultants in respect of similar work.

144 The January 2004 groundwater report refers to the proposed use of the site as "ongoing petroleum facility". I infer that the report was prepared with this in mind, and that it was Mobil who instructed IT Environmental to this effect.

145 In May 2004, the plaintiffs received another expression of interest in the land from Tabcorp. However, this proposal was not pursued as Tabcorp were seeking to have the plaintiffs develop the land for commercial uses, and then lease a portion of the commercial development only.

146 In September 2004, the plaintiffs decided to place the property on the market in its current condition. An auction was arranged for 11 November 2004. The contract of sale and vendor's statement prepared for the purposes of the auction referred to and annexed copies of all of the available environmental assessment reports concerning the land. Accordingly, any prospective purchaser was informed of the results of investigations by Handex and IT Environmental and also of the opinions expressed by Handex, IT Environmental, Diomides & Associates and Ms Mazur.

147 The property was sold at auction on 11 November 2004 for $1,201,000 (exclusive of GST). The purchaser was Mr Avi Silver, a director of United Petroleum Pty Ltd ("United Petroleum"). United Petroleum is a petroleum retailer. United Petroleum intends to develop the land for use as a petrol station.

148 The land has not been used for the conduct of any petroleum business since it was vacated by Mobil in November 2000. In fact, it has not been used at all. It has been fenced off and remained vacant.

149 IT Environmental conducted further groundwater monitoring events in mid and late 2004. Detailed reports were produced.

150 By letter dated 8 September 2005, IT Environmental provided to Mobil a draft of a Groundwater Risk Assessment dated 5 September 2005 and a draft of an undated Interim Groundwater Monitoring Report as a result of a groundwater monitoring event at the land in June 2005. The authors of these documents were not called to give evidence.

151 The covering letter was addressed to Robert Samardjiev, a full-time contractor to Mobil. Mr Samardjiev's title within Mobil is "Project Manager, Global Remediation Australia". In the letter to Mr Samardjiev, IT Environmental stated:

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152 In fact, the groundwater monitoring data annexed to the September 2005 draft Groundwater Risk Assessment revealed, for the first time, that the benzene concentration in one of the monitoring wells ("MW4") exceeded the trigger level adopted in the Groundwater Management Plan. The concentration revealed was 750 μg/L, in comparison to an adopted investigation level of 300 μg/L. Further, the existing exceedance above the adopted investigation levels in MW2 was shown as having increased from 6,800 μg/L in November 2004 to 17,000 μg/L in June 2005.

153 These exceedances of the trigger levels meant that it became necessary for Mobil to implement a remediation action plan in accordance with the clean up notice. According to the 8 September 2005 letter from IT Environmental to Mr Samardjiev, it was likely that the remediation action plan would require the removal of the tanks and "likely secondary source material in surrounding soils".

154 The draft Groundwater Risk Assessment emphasised that it had not been possible to assess the risk to groundwater arising from likely contamination of soil in the area beneath or immediately adjacent to the tanks. This was because no investigations had been conducted of this soil due to the continued presence of the tanks. The draft Groundwater Risk Assessment expressly assumed that any such contaminated soil would not be "left in-situ without being considered for remediation."

155 It is next necessary to note that the plaintiffs served a Notice to Produce on Mobil the day before the trial commenced on 8 November 2005. One of the documents produced by Mobil was an e-mail dated 3 October 2005 from Mr Samardjiev to his supervisor in Mobil, Aaron DeFina. That e-mail ought to have been discovered by Mobil as part of its ongoing discovery obligations.[6] The fact that it was not discovered is regrettable. I infer that, in the absence of the notice to produce, the e-mail would not have been provided to the plaintiffs and would not have been the subject of evidence.

156 The e-mail from Mr Samardjiev to Mr DeFina is set out in full below:

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157 As I have said, Mr Samardjiev is a contractor to Mobil. However, he occupies a fairly senior position. Mobil has four or five project managers in Victoria to deal with remediation of contaminated soil and groundwater at petrol station sites occupied, or previously occupied, by it. Some of those project managers also manage remediation projects in other states than Victoria. Mr Samardjiev reports to Mr DeFina, who is the supervisor of Mobil's Global Remediation Group for Victoria, South Australia and Tasmania.

158 After the e-mail was produced and I admitted it into evidence, Mobil filed a witness statement for Mr Samardjiev. Mr Samardjiev gave oral evidence and was cross-examined.

159 Mobil did not raise any issue about the authority of Mr Samardjiev to conduct the meeting with United Petroleum representatives referred to in his e-mail or to make statements or reach agreement with United Petroleum as recorded in the e-mail. Mr Samardjiev said that he regarded the result of the discussions with United Petroleum which are recorded in his e-mail as constituting a verbal agreement. I agree. The subsequent correspondence between Mr Samardjiev and United Petroleum provides ample evidence of this.[7]

160 On its face, the e-mail calls for an explanation. In the first place, it records that Mr Samardjiev stated to United Petroleum representatives that Mobil had a responsibility, as designated by the EPA, to clean up contaminated groundwater and soil at the land. Secondly, the e-mail records that Mr Samardjiev offered to demolish the buildings at the land and to then remove "the soil, tanks, lines and hotspots". In addition, it appears that Mr Samardjiev offered to provide United Petroleum with a "validation report" after these works had been performed, in order to demonstrate to United Petroleum that the land had been "validated". Thirdly, the e-mail states in unequivocal terms that, in the view of Mr Samardjiev, limiting Mobil's clean up obligations to the remediation works offered was of such a benefit to Mobil that:

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163 Accordingly, Mr Samardjiev came to the task of project managing Mobil's environmental responsibilities with respect to the land without any, or any significant, understanding of the issues between the plaintiffs and Mobil.

164 Mr Samardjiev said that he "briefly looked" at the ESA and the other reports which had been prepared concerning the contamination issues at the land. However, he said that "it is only the more recent groundwater reports that I have actually noticed" and that he viewed his role in relation to the land as in relation to "where the site was at now, and what I needed to do".

165 In this context, Mr Samardjiev said that the focus of his attention was on the most recent groundwater reports, which indicated that the trigger level for benzene contamination had been exceeded at MW4. I have noted this exceedance above. Accordingly, Mobil was required under the terms of the Groundwater Management Plan, as adopted by the clean up notice, to notify the EPA of this exceedance. Mr Samardjiev did so in or about September 2005.

166 In his witness statement, Mr Samardjiev said that, following discussions with representatives of the EPA, he considered a number of options as to what contingency action needed to be undertaken at the land. One option which he considered was the installation of a groundwater remediation system at the land. Such a system would involve pumping out contaminated groundwater and safely disposing of it. A second option which Mr Samardjiev considered was, in his words, "to remove any soil affected". The unstated assumption underlying this second option was that it was contamination in the soil which was causing the groundwater to become polluted. In my view, there is no other rational explanation for the choice of the words "soil affected" appearing in Mr Samardjiev's witness statement.

167 Mr Samardjiev said in his witness statement that he preferred the second option as the "most effective" for Mobil because it would reduce the level of ongoing monitoring at the land and would also reduce the likelihood of Mobil needing to maintain ongoing active or passive attenuation programs. In oral evidence, Mr Samardjiev said that his reference to the second option being the "most effective" was a reference to the fact that it would be "more cost effective" for Mobil to adopt that option.

168 In cross-examination, Mr Samardjiev sought to explain the second option, of removing "any soil affected", as not being necessitated by the need to remove contaminated soil. He said that he had discussed the removal of the tanks and soil with Michael Hill of IT Environmental and Mr Rehfisch of the EPA. Each of them had supported the view:

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173 I reject these attempts by Mr Samardjiev to rationalise the statements and comments made by him in his e-mail. In my view, the statements and comments made by Mr Samardjiev in his e-mail reflected his honest recollections of the meeting with United Petroleum representatives and represented his honest beliefs at the time. Much of what he was offering to do conformed with the observations by IT Environmental in its letter of 8 September 2005 to Mr Samardjiev as to the likely requirements of a remedial action plan if the trigger levels for groundwater contamination were exceeded. That was the very situation which confronted Mr Samardjiev and with which he was principally concerned.

174 To the extent that the plaintiffs rely upon Mr Samardjiev's e-mail as containing admissions that Mobil had the responsibilities referred to in the e-mail, great care needs to be taken in identifying the significance of any admissions. This is because the question of Mobil's responsibility is either a question of law for me to decide or, at best, a mixed question of fact and law. In this regard, I do not accept that Mr Samardjiev's statements and comments can be treated as admissions upon which I could base a finding that Mobil was in breach of its clean up obligations under cl. 7(b) of the lease.[9]

175 However, this does not mean that the statements and beliefs of Mr Samardjiev are of no relevance. As I have said, the statements and beliefs of Mr Samardjiev represent his honest assessment of the situation in circumstances where the trigger levels for contaminated groundwater had been exceeded. Further, his statements and beliefs are consistent with the observations of IT Environmental as to the likely requirements of a remedial action plan in such circumstances. Finally, given Mr Samardjiev's position within Mobil, and his experience and qualifications, I am entitled to, and do, give some weight to his views as to the appropriate action for Mobil to take in order to clean up the contamination at the land.

176 There is another aspect of the evidence of Mr Samardjiev which is of some concern. Notwithstanding Mr Samardjiev's honest belief that Mobil has a responsibility to clean up the contaminated soil and groundwater at the land, which is at least in part based upon the obligations of Mobil under the clean up notice, Mobil had not, as at the time Mr Samardjiev gave evidence, performed any of the works referred to in Mr Samardjiev's e-mail. This is notwithstanding the concerns of Mr Samardjiev that delay in performing these works may expose Mobil to claims by United Petroleum for compensation as a result of any delay in United Petroleum commencing petroleum retailing operations at the land. Further, the clean up notice required Mobil to perform these works within three months of becoming aware of groundwater contamination exceeding trigger levels. At the very latest, this period expired on 8 December 2005, three months after receipt by Mobil of the letter from IT Environmental and enclosed reports. Mr Samardjiev gave evidence on 23 November 2005.

177 This situation has been brought about because Mobil's solicitors discovered what Mr Samardjiev was proposing in relation to the land and put a stop to it. Mr Samardjiev gave evidence that he has been directed by Mobil's solicitors to put all of the proposed works by Mobil at the land "on hold" pending the completion of the hearing in this proceeding. This direction was first given in October this year, shortly before the commencement of the trial.

178 Notwithstanding this direction, Mr Samardjiev saw no harm in proceeding to put in place all of the necessary preparatory steps to enable the proposed clean up works at the land to proceed once the hearing of this proceeding was completed. Accordingly, he applied for relevant demolition permits and the like, and corresponded with United Petroleum representatives concerning schedules of works and timelines. It appears that this conduct by Mr Samardjiev also came to the attention of Mobil's solicitors. As a result, Mr Samardjiev was directed to cease all preparatory work, including applying for permits and discussing schedules and timelines for the proposed clean up works with United Petroleum.

179 Having regard to the dates of various e-mails concerning scheduling and timelines, I infer that this later direction was given to Mr Samardjiev during the course of the trial or very shortly before the trial commenced. When Mr Samardjiev was asked whether he was having continuing discussions with representatives of United Petroleum concerning Mobil's proposed clean up works at the land, after his last e-mail to United Petroleum on 4 November 2005, he replied:

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185 There was no dispute as to the applicable legal principles. It was submitted on behalf of Mobil that the terms of cl. 7(b) of the lease were "irremediably obscure" such as to be incapable of any definite or precise meaning. Accordingly, it was submitted that I should find that cl. 7(b) of the lease is void for uncertainty.

186 Before considering the contention on the part of Mobil that cl. 7(b) is void for uncertainty, it is necessary to note the evidence and agreement of the parties that there is, and has never been, such a thing as a "maximum allowable concentration" which has been set or adopted by the EPA in respect of any form of contamination. The evidence and agreement of the parties establishes that, in considering whether land in Victoria is suitable for any particular use, the EPA, environmental auditors appointed by the EPA and professional environmental consultants have regard to a number of laws, regulations, directions, standards, guidelines and policies. In general terms, these documents are established around investigation levels of contamination. Those investigation levels act as a trigger or threshold for further investigation of the extent of contamination at the land in question, and an assessment of the risk to human health and the environment, in order to determine whether the land in question is suitable for use of any kind, or for a particular use.

187 The argument put on behalf of Mobil as to uncertainty was straightforward. Based upon the agreed fact that the EPA does not set or adopt any "maximum allowable concentration" for contamination of either soil or groundwater present at land in Victoria, it was submitted that the parties failed to reach agreement upon an objective standard to which Mobil was required to clean up the land under cl. 7(b) of the lease.

188 On behalf of the plaintiffs, it was contended that, when regard was had to the terms of cl. 7 of the lease as a whole, and its evident commercial aim or object, the Court should construe cl. 7(b) as imposing an obligation upon Mobil to clean up the land:

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190 I do not accept these submissions on behalf of Mobil. In my opinion, when cl. 7(b) of the lease is construed in the context of cl. 7 as a whole, and in light of its obvious commercial purpose as disclosed by the whole of that clause and the factual matrix against which it was agreed, cl. 7(b) is not so obscure as to indicate that the parties failed to reach agreement as to the standard against which Mobil is obliged to clean up any contamination at the land.

191 The objective factual framework against which cl. 7(b) was agreed has been set out earlier in these reasons. The genesis of cl. 7(b) lay in the concern by Mobil that the previous lease did not contain a provision dealing expressly with Mobil's environmental clean up obligations on the expiry of the lease term. This caused Mobil to propose an initial draft of cl. 7 to be included in the lease. The correspondence between the solicitors for the parties following Mobil's proposal demonstrates, as do the words of cl. 7(b) itself, that the objective aim or object of the parties was to introduce a clause in the lease which specified the extent of Mobil's clean up obligations at the expiry of the lease.

192 In considering whether the words of cl. 7(b) record an enforceable agreement between the parties as to the extent of Mobil's clean up obligation, it is necessary to consider the terms of cl. 7 as a whole.

193 Clause 7(a) imposes an obligation upon Mobil, during the term of the lease, to comply with the requirements of the Act in respect of the land. This obligation is not limited to satisfying any notices or orders issued by the EPA under the Act. Under ss. 39(1)(b) and 45(1)(b) of the Act, it is an offence to "pollute" soil or groundwater at land so as to make, or be reasonably expected to make, the soil or groundwater "harmful or potentially harmful to the health... of human beings".

194 Clause 7(b) has two limbs. The first limb requires Mobil, at its cost, to establish the extent of contamination (if any) existing at the land when the lease expires. This is to be done by means of an ESA ("the ESA obligation"). Establishing the extent of contamination at the land on the expiry of the lease is an important component of the scheme agreed by the parties in cl. 7. In the first place, it is the level of contamination established by the ESA which is to determine whether Mobil has a clean up obligation. Putting to one side the question of agreement by the parties as to the standard of clean up required, such a standard must be applied against the findings of the ESA as to the level of contamination then existing at the land. Secondly, the indemnity granted by Mobil to the plaintiffs under cl. 7(c) is expressly linked to "any contamination disclosed by the ESA".[28]

195 The second limb of cl. 7(b) is obviously intended to record the agreement of the parties as to the standard to which Mobil is required to clean up any contamination at the land ("the clean up obligation"). Although the words used by the parties to describe this standard refer, when construed strictly and pedantically, to a non-existent standard, that does not mean that the words are so obscure that the Court must find that the parties failed to agree upon the applicable standard.

196 In my opinion, the words used in cl. 7 give a clear guide or "clue"[29] as to the standard which the parties intended Mobil was required to clean up. In the first place, as I have noted, cl. 7(a) requires Mobil to, amongst other things, ensure that it does not "pollute" the land (soil or groundwater) in contravention of ss. 39 or 45 of the Act. Further, under cl. 7(a) Mobil is required to comply with any notices or orders issued under the Act by the EPA. Secondly, against a level of contamination established by the ESA, Mobil has agreed to clean up the land to levels of contamination which, by reference to a standard set or adopted by the EPA, will permit any of the commercial uses under the applicable zoning. Although the parties have mis-described the standard set or adopted by the EPA with respect to contamination levels of land, there is no doubt that they intended to impose on Mobil an obligation to clean up the land in accordance with standards set or adopted by the EPA for the purpose of determining whether land will be suitable for commercial uses under the applicable zoning.

197 Next, in considering cl. 7 as a whole, cl. 7(c) imposes an obligation upon Mobil to indemnify the plaintiffs in respect of claims against them "arising from or associated with any contamination disclosed by the ESA arising from the use of the [land] as a service station". This clause provides a clear indication that the parties intended that Mobil would bear the financial cost arising from any petroleum contamination at the land. Although cl. 7(c) is not directly relevant to the issues in this proceeding, it demonstrates the intention of the parties as to the allocation of costs arising from contamination at the land.

198 Finally, cl. 7(d) of the lease contains the agreement of the parties as to the consequences for Mobil if it does not clean up in accordance with the clean up obligation, and as to its responsibilities if it does clean up. If Mobil does not clean up, then it is obliged to pay the licence fee. If it does clean up, it must "then make good any damage caused by such works to the reasonable satisfaction of [the plaintiffs]" ("the make good obligation"). Once again, the intention of the parties is clear. It is Mobil who is to bear the financial consequence of any contamination existing at the land at the expiry of the lease. This includes paying notional rent for the land (the licence fee) until it complies with the clean up obligation.

199 Having regard to the terms of cl. 7 as a whole and the obvious commercial purpose disclosed by it, I reject the submissions on behalf of Mobil that cl. 7(b) of the lease is void for uncertainty.[30] I accept the commercially sensible construction of cl. 7(b) which has been put forward on behalf of the plaintiffs. In my view, that interpretation accords with that which reasonable businesspeople in the position of the parties would have understood cl. 7(b) to mean.

200 No difficulty arises in identifying the relevant laws, regulations, directions, standards, guidelines or policies set or adopted by the EPA in November 2000. In the first place, the Act governed the situation. Second, the principal expert witness called on behalf of the plaintiffs (Anthony Lane) and the principal expert witness called on behalf of Mobil (Peter Mirkov) agreed that, in November 2000, the EPA had regard to the following standards in considering whether land was suitable for any particular use:

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201 Mr Mirkov said that other guidelines were relevant to the assessment of whether contaminated land in Victoria was suitable for particular purposes. In particular, reliance was placed by him upon the Guidelines for the Management of Petroleum Hydrocarbon Impacted Land, April 1999 ("Australian Oil Industry Guidelines" or "AOIG").[31]

202 However, the only representative of the EPA who gave evidence, Stuart McConnell, said that the Australian Oil Industry Guidelines have no status before the EPA and have not been reviewed or endorsed by the EPA in any way. I accept this evidence.

203 As appears hereafter, the environmental expert witnesses who were called to give evidence had no difficulty in expressing opinions on the issues raised by cl. 7(b). Opinions were expressed as to the adequacy of the ESA, and whether it established the level of contamination of the land. Further, opinions were expressed as to whether, having regard to the extent of contamination identified in the ESA and which may be inferred to exist in the vicinity of the tanks, the land was suitable for commercial uses under the applicable zoning. The fact that none of the experts had any difficulty in expressing these opinions, supports the commercially sensible interpretation of cl. 7(b) put forward on behalf of the plaintiffs. The experts expressed their opinions by reference to the laws, regulations, directions, standards, guidelines and policies adopted by the EPA in November 2000 in considering whether land was suitable for any use, or any particular use.

204 I turn to consider whether Mobil has breached cl. 7 of the lease.

HAS MOBIL BREACHED CLAUSE 7?

205 Before considering whether Mobil is in breach of cl. 7, it is necessary to consider the relationship between the obligations of Mobil under cl. 7 and the right of Mobil under cl. 4(b) to elect to either remove the tanks or render them useless and leave them at the land

206 The conduct of Mobil from the time it determined that it would not renew the lease has, in my view, been affected by an underlying assumption. Mobil has assumed, and has asked its consultants and experts to assume, that its obligations under cl. 7(b) must be assessed and considered on the basis that the tanks and the immediately surrounding tank sands, soil and groundwater were the responsibility of the plaintiffs ("the tanks assumption"). In my view, Mobil, its consultants and experts were wrong to proceed on the tanks assumption. The option which Mobil had under cl. 4(b) to render the tanks useless and leave them at the land, and thus to assign ownership of the tanks to the plaintiffs under cl. 5(f)(i) of the lease, does not affect the obligations of Mobil under cl. 7(b). It must be remembered that Mobil was not obliged to render the tanks useless and leave them at the land. It had an option to remove them, in which case it was required to "make good". If the only way in which Mobil could comply with its obligations under cl. 7(b) was to remove the tanks, it was in my opinion obliged to do so. It was not open to Mobil to limit the extent of its obligations under cl. 7(b) by electing to leave the tanks at the land and assigning ownership of the tanks to the plaintiffs.

207 By electing to leave the tanks at the land, and assigning ownership of the tanks to the plaintiffs, Mobil exposed itself to the risk that it might be required to remove the tanks in order to comply with cl. 7(b) and, if it did so, to re-install the tanks or replace them with tanks of similar quality in order to comply with the make good obligation.

208 There is another underlying assumption which has affected Mobil's conduct in relation to its obligations under cl. 7(b) of the lease. Mobil has assumed, and has asked its consultants and experts to assume, that its obligations under cl. 7(b) must be assessed and considered on the basis that the continuing use of the land would be for service station purposes ("the service station assumption"). In my view, Mobil, its consultants and experts were wrong to proceed on the service station assumption. The service station assumption is contrary to the obligations of Mobil under cl. 7(b) of the lease. The ESA obligation requires Mobil to establish the level of contamination at the land, and assess any risks arising from such contamination, on the assumption that the land may be used for any of the commercial uses permitted under the applicable zoning. Under the clean up obligation, Mobil is required to clean up so as to permit any of those commercial uses. The service station assumption is inconsistent with both of these obligations.

(1) Clause 7(a): Did Mobil comply with the Act during the term of the lease?

209 Although the plaintiffs alleged in the statement of claim that Mobil breached cl. 7(a) of the lease, and directed brief final submissions towards this issue, it is unnecessary for me to consider this issue in any detail. No submissions were directed towards the assessment of any damage suffered by the plaintiffs by reason only of a breach of cl. 7(a).

210 In my view, it is sufficient to dispose of the cl. 7(a) issue by referring to the fact that the ESA established one area of significant benzene contamination in both soil and groundwater and, in addition, noting that the experts agreed that it was probable that there was further contamination of the land in the vicinity of the tanks. I find that it is probable that this contamination was the result of the conduct by Mobil of a petrol station business at the land during the period of the lease. If this be so, then Mobil has breached cl. 7(a) of the lease by failing to comply with ss. 39(1)(b) and 45(1)(b) of the Act. Those sections prohibit changing the condition of land or water (including groundwater) to the extent that the land or water is, or may reasonably be expected to be, harmful or potentially harmful to the health or welfare of human beings. The contamination which appears at the land includes benzene contamination, which is potentially harmful to the health or welfare of human beings.

(2) Clause 7(b): Did the ESA establish the level of contamination at the land?

211 The principal environmental expert who gave evidence on behalf of the plaintiffs was Anthony Lane of Lane Consulting. The principal environmental expert who gave evidence for Mobil was Peter Mirkov of IT Environmental. I will refer to them jointly as "the experts". Prior to giving oral evidence, each of them prepared an expert witness statement pursuant to Order 44.[32]

212 As the issues developed in the trial, I ordered that the experts confer and provide a joint report to the Court under the provisions of Rule 44.06. I directed that the joint report specify the matters which were agreed, the matters which were not agreed and the reasons for their not agreeing ("the joint report").

213 In section 4 of the joint report, the experts agreed that the ESA did not establish the level of contamination at the land. On its face, this aspect of the joint report demonstrates a breach by Mobil of the ESA obligations. However, it was submitted on behalf of Mobil that, on its proper construction, the ESA obligation required only that Mobil cause an ESA to be prepared which establishes, as far as reasonably practicable, the level of contamination at the land. In support of this submission, it was contended that the use of the words "to establish", rather than "which establishes", assists Mobil's submission. I reject this. In the context of the clause, the words "to establish" mean "for the purpose of establishing".

214 It was contended on behalf of Mobil that no ESA can conclusively establish the level of contamination at land. To do so would require all of the soil and groundwater to be sampled and analysed. This is an unrealistic commercial requirement. The parties could not have intended such an absolute requirement.

215 I accept that the parties did not intend that Mobil should test all of the soil and groundwater at the land. However, the degree to which the ESA required by cl. 7(b) must establish the level of contamination is not one based on some general notion of reasonableness. The extent to which an ESA required by cl. 7(b) must establish the level of contamination is that which will be sufficient to enable an assessment to be made as to whether any clean up is required under the clean up obligation so as to permit commercial uses under the applicable zoning. In this regard, it is convenient to set out the responses of the experts to the more general question as to whether the ESA "reasonably establishes" the level of contamination at the land:

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223 In my view, this is what ought to have been done in this case. Having regard to the terms of the clean up obligation, Mobil ought not to have treated the ESA as one designed for the purposes of a lease hand back for continuing service station use.

224 Notwithstanding these matters, Mr Mirkov gave evidence that, in his opinion, the ESA adequately established the level of contamination at the land. However, this opinion was clearly based upon the invalid tank assumption and service station assumption. Both of these assumptions appear in Mr Mirkov's responses in the joint report, which I have referred to above. I reject Mr Mirkov's evidence on this issue.

225 Having regard to the finding I have made in relation to the inadequacy of the scope of the Handex ESA to establish the level of contamination at the site for ongoing commercial use, it is unnecessary to consider in detail the specific allegations raised by the plaintiffs in relation to deficiencies in the way the ESA was conducted by Handex. However, two specific allegations were raised and considered in great detail in the evidence. I will briefly consider these further matters.

226 First, the plaintiffs submit that Handex ought, at the least, to have taken soil samples when they installed the additional two groundwater monitoring wells in November 2000. The experts agreed that, if the objective of the ESA was to ascertain the level of contamination at the land in circumstances where there were indications of soil contamination at soil bores 5 and 6, Handex should have taken and tested soil samples when installing the additional groundwater monitoring wells in November 2000. Having regard to the fact that these wells were drilled in close proximity to soil bores 5 and 6, soil sampling at these locations would have assisted to further delineate the extent of the soil contamination in this area of the land.

227 Secondly, the plaintiffs allege that the ESA is deficient because Handex failed to send for analysis a sample of the soil taken from soil bore 5 at a depth of 5.1m. The PID reading of 1090 ppm at this location was the highest reading obtained by the Handex field testing. Mr Lane's evidence was that he could not understand why the sample had not been sent for analysis. This was particularly the case in circumstances where a soil sample taken at 2.5m depth from the soil bore nearest soil bore 5, soil bore 6, had disclosed a PID result of 950. This sample subsequently revealed, on a laboratory analysis, a concentration of benzene of 24mg/kg. On any view of the applicable investigation level, this was a very significant level of contamination which required further investigation and assessment.

228 Mr Hadwen was called by Mobil as a witness to support the sufficiency of the ESA.[33] Mr Hadwen is a consultant who at the time worked for Handex, although not on this particular ESA. He now works as an internal remediation manager for Mobil. Mr Hadwen said that he did not know why the sample from bore 5 was not sent for analysis because he had not spoken with the driller. Nevertheless, he offered two hypothetical explanations.

229 First, Mr Hadwen suggested that perhaps the driller had selected the two deepest samples from soil bore 5 at 5.5m and 6.1m in order to test whether the contamination had reached the groundwater table. Mr Lane's evidence was that this explanation did not sound plausible. While he acknowledged that it was relevant to establish whether the contamination has reached the water table, in Mr Lane's view it was most relevant to investigate the soil samples from soil bore 5 which revealed the highest PID readings. This was because groundwater naturally rises up and recedes through the soil. If the groundwater is contaminated it will deposit that contamination as it rises and recedes through the soil. This results in a "smear zone". The sample which Handex failed to test fell within this smear zone and, in Mr Lane's view, should have been sent to the laboratory for analysis. I accept this evidence.

230 Next, Mr Hadwen suggested that, in the course of the PID testing in the field, the integrity of the sample for laboratory analysis might have been destroyed so as to make it unsuitable for laboratory analysis. Mr Lane was of the view that it would be very poor field practice to use the entire sample for the PID test and not put a portion in a jar to go to the laboratory. He said that he would be "after someone's blood" if that happened on a job he was managing. I accept this evidence.

231 I find that the conduct of the ESA was flawed in the two respects discussed. The conduct of Handex in this regard was insufficiently rigorous to establish the level of contamination at the site.

232 The plaintiffs' case in relation to a breach of the ESA obligation focused on soil rather than groundwater. Nevertheless, it appears that the scope of the groundwater investigations conducted for the purposes of the Handex ESA were insufficient to establish the extent of the groundwater contamination at the site. As appears from the factual narrative which I have set out earlier in these reasons, the investigations following the service of the clean up notice revealed significant groundwater contamination issues. Were it not for the service of the clean up notice, I find that it is unlikely that these issues would have been fully revealed.

(3) Clause 7(b): Was Mobil obliged to clean up the land?

233 Many of the reasons which I have given for my finding that Mobil breached the ESA obligation are relevant to the allegation that Mobil breached the clean up obligation.

234 In the joint report, the experts expressed their opinions as to whether, in November 2000, the land was suitable for any as of right commercial use permitted under the applicable zoning. The experts did not agree. They responded:

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243 I find that this evidence of Mr Mirkov is, by itself, sufficient to establish a breach by Mobil of the clean up obligation. If the plaintiffs wished to develop the land by constructing on it a commercial building, perhaps including an underground carpark, to be used for one of the commercial uses permitted by the applicable zoning, the plaintiffs would have been put to the inconvenience and expense of employing an environmental consultant to write an environmental management plan to deal with the contamination disclosed by the ESA, at least in the area of soil bore 6. Further, if such construction was over the area of the tanks, where the experts agree there is likely to be further contamination, I find that it is likely that the environmental management plan would need to address the likely contamination in this area.

244 In my opinion, the clean up obligation required Mobil to return the land to the plaintiffs in a state which would enable the plaintiffs to develop the land for any of the commercial uses permitted by the applicable zoning. Mobil did not do so because the plaintiffs could not do this without incurring the cost and inconvenience of engaging an environmental consultant to write an environmental management plan.

245 As a further ground establishing a breach of the clean up obligation, the plaintiffs placed reliance upon the risk assessment conducted by Mr Lane with respect to the hotspot of contamination at soil bore 6.

246 Mr Lane's assessment was that this concentration of benzene posed a lifetime cancer risk to an office worker in a commercial building built over that hotspot. On this basis, Mr Lane was of the view that the site was not suitable for any as of right ongoing commercial use as at November 2000.

247 Mr Lane conducted an assessment of the lifetime risk to an office worker in a commercial office building built on this site from the presence of the levels of soil contamination disclosed in the ESA. Mr Lane and his associates undertook this risk assessment using a modelling software package known as "RISC 4". Using this model, Mr Lane measured the risk to human health of exposure in an office environment to the vapours released by the level of benzene found at soil bore 6. This risk assessment was based on exposure for eight hours a day for between 25 and 30 years. Mr Lane calculated the incremental lifetime cancer risk from exposure to contaminated soil at the site as ranging from 1.2 x 10-5 to 2.8 x 10-5. This is above the adopted acceptable risk level of 1x 10-5.

248 Mr Mirkov criticised the results arrived at by Mr Lane in his modelling of the lifetime cancer risk posed by the vapours from the benzene contamination at soil bore 6. Mr Mirkov made three principal criticisms of Mr Lane's modelling:

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252 Perhaps the most fundamental criticism by Mr Mirkov of Mr Lane's risk assessment was that it was based on an incorrect assumption as to the number of air changes per day. It was submitted that the computer model should have been run on the assumption that there would be 48 air changes per day. However, this submission was based upon an underlying premise that the hypothetical office worker in the commercial building would be present for 24 hours a day. Mr Lane's risk assessment assumed exposure for an eight hour working day. I find that this was a reasonable assumption. Based on this assumption, Mr Lane accepted that it would be appropriate to assume two air changes per hour in modelling the risk. This would result in an assumption of 16 air changes per day being appropriate. Mr Lane said, in this regard, that the difference between 12 and 16 air changes per hour "is not that significant". Mobil called no evidence as to what the results of the computer modelled risk assessment would have been if 16 air changes had been assumed. I accept Mr Lane's evidence that the difference is unlikely to have been significant. Accordingly, another breach of the clean up obligation is established.

NUISANCE CLAIM

253 As an alternative to their claim in breach of contract, the plaintiffs raised a claim against Mobil based on the tort of nuisance. The plaintiffs' submissions concerning this claim were briefly put in writing and not developed to any extent in oral argument. The written argument filed on behalf of Mobil did not deal with the nuisance claim at all. In oral submission, it was submitted on behalf of Mobil that the case had been conducted on the basis of breach of contract and that no evidence had been led to prove that the contamination existing at the land was the result of the conduct of Mobil. It was submitted on behalf of Mobil that the evidence established that the land had been used for a petrol station prior to it taking occupation in 1981.

254 As appears above, the location of the contamination at the land, in the vicinity of the petrol bowsers and tanks, indicates that it is the conduct of Mobil which has caused all or a substantial part of the contamination existing at the land. Based on the duration of Mobil's possession of the land and conduct of a petrol station business on it, I infer that this is so.

255 However, as the matter was not fully argued and I have concluded that the claim in contract is made out, it is unnecessary for me to reach a conclusion as to whether the tort of nuisance has been established.

CAUSATION ISSUES

256 It was submitted on behalf of Mobil that there was no causal link between any loss suffered by the plaintiffs and any breach of the lease by it. The basis of this submission was that the proposed lease to Woolworths did not proceed because of conduct on the part of the plaintiffs which had the effect of breaking the chain of causation between any breach of the lease and the failure to secure Woolworths as a tenant.

257 The conduct of the plaintiffs which it was contended had this result was two-fold. First, reliance was placed upon the contention that, at the 20 March 2001 meeting, Mr Flicker refused the Mobil tanks offer. Secondly, reliance was placed upon the refusal by the plaintiffs to accept the Woolworths tanks offer.

258 I reject the submissions made on behalf of Mobil in this regard. In my view, the conduct referred to did not operate to sever any causal connection between the breaches of cl. 7 by Mobil and the failure of the proposed lease to Woolworths to proceed. Further and in any event, the claims made by the plaintiffs do not depend entirely upon proof of a causal connection between the breach by Mobil and the failure of the proposed lease to Woolworths. Whether or not the lease to Woolworths proceeded, the fact remains that the land was, by reason of the breaches by Mobil, contaminated to a level which made it unsuitable for commercial uses under the applicable zoning. Unless and until Mobil remedied its breaches, the plaintiffs were unable to use the land for the commercial uses contemplated by cl. 7(b) of the lease. In these circumstances, the licence fee was payable.

259 As to the Mobil tanks offer, I have found that it did not amount to a formal offer but was merely part of the discussion about ways in which the dispute between the parties might be progressed or resolved. But even if it was a formal offer, it did not go far enough to sever any causal connection between the breaches of cl. 7 by Mobil and the failure of the plaintiffs to secure the proposed lease to Woolworths. The offer made no reference to the clean up of any contaminated soil or groundwater at the land, whether surrounding the tanks or elsewhere (such as at soil bore 6). Further, the offer did not include an offer to "make good", as required by cl. 7(d). In my view, given that the tanks were by this time the property of the plaintiffs, Mobil was required to re-install or replace the tanks if it removed them in the course of performing its clean up obligation. This was required by Mobil as part of the make good obligation. If the plaintiffs had refused an offer which included all of these elements, the position may have been different. But no such offer was ever made by Mobil.

260 As to the refusal by the plaintiffs of the Woolworths tanks offer, this offer was inextricably linked with the requirement by Woolworths that it would not lease the land unless and until the contamination was cleaned up to its satisfaction, as required by the Landlord's Works requirement. It was only if the clean up required the removal of the tanks that there was an issue. By making the Woolworths tanks offer, Woolworths was seeking to ensure that it would be able to proceed with the proposed lease even if the tanks needed to be removed as part of the clean up process. The refusal of the Woolworths tanks offer did not cause Woolworths to lose interest in the property. I am satisfied that the plaintiffs and Woolworths would have reached some agreement about the tanks if they were removed by Mobil in the course of complying with the clean up obligation. I will return to this issue later in this judgment when considering the amount of the plaintiffs' loss.

261 I find that the breaches by Mobil of the lease are to be regarded, on a commonsense view, as the cause of the plaintiffs failure to secure final agreement with Woolworths on a lease. Alternatively, at the very least Mobil's breaches caused the plaintiffs to lose a substantial opportunity to lease the land to Woolworths.

MITIGATION ISSUES

262 As an alternative to the contention that the conduct of the plaintiffs severed the chain of causation, it was submitted on behalf of Mobil that such conduct on the part of the plaintiffs amounted to a failure by the plaintiffs to take steps which they ought reasonably to have taken so as to minimise their loss. I reject this submission. For the reasons given above in respect of causation issues, there was nothing unreasonable in the plaintiffs refusing to accept the Mobil tanks offer. The Mobil tanks offer fell far short of an offer by Mobil to comply with the clean up obligation.

263 Nor can the conduct of the plaintiffs in respect of the Woolworths tanks offer be considered unreasonable. The plaintiffs acted at all times on the basis of the expert advice of Mr Diomides. The substance of that advice was confirmed by Mr Crockett and Ms Mazur. In circumstances where Mobil was refusing to carry out any clean up, and in the absence of any offer by Mobil to replace the tanks if they were removed as part of any clean up, it was, in my view, reasonable for the plaintiffs to wait and see what action Mobil took as a result of the matter being referred to the EPA before committing itself to the Woolworths tanks offer.

264 In this regard, Mobil knew, or had at least prepared internal estimates, of the cost of clean up of the land to permit commercial uses. Mobil's estimate of that cost was approximately $130,000 and was prepared within a few days of the ESA being completed and provided to the plaintiffs. Notwithstanding this knowledge, Mobil did not communicate it to the plaintiffs. Mobil continued throughout the dispute to leave the plaintiffs in the dark, to do the best that they could on the basis of the advice from the experts retained by them. As I have said, I accept the evidence of Mr Flicker that he was told by Mr Diomides that the costs of cleaning up the land were "very difficult to establish" because the extent of the contamination was unknown. Further Mr Diomides told Mr Flicker that the clean up costs could be very substantial, perhaps as much as $1M or more. In these circumstances, it was not unreasonable for the plaintiffs to insist upon Mobil performing its contractual obligations before exposing themselves to obligations to clean up the contamination at the land or to replace the tanks in the event that they were removed as part of any clean up.

265 The allegation by Mobil that the plaintiffs failed to act reasonably to mitigate their loss and damage is wholly unmeritorious. Mobil is one of the largest petroleum retailers in the world. It has vast resources and access to both internal and external expertise on the issue of petroleum contamination of land. In its dealings with the plaintiffs, it was Mobil who acted unreasonably. It commissioned the ESA on the false premises of the tanks assumption and the service station assumption. When the Mobil officers responsible for the conduct of the matter became aware of the requirements of cl. 7(b) as to ongoing use, they did not change their approach. They continued to assert, in answer to the plaintiffs' complaints, that the land was suitable for ongoing use as a service station and that there was, accordingly, no clean up obligation upon Mobil. It is not to the point that Mobil knew by this time that the plaintiffs wished to lease the land to Woolworths for use as a service station. That intention could always change, as this case demonstrates. It was the obligation of Mobil to comply with the terms of cl. 7(b) whatever may have been the current intentions of the plaintiffs for the future use of the land. As I have said, Mobil did not do so and it does not lie in its mouth to assert that the plaintiffs acted unreasonably.

ASSESSMENT OF DAMAGES

(1) Relevant legal principles and issues

266 The claim of the plaintiffs for breach of contract brings into operation the ordinary rule as stated by Parke B in Robinson v Harman[35]:

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272 There was no dispute about the applicable legal principles. It was submitted on behalf of the plaintiffs that the opportunity which it had lost was "a certain opportunity to secure a profitable second contract",[43] so that damages should be assessed on the basis that the plaintiffs have been deprived of the whole of the benefit of the proposed lease to Woolworths.

273 The Court's assessment as to the value of the lost opportunity to lease the land to Woolworths is capable of being relevant at two levels. This is because there are two limbs to the plaintiffs' damages claim. First, the plaintiffs seek as damages either the amount of rent which Woolworths would have paid under a lease prior to the sale of the land in November 2004 or the amount of licence fees payable by Mobil under cl. 7(d) of the lease for the period between the expiration of the lease and the sale of the land in November 2004. The quantum of these two alternative claims is, if a lease to Woolworths is treated as a certainty, almost identical. However, if the Court assesses the lost opportunity to lease the land to Woolworths as less than certain, then damages for loss of rent could be significantly less than the claim for licence fees. Furthermore, as the licence fees are amounts accruing due under the terms of cl. 7(d) of the lease, a judgment for the plaintiffs based on non-payment of licence fees may give the plaintiffs a higher entitlement to interest on its damages award. This is because the plaintiffs have consistently made demand for licence fees from an early time.[44] Having regard to these matters, in the event of success on their claims the plaintiffs have elected to have a judgment under cl. 7(d) of the lease. It follows that the Court's assessment of the prospect of a lease being concluded with Woolworths if Mobil had complied with its clean up obligation under cl. 7(d) is not relevant to the first limb of the plaintiffs' claims.

274 However, the position is not so straightforward with respect to the second limb of the plaintiffs' claim. Under this limb, the plaintiffs claim as damages the difference between the actual sale price obtained by them on sale of the land in November 2004 and the sale price which it is alleged could have been obtained if Mobil had complied with the clean up obligation. The Court's assessment of the prospect that the plaintiffs would have secured a lease to Woolworths, and on what terms, is relevant to this limb of the damages claim.

(2) Loss of rent/licence fees

275 As I have said, on the first limb of their claim the plaintiffs have already elected for a remedy calculated by reference to cl. 7(d) of the lease. Accordingly, there being no dispute as to the arithmetic, there will be judgment for the plaintiffs in the sum of $575,735.99 and interest. As to the calculation of interest, upon which I will hear the parties further if no agreement is reached, I note that the plaintiffs have demanded payment of licence fees from an early time.

276 By a letter dated 28 December 2000, Mr West informed Mr Burge of Mobil:

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277 Mr Burge understood this as a claim by the plaintiffs for the licence fee referred to in cl. 7(d) of the lease, which is equivalent to the rental payable under the lease at the date of its expiration. At regular intervals from this time, the plaintiffs, through Mr West, continually demanded from Mobil that it pay the licence fee until the land was cleaned up in accordance with cl. 7(b) of the lease. In future correspondence, there was no confusion as to the description of the licence fee, and it was so described in the demands made.

(3) Diminution in value of the land

278 The parties each called one expert valuer to give evidence. Their opinions were diametrically opposed on all but one issue. The experts agreed that, if the land was valued on the basis that it was leased to Woolworths on commercial terms, the fair market value of the land could be ascertained by applying a capitalisation rate of 8 per cent on the passing rent. On this basis, if the passing rent was taken as being in accordance with the rent which would have been payable by Woolworths under the proposed lease, without any adjustment by reason of a need to install new tanks, a value of $1,870,000 is established.

279 However, if I am to consider valuation of the land on the basis that it was leased to Woolworths, it is in my view appropriate that I consider and make findings on two matters. First, as to the likely commercial terms which would have been agreed between the plaintiffs and Woolworths if Mobil had complied with the clean up obligation. This is necessary to identify the opportunity which has been lost. Secondly, I will proceed to assess the prospect of whether a lease to Woolworths on those terms would have proceeded at all.

280 In considering these questions, a number of matters must be taken into account. In my view, the principal factors to be considered are:

(1) What was the extent of the interest of Woolworths in leasing the land?

(2) To what standard was Mobil required to clean up the land?

(3) Within what time was Mobil required to clean up the land?

(4) To what standard did Woolworths require the land to be cleaned up?

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I will consider each of these factors separately.

281 As to the extent of Woolworths' interest in leasing the land, I find that it was extremely high. The evidence of this has been set out in the factual narrative contained in this judgment. In summary, Woolworths was at the time expanding its chain of petroleum retail outlets at a rapid pace, described by Mr Webb as "go, go, go, go". The extent of Woolworths' interest is indicated by the fact that, notwithstanding the contamination issues at the property, Woolworths remained interested in leasing the land until at least January 2002. This was more than one year after the expiration of the lease and the agreement, subject to contract, of the commercial terms of the proposed lease.

282 As to the standard of clean up, I have held that Mobil was required to clean up the contamination at the land so as to enable it to be used for the commercial uses permitted under the applicable zoning. I have found that the clean up obligation extended to the removal of the tanks, cleaning up any contamination such as that found in soil bore 6 and in the vicinity of the tanks and then, under the make good obligation, re-installing or replacing the tanks or tanks of at least similar quality.

283 As to the time within which Mobil was required to clean up, cl. 7 of the lease makes it abundantly clear that Mobil could not take its time. Clause 7(b) requires an ESA to be prepared "at the expiration" of the lease and that Mobil "shall thereupon" clean up the land. Clause 7(d) provides that Mobil is to have access to the land for a period of 30 days following the expiration of the lease "or such longer period as is reasonably required" (emphasis added). Such access is for the purpose of carrying out the clean up works and to "then make good any damage caused by such works to the reasonable satisfaction of [the plaintiffs]". Until Mobil has complied with all of these obligations, Mobil is obliged under cl. 7(d) to pay the licence fee. All of these factors, together with commercial commonsense, indicate that Mobil was required to clean up the land within a reasonable time of the expiration of the lease. In this regard, a reasonable time must take account of the right of the plaintiffs to utilise the land as soon as reasonably practicable for the commercial uses permitted by the applicable zoning.

284 The evidence of Mr Samardjiev is relevant to the reasonable time required to perform clean up works at the land. Mr Samardjiev gave evidence that he was aiming to get permits for the demolition of all buildings on the land and to clean up the contamination, including removing the tanks, in time to allow United Petroleum to install its own tanks, backfill and compact the soil and redevelop the land for the purpose of commencing trading in about February 2006. At the earliest, Mr Samardjiev's efforts in this regard could have commenced in early October 2005. The evidence of Mr Samardjiev supports a finding that it was possible for all of these works to be carried out within a period of four months. I find that a reasonable time for Mobil to comply with the clean up obligation and the make good obligation was no more than six months after the expiry of the lease. This allows, in order to cater for contingencies, a further two months in addition to the timeframe against which Mr Samardjiev said he was working to satisfy the requirements of United Petroleum. Accordingly, the clean up and make good obligations of Mobil should have been complied with by 13 May 2001 at the latest.

285 There is evidence as to the standard to which Woolworths required the land to be cleaned up. That standard is to be found in the Landlord's Works referred to in cl. 2.3 of the schedule to the draft agreement for lease. Clause 2.3(b) of that schedule provided that the plaintiffs were required to remove or procure:

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286 In my view, the standard of clean up required by Woolworths was no higher than the clean up obligation. Although the term "Environmental Laws" is widely defined, I do not think that this alters the situation. Woolworths were very keen to lease the land, and it is unlikely that any strict interpretation of "Environmental Laws" on its part would have caused it to withdraw from the proposed lease if Mobil had complied with its clean up obligations. In particular, I note that the standard of clean up required by Woolworths was "in accordance with the [EPA] guidelines for the level of contamination at premises of the nature of the [land]". The reference to premises of the nature of the land, indicates that the extent of clean up required by Woolworths was so as to permit the land to be used for a service station. That was its immediately preceding use and was the proposed use by Woolworths. Accordingly, the standard of clean up required by Woolworths was of a lesser extent than that required to be done by Mobil to comply with the clean up obligation.

287 Further, under cll. 2.3(f) and (g) of the schedule to the draft agreement for lease, Woolworths required that the tanks remain at the land and be in working order and free of leaks and other defects. As I have said, having regard to the fact that Mobil assigned ownership of the tanks to the plaintiffs, Mobil was required to reinstall or replace them in accordance with its make good obligation under cl. 7(d). Had it done so, a question arises as to whether this would have satisfied Woolworths, or whether it would have sought to alter the commercial terms of the proposed lease.

288 On the one hand, Mobil cannot be heard to say that the tanks were not in working order and free of defects, as required by Woolworths. Mobil asserted throughout the trial that the tanks had been tested and found to be "tight" and, in final submissions, maintained the submission that I should find that the tanks were in fact "tight" at the expiration of the lease.

289 On the other hand, the removal of the tanks by Mobil would have provided Woolworths with an opportunity to insist upon new tanks being installed by the plaintiffs. On no view of the make good obligation, could Mobil have been required to pay for the cost of installing new tanks.

290 In this regard, it must be remembered that the tanks were over 20 years old and were made of steel. Corrosion was likely. Later in the day of the 20 March 2001 meeting, Mr Webb telephoned Mr Diomides. Mr Diomides' telephone log records the following conversation:

[171]

291 I find that it is probable that, as a result of Mobil removing the tanks in order to comply with the clean up obligation, there would have been a renegotiation of the commercial terms of the proposed lease to Woolworths. Although it occurred after the six month period within which I have found Mobil was obliged to comply with the clean up and make good obligations, the evidence establishes that, when the issue of possible removal of the tanks was raised by the plaintiffs,[46] Woolworths responded seeking compensation.[47] Soon after, Woolworths made the Woolworths tanks offer.[48] The response of the plaintiffs was to continue to insist that, if the tanks were removed during clean up works, the plaintiffs and Woolworths could renegotiate the commercial terms.

292 I find on the balance of probabilities that, upon Mobil removing the tanks as part of the clean up works, it is more probable than not that the plaintiffs and Woolworths would have reached agreement on revised commercial terms. The effect of that agreement would most likely have been to impose the cost of installing new tanks on the plaintiffs. This could have been done by the plaintiffs agreeing to pay for the installation of new tanks, or by agreement being reached as to a revised rental, such as that contemplated by the Woolworths tanks offer. Accordingly it is necessary to take this likelihood into account in considering the value of the opportunity which has been lost by the plaintiff.

293 Whether that agreement would have involved the plaintiffs paying for the new tanks or Woolworths paying a reduced rental is a matter of speculation. However, the fact that the plaintiffs rejected the Woolworths tanks offer indicates that they were not disposed to accept a reduced rental which involved Woolworths seeking to recoup the cost of the tanks, and interest thereon, over the 15 year period of the lease. In my view, it is most likely that the plaintiffs would have elected to pay for the cost of new tanks, rather than accept a reduced rental.

294 The Woolworths tanks offer involved a reduction of the annual rent by 9 per cent of the cost of installation of new tanks. The only credible evidence as to the cost of installation of new tanks was an internal Woolworths' estimate of $250,000.[49] It appears that the Woolworths tanks offer was based upon this estimate, and would have had the effect of Woolworths recouping the cost of the tanks, together with a margin for interest, over a 15 year period. On my calculations, the Woolworths tanks offer involved an annual rent reduction of $22,500 over 15 years.[50] This would have involved the plaintiffs in receiving $337,500 less rent over this period.

295 Accordingly, I am of the opinion that the value of the land should, for the purposes of the second limb of the plaintiffs' damages claim, be assessed on the basis that the Woolworths lease was in place on the commercial terms agreed between the plaintiffs and Woolworths in November 2000. As I have said, on this assumption, there is no dispute between the experts as to the appropriate capitalisation rate to apply to the passing rent. The result is that, for the purposes of considering the second limb of the damages claim, I will adopt a value for the land in November 2004 of $1,870,000. This exceeds the sale price to United Petroleum by $669,000. However, the sum of $250,000 for the cost of new tanks must be deducted from this amount, leaving a total of $419,000.

296 I have no doubt that Mr Flicker would have attempted to obtain from Mobil a contribution towards the cost of new tanks at the land. However, I am not satisfied that there is any realistic possibility that Mobil would have agreed to contribute any amount towards the purchase of new tanks. It was not obliged to do so and its conduct throughout the dispute indicates that it would have been most unlikely to make any payment which it was not legally obliged to make.

297 There remains for consideration my assessment of the prospect that the Woolworths' lease would not have proceeded at all. After all, the draft agreement for lease was never signed and the issue concerning compensation to Woolworths for the cost of new tanks may have proven a sticking point which could not be resolved by negotiation. However, in assessing the value of the opportunity which has been lost, I have already assumed against the plaintiffs that they would have been required to pay for new tanks if a lease to Woolworths was to proceed. Accordingly, it is not in my view appropriate that I further discount the plaintiffs' damages by reason of this contingency.

298 The question remains as to whether I should nevertheless reduce the damages because of the prospect that, for some other reason, the proposed lease to Woolworths might not proceed. In this regard, I note that in final written submissions Mobil relied upon "two possible reasons for the lease to Woolworths not proceeding". First, it was submitted by Mobil that Woolworths may have withdrawn from the proposed lease because of the state of contamination of the land. Mobil accepted that, if it was in breach of the clean up obligation, it was responsible for, and could not rely upon, this contingency. Secondly, it was submitted on behalf of Mobil that Woolworths may have withdrawn because there was no agreement between the plaintiffs and Woolworths as to the financial consequences if the tanks were removed as part of the clean up of the land. As I have said, I have taken this matter into account in assessing the value of the opportunity which the plaintiffs have lost. It seems to me that it would be doubly penalising the plaintiffs if I were to take this matter into account further in assessing the prospect that the lease to Woolworths might not have proceeded at all.

299 However, the fact remains that the draft agreement for lease was never signed. There are no certainties in commercial life. Although Woolworths was extremely keen to lease the land, it was open to it to change its mind. It seems to me that I should make a small reduction to the damages recoverable by the plaintiffs to take account of this general commercial risk. In doing so, I take account also of the impression which I gained from the evidence, and from observing Mr Flicker in the witness box, that he is a man who drives a hard bargain, and this may have resulted in Woolworths refusing to proceed. Accordingly, I will further reduce the damages by an amount of 10 per cent to take account of this possibility. This will have the effect of reducing the plaintiffs' damages for diminution in the value of the land by a further $41,900, leaving a figure of $378,900.

300 The plaintiffs put their claim for damages for diminution in the value of the land on an alternative basis. It was submitted on behalf of the plaintiffs that, if the land was valued in November 2004 on the basis of vacant possession, a value of $1,810,000 would be applicable. If this value were to be adopted, the plaintiffs' damages on this account may be considerably larger than I have found. However, I would still need to consider whether another tenant could be found on the same commercial terms as if the Woolworths' lease had proceeded and, in that regard, to have given consideration to the state of the tanks. Although Mobil may have been required to reinstall the existing tanks as part of its make good obligation, or to replace them with tanks of a similar age which tested as "tight", I am not satisfied that another petroleum retailer would have agreed to lease the land for 15 years, at the same rent which Woolworths agreed to pay, with tanks in that condition.

301 In any event, the plaintiffs do not have a right to elect the basis upon which damages will be assessed. It is a matter for the Court to determine the correct measure of damage, on the basis that the plaintiffs are to be put in the position they would have been had the contract been performed.[51] Given my view that, if Mobil had performed the clean up obligation, the plaintiffs would have leased the land to Woolworths on the revised commercial terms discussed above, it is inappropriate to assess damages on the basis that the Woolworths' lease did not proceed. Indeed, this would be contrary to the whole tenor of the plaintiffs' case, which was that it has been deprived of the opportunity to lease the land to Woolworths.

302 It is accordingly unnecessary for me to consider the conflict in the evidence of the expert valuers as to the value of the land in November 2004 if it was sold with vacant possession.

(4) Conclusions on amount of damages

303 As stated above, the plaintiffs are entitled to recover:

[174]

[1] A reference to Mobil Oil Australia.

[2] This reference to "this clause 2.3(d)" is, in my view, an error and was intended to be a reference to "clause 2.3(b)".

[3] Qualitative Risk Assessment.

[4] Groundwater Monitoring Event.

[5] It appears that Ms Mazur saw the penultimate draft of this report.

[6] Supreme Court (General Civil Procedure) Rules 1996 (Vic) r 29.15.

[7] E-mails dated 21 and 27 October 2005 and 2 and 4 November 2005 between Mr Samardjiev and Elias Anastasiou of United Petroleum.

[8] A reference to this proceeding.

[9] Dovuro Pty Ltd v Wilkins [2003] HCA 51; (2003) 215 CLR 317 at [25] per Gleeson CJ, [66]-[71] per Gummow J.

[10] No application was made for an adjournment of the trial pending the completion of Mobil's proposed clean up works and the gathering of evidence in connection with those works being undertaken.

[11] [2005] VSC 347 at [88] to [94]; see also Patrick Corporation Ltd v Toll Holdings Ltd [2005] VSC 392 at [81] to [87] per Dodds-Streeton J.

[12] Reardon Smith Line Ltd v Ynngar Hansen-Tangen [1976] 1 WLR 989 at 997; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1982) 149 CLR 337.

[13] [1932] UKHL 2; [1932] All ER 494.

[14] [1932] UKHL 2; [1932] All ER 494 at 499.

[15] [1932] UKHL 2; [1932] All ER 494 at 503-4.

[16] [1988] 15 NSWLR 130.

[17] [1988] 15 NSWLR 130 at 136.

[18] [1994] VicRp 53; [1994] 2 VR 32.

[19] [1994] VicRp 53; [1994] 2 VR 32 at 67.

[20] [2005] VSCA 29.

[21] [2005] VSCA 29 at [76]

[22] [2005] VSCA 29 at [77]- [81].

[23] [1997] UKHL 19; [1997] AC 749.

[24] [1997] UKHL 19; [1997] AC 749 at 770-1.

[25] [2004] HCA 35; (2004) 218 CLR 451 at [22].

[26] [2004] HCA 52; (2004) 219 CLR 165 at [40].

[27] (1992) 27 NSWLR 326 at 332-3.

[28] It follows that, even if the second limb of cl. 7(b) were held to be void for uncertainty, the ESA obligation contained in the first limb would survive. It is separate and severable from the second limb, is unambiguous and has work to do even if the second limb of cl. 7(b) is not enforceable.

[29] Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326 at 333, per Kirby P.

[30] I note that it was submitted on behalf of Mobil that, if the second limb of cl. 7(b) of the lease was void for uncertainty then the first limb should be struck down also. I have rejected this submission above.

[31] Reference was also made by Mr Mirkov to the New Zealand Oil Industry Guidelines issued in June 1999.

[32] Supreme Court (General Civil Procedure Rules) 1996 (Vic).

[33] I have already commented on the failure of Mobil to call Mr Amato, who was the author of the ESA, to give evidence. Nor did Mobil call the geologist or driller, who supervised and performed the field testing, to give evidence.

[34] As appears in the factual narrative, Mr Bond estimated that it would be prudent to remove at least 84 cubic metres of soil to remediate this hotspot.

[35] [1848] EngR 135; (1848) 1 Ex 850 at 855.

[36] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at 80.

[37] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at 104.

[38] [1994] HCA 4; (1994) 179 CLR 332.

[39] [1991] HCA 54; (1991) 174 CLR 64.

[40] [1991] HCA 54; (1991) 174 CLR 64 at 104.

[41] [1994] HCA 4; (1994) 179 CLR 332 at 355.

[42] [1994] HCA 4; (1994) 179 CLR 332 at 364.

[43] Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64 at 104.

[44] See Supreme Court Act 1986 (Vic) s. 58.

[45] The "Environmental Laws" are defined in the draft lease annexed to the proposed agreement for lease as "all laws and regulations, environmental protection policies, and directions, standards and guidelines of any authority (and any other like bodies) regulating or otherwise relating to the environment..."

[46] 22 May 2001 letter from Mr West to Mr Dugdale.

[47] 6 July 2001 e-mail from Mr Dugdale to Mr West.

[48] 20 July 2001 e-mail from Mr Dugdale to Mr West.

[49] Mr Samardjiev gave an uninformed estimate, but said he did not know how much new tanks would cost.

[50] $22,500 is 9 per cent of $250,000.

[51] Commonwealth v Amann Aviation [1991] HCA 54; (1991) 174 CLR 64 at 136; Bence Graphics International Ltd v Fasson UK Ltd [1998] QB 87 at 100.

At a glance

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Judgment (174 paragraphs)

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Legislation Cited (8)

Cases Cited (8)