//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2026] NSWCA 90
respondent. Appeal dismissed. The parties were directed to file agreed costs orders within 14 days or, failing agreement, submissions on costs within the specified page limits and timetable, for determination...
The appeal concerned who bore the contractual cost of asbestos encountered during redevelopment of former Defence land at Moorebank. The lease did not promise a pristine site or require removal of every trace of asbestos. The Court read the remediation clause alongside the planning and site-audit framework. Because an accredited auditor certified the site suitable for commercial/industrial use subject to an Environmental Management Plan, the Commonwealth had met the contractual standard, even though asbestos remained. The separate promise to return the premises clean and in good repair did not add a stricter contamination obligation. The Court therefore dismissed the appeal without deciding whether the Deed of Surrender separately released the claims.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
10 cited instruments linked from this judgment.
2,335 words · generated 05/10/2026
The Trust Company Ltd and Qube RE Services Pty Ltd appealed the dismissal of their contractual claim against the Commonwealth. They sought about $20 million for additional costs said to have arisen from asbestos encountered during redevelopment of an 83-hectare site at Moorebank, formerly used for many years by the Department of Defence. The primary judge made an alternative damages assessment of $3,238,830, which the appellants did not challenge on appeal. The appeal instead turned on contractual obligations in a lease and a deed of surrender. [1], [37]
The relevant Lease was dated 5 July 2013. Clause 17.2 provided that, by the lease’s expiry, the tenant would “remediate the Land to a standard suitable for on-going commercial/industrial use and so that no significant contamination is migrating from the site”. Clause 19.1 required the tenant to return the Premises “clean and in good repair and condition”, subject to fair wear and tear. The Lease defined the Premises to include the Land, but the remediation covenant was specifically expressed to concern the Land. [2], [50], [54]-[56]
The parties executed the Deed of Surrender on 14 December 2015, in return for a payment of $25 million by the Commonwealth. It required performance of specified hand-back obligations and addressed remediation and a Site Audit Statement. The statement could certify the Land suitable for commercial/industrial use either unconditionally or subject to an Environmental Management Plan. The deed also contained disputed release provisions. [57]-[68]
The Commonwealth had undertaken investigations and asbestos clean-up work over several years. Those investigations included surface emu-picks, principally around building footprints and transit routes. The evidence included limitations: some areas were not inspected, and the work did not investigate subsurface soil. [28]-[29] The site auditor signed a Site Audit Statement on 12 October 2016, certifying the Land suitable for commercial/industrial use subject to compliance with GHD’s Environmental Management Plan. That plan addressed asbestos, including the potential for further finds and management procedures. [33]-[34]
During later construction, contractors encountered asbestos-containing material in topsoil, backfill and other locations. The primary judge found on the balance of probabilities that asbestos remained on the surface near the southern burial pits and in other areas. The Court of Appeal upheld the substance of that finding, while accepting that three particular samples did not establish surface asbestos. [82]-[97]
Leeming JA’s reasons, agreed with by Free JA and Griffiths AJA, dismissed the appeal. The decisive point was not whether asbestos remained, but whether the contractual standard had been met. The Court concluded that the conditional Site Audit Statement and Environmental Management Plan satisfied cl 17.2. It also held that cl 19.1 did not impose an additional remediation obligation. [136], [147]-[150], [159]-[164]
The Court began with the words of cl 17.2. It identified two cumulative requirements: remediation to a standard suitable for on-going commercial/industrial use, and no significant contamination migrating from the site. The clause did not expressly require the removal of all contamination. The word “significant” itself left room for some contamination to remain without breaching the migration limb. [99]-[100]
The Court cautioned against treating “remediate” as a self-contained answer. Even adopting the dictionary meaning favoured by the primary judge, “to correct or improve”, the question remained what it meant to improve the Land “to a standard suitable for on-going commercial/industrial use”. The relevant unit of meaning was the phrase in context, not an isolated word. The Court supported this approach by reference to Agfa Gevaert and Kelly. [101]-[102]
Context mattered. The Lease was registered, so the Court noted limits on reliance upon extrinsic evidence of the parties’ commercial purpose. It nevertheless considered surrounding circumstances that could be known without evidence outside the instrument. The site had a long history of Defence use, was large, and was likely to be redeveloped or put to a different commercial/industrial use after the Commonwealth left. That future use would engage planning controls. [107]-[113]
The planning and contaminated-land regime helped explain why the parties’ language matched the site audit process. The prescribed Site Audit Statement form included a finding that land was “suitable” for “commercial/industrial use”, and permitted suitability to be conditional. The Court considered it natural to read cl 17.2, which used the same suitability and use terminology, in light of that framework. A conditional certificate was not necessarily inconsistent with suitability. [116]-[123], [129]
The Court rejected the argument that “suitable” had to mean unconditionally suitable. Commercial/industrial use itself depended on the relevant planning approval or consent, and the planning process could impose conditions, including compliance with an Environmental Management Plan. The certificate in this case was not shown to be defective, and the appeal did not maintain a challenge to its adequacy. [121]-[123], [129]-[133]
The result did not mean that any condition would suffice. Leeming JA acknowledged a hypothetical case in which conditions were so substantial that they prevented practical use of most of the site for a long period. That was not the case before the Court: the auditor certified suitability subject to the September 2016 plan, and the Court treated that certification as meeting the covenant’s standard. [121]
The Court also rejected the idea that remediation necessarily meant removing asbestos from the top 10 cm of soil. NEPM 2013 said there were various acceptable means of providing confidence that surface soil was free of visible asbestos, including raking, hand-picking or a durable hard cover. It did not require removal of the soil. The judgment noted more generally that remediation standards concern managing risk, and do not invariably demand removal. [23], [134]-[135]
The appeal ground concerning cl 19.1 failed for related reasons. Clause 17.2 specifically addressed contamination; cl 19.1 was a more general hand-back obligation informed by the Condition Reports. Reading the general obligation to require more stringent asbestos remediation than the specific covenant would undermine the negotiated standard in cl 17.2. The clauses were to be read consistently, not as imposing cumulative duties with conflicting standards. [146]-[150]
A separate ground succeeded only in part: the primary judge had relied on post-contractual conduct in construing the Lease. Leeming JA accepted the error, citing the general rule against using what parties said or did after contract formation as an aid to construction. It did not affect the result, because the appeal was resolved by the contractual text and permissible context. [126]-[128]
This judgment did not announce a general rule that environmental management plans always discharge lease remediation obligations. Its holding was tied to the particular wording of cl 17.2, the conditional Site Audit Statement regime, the plan in evidence, and the absence of a challenge to the auditor’s certification. The central construction was that the clause’s required outcome could be met by conditional certification, notwithstanding continuing asbestos. [120]-[123], [132], [136]
The reasoning treats suitability as use-specific rather than synonymous with a pristine or contamination-free site. The clause defined its standard by reference to commercial/industrial use, while the Lease’s definition of contamination also connected risk to the Premises’ permitted use. The Court therefore distinguished between the physical presence of a contaminant and whether the contractual standard for the relevant use had been met. [48], [109]-[110], [132]
The decision also illustrates how regulatory language can inform the construction of contractual language. “Suitable” and “commercial/industrial use” corresponded closely to the site audit form and planning framework. The Court considered that contextual fit significant, while emphasising the registered status of the Lease and the limits on using evidence external to its terms. [107], [116]-[123]
On the relationship between specific and general clauses, the judgment applied a harmonious construction. A general promise to return premises “clean and in good repair and condition” did not, in the circumstances, silently convert a specific and qualified contamination covenant into a duty to remove all asbestos. This is a construction of this Lease, not a universal rule that make-good clauses can never address contamination. [147]-[150]
The judgment also restated the general exclusion of post-contractual conduct as an aid to contractual construction. It relied on Agricultural and Rural Finance v Gardiner and Personnel Contracting, and found no applicable exception. [126]-[127] The outcome remained unchanged because that point did not displace the independent construction based on the contract’s text and admissible context. [128]
At [99], the Court said cl 17.2 imposed two cumulative obligations: suitability for on-going commercial/industrial use, and no significant contamination migrating from the site. In plain English, the tenant promised a specified state of the land, not necessarily the elimination of every contaminant.
At [100], Leeming JA said the clause did not require removal of all contamination. The words “suitable” and “significant” mattered: land can meet a use-based standard without being suitable for every more demanding use, and the migration limb allows for the possibility of insignificant migration.
At [120], the Court stated its decisive construction: a Site Audit Statement certifying suitability for on-going commercial/industrial use could satisfy the covenant whether the certification was unconditional or conditional. This does not make every conditional certificate sufficient. The Court expressly left open the possibility that exceptionally restrictive conditions might fail the contractual standard. [121]
At [123], the Court explained why the site audit framework was relevant: the lease’s language matched the mandated form of certification, the planning regime allowed conditional approval, and the construction promoted certainty when possession returned to the landlord. The point is not that regulatory documents automatically override a contract, but that the language and operation of this clause aligned with that regime.
At [136], the Court applied its construction to the facts. It held that the conditional Site Audit Statement and extant Environmental Management Plan signified that the Land was suitable within the meaning of cl 17.2, despite asbestos-containing material remaining at the surface and within the top 10 cm.
At [149], the Court explained why cl 19.1 did not add a second remediation duty: it would be inconsistent to read a general hand-back clause as undoing what the specific contamination clause permitted. In plain English, the more specific clause set the contamination standard, and the general clause did not silently raise it.
The decision is most directly relevant where a lease contains a use-specific remediation standard, such as “suitable for commercial/industrial use”, and a separate regulatory or audit process certifies the site as suitable subject to an environmental management plan. The Court’s analysis is especially relevant when the dispute concerns whether a conditional certification can satisfy the contractual language. [50], [61], [116]-[123]
It may also be relevant where a party argues that a general “clean and in good repair and condition” covenant imposes a stricter contamination obligation than a specific remediation clause. The judgment’s approach is to read both provisions together, paying attention to their wording, subject matter and relative specificity. [137], [146]-[150]
The factual limits are important. Here the auditor’s certification was not challenged on appeal as defective, and the parties had a plan directed to the identified risks. The Court did not decide what follows if an auditor’s certification is erroneous, if the plan is unenforceable or ineffective, or if its conditions make the contractual use impracticable. [121]-[122], [132]
The decision is not a holding that asbestos may always be left in place, that every environmental management plan is adequate, or that a landlord or tenant’s regulatory duties are identical to its contractual duties. Its focus was interpretation of particular lease covenants. The Court accepted that asbestos remained, but resolved whether that fact amounted to breach of the contractual standard before it. [98]-[100], [136]
The supplied judgment is dated 21 May 2026 and contains no subsequent judicial treatment of the decision. Accordingly, later application, approval, distinction or criticism cannot be established from the supplied material.
The decision itself drew on earlier authorities for its approach. It referred to Agfa Gevaert and Kelly on reading words as part of the whole sentence or phrase, and to Westfield Management and Deguisa on the significance of a registered instrument when considering extrinsic evidence. [101]-[107]
For post-contractual conduct, the Court relied on Agricultural and Rural Finance v Gardiner and Personnel Contracting. For procedural fairness and materiality, it applied LPDT. Those citations explain the legal framework applied in this appeal; they do not establish how later courts have treated this judgment. [126]-[127], [157]
Several issues were expressly left undecided. First, the Court did not determine the reach of “on-going” in cl 17.2. It noted force in the argument that the word added little beyond indicating future use, rather than restricting the possible uses to the former storage and distribution function. It did not need to resolve that point. [103]
Second, the Court did not determine how the covenant would operate if the site auditor wrongly certified conditional or unconditional suitability. It noted that the answer might depend on whether the error was innocent, negligent or knowing. The appeal did not require a ruling on that question. [122]
Third, the Deed’s release provisions remain unresolved. Leeming JA identified competing readings of cl 7.3 and acknowledged the relevance of the Deed’s other provisions, including the access obligations. But he considered that deciding the release question would not affect the appeal’s outcome. Free JA expressly preferred not to express a view on the Deed. [153]-[158], [163]
Fourth, the Court did not determine the procedural fairness challenge to the primary judge’s reliance on the release. It concluded that, even assuming a denial of an opportunity to address the issue, the outcome would inevitably have been the same because of the proper construction of cls 17.2 and 19.1. [157]-[158]
Finally, the judgment does not settle the costs of the appeal. It identified possible outcomes, including an order relating to the third hearing day or no order as to costs, but directed the parties to seek agreement or make submissions. [161]-[162]
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on, relying on, or using this analysis, have a qualified Australian lawyer check it.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: The Trust Company Ltd v Commonwealth of Australia [2026] NSWCA 90
Hearing dates: 4, 5, 18 March 2026
Decision date: 21 May 2026
Before: Leeming JA at [1]
Free JA at [163]
Griffiths AJA at [164]
Decision: 1. Appeal dismissed.
2. The parties to file and serve within 14 days of today any agreed orders as to costs, or, in the absence of agreement, submissions not exceeding four pages as to the costs of the appeal, and to file and serve within 7 days thereafter submissions not exceeding three pages in reply, with a view to any question as to costs being determined on the papers.
Catchwords: CONTRACT — lease — tenant’s obligation at end of lease to remediate to standard suitable for on-going commercial/industrial use — Land occupied for many years by Department of Defence — asbestos known to be present on land — whether provision of site audit statement certifying land suitable for commercial/industrial use subject to compliance with environmental management plan discharged tenant’s obligation even though asbestos continued to be present in topsoil — whether primary judge erred in finding asbestos continued to be present in topsoil — tenant’s obligation to return premises clean and in good repair and condition — whether that obligation added to obligation to remediate — significance of statutory regime concerning planning permission and remediation of land — whether appropriate to determine non-dispositive issues concerning release in deed of surrender
Legislation Cited: Commonwealth Places (Application of Laws) Act 1970 (Cth), s 52
Constitution, s 52
Contaminated Land Management Act 1997 (NSW), s 5
Contaminated Land Management Regulation 1998 (NSW), r 12
Environmental Planning and Assessment Act 1979 (NSW), s 4.66
National Environment (Protection of Site Contamination) Measure 1999, Sch B1 ss 2.1.2, 4.8
National Environment Protection (Assessment of Site Contamination) Amendment Measure 2013 (No 1)
National Environment Protection Council Act 1994 (Cth), ss 7, 14, 21
National Environment Protection Council Act 1994 (NSW), s 7
State Environmental Planning Policy No 55 – Remediation of Land
Cases Cited: 2 Elizabeth Bay Road Pty Ltd v The Owners - Strata Plan No 73943 (2014) 88 NSWLR 488; [2014] NSWCA 409
Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57
AQC Dartbrook Management Pty Ltd v Minister for Planning and Public Spaces (2021) 105 NSWLR 152; [2021] NSWCA 112
Bevelon Investments Pty Ltd v City of Melbourne (1976) 135 CLR 530; [1976] HCA 49
Burness v Hill [2019] VSCA 94
Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 275 CLR 165; [2022] HCA 1
Customs v Agfa Gevaert Ltd (1996) 186 CLR 389; [1996] HCA 36
Deguisa v Lynn (2020) 268 CLR 638; [2020] HCA 39
Ex-Christmas Islanders Association Inc v Attorney-General (Cth) (2005) 149 FCR 170; [2005] FCA 1867
Ghali v Chief Commissioner of State Revenue (2013) 85 NSWLR 378; [2013] NSWCA 340
Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23
Gulic v Boral Transport Ltd [2016] NSWCA 269
Hocking v Director-General of the National Archives of Australia (2020) 271 CLR 1; [2020] HCA 19
Housman v Camuglia (2021) 104 NSWLR 615; [2021] NSWCA 106
JR Consulting & Drafting Pty Ltd v Cummings (2016) 239 ALR 625; [2016] FCAFC 20
Kelly v The Queen (2004) 218 CLR 216; [2004] HCA 12
LPDT v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2024) 280 CLR 321; [2024] HCA 12
Lym International Pty Ltd v Marcolongo (2011) 15 BPR 29,465; [2011] NSWCA 303
Massoud v Nationwide News Pty Ltd; Massoud v Fox Sports Australia Pty Ltd (2022) 109 NSWLR 468; [2022] NSWCA 150
Paliflex Pty Ltd v Chief Commissioner of State Revenue (NSW) (2003) 219 CLR 325; [2003] HCA 65
Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64
PPK Willoughby Pty Ltd v Baird [2021] NSWCA 312
Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; [1985] HCA 14
Queensland Phosphate Pty Ltd v Korda and Shepard (as joint and several liquidators of Legend International Holdings Inc (in liq)) [2017] VSCA 269
Re Willmott Forests Ltd (in liq) (mgrs and recs apptd) (2012) 36 VR 472; [2012] VSCA 202
Redbubble Ltd v Hells Angels Motorcycle Corporation (Australia) Pty Ltd (2024) 303 FCR 100; [2024] FCAFC 15
Reid v Commonwealth Bank of Australia (2022) 109 NSWLR 149; [2022] NSWCA 134
Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45; [2002] HCA 5
Springrange Pty Ltd v Australian Capital Territory (2010) 177 LGERA 125; [2010] ACTCA 17
The Trust Co (Nominees) Ltd v Banksia Securities Ltd (recs and mgrs apptd) (in liq) [2016] VSCA 324
The Trust Company Ltd v Commonwealth of Australia [2025] NSWSC 502
Transport for NSW v Hunt Leather Pty Ltd (2024) 115 NSWLR 489; [2024] NSWCA 227
Westfield Management Ltd v Perpetual Trustee Company Ltd (2007) 233 CLR 528; [2007] HCA 45
Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and Managers Appointed) (in liq) (2013) 251 CLR 592; [2013] HCA 51
Zhang v ROC Services (NSW) Pty Ltd (2016) 93 NSWLR 561; [2016] NSWCA 370
Texts Cited: P Herzfeld and T Prince, Interpretation (3rd ed, 2024, Lawbook Co)
R Catterwell, A Unified Approach to Contractual interpretation (Hart Publishing, 2020)
Category: Principal judgment
Parties: The Trust Company Ltd ACN 004 027 749 (First Appellant)
Qube Re Services Pty Ltd ACN 158 015 877 (Second Appellant)
Commonwealth of Australia (Respondent)
Representation: Counsel:
M Ashhurst SC / G Farland (Appellants)
J Steele SC / L Robb Vujcic / S Puttick (Respondent)
Solicitors:
Pinsent Masons (Appellants)
Clayton Utz (Respondent)
File Number(s): 2025/00234952
Publication restriction: Nil
The critical documents are a 5 year lease dated 5 July 2013 and a Deed of Surrender dated 14 December 2015. Both were in respect of the same land at Moorebank. I shall refer to the Lease, the Deed and the Land.
The parties to the Lease and the Deed were the same: The Trust Company Ltd and the Commonwealth. The parties’ submissions referred to the “Developer” and “Defence”. That usage was understandable, but imprecise.
The first appellant, The Trust Company Ltd, is now the legal owner of the Land. The Lease states that it is the “custodian of the assets of the Moorebank Industrial Property Trust”. The second appellant is neither the legal owner of the Land nor a party to the Lease or the Deed, although the Lease referred to the second appellant as the trustee of the Moorebank Industrial Property Trust, stating that “[t]he Custodian enters into this Lease as custodian and agent of the Trustee”. When the entitlement of the second appellant to any damages was raised, senior counsel acknowledged it was difficult to see how any of the claims, based as they were on damages for breach of covenants in the Lease and the Deed, could result in a judgment in favour of the second, as opposed to the first, appellant. It is not necessary to reach any conclusion on this point, and the term “Developer” glosses over the fact that there are two appellants, neither of which seemingly is the beneficial owner of the Land or was directly involved in decisions connected with its development.
The respondent is the Commonwealth of Australia, which has established a Department of Defence under the control of a Minister. But while it is common to refer to “the Department” or “Defence”, the Department of Defence lacks legal personality (cf Hocking v Director-General of the National Archives of Australia (2020) 271 CLR 1; [2020] HCA 19 at [36] and Ex-Christmas Islanders Association Inc v Attorney-General (Cth) (2005) 149 FCR 170; [2005] FCA 1867 at [45]).
Despite the inaptness of aspects of each label, it will be convenient to adopt the usage of the parties and the primary judge and refer to the “Developer” and “Defence”, all the time bearing in mind that the claims are for damages for breaches of covenants in the Lease and the Deed to which the legal owner the Trust Company Ltd and its former tenant the Commonwealth were parties.
For nearly a century, Defence owned the Land. It was under Torrens Title. By the early 21st century, some 66 buildings including warehouses and administrative offices were located on the Land, which was used as a supply and distribution centre.
In January 2003, Defence exchanged contracts to sell the Land to an investment vehicle of a major bank. In March 2003, Defence completed the sale and leased the Land back for ten years, with an option to renew the lease for two further terms of 5 years each. The initial rent was $14,000,000 per annum, payable monthly. The lease was registered.
In 2007, the bank on-sold the Land to (ultimately) the Developer. The sale was subject to the 2003 ten year lease, and Defence continued to occupy the Land under that lease.
The Developer and Defence entered into a further lease of the Land in 2013, with a term of 5 years and a single 5 year option. In this document, the lessee was described as “Commonwealth of Australia (Department of Defence)” but nothing turns on that. There were some other differences between the terms of this lease and those of the 2003 lease, including those mentioned above reflecting the sale of the Land to the Developer. It seems likely, and the appeal proceeded on the basis, that the differences were negotiated in connection with the exercise or threatened exercise of the first option under the original lease. However, there was no evidence before this Court concerning those negotiations, and it seems likely that there was none before the primary judge. (No criticism is implied; this reflected its status as a registered instrument.) It is this registered lease AH874146, dated 5 July 2013 and commencing 26 March 2013 with an annual rent commencing at $19,400,000, which is the Lease at the heart of this litigation. The Lease is the source of some of the contractual entitlements at the forefront of the appeal, and which were (in large measure) surrendered by the Deed of Surrender which gives rise to the remaining rights in issue in this appeal.
The Developer’s submissions were confined to the contractual aspects of the Lease; indeed, they emphasised the fact that the first appellant had not been a party to the original ten year lease. No reliance was placed on the property rights created by either lease, or the entitlement of the first appellant under s 117 of the Conveyancing Act 1919 (NSW) as opposed to what flowed from contract. That is not a criticism; instead it reflects the dominance of contract in this area of the law, associated in this country with Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; [1985] HCA 14. It is “now firmly established that a lease is a species of contract”: Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and M**anagers A**ppointed) (in *)* (2013) 251 CLR 592; [2013] HCA 51 at [39]; see also at [62]-[67] (the initial resistance to , and the decisions over the ensuring quarter century, are considered in *) (Receivers and Managers Appointed)* (2012) 36 VR 472; [2012] VSCA 202 at [41]-[52] and [67]-[72]). Nor was it suggested that anything in this litigation gave rise to a need to consider anything other than contractual principles.
… this was never raised in the pleading. We had no opportunity to have obtained any of the communications between the relevant parties. We had no opportunity to seek the correspondence between the parties on the drafting of this deed, and the deed is clearly ambiguous for the reasons we’ve said. We say there’s only one possible construction when one considers cls 10 and 12, but the actual clause itself, the subject clause, is ambiguous.
A great deal of time in arguing this appeal was directed to what had been in issue, in litigation where both sides appear to have altered their focus as the trial proceeded. While the trial had occupied some eight days, the parties exchanged hundreds of pages of submissions. On the view I take, it will not be necessary to resolve that dispute.
I pause to note the legal character of the demised land. The Commonwealth had been the legal owner of the Land from early in the 20th century. Presumably it had been acquired for defence purposes, thereby engaging s 52(i) of the Constitution, with the result that State laws could not apply of their own force. However, that status prima facie ceased when the Commonwealth sold the Land to the bank in 2003: Paliflex Pty Ltd v Chief Commissioner of State Revenue (NSW) (2003) 219 CLR 325; [2003] HCA 65. There may be a question how a sale and lease-back under a long-term lease impacts the status of the Land for the purposes of s 52(i), but if so it does not arise in this appeal and was not the subject of any submissions (I am conscious that it was held in Bevelon Investments Pty Ltd v City of Melbourne (1976) 135 CLR 530; [1976] HCA 49 that a 5 year lease to the Commonwealth did not, or probably did not, amount to the land falling within s 52(i)). But nothing turns on this. If the land continued to fall within s 52(i) after 2003, State planning laws applied by dint of the Commonwealth Places (Application of Laws) Act 1970 (Cth), and of their own force no later than the Commonwealth’s surrender of the Land.
The planning background should be mentioned. The evidence (or at least, the documents in the appeal books) did not explain with any precision the process by which approval was undoubtedly given to the Developer to remove most of the structures on the Land, and construct the intermodal terminal facility at a cost of $490 million mentioned by the primary judge at [120]. The amount of expenditure means that the Developer would have been entitled to seek approval under the former Part 3A of the Environmental Planning and Assessment Act 1979 (NSW) thereafter proceeding pursuant to transitional provisions which were considered in AQC Dartbrook Management Pty Ltd v Minister for Planning and Public Spaces (2021) 105 NSWLR 152; [2021] NSWCA 112 at [73]-[81] which “permitted Part 3A to live long after its repeal in 2011”, or under the somewhat different regime which replaced that Part after its repeal. Nothing turns on this for present purposes save that the terminology is different (for example, “approval” as opposed to “consent”, and so on) and for that reason I shall refer in general terms to “planning permission”. The main reason for mentioning this is not terminological exactitude, but rather that the evidence fell short of addressing what role was played in the planning process by the Site Audit Statement and the Environmental Management Plan to which a great deal of the evidence was directed. Nonetheless, the appeal proceeded on the basis that planning permission had been sought and obtained to develop the Land for the Developer’s intermodal terminal facility, notwithstanding the breaches on which the Developer sued which turned on the presence of asbestos on the Land after the Commonwealth surrendered its lease.
For many years, asbestos has been found on the Land. Evidently, at least one source of the asbestos was from the roofs of some of the buildings. Asbestos has been detected by various investigations, some of the surface, and at least one of which was intrusive into the top levels of the soil. The evidence was to the effect, speaking generally, that when asbestos containing material was found, it was picked up, and recorded in a document which became the asbestos register.
The surface investigations included an “emu pick” undertaken within a 5 metre buffer zone around the footprint of various buildings and known transit routes between buildings. An emu-pick amounts to the manual collection or hand-picking of visible fragments or pieces of suspect materials by a systematic process of visual inspection across the surface of a site. The primary judge recorded at [398] that the emu pick was not conducted across the entirety of the Land, but focussed on the areas where asbestos-containing fragments were most likely to be.
The term “emu pick” is also referred to as a “hand pick” or “emu bob” in the National Environment (Protection of Site Contamination) Measure 1999 (see, for example, Sch B1 s 4.8). The Measure achieved prominence in the parties’ submissions in the appeal, although without much analysis of its juristic nature. The Measure states in cl 4 that it is made pursuant to s 14(1) of the (Cth). The Measure is a legislative instrument (s 21). Section 7 contains some statements concerning “the intention of the Parliament of the Commonwealth” concerning the implementation of any Measure; it is unnecessary for present purposes to analyse the legal effect of that section. The Measure also contemplated that it would be implemented by laws of other States and Territories, and states that it has been made under, relevantly, the (NSW). That legislation also contains s 7 which is in similar terms to s 7 of the Commonwealth Act.
2.1.2 Inappropriate use of investigation levels and screening levels
Investigation and screening levels are not clean-up or response levels nor are they desirable soil quality criteria. Investigation and screening levels are intended for assessing existing contamination and to trigger consideration of an appropriate site-specific risk-based approach or appropriate risk management options when they are exceeded. …
The use of investigation and screening levels as default remediation criteria may result in unnecessary remediation and increased development costs, unnecessary disturbance to the site and local environment, and potential waste of valuable landfill space. …
“Surface soil” was not defined, but the primary judge recorded that “the experts generally agreed that it included the top 10 cm”: at [367].
Remediation options which minimise soil disturbance and therefore public risk are preferred. Management of asbestos in situ is encouraged, which may include covering the contamination with uncontaminated fill or other protective or warning layers. It should be noted that the common alternative of complete removal of asbestos from a site often involves extensive and costly investigative and validation sampling and may not be effective or necessary for the protection of human health.
There are various acceptable means to provide confidence that the soil surface is free of visible asbestos including, but not limited to, multi-directional raking of soil to about 10 cm depth and hand picking of asbestos fragments or covering with a durable hard cover ....
The reason for mentioning this history is that NEPM 2013 was an important part of the Developer’s claim that the contractual duties which it alleged had been breached by Defence were informed by the standards contained in that Measure, noting that it came into force slightly before the execution of the 2013 lease. NEPM 2013 was relied upon to quantify the obligations to remediate and to clean the Land at the expiry of the Lease. In a nutshell, the Developer said that the breach of cll 17.2 and 19.1 occurred when the Commonwealth “failed to remediate the soil to a depth of 10 centimetres in the areas of known asbestos contamination prior to the expiry of the lease”.
The essence of the Developer’s submission was that the discovery of widespread asbestos on site in 2011, as described in GHD’s reports at the time, together with the limited cleanup then undertaken, evidenced that Defence breached the Lease by leaving the Land without ensuring that the topsoil was free of asbestos. That required more than a limited emu-pick to a distance 5 metres around the buildings. The fact that Defence provided the Developer with the asbestos register in June 2015 made no difference, where Defence did not disclose that asbestos containing material was identified externally throughout the Land and Defence had not remediated that debris in the top 10 cm of the topsoil.
Mr Ashhurst SC, who with Mr Farland appeared in this Court for the Developer as they had done at trial, explained at the commencement of his oral address:
The appellants contend, as they contended in the proceedings below, that the respondent breached its remediation obligations under cl 17.2 of the lease, and the cleaning obligations under cl 19.1 of the lease, when the respondent failed to remediate the topsoil or clean in areas of known – emphasise known – asbestos contamination prior to the respondent vacating the property in December 2015. The depth of this required remediation … contended for by the appellants was approximately 10 centimetres, which was the then depth recommended in the NEPM, National Environment Protection Measures 2013 Guidelines, that were applicable when the respondent was vacating the premises in December 2015.
In September 2012, the environmental consultant JBS&G Australia Pty Ltd began to conduct preliminary site inspections for the Developer.
At around the same time, contractors engaged by Defence were engaged in a clean-up of asbestos, prior to the conclusion of the original 10 year lease. The primary judge summarised this at [121]-[135], in terms which were not criticised by either side. Nothing presently relevant turns on the details. The summary reflects the extent to which efforts were made to identify and remove asbestos containing materials, and was called in aid by Defence on its notice of contention when it asked this Court to conclude that all surface asbestos had been removed by the time the Commonwealth surrendered the Lease.
121 In parallel with the developer’s efforts to obtain planning approval, Defence undertook a site clean-up after discovering asbestos in one of the buildings. In 2011, AC debris and associated dust was discovered inside Building 80 at DNSDC. Defence commissioned GHD to undertake an asbestos re-survey of the buildings and structures at DNSDC. GHD then noted that the lease was due to expire in 2014, when Defence planned to move out.
122 In August and September 2011, GHD’s health and safety consultant, Matt Goodwin, inspected the buildings at DNSDC for asbestos. A detailed spreadsheet was compiled, which became the asbestos register. The spreadsheet included where suspected ACM fragments had been collected outside buildings for sample, with additional notes such as “likely more present throughout grassed area. Likely to experience disturbance during lawn maintenance.”
123 On 4 October 2011, GHD reported its findings and provided advice on the proposed scope of works to decontaminate the structures identified for remediation. The consultants noted that the majority of the structures at DNSDC were built prior to 1985 and originally had cement roofs believed to contain asbestos. An aerial photograph from the 1980s depicted a large portion of the buildings with cement roofs. Other buildings with metal roofs were believed to have previously had cement roofs that were replaced at some point. The surveyors focussed on asbestos cement debris associated with the removal of cement roofs from warehouse structures. Asbestos cement debris was identified on the floor within 13 buildings and on elevated surfaces in 15 buildings (assumed to be associated with the previous removal of roofs within each structure). In addition, “Asbestos cement debris was identified externally throughout the site.”
124 GHD recommended a remediation strategy for asbestos cement debris located internally and externally. GHD identified those buildings requiring the removal of internal debris. GHD noted that it was possible that there was unidentified debris in areas that were not accessible during the survey, including between roof sheets and sarking. The proposed remediation strategy was designed to ensure the safe occupation of the buildings, and would be carried out in conjunction with a full air monitoring program to assess the suitability for occupation, “This strategy is not designed for the completed remediation of the buildings as this is not deemed cost effective due to the limited lifespan of the asset.”
125 For external asbestos, GHD recommended “The contractor is required to undertake an emu-pick of asbestos cement debris located externally within a five metre buffer zone around the footprint of all buildings and also on known transit routes between buildings.” Further details were given as to how the emu-pick should be undertaken. The consultant’s report concluded with a number of limitations, including that the report did not provide a complete assessment of the status of the site. Attached to GHD’s report was the spreadsheet completed by Mr Goodwin which, as mentioned, became the asbestos register.
126 On 4 January 2012, hygienist Parsons Brinkerhoff provided an asbestos remediation inspection certificate for the removal of AC debris on the ground externally to Building 80, between the building and the boundary as determined by a western stormwater drain. Visible materials had been removed from the area as far as reasonably practicable. Areas not accessed included areas below the ground surface, areas covered or obscured by vegetation and areas obscured by stockpiles.
127 In January 2012, GHD provided its final audit and clearance report on the removal of asbestos from Building 80, concluding that the building was suitable for re-occupation. GHD presumed that the source of asbestos contamination at Building 80 was the result of “poor removal practices during the removal of a former asbestos cement roof.” GHD set out at length the asbestos removal works which had been undertaken. The consultant also noted that asbestos debris directly to the west of the building was emu-picked after the final audit was completed. GHD noted the limitations of its audit report, where no audit inspection could be regarded as absolute and where partial or total demolition of structures may reveal further asbestos, and where not all areas could be accessed at the time. Further:
“asbestos debris may also be present within the subsurface soils immediately surrounding [Building] 80. Therefore the removal of surface debris may not necessarily mean that the areas are free of asbestos. Over time weathering events may assist subsurface asbestos materials being uncovered.”
128 In February 2012, GHD prepared a further scope of works to Defence for asbestos remediation works at DNSDC. The site was delineated into 20 emu-picking zones.
129 From June 2012 on, GHD provided an asbestos removal clearance certificate for emu-picking zones. Where each certification followed a similar format, it is convenient to set out the first such report. GHD noted that the asbestos removal works were commissioned “following the identification of asbestos debris on surface soils throughout the entire site which appeared to be concentrated around building footprints.” The clearance certification outlined their findings, “including any areas of further concern, potential ACM that could not be removed and any limitation.” A contractor had been engaged to remove asbestos debris across the entire site, “The majority of contamination was identified surrounding each building footprint, however as a risk mitigation measure the entire site was subject to Emu Picking”. Personnel walked the area in a series of parallel traverse lines spaced one metre apart and collected all visible asbestos cement debris, “Rakes were used to aid in visual observation but at no stage were they used to investigate sub-surface soils.”
130 GHD concluded that, as far as reasonably practicable, all visible and accessible asbestos containing debris had been removed to a satisfactory standard and the area was suitable for reoccupation. The consultant set out some limitations on their report:
The following limitations apply to the clearance inspection:
• Many areas were heavily vegetated with grass and/or trees, all effort was made to assess these areas however concealed asbestos debris may remain;
• Drainage areas could not be fully inspected due to the presence of water and reeds; and
• At no stage were subsurface soils investigated for the presence of asbestos debris. It is highly likely that asbestos debris are present within the sub surface soils, and overtime due to weather events or localised disturbance, they may become visible on the surface.
131 On 18 February 2013, an occupational hygienist provided an asbestos remediation clearance certificate in respect of the removal of visible ACM fragments on the ground surface to the western side of the building footprint of Building 13 extending five metres from the building. Visible fragments had been removed as far as reasonably practicable from the ground surface only. The hygienist had not accessed areas below the ground surface, areas covered or obscured by vegetation, furniture, skip bins, stockpiled office items and shipping containers. No subsurface investigation was undertaken. The hygienist certified that the area could now be returned to normal use.
132 Similar certificates were provided for other buildings at the DNSDC, where the areas not accessed included areas within guttering, an electrical substation, areas obscured within drains and drainage channels, areas obscured by military vehicles, boats, miscellaneous equipment, garden beds, vehicles and the like. The last certificate was issued on 16 March 2013.
133 In total, 18 asbestos remediation clearance certificates were issued by the occupational hygienist for the removal of asbestos containing debris on the ground surfaces extending five metres from the perimeter of buildings on the DNSDC, specifically, for Building 12, Building 17 (eastern and western sides), Building 18 (southern, eastern and western sides), Building 24 (eastern and northern sides), Building 50 (northern western sides), Building 51 (northern side), Building 53 (northern and eastern sides), Building 54 (eastern and northern sides), Building 60, Building 63, Building 67 (all sides of the building), Building 72 (southern side), Building 73 (eastern side), Building 75, Building 80 (western side). I note that the certificates and GHD’s clearance reports do not refer to each of the 20 emu-picking zones proposed at the outset, nor all of the buildings at DNSDC. It would appear that not all of the initial work proposed by GHD was completed.
134 From 26 to 28 February 2013, the occupational hygienist also inspected the DNSDC site and updated the asbestos register based on their observations. The updated register recorded that external asbestos fragments had been removed, with further notations also made including, “This area should be inspected periodically due to the tendency for fragments to migrate to the surface.” and “Continue monitoring”.
136 This advice appears to have been heeded. In April 2014, hygienist Parsons Brinckerhoff inspected the DNSDC site and updated the asbestos register. Asbestos detected was noted as being either external to a particular building or internal. The type of asbestos was also recorded together with its condition, any laboratory results, a risk rating, control and any comments, including previous inspections or action taken.
In 2015, Defence executed the Deed. Speaking generally, the Deed obliged Defence to provide a Site Audit Statement (being a document provided by an independent auditor accredited by the NSW Environmental Protection Authority – see further below) certifying that the Land was suitable for commercial/industrial use, either unconditionally or subject to compliance with an Environmental Management Plan or “EMP”. I shall return to the terms of the Deed below.
Defence had retained GHD to undertake a variety of tasks concerning the Land, including preparing an prepare an Environmental Management Plan. The accredited auditor was Mr Andrew Lau of JBS&G. In May 2016, GHD provided their reports to Mr Lau for his consideration. He provided lengthy comments. In relation to asbestos on the Land, they included the following:
In accordance with the NSW audit framework, I have accepted and relied on the previous audit statement and accompany report (Ryall 2002) and have not attempted to critique or re-assess the work previously undertaken (ie, pre 2002) and which was the subject of the previous audit.
However, since 2002, there have been changes in guidelines – particularly relating to the assessment and management of asbestos … which require further consideration than what was reported in the previous investigations and audit. For this reason, in addition to the conditions imposed on the previous audit statement, I’m of the view that … further assessment/management of asbestos is also required. … the asbestos issue will need to be addressed in the Environmental Management Plan (EMP) which is to be prepared for the site.
In relation to asbestos, two issues arise from the extent of the previous investigations undertaken at the site which I’d like to see addressed in the EMP:
(1) how the site will be able to be deemed ‘suitable’ where there is asbestos on the ground surface and whether a concerted effort will need to be made to remove visible fragments of asbestos on the ground surface prior to obtaining sign-off; and
(2) the amount of previous soil analyses for asbestos, coupled with large data gaps imposed by the presence of buildings/other structures, means that the form of asbestos which may be present at the site cannot be exclusively limited to fragments of ACM and the potential presence of [friable asbestos] will need to be incorporated into the management measures in the EMP.
The proposed annual inspections should also include a visual inspection of the accessible ground surface (at least while ever the current ground levels are maintained) and removal of any identified suspected ACM fragments to a licenced waste facility …
236 … GHD noted:
Timeframes
This EMP is applied to the site for the time of issue (July 2016), and so long as it continues to be used for the designated use and layout as an industrial and commercial property (surrounded by a security fence).
The EMP has been prepared to reflect current site activities and may be amended from time to time as detailed in Procedures 01 to 07.
This EMP will expire and will require amendment should the site use change at any time, including increased frequency of surveys, redevelopment, changes in land use or additional site assessments.
237 GHD summarised the work undertaken on the site in 2015 and the results of its intrusive testing in 2016. In particular, GHD repeated that fragments of ACM were noted on the ground surface and shallow soils at several locations, most notably in the southern burial pits; “The potential for widespread presence of ACM on the surface across this portion of the site cannot be discounted.” An aerial photograph including the southern burial pits was provided and the locations where asbestos had been detected was marked. A summary of the soil contamination found by GHD in its intrusive investigation was provided, including fragments of ACM in the southern burial pits.
238 GHD’s investigations into subsurface conditions and fill were also summarised, noting “very limited presence of building material present in the fill soil; which is considered to present a primary indicator for the potential presence of asbestos in soil.” GHD noted that it had previously (in 2013) reviewed historical aerial photographs and noted that the limited demolition of buildings, but the southern part of the site was “notably disturbed” and tied in with the location of the southern burial pits and therefore has the potential for fill materials. GHD also advised:
GHD note that there has been limited sampling for asbestos in soils at the site; however, based on our investigation GHD concludes the following:
• GHD reported limited asbestos fragments across the site which were localised in the southern portion of the site; in the area of the ‘southern burial pits’
• Fill soils recorded across the site have indicated limited potential for asbestos containing materials, with the exception of those in the southern portion of the site in the area of the ‘southern burial pits’.
• GHD consider based on our findings that the majority of the site has been assessed in accordance with the guidelines detailed in the NEPM such as review of the potential sources such as demolition of pre-existing structures (pre 1990) or burials indicating limited potential source areas (other than in the area of the southern burial pits).
239 GHD noted than an EMP had been developed to mitigate these risks. GHD then set out the potential sources of contamination (including asbestos fragments in the soil), potential exposure pathways to this contamination and potential receptors for contamination. When considering receptors, GHD noted that Defence was in the process of vacating the site, “GHD understands the site will be developed in the future for use as an intermodal terminal (commercial / industrial land use).” Potential receptors may include future construction and maintenance workers. A number of control measures were necessary to control this exposure. GHD then set out environmental management procedures, including for ACM in the southern portion of the site and a procedure for unexpected finds.
On 12 October 2016, Mr Lau signed a Site Audit Statement. The statement certified that, in his opinion, the site was suitable for commercial/industrial use subject to compliance with the Environmental Management Plan prepared by GHD. Mr Lau listed the information sources for the site audit, including the reports of Egis Consulting Australia, URS, HLA-Envirosciences, Milsearch, Dr Ryall’s Site Audit Statement of 9 December 2002 and, more recently, GHD’s reports from 2014 and 2015, together with GHD’s Environmental Management Plan.
As flagged above, in 2016, planning permission was obtained to construct an intermodal terminal facility on the Moorebank site and adjoining land. From 2017 to 2019, the Developer commenced initial construction work which included removing vegetation and soil, digging up and removing underground infrastructure, including stormwater pipes and telecommunication pits: see reasons of the primary judge at [309].
In the course of undertaking those works, the demolition contractor encountered asbestos containing material in topsoil, in backfill around underground infrastructure and under hardstands. Asbestos containing material was also found in a pit on the southern portion of the Land, in which Defence had buried various equipment, supplies and rubbish after World War II. Some hazardous chemicals were also found in some tanks in some buildings.
It may be that what mattered to the Developer and its contractors when much of the topsoil was removed from the Land was the fact that the waste contained sufficient quantities of asbestos to cause it to incur additional costs. The Developer claimed to have spent $20 million in dealing with these contaminated materials. There was a deal of evidence, resolved by the primary judge and forming no part of the appeal, which reduced those damages to the $3,238,830 found notionally by her Honour, in accordance with the general rule to make findings in the alternative so as to avoid the need of a retrial if an appeal is allowed, as stated in decisions of this Court including Gulic v Boral Transport Ltd [2016] NSWCA 269 at [7], PPK Willoughby Pty Ltd v Baird [2021] NSWCA 312 at [15], Massoud v Nationwide News Pty Ltd; Massoud v Fox Sports Australia Pty Ltd (2022) 109 NSWLR 468; [2022] NSWCA 150 at [35] and Transport for NSW v Hunt Leather Pty Ltd (2024) 115 NSWLR 489; [2024] NSWCA 227 at [99]. In light of the Developer’s acceptance of that amount, it is unnecessary to summarise the evidence or her Honour’s reasoning which led to that finding.
However, at trial and on appeal, two details achieved prominence: the precise location at which the asbestos was located, and whether it had been on the surface, or if not, how deeply below the surface it was located. This was a consequence of the facts that (a) some of the excavated topsoil was located outside the demised Land (and in particular, slightly beyond its southern boundary near what were known, accurately if somewhat unimaginatively, as the “southern burial pits”) and (b) the Developer did not maintain that the Commonwealth’s obligations extended to identifying and removing asbestos containing material which was sufficiently deeply buried in the soil.
The question is whether Defence breached the lease and / or the deed when vacating the site. The issues are straightforward:
(a) What were Defence’s contractual obligations to remediate the land and ‘make good’ the premises?
(b) Did the deed affect those obligations?
(c) Did Defence perform its obligations?
(d) If not, are the damages sought caused by any breach or simply development costs?
The parties agreed on only three things. First, the case could be resolved having regard to a handful of documents (which may not explain the 83-volume court book). Second, the parties’ cases passed like ‘ships in the night’. Third, Defence accepted that, if it was wrong about everything else, then it should pay damages of some $360,000.
In the result, the developer’s claim fails. The remediation obligation under the lease was generally expressed and obliged Defence to remediate the site to a standard suitable for what the Moorebank site was already being used for, but not for any commercial / industrial use, nor for development activities to enable the site to be used for any such use: see [102], [144]. The deed did not amend the remediation obligation but released Defence from any claim in respect of non-performance of that obligation, on Defence procuring the site audit statement: see [221]. Defence was so released.
By way of non-exhaustive overview, the Developer agreed that the Deed did not amend the obligations upon the Commonwealth in the Lease, but said that those obligations were not discharged by obtaining a conditional Site Audit Statement. It said that the release in the Deed had not been the subject of pleading or submissions, and it was not open to the primary judge to have relied on the release it contained, and that in any event, her Honour’s construction of the Deed was wrong. On the other hand, the Commonwealth maintained by notice of contention that when it vacated the Land, all surface asbestos had been removed. It upheld the reasoning of the primary judge, but added, albeit belatedly, to its notice of contention the submission that the remediation obligation in the Lease was satisfied by the preparation and provision of an Environmental Management Plan, on the basis of which a Site Audit Statement certified that the Land was suitable for commercial/industrial use.
On the view I take, the dispositive questions are questions of construction of the Lease.
Rather than summarising the course of the trial, the more efficient course in light of the parties’ stances on appeal is to summarise the salient provisions of the Lease and the Deed, then to turn to her Honour’s reasons on the central questions of construction, and then to address the grounds arising under the notice of appeal and notice of contention, in a logical order, deferring the summary of some of the evidence insofar as it is necessary to resolve particular grounds until those grounds are reached.
7.1 Permitted Use
The Lessee must only use the Premises for the Permitted Use and any use reasonably incidental to the Permitted Use.
“Defence Purposes”, although capitalised, was undefined. “Existing use rights for Defence Purposes” is apt to pick up such uses as could lawfully be continued under provisions such as (what was at the time) s 107 of the Environmental Planning and Assessment Act (see now s 4.66). What they were was unexplored, at least in the parties’ submissions in this Court. The balance of the definition – “together with all such other uses as may be permitted under the local planning laws” – was not necessarily tied to “Defence Purposes”, noting that there was an entitlement to sublet (cl 15.1) and to assign to a Commonwealth statutory body (cl 15.2), or to anyone else with the lessor’s consent (cl 15.2(2)). The primary judge concluded, favourably to the Developer, that the definition of Permitted Use was sufficiently broad to enable uses other than for Defence Purposes by, say, a sub-lessee or assignee of the Lease.
Clause 7.3 provided:
7.3 No warranty as to use
The Lessor does not warrant that at the Commencement Date the Premises:
(1) is suitable for any purpose;
(2) may be used for the Permitted Use;
(3) is free from Contaminants, Asbestos or Hazardous Substances; or
(4) complies with Official Requirements.
“Asbestos” means mineral silicates belonging to the serpentine amphibole groups of rock forming minerals. It includes actinolite, amosite (brown asbestos), crocidolite (blue asbestos), chrysolite (white asbestos), tremolite, or any mixture containing one or more of these.
“Contamination” means the presence in, or under the Premises of a substance at a concentration above the concentration at which the substance is normally or naturally present in, or under that Land, being a presence that presents a risk of harm to human health if the Premises are continued to be used for their Permitted Use and “Contaminant” and “Contaminate” each have a corresponding meaning;
“Hazardous Substance” includes anything, which may create a risk to the health or safety of the Lessee’s Employees and is known to be hazardous and which is listed on the National Occupational Health and Safety Commission’s List of Dangerous Hazardous Substances (NOHSC 1005 (1999) as amended from time to time. …
There was no issue that certain forms of asbestos presented a risk of harm to human health and thus could constitute Contamination as defined. The “List of Dangerous Hazardous Substances” was not before the Court, but the appeal proceeded on the basis that certain forms of asbestos were also Hazardous Substances as defined.
Clauses 17.1 and 17.2 provided as follows:
17. CONTAMINATION AND HAZARDOUS SUBSTANCES
17.1 Environmental Matters
The Lessee will make no claim against the Lessor due to the presence of Contamination or Hazardous Substances on the Premises as at the Commencement Date or b[r]ought on to the Premises by the Lessee after the Commencement Date.
17.2 Obligations on expiration of Lease
By the expiration of the Lease the Lessee will remediate the Land to a standard suitable for on-going commercial/industrial use and so that no significant contamination is migrating from the site.
(The lower-case “contamination” in cl 17.2 is as per the Lease. It may be an oversight. Alternatively, bearing in mind that the definition includes a qualitative component (“that presents a risk of harm to human health”) it may have been thought that it was inapt to use the defined term in a clause which imposed its own qualitative measure (“significant contamination”). Neither side sought to make anything of this.)
Clause 17.3 concerned where the Lessor had caused Asbestos, Contamination or Hazardous Substances to be introduced onto the Land after the Commencement Date, and in the case of Asbestos or Hazardous Substances, imposed an obligation on the Lessor to:
remediate or remove the Asbestos or Hazardous Substances in accordance with all applicable Official Requirements and standards to remove any risk to the health or safety of persons, including Lessee’s Employees.
Clause 17.4 dealt with apportionment of costs where the Lessee had contributed to the contamination that was the subject of the obligation in cl 17.3. Clause 17.5 required the Lessee on request by the Lessor to provide copies of all licences and consents which the Lessee had obtained from any relevant authority pursuant to any Environmental law, and to advise the Lessor “immediately of any Contamination which is reportable to any relevant authority pursuant to any Environmental Laws”.
Clause 19 concerned termination of the Lease. Clause 19.1 provided:
19.1 Lessee’s duties
(1) Before expiry the Lessee must, having regard to the condition of the Premises detailed in the Conditions Reports: (a) vacate the Premises and given them back to the Lessor clean and in good repair and condition (fair wear and tear excepted).
Two textual aspects of the critical clauses may be noted immediately. The term “remediate” in cl 17.2 was not defined in the Lease. The remediation obligation in cl 17.2 was in respect of the Land, but the obligation in cl 19.1 was in respect of the Premises. However, the definition of Premises included the Land.
The Developer did not rely on any other provisions in the Lease relating to the remediation of the Premises.
On 14 December 2015, Defence and the Developer executed a “Deed of surrender of lease”. Once again, the party was named “Commonwealth of Australia (Department of Defence)”. At this time, the Lease had some two years to run, and Defence had the benefit of a 5 year option. Nonetheless, the Lease was surrendered on Defence paying $25 million: cl 3.1; cl 1.1 (22) and (23). The circumstances that led to the negotiation of that payment were not before the Court.
The parties agree that Defence ceased to occupy the Land on 14 December 2015. However, Defence was granted a licence to access the refuelling area (called “the Licensed Area”) for six months to comply with its remediation obligations and a further 12 months (“the Extraction Period”) to complete extraction and testing of that area. Defence was also given a licence to access the rest of the Land for six months in order to obtain a new Site Audit Statement.
Clause 4.1 of the deed provided:
4 Tenant’s obligations
4.1 Without limiting the Tenant’s obligations under the Lease upon the expiration or earlier determination of the Lease, the Tenant must on or prior to the Surrender Date comply with its obligations under clause 19.1(1) of the Lease including but not limited to vacating the Premises and giving back to the Landlord clean and in good repair and condition, having regard to the condition of the premises described in the Condition Report.
Thus cl 4.1 brought forward Defence’s “make good” obligation in respect of the Premises in cl 19.1(1) to “prior to the Surrender Date”.
Clause 4 continued:
4.3 Without limiting the Tenant’s obligations under the Lease upon the expiration or earlier determination of the Lease, the Tenant must remediate the Land to a standard suitable for ongoing commercial / industrial use and so that no significant contamination is migrating from the Land, as required by clause 17.2 of the Lease. The parties acknowledge and agree that this obligation includes, but is not limited to, the Tenant certifying to the Landlord that:
(1) the Tenant has remediated the Land to a standard suitable for ongoing commercial / industrial use; and
(2) there is no significant contamination migrating from the Land in accordance with the Contamination Management Summary site audit report, DNSDC site, Moorebank, December dated 2002 and DNSDC Moorebank - Refuelling Area Remedial Action Plan dated November 2015,
as evidenced by:
(3) a new site audit statement section A, prepared by the Site Auditor on or before expiry of the Access Period, which certifies that the Land is suitable for commercial / industrial use either:
(a) unconditionally; or
(b) subject to compliance with a specified environmental management plan; and
(4) a new site audit statement section B, prepared by the Site Auditor on or before expiry of the Licence Period, which certifies that the Licenced Area can be made suitable for commercial I industrial use, conditional upon completion of the remediation works,
copies of which must be provided to the Landlord and be in a form capable of being relied upon by the Landlord.
4.4 If clause 4.3(3)(b) applies, the Tenant must obtain the Landlord’s prior written approval (acting reasonably and such consent to be provided in a reasonable timeframe) in respect of the environmental management plan before it is submitted to the Site Auditor for review and to any amendment proposed to be made to the environmental management plan.
The opening words of cl 4.3 “Without limiting the Tenant’s obligations under the Lease”, and the words “this obligation includes but is not limited to” are words which are apt to exclude any inference that the new obligations under cl 4.3 concerning remediation and the provision of a Site Audit Statement are a replacement of the existing obligations to remediate under the Lease.
Clause 7 provided:
7 Release and indemnity
7.1 Subject to the Landlord complying with its obligations under this Deed, on and from the Surrender Date, the Tenant releases the Landlord from all claims under or relating to the Lease.
7.2 Subject to clauses 7.3 and 7.4 and the Tenant complying with its obligations under this Deed, from the Surrender Date the Landlord releases the Tenant from all claims under or relating to the Lease which arise after the Surrender Date.
7.3 Despite the release contained in clause 7.2, this Deed will apply to all provisions of the Lease except provisions relating to:
(1) the remediation of the Premises;
(2) the Tenant’s obligations under clause 19.1 of the Lease; and
(3) the return of all keys and other security devices,
which have not been fully and satisfactorily performed by the Tenant as at the Surrender Date and the unsatisfactory performance verified by the Landlord following an inspection of the Premises.
Clause 7.4 obliged Defence to dispose of any unexploded ordnance “found or identified on the Premises”.
Once again, the words “Subject to clauses 7.3 and 7.4” in cl 7.2, and “Despite the release contained in clause 7.2” and the further reference to “the remediation of the Premises” and “the Tenant’s obligations under clause 19.1 of the Lease” are apt to mean that obligations of Defence to remediate and in cl 19.1 are not the subject of the release in cl 7.2.
Clause 8 provided:
8 Acknowledgement
8.1 The Landlord and the Tenant acknowledge and agree that, despite the terms of this Deed:
(1) the Tenant continues to be bound by the provisions of the Lease up to and including the Surrender Date;
(2) the Tenant remains liable to the Landlord for any breach of the Lease which occurred before the Surrender Date, even if the Landlord does not discover a breach or make a claim in connection with a breach or default until after the Surrender Date; and
(3) the execution of this Deed by the Landlord does not constitute a waiver by the Landlord of any past breach or default by the Tenant.
The Deed then turned to granting access by Defence to the Land after the Surrender Date in order for Defence to comply with its obligations under the Deed. For the Land generally, the Developer gave Defence access to the Balance of the Land (being the Land other than the Licensed Area) during the Access Period to comply with its remediation obligations under cl 17 of the Lease and cl 4.3(3) of the Deed: cl 12.1(1). Access Period was the earlier of six months from the Surrender Date or the date when Defence complied with its obligations under cl 4.3(3) of the Deed: cl 1.1 (1).
For the refuelling area in particular, the Developer granted Defence a non-exclusive licence to the Licensed Area during the Licence Period: cl 10.1. Licensed Area was the refuelling area identified by GHD on its 2015 Remedial Action Plan: cl 1.1 (14); Annexure C - Licence Plan. Licence Period was the earlier of 10 months after the Surrender Date or when Defence had complied with its obligations under cl 4.3 of the Deed: cl 1.1 (11). Defence was permitted to access the Licensed Area to comply with its obligations under cl 17 of the Lease and cl 4.3 (except for cl 4.3(3)) of the Deed: cl 10.1.
The primary judgment was confronted with a fact-intensive appeal, with a great deal of expert evidence and many thousands of pages of documentary evidence. It is unnecessary to summarise all aspects of her Honour’s comprehensive judgment of 490 paragraphs, with an addendum of a further 124 paragraphs. Her Honour’s essential reasoning on the questions of construction of the Lease may be summarised as follows.
First, the primary judge regarded the critical clause as cl 17.2. After reproducing authorities dealing with the construction of commercial contracts, her Honour said at [105]-[107]:
105 Looking first at “remediate”, this word is not defined in the lease. Nor does the lease specifically refer to the Contamination Land Management Act 1997.
106 The commercial context included the fact that Defence had just completed an apparently protracted process of investigating site contamination in order to re-zone the land. This culminated in a site audit completed under the Contaminated Land Management Act 1997, to certify that the site was suitable for commercial / industrial use subject to a site management plan being implemented during the ongoing use of the site. This process had been disclosed to interested purchasers through a due diligence process.
107 But I agree with the developer that, when cl 17.2 is read as a whole, “remediate” is simply used as a verb and does not incorporate the definition in the Contamination Land Management Act 1997. The verb should be given its ordinary English meaning, and the Macquarie Dictionary definition relied on by the developer is as good as any, being “to correct or improve (a deficiency or impairment)”.
109 Here, the word “on-going” is important, strongly evoking the concept of continuity. To use the same Macquarie Dictionary relied on by the developer, “on-going” means “in progress” or “continuing to exist”. Similarly, the Concise Oxford English Dictionary defines “on-going” as “continuing; still in progress”. The concept of continuity is repeated in the tail-end of cl 17.2, referring to “contamination” migrating from the site. As earlier mentioned, the definition of Contamination was a modification of s 5 of the Contaminated Land Management Act so that whether there was Contamination turned on whether there is a risk of harm to human health “if the Premises are continued to be used for their Permitted Use”.
110 The only on-going commercial/industrial use referred to in the consultants’ reports compiled by Defence in preparation for sale, and apparently shared with interested purchasers in due diligence, was the continued use of the site as a storage and distribution facility. I do not think that “on-going” was intended by the parties to be construed narrowly as referring only to the use for which Defence was then putting the site, where the definition of Permitted Use was defined more broadly to cover the use to which a sub-lessee or assignee of the lease may put the site. But the ability of a sub-lessee or assignee to do something markedly different on the site was limited by local planning laws (Item 5, Sch 1). Whilst Defence or its assignee could make alterations, demolitions or additions to the Premises (cl 11.1), the commercial realities of the term of the lease suggest that a wholesale change of use was not in reasonable contemplation.
111 I consider that, viewed objectively, the obligation to remediate the land would not have been understood by the parties at the time to extend to remediation to a standard that accommodated any future commercial / industrial use. Nor do I consider that the parties would have contemplated that the obligation to remediate the land extended to remediation to a standard that accommodated any physical changes which may need to be made to the landform to accommodate any future commercial / industrial use. Such an interpretation gives the word “on-going” no work to do, where I consider that this word is specifically deployed to confine the remediation obligation. Further, such an interpretation would expand “commercial / industrial use” to include demolition, excavation and construction activity, which strikes me as the antithesis of “on-going” use and, rather, embarking on something new and different. It is not “continuing” but stopping and starting again.
112 Other provisions of the lease tell against the construction proffered by the developer, where the lease must be read as a whole. Although the developer put its argument in a variety of formulations, essentially, it was said that Defence’s remediation obligation was to remove the asbestos which the developer has since encountered when levelling the buildings, digging up the underground services and removing existing pavements, hardstands and roads in order to use the land for something different than what Defence had been using the site. Such an extensive obligation would be inconsistent with Defence’s obligation to ‘make good’ the Premises at the end of the lease, in accordance with the Condition Report and where no improvement in the condition of the Premises was required: cls 8.1(2), 19.1. Destroying these improvements to see whether there was any asbestos present would also destroy Defence’s ability to make sure that the buildings, pavements, road and services were in good condition.
113 Finally, the commercial context includes the fact that Defence was selling a very large parcel of land. The possibilities for the use of that land by a purchaser were endless. The lease formed part of a ‘sale and lease-back’ transaction. As I read cl 17.2, Defence was effectively agreeing to remediate the Moorebank land at the end of the lease so that the purchaser got what it paid for, being a large site which Defence was then using for a particular purpose, and which the purchaser could continue to use for that purpose at the end of the lease without further remediation.
114 I consider that a reasonable person would have understood that Defence agreed to address contamination to permit the purchaser to continue to use the land for what Defence had been using it, but not to remediate the site to enable the purchaser to use the land for any commercial / industrial use, including major earthworks. The expansive, open-ended and extremely onerous obligation contended for by the developer strikes me as commercially unpalatable and a bargain to which the vendor of this land would not have agreed, nor a purchaser expected.
In sum, I consider that the remediation obligation in cl 17.2 was expressed in general terms. Clause 17.2 did not refer to a particular “standard”. The clause certainly did not refer to the standard suggested by the developer, being NEPM (2013), which did not then exist. Rather, the word formed part of a phrase “a standard suitable for …”. Defence was obliged to remediate the site to a standard suitable for “on-going” commercial / industrial use, being what the Moorebank site was then being used for, give or take, being a storage and distribution centre.
Thirdly, the primary judge returned to the standard to which remediation was required, saying at [157] that it “remained generally expressed in the new lease and did not incorporate by reference the requirements of NEPM (2013)”. Her Honour said that the “word formed part of a phrase ‘a standard suitable for …’. The remediation obligation remains as earlier construed.”
Fourthly, addressing the Deed, her Honour regarded cl 7.3 as “barely intelligible”, but said at [205]:
Where cl 4.1 brought forward the time for performance of the ‘make good’ obligation to “prior to the Surrender Date”, and there were no specific instances of non-performance of the hand-over or ‘make good’ obligations identified at the time, then Defence was released from all claims in respect of performance of hand-over and ‘make good’ obligations arising after the Surrender Date, subject to Defence complying with its obligations under the deed: cl 7.2.
208 That is, the release did not extend to pre-Surrender Date breaches of the lease, even if the developer did not discover the breach until after that date. It is difficult to see how this ‘carve out’ from the release could apply to pre-Surrender Date breaches of the remediation obligation in cl 17.2 of the lease. The time for performance of the remediation obligation had not been brought forward. There could be no breach of the remediation obligation before the Surrender Date, where the time for performance had not arrived.
209 The position is not as clear when one considers the ‘make good’ obligation in cl 19.1 of the lease. Clause 4.1 of the deed brought forward the time for performance of that obligation to “prior to the Surrender Date”, which is basically the same thing as “before the Surrender Date”. Clause 8.1(2) is inconsistent with cl 7.3, in particular, the chaussette, which prescribes criteria for identifying specific instances of non-compliance with the ‘make good’ obligation as at the Surrender Date.
210 As to how this inconsistency should be resolved, I consider that primacy should be given to the specific provisions in cl 7.3 over the general provisions in cl 8.1(2): Herzfeld & Prince, Interpretation (3rd Ed) at [6.200]. Clause 8.1(2) is a general provision applying to all breaches of the lease, whilst cl 7.3 sets out specific requirements to identify any particular breaches of the ‘make good’ obligation, including an inspection by the Landlord of the Premises. Were it otherwise, that specific procedure would be rendered nugatory.
211 As such, whether Defence was released from all claims under the lease – both as to its remediation and ‘make good’ obligations – turned on whether Defence complied with its obligations under the deed.
226 I agree with the developer that the deed did not vary the extent of the remediation obligation. What the parties to the deed did agree, however, was that, if Defence performed its obligations under cls 4.3 and 4.4 of the deed, then Defence would be released from claims relating to non-performance of the remediation obligation from the Surrender Date: cl 7.2. If Defence did not comply with that procedure, then the remediation obligation remained as stated in the lease. The acknowledgement in cl 8.1(2) did not alter that result, where Defence did not (and could not) breach the remediation obligation before the Surrender Date.
227 By these means, the generally expressed remediation obligation in the lease was re-crafted into a set of bespoke obligations, which were likely of more use to the developer and productive of certainty to Defence. To be added to the mix was $25 million paid by Defence. It is not known to what extent that figure reflected compensation to the developer for rent foregone and to what extent it reflected compensation for the risks associated with vacating the site without further remediation. But it was a substantial sum negotiated by sophisticated commercial parties. That was the deal struck, and by which both parties are bound.
Seventhly, at [258]-[278], her Honour concluded that Defence had complied with its obligations under the Deed, thereby engaging the release.
It is unnecessary to summarise the lengthy portions of the reasons of the primary judge dealing with planning permission, demolition and removal of topsoil. However, at [364]ff, her Honour considered the position which would obtain if she were wrong about the effect of the release under the Deed. After summarising the evidence bearing upon this, her Honour’s conclusions at [389]–[405] bear on both the construction of cl 17.2 and the finding (challenged by Defence) of the continuing presence of asbestos on the surface of the Land, and those paragraphs are best reproduced in full:
389 If it be the case that Defence was not released from the developer’s claims in respect of non-performance of the remediation obligation after the Surrender Date, then it is necessary to consider whether Defence complied with its remediation obligations under the lease. As earlier mentioned, I consider that the remediation obligation in cl 17.2 was expressed in general terms. Clause 17.2 did not refer to a particular “standard”. The clause did not refer to NEPM (2013), which did not exist when the wording in cl 17.2 was first formulated. Rather, the word formed part of a phrase “a standard suitable for …”. Defence was obliged to remediate the site to a standard suitable for “on-going” commercial / industrial use, being what the Moorebank site was then used for, being a storage and distribution centre.
390 As such, it was not necessary for Defence to remediate the site in anticipation of earthworks to effect a change in the use of the site to a different commercial / industrial use. Defence did not have to dig up, as a precautionary measure, stormwater pipes or telecommunication pits to check whether these items were made with ACM materials or backfilled with soil containing AC fragments. Indeed, doing so would have made it difficult for the developer to continue to use the site for “on-going” commercial / industrial use, where services and utilities were no longer available.
391 It is inherent in the notion of “on-going” use that, generally speaking, the existing buildings and surfaces will remain and be used in the same manner. So far as the Land was concerned, this would mean, generally speaking, that the Land would be undisturbed. But things do happen. Maintenance may require a stormwater pipe to be dug up, repaired or replaced. A new footpath may be constructed or a new garden bed planted. A mature tree may be blown over in a storm, dislodging the surrounding soils in the process. What was the content of Defence’s remediation obligation in the circumstances?
392 In this regard, I think it is important to bear in mind that “remediate”, in its ordinary English usage, does not mean to make perfect. To use the Macquarie Dictionary definition relied on by the developer, “remediate” is “to correct or improve (a deficiency or impairment)”.
393 Whether regard is had to NEPM (1999) or NEPM (2013), the commonly expressed position was that there should be no asbestos on the surface of soils. Having asbestos on the surface of soil also strikes me as inconsistent with the “on-going” commercial / industrial use of the site. How can employees use the site where there is asbestos on the ground, given the infamous potential for interaction with that substance to have profoundly adverse health consequences? I consider that it was Defence’s remediation obligation, so far as asbestos was concerned, to ensure that there was no AC fragments on the surface of the ground. Defence also needed to warn those using the site of the potential presence of asbestos beneath the surface, in the event that it was necessary to disturb the surface of the soils. Defence attended to the latter as I have endeavoured to describe.
394 As to the former, had Defence looked to NEPM (2013) for guidance as to how to go about this, Table 7 required that there be “No visible asbestos for surface soil”. Paragraph 4.8 of NEPM (2013) added:
There are various acceptable means to provide confidence that the soil surface is free of visible asbestos including, but not limited to, multi-directional raking of soil to about 10 cm depth and handpicking of asbestos fragments or covering with a durable hard cover. …
395 The “various acceptable means” to ensure that there is no visible asbestos in surface soil included raking to 10 cm depth. There was no mandatory method. Section 4.8 did not suggest that the top 10 cm of soil must be removed.
396 Indeed, no one thought that the top 10 cm of soil had to be removed except Dr Swane. I prefer the views of Dr Wright and Mr Clay in this regard. As Mr Clay said, it was neither possible nor necessary to remove the top 10 cm of soil from every site to make it safe, “I mean there just isn’t enough landfill space in Australia to put all that material, it’s completely unsustainable, and it is a legitimate and often carried out remedial method to do a regular inspection of sites, to pick the asbestos out of the dirt, to give a clearance certificate at that time and come back 12 months later and repeat the process all over again.”
397 As to how Defence should have gone about the task of ensuring that there was no asbestos in surface soil, I prefer the very sensible approach outlaid by Dr Wright, being to consider the history of the site and how AC fragments might have come to be on the soil in the first place. There was no great mystery as to how AC fragments might have come to be on the ground at the Moorebank site. Reports obtained by Defence, both before and after the sale, pointed to “poor removal practices” during the replacement of the asbestos cement roofing in the 1990s: at [127]. The history of the site indicated that any AC fragments mostly likely landed on the surface of the ground around the building footprints. The AC fragments were not buried but, most likely, on the surface. But that was some 25 years ago. Those AC fragments may have become covered by grass, plants or additional soil added to garden beds.
398 Making sure that there was no asbestos on the surface of the soils appears to have been what GHD endeavoured to achieve in 2011 and 2012, when preparing and executing a remediation strategy for AC debris located externally to the DNSDC buildings. An emu-pick was undertaken within a 5 m buffer zone around the footprint of buildings and known transit routes between buildings. That is, the emu-pick was not across the entire Moorebank site but focused, as Dr Wright suggested was appropriate, on the areas where AC fragments were most likely to be.
399 That said, GHD’s clearance reports and the asbestos hygienist’s clearance certificates were not in evidence for all of the DNSDC buildings nor all of the emu-picking zones delineated by GHD. On the evidence, the clean up was not completed as initially recommended. In particular, I was unable to locate any clearance certificate or clearance report in respect of the tenanted warehouses. When the developer conducted an emu-pick in that area, albeit some years later, AC fragments were found on the surface of the ground. It is reasonable to think that there was some asbestos left on the surface of the soil after GHD’s 2012 cleanup in the parts of the site which had not been emu-picked at the time.
400 Nor was that emu-pick definitive as grass, shrubs, trees, skip bins, military vehicles and the like prevented a complete inspection of the soil. This presented the further possibility that AC fragments may come to light in areas of the site which could not be seen at the time. To mitigate against the possibility of AC fragments coming to light in the future, an asbestos register was compiled and updated. Mr Clay said that the asbestos register indicated that Defence was managing the risk of asbestos well, in accordance with its work health and safety obligations, “it looks very much like Defence was going through a process of examining the site, checking the site, seemingly on a yearly basis, and if it found asbestos on the surface, picking it up, recording it … on the asbestos register.” Having reviewed the asbestos register, that does appear to be the case.
401 That is, putting together GHD’s clean-up and continued monitoring via the asbestos register, Defence had gone some way to performing the remediation obligation.
402 As to how well Defence performed that obligation, I note that the site was inspected by consultants from time to time after the 2012 cleanup. The consultants’ reports suggest that whatever asbestos was left on the surface of the soil after the emu-pick was not particularly noticeable. In November 2014, GHD returned to the site to inspect areas of concern, when preparing their “Stage 1 Contamination Assessment & Data Gap Analysis” of the refuelling area; there was no reference in their report to observing asbestos. In JBS&G’s site investigations in December 2014 and January 2015, 29 soil samples were taken and tested for asbestos; the results were below the NEPM criteria: see [164]. In September 2015, GHD produced its “Intrusive Site Investigations” report, which largely focused on the refuelling area. GHD noted that there were AC fragments, essentially around the southern burial pits. Defence left the site in December 2015. The site was next inspected by JBS&G in June 2016, but there is no indication that the consultant saw any asbestos fragments at the time: see [284].
403 That is, the consultants’ reports referred to the possibility of AC fragments on the ground, but not so much as having actually seen any, other than near the southern burial pit. The consultants certainly anticipated that asbestos may be encountered once early works began; the developer prepared accordingly. Ms Organo also considered that JBS&G’S later waste classification reports provided evidence of the presence of asbestos contamination in topsoils present at three locations on the Land that were likely to be present at the Surrender Date.
404 Asbestos was encountered when demolition began some 21 months after Defence vacated the site. JBS&G’s waste classification reports indicate that, by and large, asbestos was not found on the surface of the soil but on excavation. Whilst some waste classification reports refer to ACM contaminated soils surrounding the footprints of buildings, the reports do not reveal whether the AC fragments were on the surface or below the surface but revealed when the topsoil was scraped away.
405 The precise extent of any breach of the remediation obligation is now unknowable. On the balance of probabilities, I am satisfied that there was asbestos on the surface of the soil at the Surrender Date near the southern burial pits and in the three areas referred to by Ms Organo. Apart from this, any incidence of AC on the surface of soils was likely minor, as it went unobserved by both Defence and the developer’s consultants at the time.
The Developer’s notice of appeal contains 16 grounds, to which may be added the four grounds of Defence’s notice of contention. The latter was sought to be amended on the second day of the appeal. In light of the fact that oral submissions seemed unlikely to complete in any event in the two days that had been set down, the Court adjourned the appeal to a third day, which gave the Developer the opportunity to respond fully to the new grounds in the notice of contention. The Developer exercised that opportunity by full written and oral submissions, and ultimately neither opposed the amendment nor sought for additional documents to be included in the appeal books.
The various grounds are logically addressed in the following order:
Did the primary judge err in finding that there was asbestos on the surface of the soil at the Surrender Date, and instead should have found that there was no asbestos on the surface of the soil and that the asbestos located by the Developer’s expert was not visible (Notice of Contention grounds 1 and 2)?
Did the primary judge err in construing cl 17.2? This included challenges from both sides. Defence (by grounds 3 and 4 of its notice of contention) submitted that the clause was not breached, having regard to the Site Audit Statement which issued. The Developer submitted that the primary judge erred in concluding that the obligation to remediate was limited to the actual surface of the land only (Appeal grounds 6, 7, and 8), coupled with an obligation to warn about the presence of asbestos (Appeal ground 9), erred in construing “ongoing commercial/industrial use” as being limited to the uses as a storage and distribution facility (Appeal ground 10), erred in taking into account the fact that the Developer “took the site apart”, that the future use of the site included major earthworks, or that Defence had to anticipate those earthworks when fulfilling its lease obligations (Appeal ground 11) and in taking into account post-contractual conduct (Appeal ground 12).
Did the primary judge err in construing cl 19.1 (Appeal grounds 13-15)?
Was it open to the primary judge to determine the matter on the basis that by cll 7.2 and 7.3 Defence was released from remediation and make good obligations under the Lease (Appeal ground 1)?
Was the primary judge correct to conclude that by cll 7.2 and 7.3 Defence was released from remediation and make good obligations under the Lease (Appeal grounds 2-5)?
Whether or not there was asbestos on the surface at the expiry of the Lease is a question of primary fact which informs all of the obligations in issue. Whether Defence was in breach of its covenants under the Lease is logically anterior to the questions whether having regard to the running of the trial, it was open to Defence to rely on the release and, if so, whether it was an answer to the Developer’s claims. I shall proceed in that order.
The precise extent of any breach of the remediation obligation is now unknowable. On the balance of probabilities, I am satisfied that there was asbestos on the surface of the soil at the Surrender Date near the southern burial pits and in the three areas referred to by Ms Organo. Apart from this, any incidence of AC on the surface of soils was likely minor, as it went unobserved by both Defence and the developer’s consultants at the time.
It is convenient to deal with Ms Organo’s references first. These were based on areas described “TS13”, “TS28”, “TS41”. TS13 was from a soil sample obtained after digging by hand tools to remove grass cover in a location northeast of building 82, which was part of a topsoil analysis. TS28 was from topsoil beneath a concrete hardstand. TS41 was said by Ms Organo to have been sampled “from soils present between the surface soils depths of approximately 0.2 metres”.
The Developer’s written submissions maintained that the samples were evidence of the presence of asbestos contamination in topsoils. As much may be accepted. But it does not follow, as the primary judge held, that there was evidence of asbestos on the surface of the soil. The references suggest to the contrary. The better view is that TS13 was underneath grass, and it seems clear that TS28 was underneath a hardstand. TS41 is more equivocal, but the more natural reading of Ms Organo’s report, which states that the samples were “beneath” the surface soil, and refers to “depths of approximately 0.2 metres”, is that it was deeper than 10cm from the surface. This aspect of the notice of contention is made out, although until and unless the other limb of this challenge is made out, it is of little consequence.
The first limb of the notice of contention is more complex. After the Developer acquired possession, much of the topsoil on the Land was removed. It appears to have been placed in a large number of stockpiles. The Court was told that each stockpile was sampled with a view to characterising the material (including how and at what cost it could be disposed of). Stockpile 199 was described as “soils sourced from topsoil scraping within the southern burial area within demolition zone 10 to a depth of approximately 0.05m below the ground surface”. That sample for asbestos and a laboratory analysis stated that the samples were below the site assessment criteria of below “0.001% w/w AF/FA” and “no respirable asbestos fibres were detected”.
It is not clear on the face of the appeal books whether the entirety of the soil on the burial area was placed in stockpile 199 (this seems unlikely, assuming (from the numbering “199”) that there were hundreds of stockpiles), but it is some evidence of the absence of asbestos in that area. The September 2015 GHD “intrusive site investigations” study extended to the southern burial pits, where the authors identify hand grenades, fill-in plugs and fuse wells and the groundwater being contaminated with heavy metals, PAH and TPH. The scope of works was described as test pits dug to “depths ranging from 0.5 to 2.5 metres” and “Groundwater well GW077 was installed to the southern boundary of the site”.
The summary of results and observations from the soils concluded with:
Fragments of ACM were noted on the ground surface of some areas including TP068, TP072A, TP072B, TP073C, TP073, TP074, TP075, TP076.
Those eight samples were tested for the presence or absence of asbestos and some detected the presence of asbestos.
Defence submitted that at least most of those eight locations were offsite. This is because the southern burial pits were partly on but partly off the Land. Defence accepted that two test pits (TP062 and TP056) were within the Land.
There are difficulties in drawing inferences relating to this issue from the materials in the appeal books. One is that the plan on which Defence relied showed only the approximate location of the boundaries, and one of the test pits (TP076) is either precisely on the approximate boundary or only a few centimetres to the south.
A larger difficulty is as follows. The title and scope of works and descriptions that appear in the 2015 intrusive site investigations make it plain that the focus was investigating ground water and digging test pits, rather than surface asbestos. There is nothing on the face of the document that there was any examination at that time for surface asbestos. Rather, what was found, and at no fewer than eight locations where people spent time near a test pit, was asbestos on the surface. Indeed, the authors of the GHD Intrusive Site Investigations thought it fit to remark that when they undertook the digging of 21 test pits, with the purpose of investigating contaminants under the surface, they found asbestos containing material on the ground surface “in some areas” including the areas of 8 of those pits.
True it is that at least some and probably the majority of those test pits were (slightly) offsite. But it is also the case that asbestos was discovered on or near the surface even by people who were conducting subsurface investigations.
The Commonwealth made a final submission, to the effect that because there had been so much investigation of the Land over many years, and at all times when asbestos was detected, it was removed, it should be inferred that there was very little left, or at least very little on the surface. I do not accept the submission. The Land occupied a large area. There is no suggestion that all of the Land was the subject of an emu-pick. Not all of the work originally proposed by GHD was completed, as the primary judge noted at [134]. The fact of the matter is that asbestos continued to be found on the surface of the Land, even in the most recent intrusive investigations, when surface asbestos was not what was being investigated.
Added to the above is the known fact that when the Developer removed the topsoil, asbestos was found. It is inherently improbable that all of the asbestos that was found when the topsoil was removed had been located on the subsurface. It is inherently improbable that the previous investigations, all of which detected asbestos, had detected all the surface asbestos which was available to be detected. There had been many investigations before the September 2015 GHD intrusive site investigations, and that investigation did not find one or two pieces of asbestos, instead it found asbestos on the surface near at least 38% of the test pits which were dug (ie 8 out of 21), in circumstances where the investigation was directed to what was underground rather than what was on the surface. Further, one of the premises of the Environmental Management Plan was that asbestos would continue to be found into the future.
The starting point is the text of cl 17.2. First, clause 17.2 imposes two obligations upon the Commonwealth, both to be performed prior to or at the “expiration of the Lease”. The premise of both is that there is contamination on the Land. Both obliged the Commonwealth to “remediate” the Land. The first specified a standard (“suitable for on-going commercial/industrial use”). The second specified a criterion (“no significant contamination is migrating from the site”). The obligations were cumulative.
Secondly, cl 17.2 did not on its ordinary natural meaning require the removal of all contamination or hazardous substances from the Land. No such obligation was express. Nor would any such obligation be implied, for that would be inconsistent with both limbs of the clause. For one thing, there are standards which are more demanding than “suitable for commercial/industrial use”, such as “suitable for residential use”. Thus remediation which would achieve suitability for on-going commercial/industrial use is apt to include remediation which would leave in place contamination which would have to be removed or otherwise addressed in order for the Land to be suitable for residential use. For another, the words “no significant contamination is migrating from the site” carry with them the possibility that small amounts, too small to be “significant”, of contamination may be migrating from the site, and that in turn entails the presence of contamination on the site.
Thirdly, the primary judge favoured a dictionary definition of “to remediate” which had been proffered by the Developer. The choice of the definition “to correct or improve (a deficiency or impairment)” served to emphasise an important feature of cl 17.2, namely, that what mattered was not the word “remediate” in isolation, but the entire obligation expressed by the words “remediate the land to a standard suitable for on-going commercial/industrial use”. That may be seen by substituting the definition for the defined term in cl 17.2 in accordance with Kelly v The Queen (2004) 218 CLR 216; [2004] HCA 12 at [103]. The problem of ascertaining the legal meaning of the clause remains, for what does “the Lessee will correct or improve the Land to a standard suitable for on-going commercial/industrial use” mean? The resolution of the issue of the construction of cl 17.2 is not found in the meaning of individual words, but by the meaning of that phrase read as a whole and in context. That makes the clause no different from most legal language. After all, the joint judgment of Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ in Collector of Customs v Agfa Gevaert Ltd (1996) 186 CLR 389; [1996] HCA 36 at 396-397; stated:
The meaning attributed to individual words in a phrase ultimately dictates the effect or construction that one gives to the phrase when taken as a whole and the approach that one adopts in determining the meaning of the individual words of that phrase is bound up in the syntactical construction of the phrase in question. In R v Brown, a recent House of Lords decision, Lord Hoffmann said:
“The fallacy in the Crown’s argument is, I think, one common among lawyers, namely to treat the words of an English sentence as building blocks whose meaning cannot be affected by the rest of the sentence ... This is not the way language works. The unit of communication by means of language is the sentence and not the parts of which it is composed. The significance of individual words is affected by other words and the syntax of the whole.”
The approach commended by Lord Hoffmann and the High Court has been regularly applied: see for example Ghali v Chief Commissioner of State Revenue (2013) 85 NSWLR 378; [2013] NSWCA 340 at [21] and 2 Elizabeth Bay Road Pty Ltd v The Owners - Strata Plan No 73943 (2014) 88 NSWLR 488; [2014] NSWCA 409 at [82].
Fourthly, there is the word “on-going”. The primary judge relied on this to qualify and confine the classes of “commercial/industrial use” to which the remediation obligation applied: at [111]. Her Honour rejected a submission that “on-going” merely referred to future uses, on the bases that (a) that would leave the word with no work to do and (b) demolition, excavation and construction activity was antithetical to “on-going” use. It will not be necessary to reach a concluded view on this issue. However, there is force in the Developer’s submission (reflected in ground 10 of its appeal) that the word did not have the confining effect attributed to it by the primary judge, and instead added little to the clause save to confirm that the commercial/industrial use was a use to take place in the future, after the expiry of the Lease. After all, “commercial/industrial use” is a very familiar term of planning and in particular zoning terminology, and was apt to describe the different use of the Land after Defence ceased occupation.
Fifthly, the undefined word “remediate” is not merely used in cl 17.2. It is also used in cl 17.3, and in substantially the same context. That clause provides:
17.3 Lessor’s obligations
If after the Commencement Date, the Lessor causes:
(1) Contamination on the Premises;
(2) Asbestos or Hazardous Substances to be introduced onto the Premises,
the Lessor will:
(3) in the case of Contamination complete a comprehensive restoration and detoxification program so that the Contamination is removed and the Premises restored to their condition before such Contamination; and
(4) in the case of Asbestos or Hazardous Substances, remediate or remove the Asbestos or Hazardous Substances in accordance with all applicable Official Requirements and standards to remove any risk to the health or safety of persons, including Lessee’s Employees.
Thus, if the landlord had introduced Asbestos or Hazardous Substances onto the Premises, it was required to “remediate or remove the Asbestos or Hazardous Substances in accordance with [the applicable regime] to remove any risk to health or safety”. Further, the obligation to “remediate or remove” Asbestos or Hazardous Substances was in contradistinction with the obligation to restore and detoxify Contamination, which involved the Contamination being “removed”. In cl 17.3, “remediate” prima facie has a different meaning from “remove”. Another way of putting this is that “remediate or remove” appears not to be a single concept or hendiadys, in part because the verbs are separated by the disjunctive “or”, in part because of the contrast with “remove” in the previous subclause where “remediate” is absent, and in part because cl 17.3(4) is directed to an end, namely, making the Premises safe, and that may be done by removal but also by other means which do not involve removal.
There is a presumption, albeit one which is readily rebuttable, that words in a contract bear the same meaning: see The Trust Co (Nominees) Ltd v Banksia Securities Ltd (recs and mgrs apptd*) (in* liq*)* [2016] VSCA 324 at [42]. Here that presumption is relatively powerful. Clauses 17.2 and 17.3 are found in the same part of the Lease. One immediately follows the other. In both clauses, “remediate” is used in the same context – namely, responding to the presence of Asbestos and Hazardous materials so as to achieve a specified purpose. Putting the matter conversely, it would be strange if the remediation required in cl 17.2 to achieve on-going commercial/industrial use was different in nature from the remediation in cl 17.3 to remove risk to human health.
Sixthly, the covenant is found in a registered lease. Some of the rules of evidence concerning the construction of written contracts inter partes do not apply, notably, those authorising regard to extrinsic evidence of commercial purpose: Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 at [162]-[166]; Springrange Pty Ltd v Australian Capital Territory (2010) 177 LGERA 125; [2010] ACTCA 17 at [12]. This is a consequence of the Lease being registered pursuant to a legislative scheme entitling third parties (who, like the present appellants, might be assignees of the original lessor) to rely on the register: Westfield Management Ltd v Perpetual Trustee Company Ltd (2007) 233 CLR 528; [2007] HCA 45 at [5] and [37]-[42]; Deguisa v Lynn (2020) 268 CLR 638; [2020] HCA 39 at [2], [9] and [66]-[72]. But the exclusion of those rules of evidence does not deny the applicability of an approach which has regard to surrounding circumstances which may be known without evidence from outside the terms of the document: at [158]. The scope of that consideration is illustrated by the fact that in (2002) 240 CLR 45; [2002] HCA 5 at [11] (as was observed in at [166]), in construing the words “additional costs and expenses” in a lease, regard was had to the facts that (a) the parties to the transaction were two public authorities, (b) the primary purpose of the transaction was to provide a public facility, not a profit, (c) the lessee was responsible for the substantial cost of construction of the facility, (d) construction was to occur under the lessor’s land and would not interfere with the continued public enjoyment, (e) the parties’ concern was to protect the lessor from financial disadvantage from the transaction, and (f) the only financial disadvantage to the lessor which the parties identified related to additional expense which it would or might incur immediately or in the future.
Contamination of land, for the purposes of this Act, means the presence in, on or under the land of a substance at a concentration above the concentration at which the substance is normally present in, on or under (respectively) land in the same locality, being a presence that presents a risk of harm to human health or any other aspect of the environment.
Importantly, the definition in the Lease was not in absolute terms, but instead was framed in terms of a concentration of a substance that presented a risk to human health if the Premises were “used for their Permitted Use”.
Eighthly, the regulatory regime, including the Contaminated Land Management Act, addressed how land might be remediated in order to achieve a particular use. What would be a lawful land use turned in part upon the zoning. The primary judge recorded at [34]-[35]:
Some ten reports were obtained by Defence in the lead-up to the sale and ‘lease-back’ of the Moorebank site. These reports appear to fall into two broad categories: to support the re-zoning of the land for sale, and to catalogue existing facilities, fixtures and fittings for the ‘lease-back’.
Turning to [the] first group of reports, Defence began Stage 1 – Preliminary Investigation. Egis Consulting Australia was tasked with considering re-zoning the site for industrial, commercial or residential uses.
Her Honour summarised the reports thereafter. None was included in the appeal books. I agree with the Developer that those reports in terms are not available to construe the Lease. However, the process by which the zoning of the Land might be altered was part of the surrounding circumstances to which regard may be had. After all, cl 17.2 speaks in the language of zoning: “commercial/industrial use”. It is self-evident that on a large site such as this at least some of the uses for which a purchaser might seek planning permission would require a change of zoning. When during the appeal I asked what the zoning was, I was told that it was not known. However, I have subsequently noticed that one of the GHD reports in the appeal books dated September 2015 states that the “Current Land Use Zoning” was “IN1 General Industrial (Liverpool Local Environmental Plan 2008)”, while the “Former Land Use Zoning” was “Defence 5(a) (Liverpool Local Environmental Plan (LEP) 1997)”. That tends to confirm that when the original ten year lease was executed, the land had been given a special zoning reflecting its long term ownership by Defence, which would be apt for change when that use ceased.
Ninthly, as a matter of practically certain commercial reality, two things were clear. The first, which is a consequence of the sale and lease-back transaction, is that Defence had decided that in the medium term (10-20 years) it would cease to use the site. The second is that whatever was the highest and best use of the Land in the hands of some third party, it would probably be a different use from that conducted by Defence, and it would certainly involve investment and redevelopment of what was after all a very large site in south western Sydney. That meant seeking planning permission.
The primary judge summarised the salient aspects of the regulatory regime at [25]-[33] as follows:
Regulatory regime
25 The planning and development control process was (and is) governed by the Environmental Planning and Assessment Act 1979 (NSW), which also played a role in the management of land contamination together with the Contaminated Land Management Act 1997 (NSW), “State Environmental Planning Policy No 55 — Remediation of Land” and other regulatory controls.
26 Put shortly, SEPP 55 provided that a planning authority could not re-zone land without considering whether it was contaminated. If the land was contaminated, the planning authority had to be satisfied that the land was suitable in its contaminated state (or would be suitable, after remediation) for all purposes for which the re-zoned land would be permitted to be used. To that end, the planning authority was required to obtain a report specifying the findings of a preliminary investigation of the land, carried out in accordance with the contaminated land planning guidelines: cl 6(2).
27 At the time, the contaminated land planning guidelines were “Managing Land Contamination, Planning Guidelines SEPP 55 – Remediation of Land” (1998). The guidelines described the site investigation process to be undertaken by the proponent seeking re-zoning (or development approval). Depending on the circumstances, one or more of the following stages may be appropriate:
Stage 1 – Preliminary Investigation, which identified past or present potentially contaminating activities, provided a preliminary assessment of any site contamination and, if required, provided a basis for a more detailed investigation.
Stage 2 – Detailed Investigation, which was necessary when the land was or had been used for a specified activity that may cause contamination (which included “Defence works”) and a land use change was proposed that had the potential to increase the risk of exposure to contamination. A detailed investigation was to define the nature, extent and degree of contamination; assess potential risk posed by contaminants to health and the environment; and obtain sufficient information to develop a remedial action plan (RAP), if required.
Stage 3 – Remedial Action Plan, setting out the objectives and documenting the process to remediate the site.
Stage 4 – Validation and Monitoring, to demonstrate whether the objectives stated in the RAP had been achieved.
28 Each of these stages could be subject to a site audit, which was an independent review of the site investigation process conducted in accordance with the Contaminated Land Management Act 1997. A site audit would lead to the issue of a site audit statement, stating for what use the land was suitable. Only site auditors accredited by the EPA could issue site audit statements. The site auditor would also prepare a site audit summary report as required by the EPA, containing the key information and the basis of consideration which led to the issue of the site audit statement.
29 Mr Clay explained that a site audit may also be commissioned on a non-statutory basis, often by the vendor or purchaser of land. In either case, the auditor was independent of either party. The purpose of the audit was to certify that the land was suitable for a certain use or that the level of residual contamination was adequately defined. Mr Clay added that a site audit statement applied to the current or approved uses of the site; if the site use changed, then a new site audit statement may be required.
30 Guidelines were also issued by the National Environment Protection Council, called National Environment Protection Measures or NEPMs. These guidelines were made by under the National Environment Protection Council Act 1994 (Cth) and the equivalent provision of the National Environment Protection Council (New South Wales) Act 1995 (NSW). Relevantly, National Environment Protection (Assessment of Site Contamination) Measure 1999 (NEPM (1999)) established a nationally consistent approach to the assessment of site contamination.
31 NEPM (1999) included “Schedule B(1) – Guideline on the Investigation Levels for Soil and Groundwater”. Health Based Investigation Levels (HILs) were set for soil, depending on the degree of access to the soil and the time spent in that setting by young children: at [3.1]. Table 5-A set out soil investigation levels for HILs, based on human exposure settings from “A” to “F”, where “A” was a standard residential setting with garden / accessible soil and “F” was:
F. Commercial/Industrial: includes premises such as shops and offices as well as factories and industrial sites.
32 Where soil concentrations exceeded HILs for an exposure setting, the response would be determined on a site-specific basis and ranged from informing stakeholders, applying site management plans to large scale remediation: page 5, NEPM (1999). However, no HILs were specified for asbestos. The reason for this was explained in “Schedule B(7a) – Guideline on Health-Based Investigation Levels”, at page 24:
Asbestos
The major health risk is from inhaled asbestos fibres. …
No relationship between soil levels and air levels can be predicted for an asbestos-contaminated site. …
Since asbestos left undisturbed is not considered to present a risk to health from ingestion, there is no scientific basis for setting an ‘acceptable’ level in soil related to ingestion. The risks depend on the potential for disturbance and generation of airborne asbestos which may be inhaled.
33 Consistently with this, the general position adopted by the NSW EPA, as noted by Defence’s environmental science consultants at the time, was that “no asbestos in soil at the surface is permitted”: see [43].
That summary was in part drawn from the report of an expert retained by Defence (Mr Clay), who explained that the 2021 SEPP 55 had been replaced by the State Environmental Planning Policy (Resilience and Hazards) 2021. I did not understand it to have been controversial that the former and current SEPP required a decision-maker to take into account whether land is contaminated before giving development consent or planning approval. Nor did I understand it to be controversial that one mechanism used to carry out that assessment involved reports from site auditors.
The role of a site auditor was, in 2003 and at all times thereafter, circumscribed by the Contaminated Land Management Act and regulations made under that statute. In particular, the form of a Site Audit Statement was prescribed. In 2003, (former) reg 12 of the Contaminated Land Management Regulation 1998 (NSW) required the statement to be prepared using Form 2. The essence of Form 2 was the following (the bold is in the original form, but the underlining has been added):
I have completed a site audit (as defined in the Contaminated Land Management Act 1997) and reviewed the reports and information referred to above with due regard to relevant laws and guidelines. I certify that the site (tick all appropriate boxes):
(a) is suitable for the following use(s):
residential, including substantial vegetable garden and poultry;
residential, including substantial vegetable garden excluding poultry;
residential with accessible soil, including garden (minimal home-grown produce contributing less than 10% fruit and vegetable intake) excluding poultry;
residential with minimal opportunity for soil access, including units;
daycare centre, preschool, primary school;
secondary school;
park, recreational open space, playing field;
commercial/industrial use;
other (please specify): .......................................................................................
subject to
condition(s) (please specify): .............................................................................. .......................................................................................................................... ..........................................................................................................................
(b) is not suitable for any beneficial use due to risk of harm from contamination.
(comments): .................
It will be noted that one of the classes of use for which a site could be certified was “suitable” for “commercial/industrial use”. It will also be noted that the form involved a choice between options (a) “suitable” and (b) “not suitable”, and within the former, the default was suitability subject to specified conditions.
Substantially the same regime appears to have been in place at all material times thereafter. Mr Lau’s 2016 Site Audit Statement, certifying suitability for “commercial/industrial use” subject to compliance with the Environmental Management Plan, was in the same form.
There is a constructional choice in cl 17.2. The Court’s task is, having regard to the text and the matters to which regard may be had bearing in mind it is a covenant in a registered lease, to determine the objective intention to be imputed to the parties by the use of those words. That involves a process of drawing together the considerations identified above. Many works on the construction of contracts, while they are long on the various principles and rules, are short on how a court reconciles between the competing candidates for legal meaning that emerge when those principles and rules are applied. It is necessary to bear the various available constructions in mind, and consider the extent to which textual and available contextual considerations support or tell against each construction, and to that extent there is an iterative process; cf Lord Grabiner, “The iterative process of contractual interpretation” (2012) 128 Law Quarterly Review 41, and see Zhang v ROC Services (NSW) Pty Ltd (2016) 93 NSWLR 561; [2016] NSWCA 370 at [87]-[88]. But that of itself does not give much guidance to the resolution of the issue when the resulting considerations point in different directions. Helpful assistance may be found in the analysis in R Catterwell, A Unified Approach to Contractual interpretation (Hart Publishing, 2020), especially at pp 13-14 and chapters 5-6, identifying how to resolve questions of construction when text and context point in different directions.
Happily, this is a relatively straightforward case, where legitimate contextual considerations point in the same direction. I conclude that cl 17.2 was satisfied, despite the continuing presence of asbestos containing material on the land, if a site auditor certified that the land was suitable for on-going commercial/industrial use. That certification could be unconditional or conditional.
I acknowledge the possibility that there might be some conditions which were so substantial that they stood in the way of a conditional Site Audit Statement satisfying the clause (for example, a Site Audit Statement that said that only 10% of the land was suitable for commercial/industrial use, and the balance was not suitable and would require long-term measures which would preclude the land being used for any purpose for many years). But such extreme cases are well removed from the present case, where suitability is certified subject to compliance with the September 2016 Environment Management Plan. Indeed, the Site Auditor Guidelines (to which Mr Clay made extensive reference) required Site Audit Statements to be issued with as few conditions as practicable, and where the condition was compliance with an Environmental Management Plan, that compliance was required to be enforceable, notably, as a condition of development consent.
I further acknowledge that questions not free from difficulty would arise if the site auditor had wrongly certified conditional or unconditional suitability for on-going commercial/industrial use (those questions would in turn depend on whether the mistake were innocent, negligent or knowing), but once again that does not arise for it was not suggested in this appeal that Mr Lau’s report was defective (although this had been in issue at trial).
First, I respectfully agree with the Developer’s submission that nothing relevantly turns on the Ryall 2002 Audit, which is not mentioned in the Lease, and which is not available as an extrinsic material for the purposes of construction.
Secondly, the Developer’s submission that the primary judge erred in having regard to post-contractual conduct must be upheld. To be fair, the Commonwealth flagged in its written submissions provided well in advance of the hearing of the appeal that it “does not resist ground 12”. Her Honour’s statement of principle at [155] relied upon what had been said in Lym International Pty Ltd v Marcolongo (2011) 15 BPR 29,465; [2011] NSWCA 303 at [124]–[126], Queensland Phosphate Pty Ltd v Korda and Shepard (as joint and several liquidators of Legend International Holdings Inc (in liq*))* [2017] VSCA 269 at [37] and JR Consulting & Drafting Pty Ltd v Cummings (2016) 239 ALR 625 at 637; [2016] FCAFC 20 at [54]. The first was in a portion of the reasons which was directed to finding “the terms of a contract not wholly in writing”, which is not the present case, and neglected what was said later, at [142], to the effect that post-contractual conduct was not admissible. The second was confined to when the court is “determining whether a binding contract was in fact formed”, which once again is not this case. The third is a paragraph reciting what the judge at first instance in that proceeding had done, with the Full Court noting that that approach “was not challenged by either party”. Decisions are not authority for what was not argued, and the statement that neither side challenged what the primary judge had done is not to be understood as a tacit endorsement of its correctness.
The position is clear. There is a general principle “it is not legitimate to use as an aid in the construction of [a] contract anything which the parties said or did after it was made”: Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [35]; Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 275 CLR 165; [2022] HCA 1 at [45]-[46], to which many other decisions could be added. There are minor exceptions to the rule, but none was applicable here.
While conceding this ground, the Commonwealth also contended that ground 12 was “not even close to dispositive”. The Developer’s success on this ground does not alter the result I have reached based on the text of the Lease and the considerations to which regard may legitimately be had.
Thirdly, the Developer said that “suitable” did not mean “conditionally suitable”. That submission is only superficially attractive, for the following reasons.
The “commercial/industrial use” of which cl 17.2 speaks was not confined to the existing uses on the Land (whatever they be and howsoever they be expressed). That is especially the case if (as the Developer contended) “on-going” did not restrict the class of lawful permitted uses. But it was not open to the landlord after the expiration of the Lease, or any new tenant, to conduct commercial/industrial uses lawfully, unless first development consent or approval had been obtained. That is simply a consequence of the planning regime applicable to the Land. It follows that at least one element of conditionality is inextricably embedded in cl 17.2. Another way of putting this is that cl 17.2 must mean “suitable for on-going commercial/industrial use assuming planning approval is sought and obtained for that use”.
it would be necessary to find that objectively the parties intended clause 17.2 to incorporate, by way or remediation, a conditional EMP that acknowledged the risk of asbestos contamination but warned about that contamination. In other words that instead of the tenant being obliged to physically remediate the contamination it could instead issue a conditional EMP. There is simply no relevant contemporaneous evidence about the creation of this lease in 2013 that would cause the Court to accept such a novel proposition.
Mr Clay considers that, as stated in paragraph 6.23 of my 4 March 2024 expert report, the CLM Act definition of remediation includes the preparation of a long-term management plan, it also includes removal of contamination.
Section 3.4.5 of NSW EPA (2006) states that:
‘Site audit statements must be issued with as few conditions as practicable, since these qualify the auditor’s conclusions, and therefore detract from the definitive nature of the statement.
However, there will be some occasions when it will be appropriate for a site audit statement to contain conditions, such as a condition requiring the implementation of an environmental management plan (EMP).’
Section 3.4.6 of NSW EPA (2006), which is titled “Environmental Management Plans”, states that:
‘Within the context of contaminated sites management, an environmental management plan (EMP, sometimes also called a ‘site management plan’) means a plan which addresses the integration of environmental mitigation and monitoring measures for soil and groundwater throughout an existing or proposed land use. An EMP succinctly describes the nature and location of contamination remaining on-site and states what the objectives of the plan are, how contaminants will be managed, who will be responsible for the plan’s implementation and over what time frame actions specified in the plan will take place.’
Therefore, in terms of the CLM Act, the site had been definitively remediated by means of an EMP and this had been signed off as a condition of a section A SAS, as Mr Lau was entitled to do, as discussed in paragraph 13.9 of my 4 March 2024 expert report.
Finally, I return to the point which perhaps underlies the Developer’s submissions on construction. How, it may be asked, can the Land be regarded as “suitable” for ongoing commercial/industrial use if there is known asbestos on the surface? The answer is that the words in cl 17.2 are to be construed contextually, including that they represent a standard of remediation which accords with the position at the end of decades-long occupation of the Land by Defence, following which it is likely that planning permission will be required for a different use. While Defence was in occupation, the risks presented by the known presence of asbestos in the surface of the Land were addressed by implementing the Environmental Management Plan. There is no longer any challenge to the adequacy of the certification by the site auditor that, so long as the Environmental Management Plan was implemented, the Land would be suitable for commercial/industrial use. Any lawful commercial/industrial use would require planning permission. Any such planning permission would invariably be conditional, and one condition was apt to be the continued implementation of the Environmental Management Plan until and unless it were shown that such implementation was no longer required. Indeed the Site Auditor Guidelines required the site auditor to review the Environmental Management Plan to ensure that it was enforceable.
For those reasons, I do not accept the Developer’s submission that “suitable” meant unconditionally suitable.
Fifthly, the Developer emphasised that cl 17.2 should not be understood to entitle Defence to leave in place asbestos or asbestos-containing material which it knew, or ought to have known, was likely present on the surface or in the top 10cm of the soil. I do not agree. I do not accept that “remediate to a standard suitable for on-going commercial/industrial use” required either removing all asbestos from the top 10 cm of the soil, or raking the Land or laying down a concrete hardstand over the Land (which was the third alternative nominated by the Developer) in all areas where asbestos was known to exist. It needs to be borne firmly in mind that the remediation was to a particular standard, and that need not necessarily involve removal or screening. The issue is one of management of risk. This is recognised in NEPM (both as originally made, and as amended in 2013) which stated:
The use of investigation and screening levels as default remediation criteria may result in unnecessary remediation and increased development costs, unnecessary disturbance to the site and local environment, and potential waste of valuable landfill space.
19.1 Lessee’s duties
(1) Before expiry the Lessee must, having regard to the condition of the Premises detailed in the Condition Reports:
(a) vacate the Premises and given them back to the Lessor clean and in good repair and condition (fair wear and tear excepted);
(b) repair any damage caused by removal of the Lessee’s property if the Lessee elects to remove Lessee’s Property.
The Developer had pleaded that the failure to remediate the Land was a breach of cl 19.1(a). This was not a large issue at trial. Relatively brief submissions on cl 19.1 were made in Defence’s written submissions in reply.
The primary judge gave concise attention to this basis of the Developer’s claim. In part that reflected the absence of attention it had been given by the Developer. In part it was a consequence of her view of the release in the Deed. Her Honour proceeded to state the following at [418]-[419]:
418 If I am wrong about that, then the question is whether Defence complied with its obligations under cl 19.1 of the lease. As earlier mentioned, the Condition Reports informed the content of Defence’s obligation in cl 19.1. That obligation that did not involve, for example, removing underground storage tanks by crane for on-sale or recycling as scrap metal. Understandably, the bulk of the work undertaken by the developer’s contractors was not concerned with ‘make good’ tasks but demolition, removal and disposal.
419 If Dr Wright is not satisfied from the material produced by the developer’s contractors and consultants that hazardous chemical remained on the Premises as at the Surrender Date (apart from some minor exceptions), nor am I. Dr Wright was a very impressive, considered and dispassionate witness; I accept her evidence. I am not satisfied that the ‘make good’ obligation was breached save for the minor exceptions she identified.
13 The primary judge erred at J[406-407, 419] by failing to address Qube’s submission that the failure to remediate the Land was a breach of clause 19.1 of the Lease.
14 The primary judge erred at J[92-93] by concluding that Defence’s make good obligation in clause 19.1 of the Lease was to be informed by the Condition Reports and consequently “was focussed on improvements to the land, rather than the land itself”.
15 The primary judge erred at J[112] by concluding that Defence’s obligation to remediate in clause 17.2 of the Lease was inconsistent with its obligation in clause 19.1.
The Developer’s real complaint was its contention that cl 19.1 had a broader operation, so that the failure to remediate by removing asbestos containing material contravened cl 19.1 as well as cl 17.2. The Developer’s point was that although the primary judge addressed the removal of hazardous chemicals, that reasoning did not address the Developer’s claim based on the obligation to remediate the Land.
However, her Honour had already considered the relationship between cll 17.2 and 19.1 at [92]-[93]:
92 There is a tension between Defence’s positive obligation under cl 17.2 – to remediate the site to a particular standard by the expiration of the lease – and the obligation in cl 19.1 to return the Premises in the same condition as detailed in the Condition Reports, fair wear and tear excepted. To some extent, this tension is abated by each clause focussing on a different aspect of the Moorebank site. The obligation in cl 17.2 applied to the Land only. The obligation in cl 19.1 applies to the Premises, which included the Land but also Buildings and Plant.
93 Further, the Condition Reports informed the content of Defence’s obligations in cl 19.1. Defence was required to perform the obligation “having regard to the condition of the Premises detailed in the Conditions Reports”. The Condition Reports contain a detailed review of each building, its existing services and fixed plant and equipment. The Land does not feature. As such, the tension between cl 17.2 and cl 19.1 is more apparent than real. The obligation to return the Premises in good condition, fair wear and tear excepted, was focussed on improvements to the land, rather than the land itself.
On that basis, her Honour’s consideration of cl 19.1 was sufficient. It was far from prominent in the submissions at trial, and on the view of the release taken by her Honour, was non-dispositive. In a case such as the present, where the parties raised a multitude of issues, and supplied written submissions exceeding 450 pages, it is open to a judge to give relatively brief reasons on minor non-dispositive points.
Separately from the above, there is another reason why this ground does not assist the Developer. Even if the Developer established that the primary judge had failed sufficiently to address this point, that would not mean that Developer would succeed in the appeal. It is necessary for the Developer to establish that the point is well-founded in law, irrespective of any failure to provide adequate reasons. These points were made in Housman v Camuglia (2021) 104 NSWLR 615; [2021] NSWCA 106 at [33]-[34]:
… in an appeal such as the present, which is not confined to questions of law, and which proceeds by way of rehearing, and where there are no issues of credibility, the adequacy or inadequacy of reasons is usually not to the point. As was said by this Court in Stephenson v Santos [2020] NSWCA 262 at [24]:
“[24] [E]ven if there were a deficiency in the reasons, this Court would not intervene unless it were persuaded that the finding could not stand. This appeal is by way of rehearing, and there is no need for Ms Stephenson to establish error of law. For the reasons given under the heading ‘Inadequacy of reasons as separate ground’ in Shellharbour City Council v Rhiannon Rigby [2006] NSWCA 308, which have subsequently been followed in NSW Police Force v Winter [2011] NSWCA 330 at [89]-[90], these grounds were not of themselves sufficient to make out an appeal.”
The same point was made in Capilano Honey Ltd v Dowling (No 2) [2018] NSWCA 217 at [41]:
“[41] If the reasons provided addressed an issue, it is open to the unsuccessful party to challenge the reasoning on appeal. If they did not address an issue, it is open to the unsuccessful party to contend that the matter was not considered by the trial judge and, if materiality is established, the omission demonstrates error on that basis. The reasons given are the judge’s actual reasons for deciding a point. Usually the appeal court can address the substance of the matter and will not remit because the reasons were ‘inadequate’.”
Turning to the submissions on construction, the Developer contended that the primary judge misconstrued cl 19.1, because her conclusion “involved a misreading of the chapeau to clause 19.1”. The Developer submitted that the clause “does not say to return the Premises in the same condition as detailed in the Condition Reports”. But the primary judge did not hold that that was what it said. Her Honour carefully said at [93] that the Condition Reports “informed” the content of Defence’s obligations. That is, self-evidently, correct, having regard to the text of cl 19.1.
Clause 17 was a specific provision concerned with contamination and hazardous substances on the Land. Clause 19 was addressed to the Premises, which were to be returned “clean and in good repair and condition (fair wear and tear excepted)” at the expiry of the Lease. In order to assess whether the Premises were “clean” and “in good repair and condition” subject to fair wear and tear, regard was to be had to the Condition Reports. All of this points against cl 19, which is a familiar clause in many commercial and residential leases (see for example Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567 at 578; [1943] HCA 8), having any additional obligation insofar as it applied to contamination and hazardous substances, over and above what is required by cl 17.2. That is to say, there is no reason to strain cl 19.1 so that it not only applies to asbestos containing material on the Land, but further imposes an additional obligation upon Defence over and above the specific obligations in cl 17 dealing with contamination and hazardous substances.
The force of that observation is enhanced by the fact that the qualified positive obligation in cl 17.2 to remediate the Land “so that no significant contamination is migrating from the site” necessarily contemplates that cl 17.2 may be satisfied notwithstanding the continuing presence of small quantities of contamination, so long as the Land is at a standard suitable for on-going commercial/industrial use and any contamination migrating from the site is not significant. As a matter of ordinary contractual construction, cl 19.1 is to be construed harmoniously with cl 17.2, which includes construing it so as to not undermine what is expressly permitted by cl 17.2.
Another way of making this point is to observe that (1) the nature and extent of the obligations imposed by cll 17.2 and 19.1 are a question of construction, (2) the two clauses are to be considered together, appearing as they do in the same Lease and imposing obligations on Defence at the same point in time, (3) the clauses are framed in terms of different subject matters, one specific and one more general, (4) the more specific clause entitles Defence to leave some contamination on the Land. Why in those circumstances should the general clause, which is in effect boilerplate, be construed so as to be inconsistent with the specific clause which is bespoke to this Lease? That is to say, why should the parties be taken to have agreed that there were separate obligations such that satisfaction of the specific clause directed to contamination on the Land might not be sufficient to satisfy the general clause directed to whether the Premises were clean and in good repair and condition?
What remains in this appeal is the Developer’s challenge to the construction of the Deed, and the dispute between the parties about whether the pleadings and conduct of the trial permitted her Honour to rely on it. None of this will have any impact upon the outcome of the appeal.
I respectfully agree with the primary judge that aspects of the Deed are poorly drafted. That may reflect no more than that it reflects the outcome of a negotiation. But its legal meaning turns on the language in the document executed by the parties.
The Developer’s submission that if there was a breach of cll 17.2 or 19.1 of the Lease, it was not released by the Deed, assuming favourably to Defence that the conditions precedent (namely, compliance with the balance of the Deed) were satisfied, is not without force. However, there are considerations pointing in the opposite direction.
On the one hand, the release is in cl 7.2. That clause is expressly subject to cl 7.3. Clause 7.3 commences “Despite the release contained in clause 7.2”. The clause goes on to provide that “this Deed will apply to all provisions of the Lease except provisions relating to [remediation and cl 19.1]”. A literal meaning is elusive. What does it mean for the “Deed” to “apply” to a provision of the Lease? But the only relevant aspect of the Deed for present purposes is the release, and thus it seems natural to read “provision of the Lease” as a reference to a obligation or liability sourced in a provision of the Lease. Read that way, those words are to be understood as providing that the release contained in cl 7.2 does not extend to obligations or liabilities in certain provisions of the Lease, and those obligations or liabilities include those relating to remediation and cl 19.1 It may be acknowledged that at least part of the sense of cl 7 is that the known ongoing contamination issues which are the subject of elaborate provision in cll 10-12 (including concerning the “Licensed Area”) must fall outside the release. But it is difficult to see, based on the language of the Deed alone, how the release in cl 7.2 extended to the remediation obligation imposed by cl 17.2. This is the difficulty with the reasons of the primary judge at [227] that “the generally expressed remediation obligation in the lease was re-crafted into a set of bespoke obligations”.
On the other hand, telling against that construction is the ambiguity in cl 7.3 based on the word “which”. Is its antecedent the immediately preceding obligations numbered (1), (2) and (3), or alternatively “all provisions of the Lease except” those obligations? Further, cl 12(1) proceeds on the basis that the obligations under cl 17 of the Lease are not released. There is also the fact that Defence paid $25,000,000, but the Deed falls to be construed without regard to the context in which that payment was made. I acknowledge the force of the points made by the primary judge in the second half of [227] in this respect.
For those reasons, which depart from those given by the primary judge, the appeal should be dismissed.
That result reflects the fact that although when Defence surrendered the Land, there continued to be asbestos, including on the surface or within 10cm of the surface, the covenants on which the Developer sued were not expressed in absolute terms. The principal covenant (cl 17.2) required Defence to “remediate the Land to a standard suitable for on-going commercial/industrial use”. The Developer obtained the benefit of a Site Audit Statement certifying that the Land was suitable for commercial/industrial use, albeit subject to compliance with an Environmental Management Plan. True it is that the asbestos on the Land caused the incurring of costs which would not have been incurred had the Land been pristine. But Defence was not obliged to return the Land in pristine condition. Nor did the covenant to return the Premises “clean and in good repair and condition” impose any additional obligation concerning remediating the Land.
The orders I propose will permit the parties to be heard as to costs of the appeal. There is good reason to depart from the usual order as to costs, in particular having regard to the facts that the appeal extended into a third day because of the belatedly amended notice of contention which, as it turns out, was dispositive. One possible exercise of the discretion as to costs would be an order that Defence pay the Developer’s costs of the third day of the appeal, and (having regard to the parties’ mixed success), an order that otherwise the Developer pay a fraction of the Commonwealth’s costs. Another possibility would be to determine that, bearing in mind all of the considerations relevant to costs, there be no order as to the costs of the appeal, with the intention that each side bears its own costs. The parties are entitled to be heard as to costs if they are unable to reach agreement, and the orders I propose will permit that to occur.
I propose these orders:
1. Appeal dismissed.
2. The parties to file and serve within 14 days of today any agreed orders as to costs, or, in the absence of agreement, submissions not exceeding four pages as to the costs of the appeal, and to file and serve within 7 days thereafter submissions not exceeding three pages in reply, with a view to any question as to costs being determined on the papers.
FREE JA: I have had the benefit of reading in draft the reasons for judgment of Leeming JA. I agree that the appeal should be dismissed, and with his Honour’s reasons concerning the first three issues identified by his Honour at [80]. In circumstances where that is sufficient to dispose of the appeal, I prefer not to express any view about the construction and application of the Deed.
GRIFFITHS AJA: I agree with Leeming JA’s comprehensive reasons and the proposed orders.
**********
The Trust Company Ltd
Commonwealth of Australia
[2002] HCA 5
(2014) 88 NSWLR 488
(2008) 238 CLR 570
(2021) 105 NSWLR 152
(1976) 135 CLR 530
(2022) 275 CLR 165
(1996) 186 CLR 389
(2020) 268 CLR 638
(2005) 149 FCR 170
(2013) 85 NSWLR 378
(1954) 91 CLR 112
(2020) 271 CLR 1
(2021) 104 NSWLR 615
(2016) 239 ALR 625
(2004) 218 CLR 216
(2024) 280 CLR 321
(2022) 109 NSWLR 468
(2003) 219 CLR 325
(1985) 157 CLR 17
(2012) 36 VR 472
(2024) 303 FCR 100
(2022) 109 NSWLR 149
(2002) 240 CLR 45
(2010) 177 LGERA 125
(2024) 115 NSWLR 489
(2007) 233 CLR 528
(2013) 251 CLR 592
(2016) 93 NSWLR 561
(1943) 67 CLR 567
Appeal dismissed. The parties were directed to file agreed costs orders within 14 days or, failing agreement, submissions on costs within the specified page limits and timetable, for determination on the papers.
There was also little or no evidence of the circumstances surrounding entry into the Deed. This reflected an important aspect of the Developer’s appeal. The Developer complained not only that the primary judge had misconstrued the Deed and the release it contained, but also that it had not been open to her Honour to dismiss the claim on that basis. It was said:
The Measure was extensively amended by the National Environment Protection (Assessment of Site Contamination) Amendment Measure 2013 (No 1)**, with effect from May 2013, some two months before the new lease was executed. I shall follow the parties’ usage and refer to the Measure as amended after May 2013 as “NEPM 2013”.
NEPM 2013 is a document of more than a thousand pages. Much is the same as the previous Measure, including the following portion of Schedule B1:
Waste classification reports indicated that, by and large, asbestos was not found on the surface of the soil but underneath it and only identified when excavation occurred. Whilst some waste classification reports refer to asbestos contaminated soils surrounding the footprints of buildings, the reports do not reveal whether the asbestos containing fragments were on the surface or below the surface and only revealed when the topsoil was scraped away, as the primary judge observed at [404]. Nonetheless, the primary judge concluded that, on the balance of probabilities, there was asbestos on the surface of the soil near the southern burial pits in three areas referred to by Defence’s expert: at [405]. Defence challenged this finding by its notice of contention.
In short, I see no basis for interfering with the findings made by the primary judge that on the balance of probabilities there continued to be asbestos on the surface of the Land.
The result is that while there is force in Defence’s contention concerning a minor aspect of the findings of the primary judge (concerning three areas identified by Ms Organo), the substance of these grounds is not made out.
In the present case, it is legitimate to have regard to the fact that Defence had been a long term occupant of the Land, that some of the structures were old, that there was at the very least a well-founded concern that there might be contamination and hazardous substances on the Land (making it no different from many other sites occupied by Defence over many years), and that the bank’s investment vehicle would likely either itself develop the Land or alternatively sell the Land to a future developer for a use apt to be described as “commercial/industrial”.
Seventhly, cl 17.2 was in a section headed “Contamination and Hazardous Substances”. Further, the obligations in cl 17.2 to remediate the Land would be engaged if there was “contamination” on the land which was migrating. “Contamination” was defined in cl 1.2 of the Lease (which is reproduced above) in terms which were very substantially identical to the definition of the same term in s 5(1) of the Contaminated Land Management Act 1997 (NSW). That definition is:
That construction reads the clause contextually with the regulatory regime. It is natural to give a clause which refers in terms to land usage and whose application bites at the conclusion of a lease where there has been a special use by Defence for many years, a meaning which picks up the planning regime. It also draws upon the identicality of “commercial/industrial use” in cl 17.2 and the mandated form of a Site Audit Statement, including its conditionality. Such a construction also accords with the purpose, which was to permit approval or consent under the planning regime to the changed use which would occur after Defence surrendered possession. And such a construction also provides certainty, which it is to be presumed the parties would be seeking when possession was restored to the landlord.
That conclusion is dispositive of the appeal insofar as it turns upon cl 17.2. That conclusion does not involve acceptance of a number of the parties’ submissions.
The parties to this Lease chose to use the words “suitable for on-going commercial/industrial use” to delineate the scope of the covenant. It is reasonable to impute from their use of those words an intention to pick up the regulatory regime which mandates a Site Audit Statement that certifies that “the site is SUITABLE for … commercial/industrial [use] subject to compliance with the following environmental management plan”. It was no coincidence that the words in cl 17.2 so closely mirrored the mandatory language of a Site Audit Statement.
The planning regime was such that in order for a planning authority to grant approval or consent, it would be necessary to consider a Site Audit Statement, and the planning regime permitted consent to be granted conditionally, including on condition that there be compliance with an Environmental Management Plan.
Fourthly, the Developer also said that in order to make that finding:
That in substance was the reasoning of the primary judge, albeit expressed more concisely. These grounds are not made out.
It is in some respects unsatisfactory to resolve the meaning of a poorly drafted Deed without regard to context, especially having regard to the special principles governing the construction of or reliance upon a release: Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23. There is some controversy concerning this, but on any view when a release is relied upon, it is open to the releasor to point to the parties’ subjective intentions either as a matter of construction or in order to prevent what would be the unconscientious assertion of the release: see Reid v Commonwealth Bank of Australia (2022) 109 NSWLR 149; [2022] NSWCA 134 at [38]-[52]; Redbubble Ltd v Hells Angels Motorcycle Corporation (Australia) Pty Ltd (2024) 303 FCR 100; [2024] FCAFC 15 (stating at [38] that “there is appellate authority to the effect that a party’s subjective intention could inform the construction of a release: see, eg, Burness v Hill [2019] VSCA 94 at [78] per Kaye, McLeish and Hargrave JJA”), and see P Herzfeld and T Prince, Interpretation (3rd ed, 2024, Lawbook Co), pp 688-691.
The absence of contextual evidence tends to emphasise the force of the Developer’s submission that the release had not been perceived by it to be relied on by the Commonwealth. In litigation where a vast quantity of evidence was tendered at trial, it is to be expected that steps could and would have been taken to adduce evidence which bore upon whether the release was an answer to its claim.
However, the same considerations also tend to tell against reaching a final conclusion as to the construction of a poorly drafted release, in circumstances where as it happens the question arises with virtually nothing by way of surrounding circumstances save that one party paid the other $25,000,000, where that question does not affect the resolution of the appeal.
The question of whether it was open to the primary judge to determine the litigation based on the release is even more removed from the issues that are dispositive, and even more arid. The Developer contended that it was denied procedural fairness by the primary judge basing her decision upon the release. But making every assumption favourable to the Developer on that issue, the question is whether the denial of an opportunity to adduce evidence and cross-examine and be heard on the point was material: LPDT v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2024) 280 CLR 321; [2024] HCA 12 at [12]-[16]. In the present case, it “can affirmatively be concluded that the outcome would inevitably have been the same”, to use the language of LPDT at [16], because of the proper construction of cll 17.2 and 19.1.
Bearing the above in mind, I do not think it is appropriate to add to the length of these reasons to determine this issue. Merely summarising the parties’ submissions as to the shifting stances during the hearing, and whether or not the course adopted by the primary judge was open would take a deal of time and unduly lengthen these reasons, and would be directed to an issue of no interest to anyone other than the parties (and it may be doubted that the parties would have any abiding interest in an analysis which did not affect the appeal’s outcome).