New South Wales Supreme Court CITATION : Pilrift Pty. Ltd. & Ors. v. Lassgol Pty. Ltd. [2000] NSWSC 739 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 3466/99 HEARING DATE(S) : 10/07/00 and 11/07/00 JUDGMENT DATE : 31 July 2000 Pilrift Pty. Limited - 1st plaintiff Thamdale Pty. Limited - 2nd plaintiff PARTIES : Reachdail Pty. Limited - 3rd plaintiff John Mortimer Hearne - 4th plaintiff Lassgol Pty. Limited - defendant JUDGMENT OF : Hodgson CJinEq at 1 COUNSEL : Mr. B. Coles QC with Mr. M. Wigney for plaintiffs Mr. T. Hale SC with Mr. D. Weinberger for defendant SOLICITORS : Grogan & Webb, Chatswood for plaintiffs Kemp Strang, Sydney for defendants CATCHWORDS : CONTRACTS - Sale of land - Promise by vendor to decontaminate the property to the satisfaction of the Council - Asbestos discovered after Council indicated satisfaciton, whereupon Council officers required further decontamination - Whether breach by vendor. LEGISLATION CITED : Environmental Planning & Assessment Act ss.90, 91, 91AA DECISION : See par.78 of judgment IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORAM: HODGSON, CJ in Eq. Monday 31st July 2000 NO. 3466 OF 1999 PILRIFT PTY. LIMITED & ORS. V. LASSGOL PTY. LIMITED JUDGMENT 1 On 6th January 1998, the plaintiffs contracted with the defendant to purchase from the defendant land known as 35-41 Mallet Street, Camperdown for a price of $1.3 million. Special Condition 35 of that contract imposed certain obligations on the defendant relating to decontamination of the site. In these proceedings, the plaintiffs claim that the defendant breached those obligations, and seek damages for that breach. OUTLINE OF FACTS 2 Since 1997 or earlier, Combined Development Group Pty. Limited ("CDG") has carried on business as a development manager of syndicated development projects. In about July 1997, Mr. Walker of CDG commenced discussions with the defendant and with architects Insite Australia Pty. Limited ("Insite") concerning the development of this land. At the time, the land was used as a carpark and storage area for an adjacent industrial building. Insite prepared plans for the development of eight units on the land, and CDG assembled the plaintiffs as a syndicate of investors to purchase the land for $1.3 million. 3 The contract was prepared by Day Dockrill, solicitors for the defendant. Grogan & Webb acted as solicitors for the plaintiffs on the purchase. 4 On 13th October 1997, Mr. Walker met Mr. Dockrill of Day Dockrill, and they had a conversation in the following terms: Walker: We understand that you will be providing us with a certified clean site. Dockrill: Yes, that is correct. We already have a report concerning contamination. I will send you a copy. 5 On 15th October 1997, Mr. Walker wrote to the defendant, referring to the discussion with Mr. Dockrill, to the effect that "we understand that you will be providing us with a certified clean site". 6 On or about 17th October 1997, Mr. Walker received a copy of a report of that date by Dames & Moore Pty. Limited, being a preliminary contamination assessment of the site. This report noted the presence of two underground petrol storage tanks, and substantial volumes of fill material which could exhibit contamination by materials such as heavy metals and polycyclic aromatic hydrocarbons. 7 As mentioned earlier, the contract was dated 6th January 1998. The relevant terms of the contract are Special Conditions 30, 32 and 35, which are in the following terms: 30 The property is sold in its present condition and the Purchaser acknowledges that he buys the property relying on his own knowledge, inspection and enquiries and does not rely on any warranties or representations made by or on behalf of the Vendor and in particular as to any purpose for which the property may be used. ... 32.1 This agreement is subject to and conditional upon the Vendor obtaining from Marrickville Council ("the Council") on behalf of the Purchaser a development approval for the erection of eight townhouses upon the property substantially in accordance with plans prepared by Insite, Architects, in respect of the property, copies of which are annexed hereto ("the Approval") on or before 30 June 1998 ("the Agreed Date"). 32.2 Should the Approval not be granted by the Council by the Agreed Date either party may, by notice in writing, rescind this agreement whereupon the provisions of Clause 19 hereof shall apply. 32.3. The Vendor shall use its best endeavours to obtain the Approval by the Agreed Date. 32.4 The Agreed Date may be extended by agreement in writing between the parties hereto. 32.5 The Vendor and Purchaser agree that this clause is for the benefit of the Purchaser and may be waived by the Purchaser at any time by notice in writing. 32.6 Upon receipt of the Approval the Vendor shall provide to the Purchaser written notification of such granting together with a copy of the terms and conditions of development consent attaching to the approval (the Notification"). 32.7 At completion the Vendor shall deliver to the Purchaser:- (a) the Approval and all plans and documents associated therewith; (b) an assignment of its interest in the approval addressed to the Council; and (c) confirmation from Insite Architects that no sums are outstanding to it for its fees in respect of such plans and that it has no objection to the Purchaser proceeding to complete the development the subject of the approval without obtaining its further consent. 32.8 Upon the granting of the Approval the Vendor shall consent to the Purchaser lodging a Building Application for consideration by the Council in respect of the property. 32.9 For the purpose of Clause 32.1 it is agreed the Approval will not be substantially in accordance with the Plans prepared by Insite Architects if any of the following applies: (a) there are less than eight (8) townhouses approved; (b) the internal living space of each townhouse is more than five percent (5%) less than the area shown in the Plans annexed hereto; (c) if there was less than one (1) carspace for each of the eight (8) townhouses. ... 35. Annexed hereto is a report from Dames & Moor(sic) Pty. Limited being a contamination Assessment of the Property. The Vendor agrees that it shall following Completion carry out such work as is required to decontaminate the Property to the satisfaction of the Council. This Clause shall not merge on completion. If (sic) is further agreed however there shall be allowed by the Purchaser in favour of the Vendor an amount of $30.00 per cubic metre of soil (excluding rock) removed from the Property representing the number of cubic metres within the area where the carpark is being excavated. In other words the Purchaser is compensating the Vendor for the amount of excavation it would otherwise have been required to carry out for the purpose of excavating the carpark and the Vendor is only to be responsible for that part of the excavation which is not within the carpark area. In the event there is any dispute as to the amount of such area, such area shall be decided by a surveyor and/or quantity surveyor by the President of the Institution of Surveyors (NSW) Inc. 8 The plans, referred to in Special Condition 32.1, as having been prepared by Insite, showed a building of eight units, each with three stories above ground level, with a carpark under the units below ground level. Each unit was shown as being associated with a "landscaped area" between the building and the boundary of the site. 9 On 24th February 1998, the Marrickville Council gave notice to the defendant of its determination of the relevant development application, by the granting of a Deferred Commencement Consent pursuant to s.91AA of the Environmental Planning & Assessment Act 1979. The notice stated that the consent would not operate and might not be acted upon until the Council or its delegate was satisfied as to certain matters, including: 2. The construction of buildings and any remediation works shall not commence until: (i) The site has been assessed in accordance with the Australian and New Zealand Guidelines For The Assessment And Management Of Contaminated Sites, published by the Australian and New Zealand Environmental Council and National Health and Medical Research Council 1992 (ANZECC & NHMRC guidelines), to determine whether remediation works are required. (ii) The assessment report and remediation plan (where remediation works are required) have been submitted to and approved by Council. (a) Where the assessment report recommends that no remediation works are required for the site: (i) An Independent Review, verifying all works carried out by the primary consultant and being prepared by an Independent Environmental Auditor of Contaminated Sites recognised by the Environment Protection Authority or alternatively, (ii) An Independent Review, verifying all works carried out by the primary consultant and being prepared by the Environment Protection Authority, shall be submitted to Council's satisfaction. (b) Where remediation works are required for the site: (i) The Environmental Auditor of Contaminated Sites' final remediation validation report, stating that the site has been assessed and remediated in accordance with the ANZECC & NHMRC guidelines: (ii) (a) An Independent Review, verifying all works carried by the primary consultant and being prepared by an Independent Environmental Auditor of Contaminated Sites recognised by the Environment Protection Authority shall be submitted to Council's satisfaction or alternatively, (b) An Independent Review, verifying all works carried out by the primary consultant and being prepared by the Environment Protection Authority, shall be submitted to Council's satisfaction prior to (occupation of the site/any construction works being carried out on the site). Note : 1. The person acting on this consent being responsible to inform Council of the elected independent review process prior to the commencement of any assessment or remediation works. 2. If the independent review is elected to be carried out by a consultant and not the Environment Protection Authority, such consultant's services will be at the cost of the developer. Reason : To ensure that the land is suitable for its intended purpose and to this end, prevent the occurrence of a health hazard and the spread of contamination. 10 On 12th May 1998, it appears that test bores drilled by Douglas Partners, who had been engaged by the proposed builders for the plaintiffs, namely Prime Constructions Pty. Limited ("Prime"), to advise on geotechnical matters, disclosed asbestos fragments in the site. It appears that this became known on that day to Mr. Hamilton, the project manager for Prime. 11 The settlement of the purchase took place on 15th May 1998. It appears that $96,000.00 of the purchase price was held in the trust account of the defendant's solicitors as security for performance of Special Condition 35. 12 On the same day, Prime entered into a building contract with each of the plaintiffs. The most relevant provisions of this contract appear in clauses 1, 9 and 12. The relevant parts of those clauses are as follows: 1. The contractor warrants that as the date of this contract, the contract price is based upon a site inspection undertaken by or on behalf of the contractor and includes all matters including equipment the could be reasonably expected to be necessary for the completion of the work covered by this contract. The contract price may only be adjusted after the date of contract in accordance with this contract. ... 9. The contract price includes for items of work which were not reasonably foreseen at the time of entering into this contract. A Provision Sum of $10,120.00 has been allowed to cover the potential risk of these expenses. The contractor warrants that the provisional sum has been estimated with reasonable care and skill and in the light of information available at the date of this contract. This provision does not include for costs of effects arising from events known as Force Majuere. The contractor further warrants that he shall bear the risk of any cost increase which may exceed the Provisional Sum allowance. This will be known as the upper cost limit for Provisional Sums. The contractor will be obliged to demonstrate to the owner's financier an entitlement and the basis of any cost associated with respect to the Provisional sum allowance. The contract price will be reduced by any residual amount which remains unexpended from the Provisional sum at the end of the contract. The contractor will advise the owner of any claims made against the provision. ... 12. The work to be done or materials used under this contract may be varied: ... due to a requirement of a council or other statutory authority relating to the work, if at the date of this contract such requirement could not reasonably have been foreseen by the contractor; but any costs associated with variations requested by the contractor or due to the requirement of a council or statutory authority shall be dealt with as provided in Clause 9 of this agreement covering Provisional Sums. 13 The principal of Prime was also the principal of one of the plaintiff purchasers, namely the second plaintiff, which had a five-eighth share in the project. 14 In June 1998, a report was prepared by Gutteridge Haskins & Davey Pty. Limited ("GHD") of the results of what they called a Stage 2 Detailed Site Investigation. The report stated the assessment criteria as being based on a proposal to develop the site for medium density residential purposes, with eight townhouse-style apartments being constructed, and with concrete pavements completely covering the site. The report referred to the drilling of bore holes; and it concluded that the site could safely be used for the proposed medium density residential purposes once an underground storage tank (a UST) had been removed. The report contained no reference to asbestos, except in the log of bore hole 4, where there was reference to "some minor amounts of compressed fibrous sheeting (may contain asbestos)". 15 On 12th August 1998, Mr. Harwood, an accredited contaminated sites auditor, signed a site audit statement form, which recorded the viewing of the GHD report and two other documents, and which certified that the site was suitable for use inter alia for "residential with minimal opportunity for soil access, including units". It did not certify that the site was suitable for another use specified on the form, namely "residential with accessible soil, including garden (minimal home-grown produce contributing less than 10% fruit and vegetable intake), excluding poultry". 16 On 25th August 1998, the Council sent a letter to the defendant indicating satisfaction as to the matters referred to in Part A of the Development Consent, which included the paragraph 2 set out earlier in this judgment. The letter was in the following terms: I refer to Development Application No.475/97 for consent to erect eight (8) x three (3) bedroom townhouses with off-street parking for ten (10) vehicles and to strata subdivide the building into eight (8) lots notified to you by Determination No.17516 dated 24 February 1998. The Council is satisfied as to the matters referred to in Part A of the Determination. Accordingly, the consent operates from 25 August 1998 subject to the conditions set out in Part B of the Determination. This Consent will lapse unless the proposed development is commenced in accordance with Section 99 of the Act. Please address any enquiries concerning this matter to the Development and Environmental Services Division of the Council. 17 On 28th August 1998, Day Dockrill wrote to Grogan & Webb, referring to the money held back in Day Dockrill's trust account following settlement, and asserting "I assume it is in order to disburse the funds which I intend doing this afternoon". 18 On 1st September 1998, Grogan & Webb wrote to Day Dockrill, indicating that their clients had no objection to the release of $75,000.00, but did object to the release of $25,000.00 (perhaps this should be $21,000.00, as the total originally retained appears to have been $96,000.00). 19 On 7th October 1998, the Council approved the building application in respect of the development; and the following day, work commenced on the site. On that day, the excavators uncovered quantities of asbestos, and Mr. Hamilton contacted Douglas Partners, and arranged with them to carry out testing and to report to Prime in relation to contamination on the site. 20 Over the following days, Mr. Hamilton contacted the Environmental Protection Agency ("EPA") to ascertain its requirements and procedures to decontaminate the site. 21 On 12th October 1998, Grogan & Webb wrote to the defendant, care of Day Dockrill, a letter in the following terms: As you are aware we act on behalf of Combined Development Group Pty Ltd and the purchasers of the above property. It was a term of the contract by which our clients purchased the above property that: "The vendor agrees that it shall following Completion carry out such work as is required to decontaminate the Property to the satisfaction of the Council." We are instructed by our clients that: (a) despite Council advising on 25 August 1998 that the property was free from contamination; (b) on or about Thursday 8 October 1998 our clients commenced excavation work on the property pursuant to the building approval issued by Council; (c) during the course of excavation substantial amounts of asbestos were located on the site. Our clients require a meeting with Council, all experts who reported on decontamination and yourselves as soon as possible. Our clients believe that the substantial amounts of asbestos located on the site is evidence of a clear breach of the clause of the contract referred to above. We require you to take whatever steps are necessary to remove all contamination from the site including the asbestos as a matter of urgency. If some suitable arrangement for removal of the asbestos is not reached with our clients within 7 days of the date of this letter we are instructed that our clients will remove the contamination themselves and look to recover all costs and expenses associated with such removal from you. We look forward to hearing from you as to a suitable meeting. On the same day, Grogan & Webb also wrote to Marrickville Council a letter, which began with the same four paragraphs as the letter to the defendant, and then continued: Please take notice that in the event that any costs or expenses are incurred by our clients as a result of contamination of the site, our clients will look to recover such costs and expenses from Council. We await your advice as to a suitable meeting. 22 On 15th October 1998, Day Dockrill replied to Grogan & Webb in the following terms: We refer to your letter dated the 12 October, 1998. Our client believes it has complied with special condition 35 of the Contract. We note as per special condition 35 and as per letter handed over on completion dated 15 May, 1998 our clients have provided you with a letter from the Council confirming that the Council is satisfied that Deferred Commencement Consent Condition No: 2 in Determination 17516 dated 24 February, 1998 had been satisfied. Our clients arranged for the various contamination reports from independent reputable consultants to be carried out to supply to the Council so that the Council would issue the letter. We assume you forwarded a copy of your letter to us to Gutteridge Haskins & Davey Pty Limited ("GHD") and we enclose a copy of a letter GHD has sent to our client. Any proceedings taken by you for recovery of any further monies will be strenuously defended by our client. 23 On 20th October 1998, Grogan & Webb wrote back to Day Dockrill in the following terms: We refer to your letter dated 15 October 1998 and advise we are instructed to reply as follows: 1. Our client will now attend to the removal of the asbestos on the site. 2. In the event that our client suffers loss and damage in relation to these costs we are instructed that proceedings will be commenced. 24 On 21st October 1998, solicitors acting for the Council wrote to Grogan & Webb denying liability. 25 On 20th October 1998, Mr. Hamilton spoke to Mr. Theil, the Council's environmental officer, and asked for copies of the reports received by the Council; and he also spoke to Mr. Toohey, the Council's manager of monitoring services, and asked for assistance in relation to procedures for cleaning the site. Neither of these Council officers would then provide information, referring to the claim made against the Council. 26 On 26th October 1998, Mr. Hamilton had a further conversation with Mr. Theil, in which Mr. Theil said words to the effect "The Council's position in relation to the release of the reports has not changed, but as asbestos has now been found you must act appropriately or the site will be tagged". 27 On 27th October 1998, Mr. Nash of Douglas Partners attended the site, and pits were excavated and samples taken. Douglas Partners recommended removal of asbestos from the site: this recommendation is set out in a report by Douglas Partners dated 16th November 1998. 28 On 5th November 1998, Mr. Hamilton applied to the EPA for consent to dispose of contaminated waste; and these consents were finalised on 30th November 1998. 29 On 27th November 1998, the Council's solicitors wrote to Grogan & Webb a letter in the following terms: We refer to our letter dated 30 October 1998. We received instructions from the Council yesterday as follows: 1. The Council was not aware of condition 35 of the Contract for Sale between the former owner of the Property and your client requiring the former owner to decontaminate the Property to the satisfaction of the Council following completion of the contract. 2. The Council agrees to providing your client with access to contamination and remediation reports and related documents and correspondence held by the Council relating to the Development Application No. 475/97 relating to the Propoerty (sic) determined by the Council on 24 February 1998 (Determination No. 17516). With reference to your letter to the Council of 20 October 1998, Council officers wish to have a meeting with your client to discuss the removal of asbestos contamination on the Property. We understand that the asbestos decontamination works may occur next week. Now that the Council is aware of the presence of asbestos on the Property, the Council will need to consider its regulatory functions relating to this matter. The Council prefers that no asbestos decontamination works occur on the Property until the requested meeting with your client has taken place. Please contact the Council's Principal Solicitor, Ms Angela Penklis, on telephone 9335 2021 to arrange for inspection of the documents referred to above and to arrange for the meeting referred to above. 30 On 30th November 1998, CDG on behalf of the plaintiffs instructed Prime to proceed with the decontamination. 31 On the same day, or possibly on 1st December 1998, there was a meeting on the site which included Mr. Walker, Mr. Hamilton, Neil Cox from the Council, and another Council officer, probably Mr. Theil. At that meeting, it seems that Mr. Theil handed Mr. Hamilton a printed page referring to hazardous waste removal (including asbestos), and stating that such waste should be removed and disposed of in accordance with the requirements of Workcover and the EPA, and with the provisions of a number of statutes set out on the document. It appears that Mr. Theil also said words to the following effect: It is now clear that the site is contaminated. In our view the development accordingly should not proceed. The site will have to be cleaned up by you if you don't want a permanent note attached to your section 149 certificate warning of the presence of contamination. You will need to satisfy the EPA in relation to the clean up. 32 On 8th December 1998, the Council wrote to CDG a letter in the following terms: Following our recent meeting held at Marrickville Council on 30.11.98 we wish to confirm details of our discussions. Combined Development Group has engaged soil consultants Douglas Partners Pty Ltd for soil investigation works associated with asbestos found at the above mentioned site. Supervision of the removal and validation of the site is also to be conducted by Douglas Partners. Thank you for the copy of the plan prepared by Douglas Partners for remediation of the asbestos contaminated soil on the site. It is understood Council will also be provided with the validation report upon completion of the remediation. Enviro Science has been commissioned to act as site auditors for the investigation. At the completion of the investigation it is understood Council will be provided with a copy of a Site Audit Statement showing the land is suitable for its intended use. For further information in relation to this matter please contact Mr Geoff Thiel at Marrickville Council on 9335-2000. 33 Prime proceeded to carry out the decontamination of the site, from early December 1998 to 5th February 1999. It made a claim on the plaintiffs in relation to this work, amounting to $201,553.00 for the decontamination work itself, $163,302.00 arising from delay in proceeding with the building works between 8th October 1998 and 5th February 1999, and $35,598.00 in respect of rise and fall on the cost of the contract, also based on the same period of delay. The plaintiffs claim these amounts as damages; and they also claim an amount of approximately $3,000.00 paid to HLA Enviro Sciences Pty. Limited, and interest costs occasioned to the plaintiffs by the delay to which I have referred, totalling $32,823.77. 34 The plaintiffs paid the amounts claimed by Prime, after getting legal advice to the effect that the builder was entitled to be paid these amounts. 35 The only evidence led by the defendant in the case was evidence from Dr. Swane, an expert in relation to decontamination of sites. Dr. Swane took the view that the proposed development of the site was appropriately regarded as a use for "residential with minimal opportunity for soil access, including units"; but he agreed with the plaintiff's expert Mr. Nash that, as at 12th August 1998, there would have needed to be further investigation concerning asbestos before the site could properly have been certified as suitable for that use. However, he took the view that, asbestos having been discovered, the site could have been appropriately decontaminated for that use by removing the top one metre of areas where asbestos was found, and replacing that with clean soil. Even accepting that there was to be access to the soil, that is, that there was not to be concrete paving preventing any access to the soil, this method would still be sufficient, at least provided some barrier was placed over the site after removal of the top one metre and before introduction of the one metre of clean soil. Dr. Swane expressed the view that the cost of this method would have been around $60,000.00. ISSUES 36 The central issue in the case concerned the true construction of Special Condition 35 of the Contract for Sale; and associated with this, there was the question of what was meant by the satisfaction of the Council. 37 The other main issue in the case concerned the question, if breach was found, what, if any, damages were recoverable in respect of that breach? This in turn required consideration, firstly, of whether the plaintiffs were liable to pay the builder the amounts that the builder claimed, and secondly, questions of quantum of damages generally. 38 The questions associated with the construction of Special Condition 35, and what amounted to satisfaction of the Council, needed to be considered in the light of the relevant legislative provisions, namely ss.90, 91 and 91AA of the Environmental Planning & Assessment Act, as they existed prior to 1st July 1998. The most relevant provisions were s.90(1)(g), s.91(3), (3A) and (3B), and the whole of s.91AA. Those provisions at the relevant time were as follows: 90(1) In determining a development application, a consent authority shall take into consideration such of the following matters as are of relevance to the development the subject of that development application: ... (g) whether the land to which that development application relates is unsuitable for that development by reason of its being, or being likely to be, subject to flooding, tidal inundation, subsidence, slip or bush fire or to any other risk, ... (3) A condition may be imposed for the purposes of subsection (1) if it: (a) relates to any matter referred to in section 90 (1) of relevance to the development the subject of the consent, (b) requires the modification or surrender of a consent granted under this Act or a right conferred by Division 2 in relation to the land to which the development application relates, (c) requires the modification or cessation of development (including the removal of buildings and works used in connection with that development) carried out on land (whether or not being land to which the development application relates), (d) limits the period during which development may be carried out in accordance with the consent so granted, (e) requires the removal of buildings and works (or any part thereof) at the expiration of the period referred to in paragraph (d), (f) requires the carrying out of works (whether or not being works on land to which the application relates) relating to any matter referred to in section 90 (1) applicable to the development the subject of the consent, (g) modifies details of the development the subject of the development application, or (h) is authorised to be imposed under section 91AA, 91AB or 94. (3A) A consent may be granted subject to a condition that a specified aspect of the development that is ancillary to the core purpose of the development is to be carried out to the satisfaction of the consent authority or a person specified by the consent authority. (3B) A consent may be granted subject to a condition expressed in a manner that identifies both of the following: (a) one or more express outcomes or objectives that the development or a specified part or aspect of the development must achieve, (b) clear criteria against which achievement of the outcome or objective must be assessed. The condition may specify the means by which the outcome or objective may be achieved. 91AA(1) A development consent may be granted subject to a condition that the consent is not to operate until the applicant satisfies the consent authority as to any matter specified in the condition. Nothing in this Act prevents a person from doing such things as may be necessary to comply with the condition. (2) Such a consent must be clearly identified as a "deferred commencement" consent (whether by the use of that expression or by reference to this section or otherwise). (3) A "deferred commencement" consent must clearly distinguish conditions concerning matters as to which the consent authority must be satisfied before the consent can operate from any other conditions. (4) A consent authority may specify the period in which the applicant must produce evidence to the consent authority sufficient to enable it to be satisfied as to those matters. (5) The applicant may produce evidence to the consent authority sufficient to enable it to be satisfied as to those matters and, if the consent authority has specified a period for the purpose, the evidence must be produced within that period. (6) If the applicant produces evidence in accordance with this section, the consent authority must notify the applicant whether or not it is satisfied as to the relevant matters. If the consent authority has not notified the applicant within the period of 28 days after the applicant's evidence is produced to it, the consent authority is, for the purposes only of section 97, taken to have notified the applicant that it is not satisfied as to those matters on the date on which that period expires. SUBMISSIONS 39 Mr. Coles QC for the plaintiffs submitted that the object and purpose of the contract was to transfer to the purchasers title to land on which there could be built eight townhouses, which had been designed. Clause 32 contained a pre-completion obligation upon the vendor to obtain a development consent concerning plans, which included an underground carpark and landscaped areas, so that the land was available for construction of the development set out in these plans. Clause 35 was a post-completion obligation, undertaken with reference to a report which indicated inter alia that there was fill on the site which might be contaminated, and in respect of which investigation was required. The object of the contract could not be established unless the site was decontaminated; and it is common ground that in fact the site was contaminated. 40 At the date of the contract, there was no development approval, and there was nothing to indicate that the approval, when it came, would be a deferred commencement consent. In those circumstances, Mr. Coles submitted, the mere indication by the Council that it was satisfied for the purposes of the deferred commencement consent did not necessarily satisfy cl.35. In any event, what happened at that time was not satisfaction of the Council for the purposes of cl.35: that satisfaction must be rationally based on proper considerations, rather than being contrary to the Council's own condition, and based on wrong information. 41 Mr. Coles submitted that the words "to the satisfaction of the Council" should be construed as giving added protection to the party in whose favour the promise was made. Clause 35 included a promise to decontaminate; and clear words were needed to take away that obligation. In substance, the clause contained a double obligation: to decontaminate, and to do so to the satisfaction of the Council. In those circumstances, satisfaction of the Council, if it occurred, was not conclusive unless the language made clear that this should be so. Mr. Coles referred me to Newton Abbot Development Co. Limited v. Stockman Brothers (1931) 47 TLR 616; Sleigh v. Tyser (1900) 2 QB 333; Petrofina SA of Brussels v. Compagnia Italiana Trasporto Olii Minerali of Genoa (1937) 53 Ll.R. 650; Billyack v. Leyland Construction Co. Limited (1968) 1 WLR 471; and National Coal Board v. William Neill & Son (St.Helen's) Limited (1985) 1 QB 300. 42 Mr. Coles submitted that there was no assumption by the parties that the Council was discharging a particular statutory function; and that if the Council had declined to consider whether or not it was satisfied, this would not do away with the bargain between the parties. 43 Turning to the extent of the work required, Mr. Nash oversaw the work, and his evidence was that what was removed was necessary to decontaminate the site. Mr. Coles submitted that Dr. Swane's evidence, until cross-examination, was on the assumption that the whole site was to be paved over; and that his adherence to his conclusions when this assumption was displaced was not convincing. In any event, his only criticism of Mr. Nash was that Mr. Nash was too conservative; and this did not mean that Mr. Nash's advice and the plaintiffs acting on that advice was other than reasonable. It was sufficient that the plaintiffs had acted on the advice of competent advisers and chosen the course they were advised was necessary; and it was not shown that any unreasonable course had been adopted: see Lodge Holes Colliery Co. Limited v. Mayor of Wednesbury (1908) AC 323 at 325; The Board of Governors of the Hospital for Sick Children v. McLaughlin & Harvey PLC (1990) 6 Con.LJ 245. 44 Mr. Hale SC for the defendant submitted that the contract had to be construed having regard to the circumstance that every site in the metropolitan area, and particularly inner city areas like Camperdown, will be contaminated to a greater or lesser extent; and acceptable levels of contamination had to be assessed relative to the use or proposed use of the particular site. The price in the contract reflected the value of land capable of supporting a development of eight townhouses; although all that was required to satisfy cl.32.1 was Council consent to plans which were "substantially in accordance" with the plans referred to in the contract. The parties knew that there was a potential difficulty in relation to contamination, and therefore that the Council might impose conditions on its development consent relating to the question of contamination. There were various ways in which the Council could have done this, pursuant to s.90(1)(g), s.91(3), (3A) and (3B) and s.91AA. What was contemplated by cl.35 was that the Council must be satisfied, in its consent authority role, in relation to whatever it condition might impose pursuant to one or more of those provisions. 45 Accordingly, Mr. Hale submitted, at the time of the contract it was likely that the Council would require to be satisfied in relation to contamination; and once it was satisfied, the consent would operate and be irrevocable. The plaintiffs' submissions, on the contrary, required that the Council have some roving role to determine from time to time whether or not it was satisfied. This was contrary to the role of the Council: see Shanahan v. Strathfield Municipal Council (1973) 2 NSWLR 740; Auburn Municipal Council v. Szabo (1971) 67 LGRA 427; and Mison v. Randwick Municipal Council (1991) 23 NSWLR 734. 46 Condition 2 of the Deferred Development Consent required an assessment to determine whether remediation works were required; and then an independent review by an environmental auditor. The assessment was carried out by GHD, and it recommended the removal of the UST, whereupon the site would be safe for the proposed use. That decontamination work was carried out, and this was followed by Mr. Harwood's audit. The Council's letter of 25th August had statutory status under s.91AA(6), with the result that the consent became fully operative. From that time on, Mr. Hale submitted, the site had the full benefit of the development consent, which was irrevocable except in the circumstance of a party approaching the Land & Environment Court. 47 Mr. Hale submitted that whereas the Council did have a regulatory function in relation to the development consent and its conditions (cf. Finlayson v. Armidale City Council (1997) 98 LGERA 119), thereafter it had no regulatory functions, notwithstanding what was asserted in the letter dated 27th November 1998 from the Council's solicitors. At that stage, the only relevant regulative authority was the EPA, which had functions, for example, under the Contaminated Land Management Act 1997, ss.21 and 23. The Council had to make its determination in relation to the development consent on the information before it; and once its satisfaction had been indicated, nothing could prevent the developer taking advantage of that consent. 48 Mr. Hale submitted that cl.35 had to be understood in the context of the grant of development consent, not as making the Council an independent arbiter. Any alternative approach would involve uncertainty as to the criteria for decontamination: there could not be 100% decontamination, and there could be different requirements depending upon the evolution of the purchasers' design. Certainly, conversations with Council officers could not amount to satisfaction or non-satisfaction of the Council. The unreasonableness of the contrary interpretation counted heavily against it: see Wickman Tools v. Schuler AG (1974) AC 235 at 251. 49 Next, Mr. Hale submitted that the plaintiff's claim for damages depended upon making out an anticipatory breach of contract. At worst, the defendant in the correspondence in October 1998 put forward a reasonable position, based on its construction of the contract; and in those circumstances, repudiation would not be inferred: see Ross T. Smyth & Co. v. T.D. Bailey (1940) 3 AllER 60; Dainford Limited v. Smith (1985) 155 CLR 342; Carter, Breach of Contract, 2nd Ed., pp.277ff. 50 Next, Mr. Hale submitted that the plaintiffs were not liable to pay the builder's claims in respect of the decontamination work. At the time the building contract was entered into, the builder knew about the presence of asbestos on the site, although it did not know the extent of the contamination. Accordingly, the work required to remove asbestos was reasonably expected and foreseen within cls.1 and 9; and even if it was not, cl.9 imposed a ceiling of $10,120.00 on what the builder could claim. In so far as it might be suggested that a variation was involved, the relevant part of the variation clause, cl.12, referred back to cl.9. Mr. Hale referred me to British Westinghouse Electric & Manufacturing Co. Limited v. Underground Electric Railways Company of London Limited (1912) AC 673; and TCN Channel 9 v. Hayden Enterprises (1989) 16 NSWLR 130; and he submitted that, in paying the builder, the plaintiffs had not taken reasonable steps to mitigate their damages. 51 On the quantum of damages, Mr. Hale referred to Evans v. Balog (1976) 1 NSWLR 36, and submitted that, prima facie, the measure of damages was the difference in value of the site, with the vendor's obligation performed, from that without that obligation performed. Had the works proposed by Dr. Swane been carried out, there would have been no difference in value; so the plaintiffs cannot recover more than the cost of those works. There was no suggestion that excavation to remove contaminated material, in particular from the carpark, was to be paid for by the vendors. The plaintiffs did not inform the defendant of the level of costs being incurred, which were out of all proportion, both to the price under the contract and the amounts discussed as appropriate retention amounts at the time of completion. If any damages were recoverable, they had to relate to what was required to satisfy the Council; and the defendant was deprived of any opportunity to be involved in negotiations with the Council. 52 The damages referable to delay could not be claimed: had the defendant undertaken the remediation work itself after the asbestos problem had been discovered on 8th October 1998, the same delays would still have been involved. As for the remaining claim of around $200,000.00, Dr. Swane's evidence showed that the site could have been decontaminated for about $60,000.00. 53 In reply, Mr. Coles submitted that the reference to satisfaction of the Council was not tied to any particular statutory function that the Council might exercise. It was not necessarily the case that the Council would exercise powers under s.91AA, or s.91(3A), or s.91(3)(f), or any of the other provisions referred to. The absence of any regulatory function by the Council did not mean that the Council would not take an interest; and in fact the Council did subsequently take a lively interest, threatening to tag the site (meaning to place a notation on any subsequent s.149 certificate that might be issued, warning of the presence of asbestos). 54 Mr. Coles submitted that although the builder knew that there were fragments of asbestos, the building contract was entered into on a common assumption that the purchasers' contract with the defendant provided for a clean site, so that the purchasers could not hold the builder to an obligation to clean the site at great expense. At worst for the plaintiffs, they were left in a situation of difficulty when the builder made its claim, and they acted reasonably on Counsel's advice. 55 Finally, Mr. Coles submitted that the defendant's obligation to decontaminate arose on completion of the contract for sale in May 1998, and had to be performed within a reasonable time thereafter; and that reasonable time had well and truly elapsed by August 1998. Accordingly, it was not a case of anticipatory breach, and the defendants were liable for the costs associated with delay as well as the direct costs of decontamination. DECISION 56 I do not accept Mr. Coles' submission that cl.35 in substance contained two obligations, that is, to decontaminate, and also to do so to the satisfaction of the Council. The cases to which he referred were all cases where there was either an express or implied obligation to do something, and in addition, a separate obligation to do something to the satisfaction of a third party. Three of the cases (Newton, Billyack and National Coal) concerned building contracts, in which there was an express or implied promise that the work be done properly and/or in accordance with specifications; and a separate promise that the work be to the satisfaction of either a local Council or the owner's engineer; and it is not surprising that, in each of those cases, it was held that the builder's obligation was not discharged merely because of the satisfaction of the specified person. The other two cases concerned insurance contracts, in which there was an express or implied warranty of seaworthiness, and in addition, a term that some aspect of the ship be approved by the insurer; and again, it is not surprising that the Court held that, if the ship was unseaworthy, the obligation of the insured was not discharged merely because the insured had gained the approval of the insurer to some aspect of the ship. 57 In this case, apart from cl.35 itself, the vendor had no obligation to decontaminate. The extent of an obligation to decontaminate, without more, is not entirely clear: certainly, one hundred percent decontamination is not possible, and the extent of decontamination which would be reasonable is related to the purpose for which a site is to be used. If a contract did contain an unqualified promise to decontaminate, then in my opinion, if a purpose for which the site was to be used was expressly or impliedly given by the contract, then the decontamination would have to be what was adequate for that purpose; and otherwise, the decontamination would have to be to a reasonable extent, having regard to the purposes for which the land might reasonably be expected to be used. In this case, a purpose is implied, namely carrying out the development referred to in cl.32.1, and the use of the land in accordance with that development, when it had been carried out. 58 Because there could be uncertainty as to what would be adequate for that purpose, it is understandable that the satisfaction of a third party, in this case the Council, should be required. And since the contract contains no obligation to decontaminate, apart from the obligation to decontaminate to the satisfaction of the Council, I do not think cl.35 should be read as imposing two distinct obligations. 59 On the other hand, I do not accept Mr. Hale's submission to the effect that the satisfaction of the Council was tied to a particular statutory purpose, and was established once and for all as soon as the Council indicated satisfaction for that purpose. 60 At the time of the contract, it was not clear what statutory function the Council would have in relation to decontamination and the approval of the carrying out of any decontamination. It would have been reasonable to suppose that there would be either some requirement to decontaminate before a development application and/or a building application was approved, or else some condition as to decontamination in the approval of the development application and/or the building application. In the former case, the granting of a development application and/or building application would indicate satisfaction as to decontamination at that stage; while in the latter case, one might expect some appropriate indication from the Council of satisfaction if and when the condition was complied with. In the case of a s.91AA deferred commencement consent, s.91AA(6) requires the Council to notify its satisfaction or lack therof; but there does not seem to be any similar express requirement in relation to a condition imposed under s.91(3)(f) or s.91(3A) or (3B). Section 91(3A) would seem to imply that the Council needs to determine and notify satisfaction; but there seems to be no such implication associated with s.91(3)(f) or s.91(3B). 61 However, if a condition was imposed under s.91(3)(f) requiring decontamination works, then as a practical matter the satisfaction of the Council would certainly be relevant; because otherwise, the Council could, for example, seek an injunction against the development proceeding. The Council would not have a clear statutory function here, but as a practical matter, satisfaction of the Council would be important. In my opinion, satisfaction of that nature is relevant to cl.35: that is, in my opinion, cl.35 is not limited to the exercise of a specific statutory function, but extends to other situations where the satisfaction of the Council has practical significance. 62 If in such a case, the Council imposed a condition under s.91(3)(f) requiring decontamination, and at one stage indicated satisfaction, but then later discovered the condition had not been complied with, then in my opinion, unless the Council was estopped, it could seek an injunction against the development continuing. In my opinion, there is nothing to the contrary in any of the cases referred to by Mr. Hale. 63 Because cl.35 is not limited to the exercise of any specific statutory function, in my opinion it means that the decontamination must be to the satisfaction of the Council in all respects in which satisfaction of the Council is relevant, as a practical matter, to the carrying out of the development contemplated by cl.32.1, An indication of satisfaction at one time would not be conclusive, unless it meant that the satisfaction of the Council thereafter was irrelevant as a practical matter to the carrying out of the development. 64 In this case, the indication of satisfaction given in August 1998 did have a statutory effect under s.91AA, so that the condition of the deferred development consent was satisfied, and there remained no continuing condition in the development consent which required decontamination. Furthermore, the building application was then approved, without there being any condition requiring decontamination. 65 However, the Council still had a role in supervising the building works, and in that regard had a general role in upholding the public interest. As a practical matter, when the Council was made aware of contamination, which had not been disclosed to it at the time it indicated satisfaction, there were steps which the Council could take with a view to ensuring that the development did not proceed unless and until the site was further decontaminated to its satisfaction, inter alia by calling in the EPA and noting contamination on s.149 certificates issued in relation to the land. 66 Again as a practical matter, in my opinion it is plain that the Council, through its officers, was not satisfied as to decontamination of the site as from about 26th October 1998. The fact that this lack of satisfaction was not expressed through any formal process of the Council, and did not involve any specific statutory duty, does not prevent a finding that the Council was not satisfied about decontamination, for the purpose of cl.35. 67 To put this another way: what in my opinion cl.35 required was that the vendor decontaminate the site, so as to satisfy the Council to the extent to which, and so long as, satisfaction of the Council by itself and its officers was relevant as a practical matter to the carrying out of the development contemplated by cl.32. 68 In this case, the vendor did decontaminate the site to the extent of removal of a UST, with the result that the Council was satisfied with decontamination on 25th August 1998; and the Council remained so satisfied until towards the end of October 1998. However, from then on, until the asbestos decontamination was completed, the officers of the Council dealing with the matter on behalf of the Council were plainly not satisfied as to decontamination; and this meant, as a practical matter of substance, that the Council was not satisfied, and also that its non-satisfaction was relevant in a non-trivial way to the continuance and completion and use of the development. 69 In those circumstances, was cl.35 breached, and if so, when and how? 70 In my opinion, there was no breach prior to 8th October 1998, when substantial quantities of asbestos were discovered. Up to that time, the defendant had decontaminated the site to the satisfaction of the Council, and that satisfaction was continuing. However, discovery of asbestos not previously disclosed to the Council meant that the satisfaction of the Council did not continue, so that in my opinion the obligation to satisfy the Council was re-activated. 71 On about 12th October 1998, the defendant was called on to decontaminate the site and it refused. In my opinion, this was both an actual breach, in that the defendant failed to set about and proceed with the decontamination; and also a repudiation, in that the letter of 15th October 1998 did not merely deny any obligation to proceed with decontamination, but went so far as to utterly ignore a request for a meeting. In my opinion, the letter went beyond mere bona fide assertion of a tenable construction of the contract, which, on the cases referred to by Mr. Hale, will not generally amount to repudiation. The intention disclosed by the letter must also be considered in the light of the plain circumstance that urgent action was required, because building works had commenced, and large expense would be caused by delay. 72 An alternative view would be that the defendant's obligation was not re-activated until Council actually became dissatisfied, which occurred at the latest by 26th October 1998. On that approach also, there was in my opinion an actual breach in not carrying out decontamination: it was not suggested by the defendant that it did not carry out decontamination because it was denied the opportunity to do so. In my opinion also, on that approach, there was anticipatory breach in the letter of 15th October 1998. 73 Mr. Coles submitted that the breach in fact occurred much earlier, because the vendor should, within a reasonable time after completion, have decontaminated the site to such a degree as to satisfy the Council and to keep it satisfied for all purposes relevant to the development. He submitted that the fact that the vendor may have acted reasonably, in getting the GHD report and carrying out its recommendations, and in providing Council with the Harwood audit, was not relevant, because the contractual obligation was absolute. 74 There is some force in that submission; but in my opinion, on the true construction of cl.35, there was no actual breach so long as the vendor had decontaminated the site to the satisfaction of the Council at any particular time, and there was no reason to question the Council's continued satisfaction with that decontamination. This view is based on an interpretation of what cl.35 actually required, and not on a view that there was no breach so long as the vendor acted reasonably. 75 Because in my opinion the vendor's breach consisted of failure to further decontaminate once the asbestos had been discovered, the plaintiffs' damages must be limited to the cost of decontamination, and do not extend to damages associated with delay; because the delay which occurred has not been shown to be any different from the delay which would have occurred if the defendant had proceeded to decontaminate the site when the asbestos was discovered. Mr. Hale has put two submissions as to why the defendant should not be liable for the sum of a little over $200,000.00, which the plaintiffs paid the builder to decontaminate the site. Mr. Hale submitted that the plaintiff did not have to pay that amount to the builder, so that the defendant could not be held liable for that loss to the plaintiffs; and that in any event, the reasonable amount for decontamination was the sum of around $60,000.00 given in evidence by Dr. Swane. 76 On the first matter, in my opinion the plaintiffs and the builder Prime knew of cl.35 when the building contract was entered into, and having regard to that context, the plaintiffs could not rely on the building contract to insist that Prime decontaminate the site. Furthermore, in my opinion, the plaintiffs acted reasonably in paying the builder: they obtained legal advice on the matter and acted in accordance with that legal advice. 77 On the second matter, in my opinion the figure of $60,000.00 was calculated on a wrong basis. It does not take into account the additional decontamination necessary in removing and disposing of so much of the asbestos as was situated within the area of the underground carpark, which was in the plans referred to in cl.32 of the contract. Furthermore, again on this aspect also, the plaintiffs acted reasonably, in that they obtained advice from Douglas Partners and acted in accordance with it; and even if it might have been possible to satisfy the Council with some lesser work, cases such as Lodge Holes and The Hospital for Sick Children, referred to by Mr. Coles, indicate that the plaintiffs are entitled to the amounts which they actually paid their builder, provided they acted reasonably in doing so. 78 For those reasons, in my opinion the plaintiffs are entitled to damages of $201,553.00, plus interest from the time of payment of the builder. As regards the $3,000.00 paid to HLA Enviro Sciences Pty. Limited, it appears that they were commissioned to act as site auditors, and to provide to the Council a site audit statement when the asbestos was removed. I believe it follows from my reasons that the plaintiffs are entitled to this amount also. Subject to any particular circumstances that may be drawn to my attention, and any submissions that might be made, I expect that I would order the defendant to pay the plaintiffs' costs of the proceedings. *********** Last Modified: 09/26/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.