Assafiri v The Shell Company of Australia Limited - [2010] NSWSC 1058

No judgment structure available for this case.

CITATION: Assafiri v The Shell Company of Australia Limited [2010] NSWSC 1058

HEARING DATE(S): 16/08/10, 17/08/10, 18/08/10, 19/08/10, 23/09/10, 24/08/10, 25/08/10, 26/08/10

JUDGMENT DATE :
23 September 2010

JURISDICTION: Equity Division
Commercial List

JUDGMENT OF: McDougall J at 1

DECISION: Mr Assafiri is entitled to damages for misleading or deceptive conduct and breach of contract, calculated in the manner set out at [217], [265] and [272].
Parties to bring in short minutes of order.

CATCHWORDS: CONTRACTS – construction of lease – where lease required lessee to deliver up land free of all improvements and to remediate land so that it could be put to its highest and best use – whether ‘highest and best use then permitted under the zoning of the land’ includes a lawful existing use – whether it includes potential attribute of subfloor excavation or basement – what was ‘highest and best use’ within meaning of lease – whether land was in condition such that lessee sufficiently complied with obligations under lease or later agreement – whether lessee provided lessor with independent expert certificate that lessee had complied with obligations under lease – whether any negligent misrepresentations made. - TRADE PRACTICES – whether lessee engaged in misleading or deceptive conduct – Trade Practices Act 1874 s 52. - DAMAGES – whether damages recoverable for misleading or deceptive conduct – whether damages recoverable for negligent misrepresentation – whether damages recoverable in respect of any breach of lease or later agreement – whether lessor failed to mitigate loss – remoteness of loss – nature and amount of any loss and damage suffered.

LEGISLATION CITED: Contaminated Land Management Act 1997 (NSW)
Environmental Planning and Assessment Act 1979 (NSW)
Environmental Planning and Assessment Regulation 2000 (NSW)
Fairfield Local Environmental Plan 1994
State Environmental Planning Policy No. 55 – Remediation of Land
Uniform Civil Procedure Rules

CATEGORY: Principal judgment

CASES CITED: Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310
Castle Constructions Pty Limited v Fekala Pty Limited [2006] NSWCA 133
Commercial Banking Co of Sydney Ltd v Jalsard Pty Ltd [1973] AC 279
C Czarnikow Ltd v Koufos [1969] 1 AC 350
Hadley v Baxendale (1854) 9 Exch 341North Sydney Municipal Council v Boyts Radio and Electrical Pty Ltd (1989) 16 NSWLR 50
Owners of Dredger Liesbosch v Owners of Steamship Edison [1933] AC 449
Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64
Robophone Facilities Ltd v Blank [1966] 1 WLR 1428
Seven Seas Properties Ltd v Al-Essa (No.2) [1993] 1 WLR 1083
Stuart Pty Limited v Condor Commercial Insulation Pty Limited [2006] NSWCA 334
Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528

TEXTS CITED: Australian Oxford Dictionary, Second Edition, 2004
Oxford English Dictionary

PARTIES: Haissam Assafiri (Plaintiff)
The Shell Company of Australia Limited (Defendant)

FILE NUMBER(S): SC 2007/266565

COUNSEL: F C Corsaro SC / J L Doyle (Plaintiff)
R P L Lancaster SC / N C T Bilinsky (Defendant)

SOLICITORS: Koffels Pty Ltd (Plaintiff)
Allens Arthur Robinson (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

McDOUGALL J

23 September 2010

2007/266565 HAISSAM ASSAFIRI v THE SHELL COMPANY OF AUSTRALIA LIMITED

JUDGMENT

1 HIS HONOUR: These proceedings concern a former service station site on the Hume Highway at Cabramatta (the land). The plaintiff (Mr Assafiri) acquired the land by a contract for sale that was completed on 29 March 2006. Two days earlier, the then proprietor of the land, Wenzhou Pty Limited (Wenzhou) leased the land to the defendant (Shell). The lease, which was for a term of one year, required Shell to deliver up the land free of all its improvements (unless the lessor required otherwise) and, in broad terms, to “remediate” the land so that it could be put to its highest and best use without the need for further environmental remediation. The lease also required Shell to deliver a certificate from an independent expert to the effect that it had remediated the land appropriately.

2 Mr Assafiri claims that Shell has breached each of those obligations. He claims damages for breach of contract, said to be either the value of the benefit of a contract for sale of the land that (he says) was lost because of Shell’s breaches, or, alternatively, the cost of doing the work that, he says, Shell left undone.

The real issues in dispute

3 The parties agreed on the real issues in dispute. I set out (with inconsequential changes) the issues so agreed:

“highest and best use… then permitted under the zoning of the Land”

“highest and best use … then permitted under the zoning of the Land”

“highest and best use (taking into account commercial opportunities then available or reasonably expected to become available to the Landlord) then permitted under the zoning of the Land”

4. Was the Land in such a condition that Shell has sufficiently complied with clause 13.2(c) of the 2006 Lease and/or the June 2007 Agreement?

5. Did Shell provide to Mr Assafiri a certificate from an appropriately qualified independent person that Shell had complied with its obligations under clause 13.2(c) of the 2006 Lease, within the meaning of clause 13.2(d) of the 2006 Lease?

Trade Practices Act 1974

the Statement

)

(b) the “Reporting Representations” (defined in paragraph 24 of the Statement); and

(c) the “Rental Representations” (defined in paragraph 33 of the Statement).

7. Was Shell negligent in making the alleged “Compliance”, “Reporting” and “Rental” Representations?

8. The nature and amount of any loss and damage suffered by Mr Assafiri, in particular:

Trade Practices Act 1974

(b) whether damages are recoverable for any negligent misrepresentation;

(c) whether damages are recoverable in respect of any breach of the 2006 Lease and/or the June 2007 Agreement, in particular:

(i) the rescission by Global Trade Group on 6 July 2007 of a contract for the sale of land dated 16 January 2007;

(ii) the estimated cost of demolition and removal from the land of all improvements then forming part of the land and debris caused by that demolition, within the meaning of clause 13.2(b);

(iii) the estimated cost of remediation, within the meaning of clause 13.2(c);

(iv) the work, if any, to bring the site to the standard required by clause 13.2(c);

(v) the amount of any lost rental.

(d) whether Mr Assafiri has failed to mitigate its loss in respect of the demolition and/or removal of the improvements forming part of the premises, or otherwise.

4 Unfortunately, the closing written submissions for Mr Assafiri did not directly address the issues thus agreed (although the agreed statement of issues had been handed up at the commencement of the third day of hearing, 18 August 2010, and final submissions were not taken until the seventh day of the hearing, 25 August 2010). Indeed, although the written closing submissions for Mr Assafiri did purport, at one point, to refer to the issues, what they referred to was not the agreed statement of issues but some antecedent and incomplete statement.

5 The closing oral submissions for Mr Assafiri were no more focused on the agreed issues. They ranged at large and at length through the various factual and legal issues in the case, but did not do so by reference either to the agreed statement of issues or indeed to any other formulation of the issues, other than of the most basic kind.

6 The primary reason for requiring the parties to litigation to state the real issues in dispute is to focus both the evidence and the submissions on those issues, and to ensure that the Court deals with all issues. That purpose is undermined when parties do not address the issues. The Court’s task is made more difficult, and there is a real risk of injustice to a party because a submission may be accidentally overlooked. Counsel for a party should address the issues in a way that makes it easy for the Court to understand what their client’s submissions are on each issue. It is not appropriate to leave it to the Court to attempt to glean their client’s submissions, on a particular issue, from a morass of relevantly unstructured verbiage.

The witnesses in the case

7 Mr Assafiri gave evidence, as did relevant employees of Shell: Ms Emma Harvey and Mr Stephen Speer. I accept that, in general, each of them sought to give accurate evidence to the best of his or her ability. There are some qualifications to this.

8 I thought that Mr Assafiri sought to downplay what seem to be obvious advantages of the land as a site for a car sales yard. It is located on a heavily trafficked arterial road. It has excellent visibility, particularly for traffic travelling north, but also for traffic travelling south. It has frontage to three streets (the Hume Highway, Liverpool Street and Lovoni Road). It is a large site, with ample space both to display cars for sale and to accommodate customer parking. Nonetheless, Mr Assafiri consistently asserted that the location of a particular piece of land was irrelevant to whether it was suitable for use as a car yard; rather, it was purely a matter for the skill of the operator (see in particular T43-46, and see also T53-54). I do not accept this aspect of Mr Assafiri’s evidence, which I note was inconsistent with a statement his principal affidavit that the land was “a good spot for a caryard”.

9 There were also aspects of Ms Harvey’s evidence that gave me some concern. I refer, in particular, to her evidence concerning the dealings between Shell and URS in relation to the draft URS report (see at [201] and following below). The hesitation with which she gave many of her answers, and the recurrent lack of recollection on various topics, did not sit well with the otherwise straightforward and direct way in which she answered questions. I had the distinct impression that Ms Harvey was aware that full and truthful answers to some of the questions put to her might not assist the cause of her employer, and that this may have contributed to her confessed lack of recollection in some cases.

10 I note also that there were other employees of Shell who were heavily involved in the relevant transactions, but who were not called to give evidence. I refer to this at [211] below. The obvious inference is that their evidence would not have assisted Shell. Whether Ms Harvey resented being left as the sole witness on this issue I do not know; but again, it may help to explain what I perceived as uneasiness on her part, when questioned about the interaction between employees of Shell and employees of URS leading to production of the final version of the URS report.

11 To the extent that there are some discrepancies between the evidence of those witnesses, it is not necessary to dwell in detail on them, or their resolution, because:

(1) a resolution of the discrepancies is not material to a resolution of the issues; and

12 Further, each party called experts: in the fields of environmental science and remediation, town planning and valuation. One of those experts, Mr Rodney Harwood, an expert in the field of environmental remediation called by Shell, was not impressive. Mr Harwood did not seem to me to be someone who sought to give independent expert evidence, or who was prepared to act on his professed acceptance of the fact that his primary duty was to the Court. On the contrary, both listening to Mr Harwood’s evidence as he was cross-examined and reading the transcript of it, he appeared to be very much an advocate for the party by whom he was called. His evidence was replete with evasive and non-responsive answers. Further, on at least one occasion (in the course of questioning on his costings), Mr Harwood suggested that a particular item had been included in his costings, and that there was in existence a document which would show the detail. However, when pressed, he was forced to withdraw from this: “[i]t has been in my head and I have made calculations, but not in a formal sense”. When pressed further, it appeared that the assertion that he had made, and sought to defend through the reference to the non-existent costing document, was wrong (T428.28 –430.7).

13 I do not accept Mr Harwood as an expert witnesses on whose evidence I can rely. To the extent that his evidence conflicts with that of Mr Nickalaos Kariotoglou, the relevant expert called for Mr Assafiri, in general I prefer the evidence of Mr Kariotoglou.

14 Otherwise, to the extent that there are aspects of the evidence of individual experts that I do not accept, I base my conclusions on an analysis of the substance of all the expert evidence in the relevant fields, not on considerations of demeanour or, more generally, “credibility”.

Factual background

15 The land had been used as a service station site for many years until late 1998. For most of that time, Shell owned the land and operated the service station. During 1996, the land was sold to Wenzhou, as were a number of other Shell service station sites.

16 On 27 March 1996, Wenzhou leased the land to Shell, for a term of 10 years with options to renew. That lease (the 1996 lease) included not only options for renewal, but also provision for a “Demolition Option Lease”. Clause 13.4 of the 1996 lease entitled Shell to an option for one year, at the expiration of the 1996 lease or any option taken up under it, for the purpose of carrying out its obligations under cl 13.2 (which clause was in terms that were, if not identical to then not relevantly distinguishable from, cl 13.2 of the lease with which these proceedings are concerned).

17 Shell continued to use the land as a service station until 1998, when the underground fuel tanks were removed.

18 On 21 December 1998, Sydney Motor Market Pty Ltd (SMM), a company of which Mr Assafiri was sole director, made an agreement for sublease with Shell. On 15 May 1999, pursuant to that agreement, Shell granted a sublease of the whole of the land to SMM for a term ending on 26 March 2005 (the sublease).

19 In April 1999, SMM lodged a development application, DA 492/99, with Fairfield City Council (the Council). The Council approved that application, and gave consent to the use of the site as a car sales yard together with appurtenant showrooms and offices (the 1999 consent). The Council did not impose any condition requiring the environmental remediation of the land.

20 SMM took up the consent, and operated a car sales business on and from the land for a number of years. It was common ground between town planning experts called by the parties that the 1999 consent was a valid subsisting consent at all material times up until and including 2007, and that the land thus enjoyed the benefit of existing use rights as a car sales yard (or, in the terms of the Fairfield Local Environmental Plan 1994 (the LEP) to which I refer at [35] and following below), as a “motor show room”.

21 On 2 September 2002, the Council granted consent to SMM to construct a “workshop extension” and erect appropriate signs. Again, the Council did not impose any condition requiring the environmental remediation of the land.

22 SMM vacated the land on 30 July 2005.

23 On 7 March 2006, Shell exercised its option under cl 13.4 of the 1996 lease, to take a one year “Demolition Option Lease”. As a result, Wenzhou and Shell entered into the lease dated 27 March 2006, for a term of one year, referred to at [1] above (the 2006 lease).

24 As I have said, Mr Assafiri became proprietor of the land on 29 March 2006. Before that contract was completed, Mr Assafiri, through his solicitors, informed Wenzhou that he proposed to use the land as a car sales yard. Wenzhou notified Shell that Shell need not demolish and remove its improvements. That advice was important to Shell, because its obligation to demolish and remove improvements under cl 13.2(b) subsisted unless it agreed otherwise with Wenzhou. In the event, Shell decided that the improvements should be removed, and it commenced to perform what it regarded as its obligations under cl 13.2.

25 On 16 January 2007, Mr Assafiri contracted to sell the land to Global Trade Group Pty Ltd (Global). Global is a company associated with a Mr Hilayel, who had been employed by SMM as a sales manager. That contract (the Global contract) is the contract for sale referred to at [2] above. It is not suggested that Shell was notified of the intention to make that contract before it was made; on the contrary, Mr Assafiri accepts by his “pleading” that Shell was first notified of the existence of that contract by letter dated 16 January 2008.

26 Shell did not complete the performance of its obligations under cl 13.2 of the 2006 lease by 26 March 2007, the date of expiry of that lease. After some negotiation Mr Assafiri and Shell made an agreement on about 6 June 2007 (the June 2007 agreement) under which Mr Assafiri permitted Shell to go on the land in order to comply with its obligations under cl 13.2(c). In fact, some remediation work was carried out on the site between April and August 2007, and Shell received reports from Coffey Environments Pty Ltd (Coffey) and URS Australia Pty Ltd (URS) dealing with those works and their results. (Earlier work had been done by a company known as IT Environmental (Australia) Pty Ltd, which either was or became a subsidiary of Coffey. That company produced a report dated 4 August 2005. It is convenient to refer to that company under the “Coffey” name, and to that report as the 2005 Coffey report.)

27 Global rescinded the Global contract by notice dated 6 July 2007. Undoubtedly, it was entitled to do so; Shell did not submit otherwise. I shall return to the reasons for rescission when discussing Mr Assafiri’s claim for damages.

28 On 20 July 2007, Council gave a further development consent to Mr Assafiri, for the erection of a portable temporary office building on the land “and the continued use of the site as a caryard”. Again, the Council did not impose any conditions requiring the (further) environmental remediation of the land.

The critical areas of contest

29 Against that background, and bearing in mind the real issues in dispute as I have set them out above, it is convenient to note that the critical areas of contest between the parties were:

(1) was the highest and best use of the land use as a car sales yard, pursuant to what are said to be existing use rights permitting that (as Shell contended), or use for residential purposes (as Mr Assafiri contended)?

(2) What, if any, remediation of the land is required if it is to be used as a car sales yard?

30 There is no dispute that Shell has not fully complied with its obligations to remove all of its improvements. That is because it has not demolished and removed the concrete slab which covers the site. Shell’s case is (as I have indicated) that the highest and best use of the land is as a car sales yard. It says that for the land to be so used, the slab will need to remain in place. To the extent that there are contaminants in the soil (and that some contaminants remain were not disputed, although there was some dispute as to the extent of residual contamination), Shell contended that the existing slab was an appropriate way to isolate, and thus in effect render harmless, those contaminants.

31 Mr Assafiri contended that the highest and best use of the land was for residential purposes. Thus, he submitted, the slab would have to be removed, and the problem of contamination would need to be addressed.

32 However, Mr Assafiri submitted further that, even if the land were to be used as a car sales yard, it was likely if not inevitable that the slab would have to be removed, in whole or in part. That was so, he submitted, either so that underground structures could be built (for example, some sort of basement for storage) or so that a properly constructed slab, with its necessary footing trenches, could be laid. Thus, Mr Assafiri submitted, even if the land were to be used as a car sales yard, it would be necessary for further remediation to be carried out.

33 It should not be overlooked that it is common ground that the existing slab must be removed if Shell’s obligations under cl 13.2(b) are to be complied with. It is difficult to understand how, in those circumstances, the slab can be regarded as a sufficient way of dealing with the residual contaminants. In effect, Shell’s case is that its own breach of contract (in not demolishing and removing the slab) excuses it from a further breach of contract (in not fully remediating the land in accordance with cl 13.2(c)).

First issue: the proper construction of cl 13.2(c)

Clause 13

34 I commence by setting out the relevant parts of cl 13 of the 2006 lease:

13.1 Tenant to yield up Land

Subject to this clause 13, on the Ending Date the Tenant must yield up the Land to the Landlord.

13.2 Demolition, remediation, etc.

Unless the Landlord and the Tenant agree otherwise, on or before the Ending Date the Tenant must:

(a) remove all the Tenant’s property from the Premises;

(b) demolish and remove from the Land all improvements then forming part of the Premises and any debris caused by that demolition;

(c) carry out any works to the Land necessary to ensure that on the Ending Date the Land is in such a condition that all environmental Laws or Requirements which apply to the Land or to an owner or occupier of the Land are complied with such that no environmental remediation is required for the Land to be used for the highest and best use (taking into account commercial opportunities then available or reasonably expected to become available to the Landlord) then permitted under the zoning of the Land; and

(d) provide to the Landlord a certificate from an appropriately qualified independent person that the Tenant has complied with its obligations under clause 13.2(c). The provision of such a certificate will not relieve the Tenant from its obligations under clause 13.2(c).

13.3 Disposal of improvements

In performing its obligations under clause 13.2, the Tenant may dispose of the improvements then forming part of the Premises for its own benefit. Title to those improvements will vest in the Tenant on them being served from the land.

13.7 Earlier breaches

The expiry or termination of this Lease will not prejudice or affect any of the Landlord’s rights or remedies against the Tenant for an earlier default by the Tenant.

The zoning of the land

35 The zoning of the land is governed by the LEP, an environmental planning instrument made pursuant to the Environmental Planning and Assessment Act 1979 (NSW) (the EPA Act). It was common ground that the land was in a zone known as “zone 2(a) Residential A”. For convenience, I will use the expression “residential 2(a)”.

36 Clause 8 of the LEP stated as follows:

8 Zone objectives and development control table

(d) the purposes for which development is prohibited.

(2) The Council must not grant consent to development on land within a zone unless it is of the opinion that the carrying out of the development would be consistent with one or more of the objectives of that zone.

Development control table

37 Clause 8 was followed by a development control table, which in the usual way dealt with land in each of the zones identified in the LEP. In relation to land in zone 2(a), the LEP stated:

Zone 2 (a) Residential A

2 What is permitted without development consent? Nil.

3 What is permitted only with development consent? Any purpose other than a purpose included in item 2 or 4.

38 The LEP dealt also with “exempt” and “complying” development in cl 6A. I set out that clause:

6A What is exempt and complying development?

(1) Development of minimal environmental impact listed as exempt development in Fairfield Development Control Plan 29—Guidelines for exempt and complying development (as adopted by the Council on 24 August 1999 and amended on 24 June 2003) is exempt development , despite any other provision of this plan.

Fairfield Development Control Plan 29—Guidelines for exempt and complying development

complying development

(3) Development is exempt or complying development only if it complies with the development standards and other requirements applied to the development by Fairfield Development Control Plan 29—Guidelines for exempt and complying development (as adopted by the Council on 24 August 1999 and amended on 24 June 2003).

Fairfield Development Control Plan 29—Guidelines for exempt and complying development

Relevant provisions of the EPA Act

39 The EPA Act contains a number of provisions that are said to be of present relevance. They include ss 76 (which deals with, among other things, exempt development), 76A (which deals with, among other things, complying development), 84A (again dealing with complying development), 106 and 107 (defining and dealing with existing uses) and 109B (dealing with the effect of existing consents). I set out those sections:

76 Development that does not need consent

General

If an environmental planning instrument provides that specified development may be carried out without the need for development consent, a person may carry the development out, in accordance with the instrument, on land to which the provision applies.

Note: Environmental assessment of the development may nevertheless be required under Part 5.

Exempt development

An environmental planning instrument may provide that development of a specified class or description that is of minimal environmental impact is exempt development.

(a) the development may be carried out, in accordance with the instrument, on land to which the provision applies without the need for development consent, unless that land:

Wilderness Act 1987

A provision made under subsection (2) has no effect at any time during which the land is land to which paragraph (a) (i) or (ii) applies.

…

76A Development that needs consent

General

If an environmental planning instrument provides that specified development may not be carried out except with development consent, a person must not carry the development out on land to which the provision applies unless:

Complying development

An environmental planning instrument may provide that development, or a class of development, that can be addressed by specified predetermined development standards is complying development.

(6) A provision under subsection (5) cannot be made:

(ii) the Director-General of the Department of Environment, Climate Change and Water as referred to in section 79B (3), or

Wilderness Act 1987

Heritage Act 1977

(g) so as to apply to land that is identified as an environmentally sensitive area in the environmental planning instrument that makes provision for the complying development.

A provision made under subsection (5) has no effect in relation to development or land at any time during which the development or land is development or land to which paragraph (a)-(g) applies.

84A Carrying out of complying development

(a) the person has been issued with a complying development certificate for the development, and

(ii) any provisions of an environmental planning instrument, development control plan or the regulations that applied to the carrying out of the complying development on that land at the time the complying development certificate was issued.

(4) Repealed.

(5) Nothing in this Division prevents a consent authority from considering and determining a development application for the carrying out of complying development.

…

106 Definition of “existing use”

In this Division, "existing use" means:

(a) the use of a building, work or land for a lawful purpose immediately before the coming into force of an environmental planning instrument which would, but for Division 4A of Part 3 or Division 4 of this Part, have the effect of prohibiting that use, and

…

107 Continuance of and limitations on existing use

(1) Except where expressly provided in this Act, nothing in this Act or an environmental planning instrument prevents the continuance of an existing use.

The parties’ submissions

40 Mr Corsaro of Senior Counsel, who appeared with Mr Doyle and Mr Auld of counsel for Mr Assafiri, submitted that the land was zoned under the LEP, and, accordingly, that it was the LEP that should be understood as stating “the zoning of the Land” for the purposes of cl 13.2(c) of the 2006 lease. Thus, Mr Corsaro submitted, it was necessary to go to the development control table for land in the relevant zone (residential 2(a)) to see what was “permitted”. By reference to the development control table, Mr Corsaro submitted that what was “permitted” was, relevantly, anything other than a prohibited use stated in that table.

41 Since the table identified, among other things, business premises and motor showrooms uses (but not residential use) as prohibited, Mr Corsaro submitted that use as a motor showroom could not be a permitted use.

42 Mr Lancaster of Senior Counsel, who appeared with Mr Bilinsky of counsel for Shell, submitted that one needed to consider cl 13.2(c) in the light of all relevant contextual information. Further, he submitted, since the parties had made reference to “the zoning of the Land”, one should give the word “zoning” the meaning that it had in planning law. That meant, Mr Lancaster submitted, that one could properly have regard to the whole of the statutory and regulatory context dealing with the uses to which land might or might not be put.

43 Mr Lancaster noted that there were circumstances in which land could be used for particular purposes without the need for development consent: that is, circumstances outside the development control table (read in conjunction with cl 8 of the LEP) which allowed uses of land to be carried on lawfully. He referred to exempt development and complying development. He noted, further, that land could lawfully be used for an existing use even though that existing use was said to be a prohibited use under cl 8 and the development control table.

44 Thus, Mr Lancaster submitted, when the parties referred to “use… then permitted under the zoning of the Land”, they should be taken to have intended all uses that, at the termination of the lease, could be carried on lawfully. That conclusion was supported, Mr Lancaster submitted, by the parenthesised words (“(taking into account commercial opportunities then available or reasonably expected to become available to the Landlord)”), which directed attention to what it was that the parties had in contemplation the landlord might do after termination of the lease. Mr Lancaster, whilst acknowledging that the landlord at the date of grant of the lease was Wenzhou, noted that Shell was aware that Mr Assafiri had negotiated with Wenzhou for the purchase of the land. Mr Lancaster pointed to a body of evidence that, he said, indicated that Mr Assafiri had made it known to Shell, before the lease was granted, that he proposed to use the land as a motor showroom after termination of the lease.

45 In reply, Mr Corsaro turned to the definition of “existing use”. He noted that an existing use was one that, but for the statutory preservation effected by s 107, of the EPA Act would be a prohibited use under an extant environmental planning instrument.

46 Mr Corsaro submitted that an existing use could never be a “use… permitted under the zoning of the Land”, simply because it was of necessity a use prohibited by that zoning, the continuation of which was rendered lawful by the relevant provisions of the EPA Act.

47 Further, Mr Corsaro pointed to relevant provisions of the Environmental Planning and Assessment Regulation 2000 (NSW). Part 5 of that Regulation, which was made pursuant to s 108 of the EPA Act, dealt with existing uses. At the time the lease was made, cl 41 of the Regulation (which appears in Part 5) read as follows (cl 41 has since been amended, but it is not necessary to look at the amended form):

41 Certain development allowed

(d) be changed to another use, but only if that other use is a use that may be carried out with or without development consent under the Act.

(2) A use to which an existing use is changed is itself taken to be an existing use for the purposes of the Act and may, subject to this Division, be changed to another use.

48 It followed from cl 41 (as it stood in 2006), Mr Corsaro submitted, that an existing use could be changed to any other use (including one otherwise prohibited) which other use would itself become an existing use. Mr Corsaro submitted that the parties could not have intended the search for highest and best use to encompass not only any current existing use but also other hypothetical uses into which that current existing use could have been transmuted.

Decision

49 I start with the proposition that the construction of cl 13.2(c) requires the Court to take into account the whole of the relevant terms of the 2006 lease, the language used by the parties in the provision that is to be construed, the surrounding circumstances known to the parties and the purpose or object of the transaction. Further, I accept, where the parties have used words that have a specialised or technical meaning known to the law, there is a strong presumption that they intended those words to have that specialised or technical meaning. And if reasonable people in the position of the parties would understand that there was a statutory context within which the contract operated, that context may be taken into account in construing the document. See, generally, Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 at [148] to [177] (Campbell JA, with whom Spigelman CJ agreed).

50 The purpose of the 2006 lease was to give Shell a period of 12 months within which to carry out its obligations under cl 13.2. Those obligations were (to summarise the four paragraphs of cl 13.2):

(1) to remove its property;

(2) to demolish and remove its improvements, and any consequential debris;

(3) to remediate the land to make it fit, without further environmental remediation, to be put to its highest and best use; and

51 In short, Shell was to leave the land cleared and in a state where it could be redeveloped and used to best account, without the need for further money to be spent on removing or neutralising contaminants that resulted from Shell’s occupation and use.

52 Undoubtedly, Wenzhou and Shell knew that the land had been used for some years by Mr Assafiri (through SMM) as a car sales yard. Further, they knew that Mr Assafiri had entered into a contract to buy the land from Wenzhou. Mr Assafiri had stated to Wenzhou, and Wenzhou had stated to Shell, that he did not want the improvements to be demolished (from which it was open to infer that he intended to put the land to use once more as a car sales yard). Shell ultimately did not comply with that request, perhaps because of the terms in which it was framed; nothing turns on this.

53 In those circumstances, to construe the relevant words of cl 13.2(c) (“highest and best use… then permitted under the zoning of the Land”) to exclude use for a purpose for which the incoming purchaser had used the land for a period of about five years, and for which the land had existing use rights, involves an element of commercial absurdity. The parties, had they turned their corporate minds to the point, would have regarded use by Mr Assafiri as a car sales yard as a “commercial opportunity then available or reasonably expected to become available” to him.

54 Although, of course, cl 13.2(c) should be construed having regard to circumstances known to the parties at the commencement of the 2006 lease, the question of highest and best use, and the associated question of available commercial opportunities, fall to be assessed by reference to circumstances as they might exist at the conclusion of the lease. That follows because the highest and best use is what is “then permitted”. The point of time called up by the adverb “then” is the “Ending Date”. Likewise, the commercial opportunities to be assessed are those “then available” to the landlord; and again, the point of time called up is the Ending Date. Wenzhou and Shell, the parties to the 2006 lease, knew when they made it that Mr Assafiri had purchased the reversion, and must have expected that settlement of the sale to him would take place at some time during the term of the 2006 lease. It is thus relevant to take into account what those parties knew, or had they turned their minds to it would have known, of Mr Assafiri’s intentions in relation to the land.

55 In essence, the submission for Mr Assafiri is that the words “then permitted under the zoning of the Land” direct attention to, and only to, the relevant development control table in the LEP. But that table forms part only of a complex system of controls on the use of land. The LEP itself recognises that land may be used for particular purposes without consent (see cl 6A referring to exempt development, which in turn calls up, although not expressly, s 76 of the EPA Act).

56 Again, the LEP operates in a statutory context that recognises, and protects, existing use rights. The LEP expressly refers to existing uses in cl 6A(2)(b).

57 Thus, the parties, if properly advised, would have understood that cl 8 of the LEP (which specifies what it is that the development control table states for each zone to which it refers) is not the sole source of permissibility for the use of land within the City of Fairfield. Why, then, in talking of the highest and best use permitted under the zoning of the land, should they be taken to have been restricting themselves only to uses permitted by cl 8, read in conjunction with the relevant provisions of the development control table? More briefly, why should they be taken to have intended to exclude any other lawful and available use of the land?

58 Clause 8 of the LEP does not in terms speak of “permission” to use land. Rather, it states, among other things, the purposes for which development may be carried out without or with consent, and the purposes for which development “is prohibited”. Mr Corsaro submitted that permission is the antonym of prohibition, so that subcls (2) and (3), in stating the purposes for which development could be carried out with or without consent, stood in opposition to subcl (4), and must therefore be regarded as conveying the concept of permission.

59 I am not sure that the starting point of this submission is correct. But whether or not permission and prohibition are properly to be regarded as antonyms does not seem to me to assist in the resolution of the question of construction. That is because, when one looks at cl 8(1) of the LEP, it is clear that nothing in it gives permission for development to be carried out where that development is of a kind that may only be carried out with development consent (i.e., of a kind falling in the third item of the development control table that applies to the particular land).

60 It may be correct to say that cl 8, read in conjunction with the relevant part of the development control table, gives or conveys permission to use land for a purpose specified in the second item of the development control table – by reference to cl 8(1)(b), a purpose for which development may be carried out without development consent. But that is not the case for a purpose covered by cl 8(1)(c). The permission to carry out development falling into that category comes from the Council or other consent authority, not from the terms of the LEP. At most, the LEP opens the door to, or perhaps more accurately does not close the door to, consent.

61 In short, at least in the context of cl 8 of the LEP and the relevant part of the development control table, the absence of prohibition to carry out certain development cannot be equated with permission to carry out that self-same development.

62 These considerations, and the scheme of the EPA Act to preserve the availability of existing use rights, suggest that a wide construction should be given to the words “highest and best use… then permitted under the zoning of the Land”. They should be taken to refer to uses which may lawfully be carried on either with development consent (where that is necessary) or without it (where, for whatever reason, it is not necessary). That construction seems to me to give proper effect to the commercial purpose of cl 13.2, to take account of the statutory scheme within which the concept of “zoning” of land operates, and to avoid the commercial absurdity of which I spoke earlier. Indeed, it avoids a wider absurdity: namely, excluding from consideration all development that may lawfully be carried on on the land (whether by way of existing use rights, or because it is exempt or complying development, or with consent), and restricts the field of inquiry to some only of those uses: namely, in the context of the development control table, uses that may be carried on if they are the subject of development consent. But in terms of legality, there is no point of distinction between uses that, on this construction, may not be considered and the narrower category of uses that may be considered.

63 The concept of “zoning” is a creature of the EPA Act, and is effected by environmental planning instruments made under the authority of that Act. The EPA Act expressly preserves the continuance of existing uses, notwithstanding that, by definition, they are uses that would otherwise be prohibited by an environmental planning instrument. I see no basis for disregarding the EPA Act as an available source of permission, for the purposes of cl 13.2(c). On the contrary, I think that it is appropriate to construe cl 13.2(c) by taking into account what is, as I have said, the statutory framework by virtue of which the concept of zoning presently exists (and in 2006 existed), and by authority of which environmental planning instruments are (and in 2006 were) made.

64 That approach to construction is facilitated by the parenthesised words in cl 13.2(c). Those words require the search for the highest and best use to take into account commercial opportunities available, or reasonably expected to become available, to the landlord when the lease comes to an end. The opportunity for the landlord to avail himself (in Mr Assafiri’s case) of an existing use right to use the land as a car sales yard is, on any view, a commercial opportunity; and it is common ground that it was an opportunity available to Mr Assafiri on 27 March 2007. It would be absurd if, having taken into account that commercial opportunity in the search for highest and best use, one would then be required to disregard it because it was not “permitted” by the applicable development control table. It would be placing absurdity on absurdity to disregard it for that reason when the relevant absence of permission (and express prohibition) in the development control table was overridden by s 107 of the very Act that gives legal authority to the environmental planning instrument in which the development control table is contained.

65 I do not accept Mr Corsaro’s submission that the effect of the Regulation, in so far as it dealt with existing use rights in 2006, renders the construction for which Shell contended untenable. No doubt, as a matter of theory, under the Regulation as it then stood, one existing use could be converted to another (which by definition would be a use otherwise prohibited under an applicable environmental planning instrument). No doubt, in theory, that would have meant, as at 27 March 2006, that the potential uses to be taken into account were accordingly numerous. However, the exercise of ascertaining the highest and best use was not one to be undertaken at large, or in a vacuum. It was required to be undertaken by reference to, among other things, “commercial opportunities then (i.e., as I have said, at the expiry of the lease) available or reasonably expected to become available to the Landlord”.

66 In other words, the search for highest and best use is limited by two things:

(1) such commercial opportunities as are in fact available to the landlord at the end of the lease; and

67 It is therefore not correct to say that the parties were expected to rummage around among all the prohibited uses set out in the relevant part of the development control table. They were required to consider only so many of those uses as were available or reasonably likely to become available to the Landlord. Clause 13.2(c) contains its own inbuilt limitation on the range of available non-conforming uses to which the existing non-conforming use might be converted.

68 Mr Corsaro relied on the fact that the town planning experts had agreed that “the purposes of a car sales yard would not be permitted under the zone [sic] of the Land”. Whilst I accept that the experts in question are highly qualified, and I respect their opinions on questions within their areas of expertise, the question is not one of expertise but, rather, of construction of the relevant words of cl 13.2(c) according to the principles that I have explained. I do not regard the agreement of the experts as bearing on the resolution of the issue.

69 For those reasons, the first issue should be answered “yes”.

Second issue: basement as an attribute of highest and best use

70 This issue arises because Mr Assafiri has said that, if the land is to be developed and used as a car sales yard, pursuant to the existing use rights, it would be advantageous to have underground storage space. He said that SMM’s business had been plagued by vandalism, and that it would be desirable to have underground facilities, both to hold cars safe overnight and for repair and servicing. Mr Assafiri said that there were car sales yards in the general vicinity that had underground or basement areas. I accept this, although I accept also that such yards are relatively few in number.

The parties’ submissions

71 Mr Corsaro submitted that use of the land as a car sales yard comprehended, or could include, that use facilitated by, or with the benefit of, a basement area. Use with a basement would, he submitted, contribute to, or enhance, the highest and best use of the land.

72 Mr Lancaster submitted that the phrase “highest and best use” referred to the purpose for which development could be carried out, not the means (or physical configuration of the land) by which that development might be carried out. The inclusion (or exclusion) of a basement would not change the use of the land. He relied on the decision of Kirby P in North Sydney Municipal Council v Boyts Radio and Electrical Pty Ltd (1989) 16 NSWLR 50 at 59, where his Honour said that the ascertainment of what was covered by existing use rights required a broad or liberal approach, and “the determination of the appropriate genus which best describes the activities in question”.

Decision

73 In my view, the reference to “highest and best use” is a reference to the purpose of use, not the means by which that purpose is carried out in a particular case. That is clear when one looks at the context (“highest and best use… then permitted under the zoning of the Land”). The development control table in the LEP focuses attention on kinds of use, not the physical means by which those uses are carried out when land is developed. Likewise, in dealing with existing uses, the EPA Act focuses on the kind, or (as Kirby P said) “genus”, of use, not on the precise configuration of the land and improvements.

74 The point is well illustrated by the fact that, as Mr Assafiri said, some car sales yards operate with the benefit of basements and others do not. It cannot be said that those in the former category are used for the purpose of car sales yards and those in the later category are not. They are all so used; but the use is (as one would expect) undertaken in different ways, or using different facilities, from yard to yard.

75 That is not to say that the ability to have a basement is irrelevant. It is something to be taken into account in considering whether Shell complied with its obligations under cl 13.2(c) (issue 4). It is not, however, relevant to classification of use, or ascertainment of the highest and best use.

76 The second issue should be answered “no”.

Third issue: what was the highest and best use of the land as at March 2007?

77 It was common ground between the town planners, and I accept, that the highest and best use should be taken to be the “most likely use of a property which is physically possible, appropriately justified, legally permissible, financial feasible and which results in the highest value of that property”. It was common ground between the parties, and again I accept, that there were only two available alternatives: use as a car sales yard, or use for single dwelling houses.

78 The resolution of this issue therefore turns upon the valuation evidence.

The valuation evidence

79 Mr Peter Dempsey gave evidence for Mr Assafiri. Mr Gregory Windred gave evidence for Shell. Messrs Dempsey and Windred conferred, and produced a joint report. They agreed that, if the land were to be valued for residential use, Mr Dempsey’s valuation of $890,000.00 was “not unreasonable”. However, they disagreed as to the value of the land as a car sales yard.

80 Mr Dempsey did not undertake the task of valuing the land as a car sales yard in his evidence in chief. As he noted in his report dated 26 May 2009, he had been “specifically required to exclude any use that relies on existing use rights as such rights are expressly prohibited under the zoning of the land” (para 42). He formed a view, based on his interpretation of cl 13.2(c) of the 2006 lease, that “the highest and best use of the land is reflected by the highest value arising from the permitted land use” and that “the only permitted” uses are those under the actual zoning of the land being those uses permitted in the 2(a) Residential A zone” (para 44; emphases in original). As was stated in the joint report, he “valued the property as per its prevailing zoning… disregarding the previous car sales yard usage as having been operated under “Existing Use Rights” which had subsequently lapsed (under s 107 of the EPA Act 1979).”

81 Mr Windred did undertake a valuation of the land based on the assumption that it could be used as a car sales yard. On that basis, by reference to what he said were some six comparable sales that he identified and described, Mr Windred derived a value of between $550.00 and $600.00 per square metre, leading to a range of $1,229,800.00 to $1,341,600.00. Mr Windred selected, as a mid–range figure, a rate of $581.40 per square metre, or a total land value of $1,300,000.00.

82 Mr Dempsey replied to Mr Windred’s valuation. He asserted that only one of the six comparable sales identified by Mr Windred was in fact truly comparable. He said, based on that sale, that if the land were to be valued on the basis that it could be used as a car sales yard, it would have a value in the range of $760,000.00 to $805,000.00.

83 Neither valuer relied on the Global contract as evidence of the value of the land. Mr Dempsey had been asked to proceed on the basis that it was an arms’ length sale. However, it became clear, during his cross-examination, that he was not prepared to accept, or act on, that assumption. His reasons for disregarding the assumption were, to put it neutrally, unpersuasive.

84 Mr Dempsey undertook a discounted cash flow (DCF) analysis of the net present value to Mr Assafiri of the amounts that he would be likely to receive pursuant to the Global contract, had it preceded to completion. That analysis was justified because the terms of the Global contract included provisions to the following effect:

(1) that Mr Assafiri would reconstruct on the land buildings equivalent to those that had been there when it was used as a car sales yard by SMM;

(2) that the assumed cost of doing so was $300,000.00, and the assumed time for doing so was six months;

(3) that the purchase price was payable over time; and

85 Mr Dempsey’s DCF analysis showed that, at a discount rate of 8% per annum, the present value of the cash flows under the Global contract, on the assumptions that he identified, was $1,836,000.00 at the date of the contract (16 January 2007).

86 Mr Windred also undertook a DCF analysis of the receivables under the Global contract. He noted that, to move from the result of that DCF analysis to a valuation of the land based on the Global contract, one would need to deduct legal and selling expenses and other costs (including for approvals and consultants); make an allowance for profit and risk (which he put at 15%); make an allowance for holdings costs (which he put at 7% for two years); and make an allowance for “Land Purchasing Costs” (presumably, stamp duty and the like, which he put at 5.5%).

87 On that basis, Mr Windred derived an adjusted net present value of $1,281,547.00. He said, perhaps not surprisingly, that this analysis supported his attribution of value at $1,300,000.00.

88 In my view, if one is to take the Global contract as a comparable sale, it is necessary to make at least some of the adjustments to which Mr Windred referred. Clearly, in assessing the value of a contract that required work to be done and deferred payment of the consideration, one would need to take into account not only the cost of doing that work but also associated costs, and the holding costs for the time that it took for the purchase price to be received. It would also be necessary to take into account selling costs and purchasing costs. It is doubtful whether a profit and risk allowance should be made in the case of an owner–developer in Mr Assafiri’s position (vis-a-vis-Global). If this were not done, the figure derived by Mr Windred would increase by the amount of that allowance, $234,197.00, to $1,515,744.00. That figure is in line with Mr Windred’s evidence that, if one were to compare the receivables under the Global contract with his value of $1,300,000.00, it would be necessary also to add to his figure the estimated value of the improvements that Mr Assafiri was required, by the terms of the Global contract, to construct.

89 Each valuer valued the land in its condition at the time of valuation – that is to say, with no improvements other than the slab. Mr Windred said, in effect, that on the assumption that the improvements would cost $300,000.00 to construct (which was one of the assumptions underlying Mr Dempsey’s DCF analysis), the value of those improvements would feed straight through to the bottom line of his valuation, increasing it to a figure in the order of $1.6 million.

90 However, Mr Windred did not take the Global contract into account among his comparable sales. He said in his report that he was “not aware of whether this Contract was at “arms’ length” and [had] not had direct regard to this contract to this Contract as evidence of value”.

The parties’ submissions

91 In essence, Mr Corsaro and Mr Lancaster each submitted that the valuer called by his client should be preferred. Each criticised aspects of the work done by the other valuer. It is not necessary to set out the detail of those submissions.

Decision

92 I prefer the evidence of Mr Windred to that of Mr Dempsey, to the extent that the two are in conflict. My reasons for doing so can be stated shortly:

(1) Mr Dempsey was specifically asked not to value the land on a basis that relied on existing use rights, and thus his valuation did not enable a comparison of his values, for different uses, to enable a conclusion to be reached as to what, by reference of those values, was the highest and best use of the land in March 2007;

(2) Although Mr Dempsey was asked to assume that the Global contract was a sale at arms’ length, he was not prepared to do so (but could not provide any satisfactory reason for his failure to do so);

(3) when pressed in cross-examination on the Global sale, Mr Dempsey said that it should be disregarded because it was “outside the range” derived from a consideration of the six comparable sales identified by Mr Windred. However, Mr Dempsey had said also that five of those six sales should be disregarded, because they were not properly comparable. When asked how there could be a range of one, Mr Dempsey was unable to give any, let alone any satisfactory, explanation;

(4) further, when confronted with the fact that on this approach there were two comparable sales leading to quite different results, Mr Dempsey was unable to offer any explanation of why he preferred the lower sale to the higher;

(5) on the assumption (made good by Mr Assafiri’s evidence, and in any event one that his solicitors asked Mr Dempsey to make) that the Global contract was an arms’ length sale, the net present value of the cash flows under that contract is much closer to Mr Windred’s value of $1,300,000.00 (adjusted to $1.6 million to take account of the newly built improvements included in the Global contract) than it is to the figure propounded by Mr Dempsey in his report in reply;

(6) more generally, I found Mr Windred’s evidence, both written and oral, more persuasive in its reasoning than Mr Dempsey’s; and

93 Accepting, as I do, Mr Windred’s evidence in preference to that of Mr Dempsey where the two are in conflict, I accept that the value of the land, for use as a car sales yard in March 2007, was approximately $1.3 million.

94 As at March 2007, the land had the benefit of existing use rights as a car sales yard. That had been specifically confirmed by the Council in a letter of 28 December 2006 to Mr Assafiri. In that letter, Mr Mark Stephenson, who was a senior development planner in the employ of the Council, said, of the 1999 consent, that it “was considered operational when construction and occupation were completed and a Construction Certificate and Occupation Certificate issued. Therefore this approval will never lapse and stays with the property forever (i.e. there is no time limit on when you can rebuild)”. That letter appears to reflect the operation of s 109B of the EPA Act. Of course, existing use rights can be lost by abandonment (see sub-ss 107(2)(e),(3) of the EPA Act). But it was not suggested that the existing use rights that apparently underpinned the views set out in the letter of 28 December 2006 had been abandoned as at 27 March 2007. If (a matter not argued, and accordingly one on which I express no view) they have been abandoned since, that is irrelevant.

95 It follows, contrary to the assumption on which Mr Dempsey undertook his valuation, that the exercise of ascertaining highest and best use needed to consider not only use in accordance with the residential 2(a) zoning of the land but also use as a sales car yard pursuant to the existing use rights flowing from the 1999 consent and the activation of that consent by SMM’s use of the site thereafter.

96 On that basis, acceptance of Mr Windred’s value of $1,300,000.00 on the assumption that the land is used as a car sales yard, and comparison of that value to the agreed value of $890,000.00 for use for residential purposes, establishes that the highest and best use of the land as at March 2007 was as a car sales yard. Issue 3 should answered accordingly.

Fourth issue: did Shell comply with its obligations under cl 13.2(c) of the 2006 lease and the June 2007 agreement?

97 If, as I have just concluded is the case, the highest and best use of the land in March 2007 was as a car sales yard, then Shell’s obligations under cl 13.2(c) may be restated as requiring it to:

Carry out any work to the Land necessary to ensure that on the Ending Date the Land is in such a condition that all environmental Laws or Requirements which apply to the Land or to an owner or occupier of the Land are complied with such that no environmental remediation is required for the Land to be used as a car sales yard.

98 However, that obligation is preceded by the obligation set out in cl 13.2(b): to demolish and remove improvements.

99 It follows that the extent of remediation required under cl 13.2(c), although considered in the context of highest and best use as a car sales yard, assumes that Shell’s improvements (including, specifically, the slab) have been demolished and removed.

What work did Shell do?

100 Shell did not remove the slab. It commissioned a company known as ANC Foster Pty Ltd (ANC) to remediate the land, and commissioned Coffey to carry out scientific work, such as testing for contaminants, overseeing the work to be done by ANC and reporting on results.

101 Shell, through Ms Harvey, appears to have assumed that remediation was required to prepare the land for residential use. Mr Corsaro devoted much attention to this understanding, both in his cross-examination of Ms Harvey (and of Mr Speer) and in submissions. I do not understand the relevance of the point. What is relevant is not what Shell thought was required, but what cl 13.2(c) of the 2006 lease required, taking into account what was in fact the highest and best use of the land (in accordance with cl 13.2(c)) as at March 2007. If Shell was wrong in that, it matters not that they attempted (and on any view failed) to remediate the land to a sufficient standard for residential use. Shell is entitled to put its case (as it did) on the basis that the highest and best use of the land was as a car sales yard, and that accordingly what cl 13.2(c) required was remediation to a standard sufficient for that use.

102 The scope of work prepared by ANC provided for the removal and disposal of 80 tonnes, or 33 square metres, of concrete slab and the excavation and remediation of 1000 cubic metres of underlying soil. It was a proposal for remediation by a process known as “landfarming”.

103 To stand back from the detail for a moment: the evidence indicated that remediation could be undertaken in at least three different ways:

(1) by excavating contaminated soil and exposing it to the atmosphere, so that contaminants would leach out (i.e., improving the quality of the soil at the expense of the quality of the atmosphere) – a process known as “landfarming”;

(2) by excavating contaminated soil, taking it away to landfill and replacing it with clean, uncontaminated soil; or

104 The expert evidence accepted that, if the third form of remediation were used, it would be necessary to undertake some form of venting to allow the controlled and safe escape of contaminants; and that an environmental management plan, or EMP, would be needed to ensure that the capping and venting remained effective.

105 The ANC proposal did not contemplate the removal of all of the concrete slab on the land, or the remediation of all the soil that underlay that slab. Ms Harvey’s evidence was that she understood that the slab was to be removed from the site (T264.20). That was always Shell’s intention (T264.35). There was no decision not to do so; that it was not done was “an oversight” (T264.30); Shell “forgot” (T264.38). It is somewhat difficult to reconcile this evidence of corporate forgetfulness with the limited nature of the ANC quotation.

106 By contrast to what was quoted for and done, the development consent that the Council gave to Shell’s works on 13 December 2005 (1695/2005) required the “[d]emolition of all improvements on site including pavements, slabs, an awning and single storey office building”.

107 Coffey carried out testing, and assessed the work done by ANC. It is not necessary to go to the detail of what was done, because it was, effectively, common ground that areas of the land still remain affected by hydrocarbon contaminants, including carcinogenic contaminants. If that were not common ground, then I would so conclude, based on the evidence of Mr Kariotoglou. I note at this point that I consider Mr Kariotoglou to be an expert on whose evidence I can place reliance. He made concessions where it was appropriate to do so, did not seek to maintain points that were clearly unsustainable, and did not appear in any way to be an advocate for Mr Assafiri’s case. By contrast, the equivalent expert called for Shell, Mr Harwood, struck me as unpersuasive, for the reasons I have given at [12] above.

The parties’ submissions

108 Mr Corsaro’s submissions were directed primarily to the case that the highest and best use of the land was for residential purposes. However, he submitted, even if this were incorrect, nonetheless the question of the extent of work required must take into account the starting point set by cl 13.2(b): demolition and removal of all improvements, including the slab.

109 Further, Mr Corsaro submitted, it was not correct to assess the extent of remediation required on the basis of assumptions that any improvements on the land would be a “slab on ground” construction, and would not involve an excavated basement.

110 Thus, Mr Corsaro submitted, remediation was necessary to deal with, and render safe, the full extent of the remaining contamination.

111 Mr Lancaster submitted that there was no need for further remediation. He relied on the fact that, at no stage when the Council gave a consent to the use of the land as a car sales yard, or for associated development, did it require that any environmental remediation works be carried out. As he noted, the combined effect of the Contaminated Land Management Act 1997 (NSW) (the CLM Act) and State Environmental Planning Policy No. 55 – Remediation of Land (SEPP 55) was that the Council was required, as part of the process of considering the relevant development applications, to consider whether any environmental remediation was required. He submitted that the Court should infer that the Council had performed its duty, and had reached a conclusion that no such remediation was required.

112 Further, Mr Lancaster submitted, whilst it might be best practice to prepare an EMP and to cap the land, that was not required. In essence, his submission appeared to be that the existing capping was a sufficient means of control of the remaining contaminants.

113 Finally, Mr Lancaster submitted, it was irrelevant that Mr Assafiri, or a lessee or purchaser from him, might wish to construct a basement.

Decision

114 As I have said, I start with the proposition that assessment of the extent of remediation required, to render the land fit for use as a car sales yard without further remediation, should proceed on the assumption that the existing slab has been demolished.

115 The next stage of the analysis requires recognition of the fact that there are contaminants remaining in the land, and that once the slab is removed (as it should be) there will be no mechanism to control the escape of those contaminants.

116 On that basis alone, it seems to me that some form of remediation is required. That could be achieved by capping (either by using a concrete slab or a clay or synthetic material). It could be achieved by landfarming. Or it could be achieved by excavating, removing and replacing (with clean fill) all contaminated soil.

117 I note, in any event, that the unchallenged evidence of another expert (engineer) called by Mr Assafiri, Mr Art Candarakis, was that the existing slab was not an effective sealant, because of its defective condition. Mr Candarakis was not required for cross-examination. His report included the following observations and comments (which I have paraphrased):

(1) the slab was “severely deteriorated”, there were “numerous holes, cracks and irregularities” some of which were “open to the elements”;

(2) the underlying reactive clay soil was visible through holes in the slab in places;

(3) the slab was not constructed to the current Standard for footings and slabs, whether considered for commercial use or residential use;

(4) that Standard would require footing trenches up to 800mm deep and a slab 100mm deep having regard to the reactive clay soil on the land; the existing slab and footings were “considerably less”;

(5) the deterioration of the slab indicated failure of the subgrade – the foundation soil – beneath the slab;

(6) even if a new building were to be constructed, using even the existing slab, it would be necessary to excavate beneath the slab to a depth of around 500mm to provide for services. That “would necessitate further disruption to the already deteriorated slab”; and

118 I accept that evidence. It confirms, as a matter of fact rather than a matter of construction of cl 13 of the 2006 lease, that the existing slab cannot be regarded as an appropriate mechanism for containment of the contaminants in the land. It also confirms, although this is not the present point, the importance to Mr Assafiri of having Shell comply with its obligations under cl 13.2(b).

119 I do not think that it is appropriate to ignore the fact that Mr Assafiri, a lessee or a purchaser may wish to construct a basement on the site. Shell’s obligation under cl 13.2(c), taking into account the finding I have made as to highest and best use, was to ensure that no further environmental remediation was required for the land to be used as a car sales yard. The use of the verb “ensure” connotes “to make certain”, or “to secure” a result or outcome (see the Australian Oxford Dictionary, Second Edition, 2004). Read as a whole, in my view cl 13.2(c) required Shell to make certain that no further remediation would be required before any reasonable mode of user of the land as a car sales yard could be undertaken. To put it another way, it was not for Shell to dictate the mode of user (or employment) of the land for its highest and best use as a car sales yard.

120 Thus, in my view, the extent of remediation required must take into account the possibility that the user of the land might include the construction and use of a basement, unless that could be said to be unnecessary or unreasonable. In my view, such user cannot be said to be unnecessary or unreasonable. I accept Mr Assafiri’s evidence that a basement would be beneficial to the use of the land as a car sales yard, both to protect vehicles from vandalism when the yard was unoccupied (i.e., outside working hours) and to enable repair works and the like to be carried on separately from the business of selling. It follows that a slab on ground construction, as advocated by Shell and its consultants, would be insufficient; and so would any alternative method of capping.

121 Further, the proposal for capping does not address the problem of migration of contaminants through groundwater. There is some evidence that this has occurred, and that contaminants have migrated from the land to adjacent public land. At one stage, Coffey suggested that further testing of groundwater should be carried out, but Shell (through Ms Harvey) did not authorise this.

233 The rationale for that approach was, as his Lordship said at 355:

234 In the result, their Lordships concluded that damages for loss of profits whilst the mill remained stopped were too remote. In the view of the Court, it was not necessarily foreseeable, from what the defendant had been told, that the mill would be stopped until the replacement shaft was manufactured, delivered and installed.

235 The precise “special circumstance” that would render the defendant liable for loss of profits was, Alderson B said at 356, knowledge that the mill could not operate until the replacement shaft was delivered. That may be contrasted with the finding of what was actually made known, as summarised at [230] above.

236 The rule in Hadley v Baxendale (as it is convenient to call the test laid down by the Court of Exchequer) has been discussed many times, by courts of the highest authority. I do not propose to treat in detail with all the cases in which the rule has been discussed. I do however note that:

(1) in C Czarnikow Ltd v Koufos [1969] 1 AC 350, the House of Lords made it clear that that the rule in Hadley v Baxendale was not authority for the proposition that (to quote Lord Reid at 285) “every type of damage which was reasonably foreseeable by the parties when the contract was made” should fall within one or other limb of the rule; as his Lordship said, “the decision makes it clear that a type of damage which was plainly foreseeable as a real possibility but which would only occur in a small minority of cases cannot… be supposed to have been in the contemplation of the parties”;

(2) to quote once more Lord Reid in Czarnikow at 385, “it is not enough that in fact the plaintiff’s loss was directly caused by the defendant’s breach of contract. … The crucial question is whether, on the information available to the defendant when the contract was made, he should, or the reasonable man in his position would, have realised… that loss of that kind should have been within his contemplation”;

(3) as McHugh JA said in Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 at 365 – 366, “the contemplation test” limits the extent of liability; but it is not necessary for the parties to contemplate either the degree of extent of the loss that was suffered or the precise details of the way in which it was caused; it is sufficient that the parties contemplated “both the general nature of the loss or damage and the general manner of its occurrence”;

(4) the reason that the law does not fasten, on the breaker of contracts, liability for damages that would not have been within the reasonable contemplation of that party at the time of making the contract, is that knowledge of the consequences of breach forms part of the decision whether or not to enter into the contract and, if so, on what terms (see Mason P in Castle Constructions Pty Limited v Fekala Pty Limited [2006] NSWCA 133 at [39]);

(5) the rationale for liability under the second limb of the rule in Hadley v Baxendale is that the fact that a particular kind of damage is considered to have been within the reasonable contemplation of the parties, as the result of breach, at the time the contract was made gives raise to an inference that the defendant impliedly undertook to bear that kind of damage, or “special loss” (those words come from the judgment of Diplock LJ in Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 at 1448); and

Victoria Laundry

237 In a case that is very similar to the present, Gavin Lightman QC, sitting as a deputy High Court judge, considered that the vendor of a leasehold property was not liable in damages to the purchaser for non-completion, where the purchaser had on-sold that property: Seven Seas Properties Ltd v Al-Essa (No.2) [1993] 1 WLR 1083. In that case, the plaintiff, purchaser, on-sold the property to a third party on the very day that it contracted to buy the property from the defendant. The defendant refused to complete. The third party sought damages from the plaintiff, and the plaintiff in turn sought damages from the defendant. It argued that the defendant might reasonably be supposed to have had in contemplation that the plaintiff would on-sell and that, if the plaintiff did so, the defendant’s failure to complete would render the plaintiff liable to damages. Lightman QC held that for the plaintiff to recover damages, it was necessary that the defendant be on notice, at the date of the contract, of the intention of the plaintiff to enter into the contract of on-sale, and that the plaintiff’s ability to complete that contract depended on the defendant’s performance of its contractual obligation to the plaintiff. He said at 1088 that the defendant:

…will only be held to have accepted the risk if he was on notice of the purpose and intent of the plaintiff in entering into the contract with him, and the consequent exposure of the plaintiff to the risk of damage of the character in question in the event of the defendant’s breach.

238 That decision was cited, with apparent approval, by Beazley JA (with whom Ipp JA agreed “generally” and Tobias JA agreed) in Stuart at [47] to [50].

Decision

239 It is necessary to focus attention on the way that the case on causation was articulated in the further amended list statement. Reference is made to cls 44 and 45 of the Global contract (see paras 9 and 10 of the statement of contentions). The breaches alleged are of cl 13.2(b), (c) and (d) of the 2006 lease (see para 13 of the contentions). The consequences of those breaches are said to be that Mr Assafiri could not and did not comply with his obligations under cl 44 of the Global contract (see para 17 of the contentions) and that, accordingly, Global rescinded (see para 18 of the contentions).

240 Thus, the case that is put is that:

(1) Global rescinded the Global contract pursuant to cl 45 thereof;

(2) that happened because Mr Assafiri did not comply with his obligations to furnish a certificate pursuant to cl 44 thereof; and

241 In context, I think that the “pleaded” case is that the relevant breach on the part of Shell is the breach of cl 13.2(d).

242 The question of causation can therefore be resolved to the following issues:

(1) in the circumstances under consideration, was the loss of the benefit of the Global contract the natural result of the breach of cl 13.2(d), in the sense that it followed in the usual course of things from that breach?

243 Since the parties to the contract that was broken – the lease – were Wenzhou and Shell, those questions (more particularly, the second) should be considered by reference to the understanding of Wenzhou and Shell.

244 Alternatively, if (contrary to what I have said at [241] above) the causation case is that it was the breach of each of paras (b), (c) and (d) of cl 13.2 that resulted in the loss of the onsale, then the question of causation can be restated as follows:

(1) in the circumstances under consideration, was the loss of the benefit of the Global contract the natural result of the breaches of cl 13.2(b), (c) and (d), in the sense that it followed in the usual course of things from those breaches? or

245 I do not accept that the loss of the Global contract is the natural consequence, or the consequence arising according to the usual course of things, from a breach of cl 13.2(d). The ordinary consequence of that breach would be that the landlord would not have a certificate, and would therefore be put to expense in procuring an independent expert to inquire into and certify as to the sufficiency of Shell’s efforts at remediation in accordance with cl 13.2(c). The damages would be the cost of obtaining such an investigation and certification.

246 Nor do I accept that the loss of the benefit of the Global contract is the natural consequence of a breach of cls 13.2(b), (c), and (d) together. The natural consequence of a breach of cl 13.2(b) is that the landlord would be put to expense in demolishing and removing whatever fixtures had been left on the land. The natural consequence of a breach of cl 13.2(c) is that the landlord would be put to the expense of completing remediation to the appropriate standard. The damages would be, in the ordinary way, the costs of taking those steps.

247 Thus, whether the question of causation is assessed by reference to cl 13.2(d) alone, or by reference to paras (b) and (c) as well, I do not think that the loss of the benefit of the Global contract falls within the first limb of Hadley v Baxendale. Does it fall within the second?

248 If the question is to be answered by reference to what Wenzhou and Shell should reasonably be supposed to have had in their contemplation on 27 March 2006, the answer must be “no”. Undoubtedly, they knew that Wenzhou, the landlord, had contracted to sell the reversion to Mr Assafiri. There is no evidence to show that Shell was aware of the terms of that contract. Such knowledge as they had of Mr Assafiri’s intentions, with regard to the land, might have suggested to them that he would once again use it as a car sales yard. Certainly, his communications with Wenzhou, and through Wenzhou to Shell, so suggested, as did other steps taken by him. In circumstances where Mr Assafiri had not contracted to on-sell the land as at 27 March 2006, it is difficult to see why it should have been within the reasonable contemplation of Wenzhou and Shell, as at that date, that he might do so in the future.

249 As I have said, Mr Corsaro relied on cl 14.1 of the 2006 lease to show that the parties had within their contemplation a possible future sale of the reversion. That, I think, is putting far too much weight on cl 14.1. Undoubtedly, it shows that the parties foresaw, or contemplated, that there might be a sale of the reversion during the term of the 2006 lease. But the second limb of Hadley v Baxendale requires more than foreseeability. It requires, as Lord Reid said, either that the defendant should, or the reasonable person in his place would, have had in contemplation loss of the kind suffered. I accept, as McHugh JA said in Alexander, that what is required is contemplation of the general nature of loss or damage and the general manner of its occurrence, rather than the precise chain of causation. But it is still necessary to show more than foreseeability; and in my view, cl 14.1 does no more than establish foreseeability.

250 To bring the matter whin the second limb of the test in Hadley v Baxendale, it would be necessary to show, not only that the parties should reasonably have had in their contemplation the probability of a sale of the reversion during the term of the 2006 lease, but also that such a sale would have been undertaken on the faith, or in the expectation of performance, of Shell’s promise in cl 13.2(d). In the present case, there is no basis for thinking that the parties should reasonably have had in their contemplation that Mr Assafiri would on-sell the land, let alone that he would do so in terms that picked up (or sought to pick up) and rely on Shell’s obligations under para (d).

251 For essentially the same reasons, the position is no different if the case of causation, in relation to the loss of the benefit of the Global contract, is based on paras (b) and (c) as well as of para (d).

252 I conclude that Mr Assafiri is not entitled to damages for loss of the benefit of the Global contract.

253 If I were wrong in this, I would assess the value of the lost benefit at $1,515,744.00, for the reasons given at [88] above, and make allowance for the present value of the land, $1,300,000.00. Mr Assafiri cannot have damages for loss of the benefit of the sale without bringing to account the value of the asset that he still holds. Of course, if the highest and best use of the land were for residential purposes, so that its value should be taken to be $890,000.00, this would be the amount to be allowed to offset the value of the loss of the benefit of a Global sale. Since Mr Windred’s assessment of the value of the lost benefit takes into account selling costs, the amount of $890,000.00 would need to be adjusted by deducting an amount for selling costs, calculated in the same way.

Alternative claim: cost of demolition and removal of improvements, and of any further remediation required

254 It is convenient to deal with these matters together. Shell accepts that it did not remove certain improvements, and that it is liable for the reasonable cost of their removal. There is a dispute as to the proper cost of doing so, and as to an alleged failure to mitigate.

255 Before I deal with those matters, I should note that Shell does not suggest that its liability, for the proper cost of demolition and removal, is diminished because of Mr Assafiri’s assertion, at one point in time, that he wanted the improvements to remain.

256 The dispute as to quantum is between Mr Kariotoglou and Mr Harwood. Mr Kariotoglou asserts that the cost of demolition and removal is about $85,000.00. Mr Harwood said that the cost would be “half” that amount. The attack on Mr Kariotoglou‘s figure was supported by his concession that the figure had been one which he did not assess himself, but which Mr Assafiri had given him (T150.27-.49). However, there was in evidence a quotation for the work from a company known as Front Force Demolition and Excavation Pty Limited, dated 16 November 2007. The quotation, for the demolition, excavation and removal of all improvements, was for $126,000.00 plus GST. It was given on the basis that the excavated material would be classified as “Virgin Excavated Natural Material”; presumably, if the material were contaminated, the cost would be higher.

257 In those circumstances, the figure given to and accepted by Mr Kariotoglou of $85,000.00 seems to be conservative rather than excessive.

258 The issue as to mitigation is that Mr Assafiri should only be entitled to the cost of demolition and removal as at the time of Shell’s breach, not the current cost. However, as I have just said, the quotation in evidence (for substantially more than the amount of the claim) was dated 16 November 2007, or about 2 ½ months after Shell furnished Mr Assafiri with the URS report. Given that Shell, after the termination of the 2006 lease, worked spasmodically on the site until August 2007, Mr Assafiri can hardly be criticised for not himself having attended to demolition and removal of the improvements before that time. Even if there were some increase in costs from August to November 2007, the disparity of $41,000.00 between the amount of the claim and the amount of the quotation suggests that the amount claimed is not unreasonable, and has not been inflated by the passage of time.

259 For the reasons that I have given, I do not regard Mr Harwood’s evidence to the contrary as having any persuasive force. In my view, this aspect of the claim should be allowed, in the amount of $85,000.00.

260 The issues as to the cost of further remediation were in essence, whether it was necessary at all; whether, to the extent that it was necessary, some form of capping was sufficient; or whether, as Mr Kariotoglou proposed, it was necessary that the mode of remediation be in effect removal and disposal of all contaminated material, and the importation and placement of clean fill. Mr Harwood accepted that if it were necessary for the land to be given a clean bill of environmental health (my words, not his), then in general Mr Kariotoglou’s approach to remediation was appropriate (T423.14-.43).

261 Mr Kariotoglou’s estimate of remediation costs was, as amended by him following his conclave with Mr Harwood, in the range $1,110,000.00 to $1,130,000.00 (as stated in their joint report). I am satisfied, based on Mr Kariotoglou’s evidence in cross-examination, that this estimate included some double counting (in relation to management and supervision). I am satisfied also that, as Mr Kariotoglou effectively conceded in cross-examination, he overstated the quantity of material that should be removed and replaced. It should also be noted that his estimate included the amount just discussed, of $85,000.00 for demolition and removal of Shell’s remaining “improvements”.

262 Leaving aside that last amount, I formed the view that Mr Kariotoglou’s revised estimate overstated three amounts, because of internal overlaps in his break-up of his costings. The first of those areas of overlap relates to management. The revised estimate included a figure of $56,000.00 (item (b), relating to remediation management). Some of the work in that appeared to overlap with a subsequent item of Mr Kariotoglou’s costing (item (p), relating to “environmental field work”, in the sum of $103,360.00). It is difficult to be precise, and the task of estimating the proper amount to be allowed is not assisted by the fact that, here as elsewhere, I do not find Mr Harwood’s evidence persuasive. The total of those two items is, in round figures, $160,000.00. In my view, it would be appropriate to reduce that total by $30,000.00. I accept that it is not possible to give a detailed justification of the amount of this reduction. It is based on my view that there is some degree of overlap.

263 The other area where there appears to be some degree of overlap is Mr Kariotoglou’s allowance of $45,000.00 for a validation report (item (q)). Again, this seems to me to be an over–estimate given the allowance for preparation of a remedial action plan, the allowance for remediation management (which I acknowledge has just been reduced) and the allowance for environmental field work. In my view, the overlap requires a reduction of the order of $20,000.00. Again, I accept, it is not possible to give a detailed justification of this conclusion.

264 The remaining area is somewhat more clear–cut. Mr Kariotoglou allowed for the disposal of 2,815 tonnes of contaminated material at a unit rate of $135.00 per tonne. He conceded in cross-examination that his estimate included the removal of material which was not contaminated, and that it could be refined. The total “refinement” was of the order of 498 cubic metres, although, as Mr Kariotoglou said, if the removal of material were to be refined in this way, there would be an additional cost involved in ensuring that contaminated material was not left onsite. The arithmetic consequence of reducing Mr Kariotoglou’s figure, of $464,475.00, for removing and disposing and disposing of contaminated material, by taking out 498 cubic metres is that it should be reduced to $382,305.00. Allowing some amount for extra supervision, and accepting that the process is not exact, I think that justice would be done between the parties if the item were reduced by $80,000.00, which takes account of both the reduction in material removed and the need for some additional supervision.

265 Those adjustments require a reduction, in Mr Kariotoglou’s revised estimate for further remediation, in the amount of $130,000.00. If one applies that reduction to the mid point of his range (as I have said, in round figures, the range was $1,110,000.00 to $1,130,000.00), one comes to an allowance of $990,000.00 for further remediation. I repeat that this includes Mr Kariotoglou’s allowance of $85,000.00 for demolition and removal of those “improvements” that Shell left on site.

The claim for loss of rental

266 The claim for loss of rental was put on the basis that it represented, in effect, the opportunity cost of not being able to put the land to use because Shell’s improvements had not been demolished and removed and the land had not been remediated. I accept, as Mr Lancaster submitted, that if damages were allowed for the loss of the benefit of the Global contract then no claim should be allowed for opportunity cost (or loss of rental). However, I have rejected the claim for damages representing the loss of the benefit of the Global contract.

267 Accordingly, in principle, Mr Assafiri is entitled to damages for his inability to put the site to productive use for some period of time, following the cessation of Shell’s attempts at remediation. Clearly enough, Mr Assafiri was required, in the exercise of his obligation to mitigate his loss, to undertake that task himself. It was suggested that he was unable to do so, because of lack of funds. The parties did not address on the consequences of this, or, in particular, of the application of the reasoning of the House of Lords in Owners of Dredger Liesbosch v Owners of Steamship Edison [1933] AC 449.

268 In those circumstances, I think, the appropriate course is to allow a reasonable (or notional) period for Mr Assafiri to do that which Shell should have done, and to allow damages for loss of use of the land during that period.

269 The evidence is somewhat sparse. However, one can infer, from the terms of the 1996 lease, that Wenzhou and Shell contemplated that it might take Shell 12 months to demolish its fixtures and remediate the land. That inference flows from the grant of the “Demolition Option Lease” in cl 13.4 of the 1996 lease. It was the exercise of that option which led to the grant of the 2006 lease.

270 It could be said that Shell had undertaken some of the works required by cl 13.2 of the 2006 lease. However, Mr Assafiri was put in the position where not all of those works were carried out. Accordingly, he was required himself to undertake those works. One would think that it might take him a little longer than it would have taken Shell. In the circumstances, and taking a broad brush approach, I think that it is fair to allow some 12 months from the cessation of Shell’s activities for loss of use of the land. Thus, Mr Assafiri is entitled to an amount for loss of use of the land from 27 March 2007 (when Shell yielded up the land) until 31 August 2008 (calculated from the date when Shell provided Mr Assafiri with the URS report, in purported satisfaction of its obligations under cl 13.2(d) of the 2006 lease). That is a period, rounded off to 27 August 2008, of some 17 months.

271 Mr Corsaro submitted that the value of the lost opportunity, or of loss of use, could be quantified by reference to a number of different benchmarks. He referred to the rent that might have been paid by Global had its sale proceeded to completion, had the building works been carried out and had it taken a lease as contemplated by the Global contract. Another benchmark to which Mr Corsaro pointed was the amount paid by Shell under the 2006 lease. To my mind, bearing in mind both the test in Hadley v Baxendale and the need to do some sort of rough justice between the parties, it is the latter benchmark that is appropriate.

272 Accordingly, Mr Assafiri is entitled to damages for loss of use of the land, or opportunity cost, at a rate equating to that payable had the 2006 lease continued according to its terms. That lease provided for an annual rent of $102,653.00, to be adjusted after the first 12 months of the lease by not less than 103% and not more than 106%. Using the approximate midpoint of that range of adjustments leads to a monthly rent, for the notional second year of the lease, of $8,940.00. Mr Assafiri is thus entitled to damages for lost rent, or opportunity cost, of $151,980.00, less the amounts actually paid by Shell whilst it was in occupation of the land after 26 March 2007.

Mitigation

273 That leaves the issue of mitigation. As to loss of rental, or opportunity cost, that is dealt with by my allowance of damages for a reasonable period within which Mr Assafiri should have carried out the works left undone by Shell. As to Mr Kariotoglou’s costs for further remediation (as adjusted by him following the joint conference with Mr Harwood and as further adjusted by me), the figures appear to be based on an estimate prepared by Mr Kariotoglou as at the date of his primary report, 27 May 2009. On the basis of my conclusion that it is reasonable to assume that Mr Assafiri completed the outstanding works within 12 months after August 2007, there may be an element of over-allowance in allowing the cost of further remediation at May 2009 rates (which would involve some degree of inflation from August 2007). However, I think, this can be dealt with by adjusting the basis on which interest on damages should be paid.

274 In relation to the amount for demolition and remediation ($990,000.00), I note that Mr Assafiri has undertaken some of the works required. Interest should be allowed, at the rate from time to time applicable under UCPR Schedule 5, on those amounts that Mr Assafiri paid, from the date or dates of payment. As to the balance (i.e., the amount of $990,000.00 found by me less the total of the amounts actually paid by Mr Assafiri to date), interest should run from 27 May 2009.

275 In respect of the damages for lost opportunity, interest should run from the notional dates for payable of each instalment of rental (of course, allowing for amounts actually paid).

Conclusions and orders

276 Mr Assafiri is entitled to damages for misleading or deceptive conduct and breach of contract, calculated in the manner set out at [217], [265] and [272] above.

277 I make the following orders:

(1) Direct the parties to submit to my Associate by 12 October 2010 short minutes of order to give effect of these reasons;

278 On 14 October 2010, I will deal with any dispute as to the orders to be made, and (if there is no agreement) with the question of costs.

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Citations

Assafiri v The Shell Company of Australia Limited [2010] NSWSC 1058

Most Recent Citation

Assafiri v The Shell Company of Australia Limited [2010] NSWSC 1204

Cases Citing This Decision

3

The Trust Company Ltd v Commonwealth of Australia [2025] NSWSC 502

Hoho Property Pty Ltd v Bass Finance No 37 Pty Ltd [2023] NSWSC 411

Assafiri v The Shell Company of Australia Limited [2010] NSWSC 1204

Cases Cited

6

Statutory Material Cited

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Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64

Dorrestijn v South Australian Planning Commission [1984] HCA 76

CITATION:	Assafiri v The Shell Company of Australia Limited [2010] NSWSC 1058
HEARING DATE(S):	16/08/10, 17/08/10, 18/08/10, 19/08/10, 23/09/10, 24/08/10, 25/08/10, 26/08/10
JUDGMENT DATE :	23 September 2010
JURISDICTION:	Equity Division Commercial List
JUDGMENT OF:	McDougall J at 1
DECISION:	Mr Assafiri is entitled to damages for misleading or deceptive conduct and breach of contract, calculated in the manner set out at [217], [265] and [272]. Parties to bring in short minutes of order.
CATCHWORDS:	CONTRACTS – construction of lease – where lease required lessee to deliver up land free of all improvements and to remediate land so that it could be put to its highest and best use – whether ‘highest and best use then permitted under the zoning of the land’ includes a lawful existing use – whether it includes potential attribute of subfloor excavation or basement – what was ‘highest and best use’ within meaning of lease – whether land was in condition such that lessee sufficiently complied with obligations under lease or later agreement – whether lessee provided lessor with independent expert certificate that lessee had complied with obligations under lease – whether any negligent misrepresentations made. - TRADE PRACTICES – whether lessee engaged in misleading or deceptive conduct – Trade Practices Act 1874 s 52. - DAMAGES – whether damages recoverable for misleading or deceptive conduct – whether damages recoverable for negligent misrepresentation – whether damages recoverable in respect of any breach of lease or later agreement – whether lessor failed to mitigate loss – remoteness of loss – nature and amount of any loss and damage suffered.
LEGISLATION CITED:	Contaminated Land Management Act 1997 (NSW) Environmental Planning and Assessment Act 1979 (NSW) Environmental Planning and Assessment Regulation 2000 (NSW) Fairfield Local Environmental Plan 1994 State Environmental Planning Policy No. 55 – Remediation of Land Uniform Civil Procedure Rules
CATEGORY:	Principal judgment
CASES CITED:	Alexander v Cambridge Credit Corporation Ltd (1987) 9 NSWLR 310 Castle Constructions Pty Limited v Fekala Pty Limited [2006] NSWCA 133 Commercial Banking Co of Sydney Ltd v Jalsard Pty Ltd [1973] AC 279 C Czarnikow Ltd v Koufos [1969] 1 AC 350 Hadley v Baxendale (1854) 9 Exch 341North Sydney Municipal Council v Boyts Radio and Electrical Pty Ltd (1989) 16 NSWLR 50 Owners of Dredger Liesbosch v Owners of Steamship Edison [1933] AC 449 Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 Robophone Facilities Ltd v Blank [1966] 1 WLR 1428 Seven Seas Properties Ltd v Al-Essa (No.2) [1993] 1 WLR 1083 Stuart Pty Limited v Condor Commercial Insulation Pty Limited [2006] NSWCA 334 Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528
TEXTS CITED:	Australian Oxford Dictionary, Second Edition, 2004 Oxford English Dictionary
PARTIES:	Haissam Assafiri (Plaintiff) The Shell Company of Australia Limited (Defendant)
FILE NUMBER(S):	SC 2007/266565
COUNSEL:	F C Corsaro SC / J L Doyle (Plaintiff) R P L Lancaster SC / N C T Bilinsky (Defendant)
SOLICITORS:	Koffels Pty Ltd (Plaintiff) Allens Arthur Robinson (Defendant)