Intensia Pty Ltd v Nichols Constructions Pty Ltd - [2018] QCA 191

SUPREME COURT OF QUEENSLAND

CITATION:

Intensia Pty Ltd v Nichols Constructions Pty Ltd [2018] QCA 191

PARTIES:

INTENSIA PTY LTD
ACN 144 893 363
(appellant)
v
NICHOLS CONSTRUCTIONS PTY LTD
ACN 010 763 505
(respondent)

FILE NO/S:

Appeal No 766 of 2018
DC No 20 of 2013

DIVISION:

Court of Appeal

PROCEEDING:

General Civil Appeal

ORIGINATING COURT:

District Court at Brisbane – [2017] QDC 319

DELIVERED ON:

17 August 2018

DELIVERED AT:

Brisbane

HEARING DATE:

23 May 2018

JUDGES:

Fraser and Gotterson JJA and Atkinson J

ORDERS:

1. The appeal is dismissed.

2. Unless the court receives submissions to the contrary to this costs order within seven days of judgment being delivered, the appellant should pay the respondent’s costs of the appeal.

CATCHWORDS:

CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where the parties contracted for the sale of the land – where it was held at first instance that the appellant’s termination of the contract was not justified – where the appellant argued on appeal that its termination was justified as the respondent had breached cl 7.4(3)(a)(ii) of the standard REIQ contract in its warranty that it was not aware of any facts or circumstances that may lead to the land being classified as contaminated land under the Environmental Protection Act 1994 (Qld) at the time of contract – where the respondent had demolished dwellings on the land before entry into the contract – where, after the date of contract, the demolition of the buildings caused the contamination of the land with asbestos – whether the phrasing “may lead to” should be construed broadly to incorporate mere possibility – whether the respondent had breached cl 7.4(3)(a)(ii) such as to give the appellant a right to terminate

Environmental Protection Act 1994 (Qld), s 14, s 16, s 17, s 371, s 373, s 374, s 421, s 458, s 540A, sch 3, sch 4

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, cited
Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181; [2001] HCA 70, cited
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, followed
Re Golden Key Ltd [2009] EWCA Civ 636, cited
Turrisi Properties Pty Ltd v LJ & BJ Investments Pty Ltd [2010] QSC 325, approved

COUNSEL:

C C Wilson for the appellant
D Thomae for the respondent

SOLICITORS:

Byrne & Lovel Lawyers for the appellant
Parker Simmonds Lawyers for the respondent

FRASER JA: I agree with the reasons for judgment of Atkinson J and the orders proposed by her Honour.
GOTTERSON JA: I agree with the orders proposed by Atkinson J and with the reasons given by her Honour.
ATKINSON J: On 11 January 2013 the appellant, Intensia Pty Ltd (“Intensia”), gave notice to the respondent, Nichols Constructions Pty Ltd (“Nichols Constructions”), that it was terminating a contract for the sale of land (“contract”) which had been…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] QCA 191
Decision Date: 17 August 2018

CaseChat Overview and Summary

Intensia Pty Ltd appealed against a decision of the District Court of Queensland, which found that Intensia was not entitled to terminate a contract for the sale of land on the basis that the land may be classified as contaminated land under the Environmental Protection Act 1994 (Qld). Nichols Constructions Pty Ltd, as the seller, had demolished buildings on the land prior to entering into the contract, resulting in the contamination of the land with asbestos. Intensia argued that the termination of the contract was justified as the seller breached clause 7.4(3)(a)(ii) of the standard REIQ contract by warranting that it was not aware of any facts or circumstances that may lead to the land being classified as contaminated land.

The court needed to determine whether the phrase "may lead to" in the warranty should be construed broadly to incorporate mere possibility. If the respondent had breached clause 7.4(3)(a)(ii), then the appellant would have had the right to terminate the contract. The court examined the standard approach to the construction of commercial contracts, which requires a consideration of the language used by the parties, the circumstances addressed by the contract, and the commercial purpose or objects to be secured by the contract.

The court concluded that the appellant failed to make good its ground of appeal, as the trial judge did not err in finding that the appellant was not entitled to terminate the contract in reliance on clause 7.4(3)(a)(ii) of the contract. The court found that there was no evidence suggesting that the seller was aware of any facts or circumstances at the time it entered into the contract which could lead to the land being listed as contaminated land as a result of the statutory process. Therefore, the appeal was dismissed, and unless the court received submissions to the contrary within seven days of judgment being delivered, the appellant should pay the respondent's costs of the appeal.

Orders

Orders of the court

1. The appeal is dismissed.

2. Unless the court receives submissions to the contrary to this costs order within seven days of judgment being delivered, the appellant should pay the respondent’s costs of the appeal.

Background

Background to the litigation

Intensia appealed that decision to this court with five detailed grounds of appeal. However, at the hearing, it abandoned all but one of those grounds of appeal.The factual background The written contract for the sale of land, in the form of the ninth edition of the standard contract for houses and residential land approved by the REIQ and the Queensland Law Society, was entered into by Intensia as buyer and Nichols Constructions as seller. Nichols Constructions entered into the contract as mortgagee in possession exercising its power of sale. Intensia acted as an undisclosed agent for Ambitious Ventures Pty Ltd (“Ambitious Ventures”). It was a commercial arms-length contract. The purchase price was $1,725,000. The deposit of $172,500 was received on 15 October 2012 and that date was then inserted by the solicitor for Nichols Constructions, who was the stakeholder for the deposit, in the relevant space on the contract as the contract date. In fact, as both parties contended, the contract was entered into on 12 October 2012. The contract was for the sale of three adjoining parcels of land (“the land”) described as:(1)Lot 3 on RP 80133, in the County of Ward, Parish of Nerang, being all that land referred to in the Title Deed reference no 15743058 and situated at 8 Ahern Street, Labrador, Queensland (“8 Ahern Street”);(2)Lot 1 on RP 104405, in the County of Ward, Parish of Nerang, being all that land referred to in the Title Deed reference no 15248216 and situated at 8A Ahern Street, Labrador, Queensland (“8A Ahern Street”); and(3)Lot 2 on RP 104405, in the County of Ward, Parish of Nerang, being all that land referred to in the Title Deed reference no 13858153 and situated at 10 Ahern Street, Labrador, Queensland (“10 Ahern Street”). On each of the three lots there was a single freestanding dwelling. There was also a fence running part of the length of the boundary between 8 and 8A Ahern Street. The dwellings on the land each contained bonded asbestos in the roof and walls. Seven years before the date of the contract, there had been an asbestos audit of the three dwellings and the boundary fences which had been there at the time. The auditor concluded that there was:“A.C. fibre cement sheeting, commonly known as old type fibro. On the date of inspection the fibre cement covered in this report was found in good condition and may remain left in-situ and its conditions monitored … These products do not pose a risk from exposure to airborne fibres so long as the materials are not disposed or have work carried out upon them. I.e. cut, sanded, drilled, etc … No asbestos products or materials were found during this inspection that warranted immediate removal …” The trial judge found that on or about 2 October 2012, Nichols Constructions obtained a building assessment report and a notice that its development application for demolition of the dwellings had been approved. The building assessment report advised, among other things, that the buildings on the land “may have asbestos and therefore special work procedure is required. See Conditions of Approval.” The development application decision notice approving the demolition of the dwellings in accordance with a survey plan was subject to conditions including “all removal of asbestos to be carried by a person holding an ‘A’ class licence under the Workplace Health & Safety Regulation 1997.”

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The second method of the land becoming listed on the contaminated land register is the one which was considered by the trial judge. It is the considerably more complicated procedure set out in s 373 and s 374 of the EPA referred to in detail in [44]-[45] of these reasons. There was no evidence capable of suggesting that the seller was aware of any facts or circumstances at the time it entered into the contract which could lead to the land being listed as contaminated land as a result of that statutory process.Conclusion It follows that the appellant has failed to make good its only ground of appeal. This is because the learned District Court judge did not err when he found that the appellant was not entitled to terminate the contract in reliance on cl 7.4(3)(a)(ii) of the contract. The appeal should be dismissed. Unless the court receives submissions to the contrary to this costs order within seven days of judgment being delivered, the appellant should pay the respondent’s costs of the appeal.

Ratio Decidendi

Legal Principle Established

Further detailed written submissions in response were relied upon by the appellant.Consideration Clause 7.4(3) of the contract set out the following Seller’s Warranty:“(3)(a) The Seller warrants that, except as disclosed in this contract or a notice given by the Seller to the Buyer under the Environmental Protection Act 1994 (“EPA”), at the Contract Date:(i) there is no outstanding obligation on the Seller to give notice to the administering authority under EPA of notifiable activity being conducted on the Land; and(ii) the Seller is not aware of any facts or circumstances that may lead to the Land being classified as contaminated land within the meaning of EPA.(b)If the Seller breaches a warranty in clause 7.4(3), the Buyer may:(i) terminate this contract by notice in writing to the Seller given within 2 Business Days before the Settlement Date; or(ii) complete this contract and claim compensation, but only if the Buyer claims it in writing before the Settlement Date.” The correct approach to the construction of such a contract is well settled. In 2015 in Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd[2] the High Court held:“In determining the meaning of the terms of a commercial contract, it is necessary to ask what a reasonable businessperson would have understood those terms to mean. That enquiry will require consideration of the language used by the parties in the contract, the circumstances addressed by the contract and the commercial purpose or objects to be secured by the contract …Other principles are relevant in the construction of commercial contracts. Unless a contrary intention is indicated in the contract, a court is entitled to approach the task of giving a commercial contract an interpretation on the assumption ‘that the parties … intended to produce a commercial result’. Put another way, a commercial contract should be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.” (footnotes omitted).Accordingly, the interpretation of this contract is governed by the principle that the parties intended it to make commercial sense.[2](2015) 256 CLR 104 at 116-117 [47]-[51]. In Electricity Generation Corporation v Woodside Energy Ltd[3] the High Court quoted with approval from a decision of the Court of Appeal of England and Wales:[4]“As Arden LJ observed in Re Golden Key Ltd, unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties … intended to produce a commercial result’. A commercial contract is to be construed so as to avoid it ‘making commercial nonsense or working commercial inconvenience’.”[3](2014) 251 CLR 640 at 657 [35].[4]Re Golden Key Ltd [2009] EWCA Civ 636 at [28]. The contract refers to the EPA. The part of the EPA which is referred to in cl 7.4(3)(a) is Chapter 7 Part 8, which deals with notifiable activity and contaminated land. Part 8 provides for the inclusion of land on an environmental management register, investigation of land on that register, remediation of the land, site management plans and notices, including notices to be given to proposed purchasers, about land recorded in the register. Also relevant is the requirement found in s 540A(1)(d) of the EPA for the administering authority, the Chief Executive, to maintain an environmental management register and a contaminated land register.

CITATION:	Intensia Pty Ltd v Nichols Constructions Pty Ltd [2018] QCA 191
PARTIES:	INTENSIA PTY LTD ACN 144 893 363 (appellant) v NICHOLS CONSTRUCTIONS PTY LTD ACN 010 763 505 (respondent)
FILE NO/S:	Appeal No 766 of 2018 DC No 20 of 2013
DIVISION:	Court of Appeal
PROCEEDING:	General Civil Appeal
ORIGINATING COURT:	District Court at Brisbane – [2017] QDC 319
DELIVERED ON:	17 August 2018
DELIVERED AT:	Brisbane
HEARING DATE:	23 May 2018
JUDGES:	Fraser and Gotterson JJA and Atkinson J
ORDERS:	1. The appeal is dismissed. 2. Unless the court receives submissions to the contrary to this costs order within seven days of judgment being delivered, the appellant should pay the respondent’s costs of the appeal.
CATCHWORDS:	CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – CONSTRUCTION AND INTERPRETATION OF CONTRACTS – where the parties contracted for the sale of the land – where it was held at first instance that the appellant’s termination of the contract was not justified – where the appellant argued on appeal that its termination was justified as the respondent had breached cl 7.4(3)(a)(ii) of the standard REIQ contract in its warranty that it was not aware of any facts or circumstances that may lead to the land being classified as contaminated land under the Environmental Protection Act 1994 (Qld) at the time of contract – where the respondent had demolished dwellings on the land before entry into the contract – where, after the date of contract, the demolition of the buildings caused the contamination of the land with asbestos – whether the phrasing “may lead to” should be construed broadly to incorporate mere possibility – whether the respondent had breached cl 7.4(3)(a)(ii) such as to give the appellant a right to terminate Environmental Protection Act 1994 (Qld), s 14, s 16, s 17, s 371, s 373, s 374, s 421, s 458, s 540A, sch 3, sch 4 Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7, cited Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181; [2001] HCA 70, cited Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37, followed Re Golden Key Ltd [2009] EWCA Civ 636, cited Turrisi Properties Pty Ltd v LJ & BJ Investments Pty Ltd [2010] QSC 325, approved
COUNSEL:	C C Wilson for the appellant D Thomae for the respondent
SOLICITORS:	Byrne & Lovel Lawyers for the appellant Parker Simmonds Lawyers for the respondent