Noor Al Houda Islamic College Pty Ltd v Bankstown Airport Ltd - [2005] NSWSC 20

No judgment structure available for this case.

Reported Decision:
(2005) ATPR (Digest) 46-263
(2005) NSW ConvR 56-129

New South Wales

Supreme Court

CITATION:
Noor Al Houda Islamic College Pty Limited & Anor v Bankstown Airport Limited [2005] NSWSC 20

HEARING DATE(S): 25/10/04, 26/10/04, 27/10/04, 28/10/04, 29/10/04, 1/11/04, 2/11/04, 3/11/04, 4/11/04, 5/11/04, 8/11/04, 9/11/04, 10/11/04, 11/11/04, 12/11/04, 15/11/04, 16/11/04, 17/11/04, 18/11/04, 19/11/04, 22/11/04, 23/11/04, 24/11/04

JUDGMENT DATE :

24 February 2005

JUDGMENT OF:
Hoeben J at 1

DECISION:
Judgment for first plaintiff, costs reserved.

CATCHWORDS:
Trade Practices Act - s52, s74, s82, s87 - Transfer of liabilities in Airports (Transitional) Act 1996 - Negligence - content of duty of care - relationship with lease - effect of exclusion provisions - claim for economic loss - damages - loss of opportunity in hypothetical scenario - causation - mitigation.

LEGISLATION CITED:
Airports (Transitional) Act 1996 (C'th)
Freedom of Information Act 1989
Limitation Act 1964 (NSW)
Trade Practices Act 1974

CASES CITED:
Alpine Hardwood (Aus) Pty Limited v Hardys Pty Limited (2001) FCA 1876
Arbest Pty Limited v State Bank of NSW Limited (1996) ATPR 41-481
Blacker v National Australia Bank Limited (2001) FCA 254 at [51]
Chapman v Luminis Pty Limited (No 4) (2001) 123 FCR 62 at 116-117
Costa Vraca Pty Limited v Berrigan Weed and Pest Control Pty Limited (1998) 154 ALR 714
Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1
Demagogue Pty Limited v Ramensky (1992) 39 FCR 31
Fitzwood Pty Limited v Unique Goal Pty Limited (2001) 188 ALR 566
Franich v Swannell (1993) 10 WAR 459 at 474-5
Fraser v NRMA Holdings Limited (1995) 55 FCR 452
Henjo Investments Pty Limited & Ors v Collins
Marrickville Pty Limited (1998) 39 FCR 546 at 557
Johnson Tiles Pty Limited v Esso Australia Pty Limited (2000) FCA 1572
Parkdale Custom Built Furniture Pty Limited v Puxu Pty Limited (1982) 142 CLR 191
Pritchard v Racecage Pty Limited (1997) 72 FCR 203
at 218-219
Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Limited (1986) 12 FCR 477 at 84
Richard v Gendore Enterprises Pty Limited and Anor [2004] NSWCA 116
RW Miller & Co v Krupp (Australia) Pty Limited (1995) 11 BCL 74
Sent v Jetcorp of Australia Pty Limited (1986) 160 CLR 540
Toll (FGCT) Pty Ltd (Formerly Finemores GCT Pty Ltd) v Alphafarm Pty Ltd (2004) ALJR 129
The Commonwealth v Verwayen (1990) 170 CLR 394
Wardley Australia v WA (1992) 175 CLR 514 at 525
Warner v Elders Rural Finance Limited (1993) 41 FCR 399 at 401-2
Winterton Constructions Pty Limited v Hambros Australia Limited (1992) 39 FCR 97

PARTIES:
Noor Al Houda Islamic College Pty Limited - First Plaintiff
Silma Ihram - Second Plaintiff
Bankstown Airport Limited - Defendant

FILE NUMBER(S):
SC 20017/2000

COUNSEL:
P Taylor SC/A Casselden - Plaintiffs
MD Young/N Sharp - Defendant

SOLICITORS:
Swaab Attorneys - Plaintiffs
Phillips Fox - Defendant

LOWER COURT JURISDICTION:

THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HOEBEN J

Thursday, 24 February, 2005

20017/00 – NOOR AL HOUDA ISLAMIC COLLEGE PTY LTD & ANOR v BANKSTOWN AIRPORT LIMITED
JUDGMENT

1 HIS HONOUR:

Introduction

2 The second plaintiff and Mr Adada were directors of the College. The second plaintiff was also its principal. The College operated from the Bankstown Airport site from 1995 until the end of 2002 when it moved to a site at Strathfield. It currently operates from that site. The College went into voluntary administration on 18 July 2003 and is insolvent.

3 The defendant, hereafter referred to as BAL, is the successor in law to the Federal Airports Corporation (FAC) in relation to the Bankstown Airport. FAC controlled the airport up to 1 July 1998. Thereafter BAL controlled the airport. BAL is a wholly owned Commonwealth business enterprise within the portfolio responsibility of the Minister for Finance and Administration. The transfer of control was achieved by the Airports (Transitional) Act 1996 (Commonwealth).

Claim and Defences

4 The first plaintiff seeks damages from the defendant on three bases – s52(1) and s74(2) of the Trade Practices Act (TPA) and negligence. The second plaintiff relies upon s52(1) TPA and negligence.

5 In summary the plaintiffs assert that the land leased to them by FAC, from which the College operated, was contaminated or that there was such a risk of contamination as to render the site unsuitable for a school. As a result the College was unable to develop that site and was forced to move. The first plaintiff claims in respect of removal costs, loss of capital funding from the Commonwealth and in respect of loss of profits in that the contamination issue and relocation of the College resulted in a significant reduction in the number of students which in turn resulted in a significant loss of Commonwealth and State recurrent funding.

6 The claim under s74(2) TPA is based on an implied term in the lease that the site was fit for its specified purpose, ie the conduct of a school. Damages are sought from the defendant for breach of contract.

7 The claims under s52(1) and in negligence raise similar issues. The plaintiffs assert that when the lease was entered into FAC was aware of the contamination but failed to so advise the plaintiffs. Had the plaintiffs been advised, they would not have commenced operating the College on that site but would have operated from another site. Apart from relocation costs, damages are sought on the basis of the difference between moneys actually received by the College whilst operating from the airport site and what would have been received had the College operated from an alternative site.

8 The claim on behalf of the second plaintiff is something of a defensive measure and will only come into operation if the damages recovered by the College are insufficient to enable the second plaintiff’s loan to the College of $603,153 to be repaid.

9 A claim in fraud was pleaded but was specifically abandoned at trial.

10 BAL challenges the factual basis of the claim, denies that the site leased by the College was contaminated and denies that it was otherwise unsuitable for the operation of a school. It also challenges the content of a number of conversations between FAC employees and Mr Adada and the second plaintiff.

11 BAL asserts that the College cannot bring itself within the ambit of s74(2) TPA and even if it could, there was no breach of the term sought to be implied.

12 In relation to s52(1) TPA BAL denies any misleading conduct. Alternatively, it says that the necessary ingredients for reliance upon s52(1) TPA have not been made out. It disputes that the transfer of “liability” from FAC to BAL included a TPA liability such as is brought into existence by the combination of s52 – 82/87 TPA. Finally, it asserts that the s52 claim has been brought out of time.

13 In relation to negligence, BAL denies the existence of a duty of care owed by FAC to the plaintiffs. It says that the relations between FAC and the plaintiffs were governed entirely by the terms of the lease and in particular, those clauses denying any reliance by the plaintiffs on representations by FAC.

14 BAL has disputed causation. It asserts that contamination, or potential contamination, did not cause any loss which might have been suffered by the plaintiffs. It asserts that such loss as can be proved was due to the plaintiffs’ own conduct or to factors unrelated to contamination.

15 In relation to damages BAL asserts that the plaintiffs have failed to mitigate their damages and that the whole basis for the claim is defective in that it relies upon assumptions which have not been proved.

16 BAL has cross-claimed against the plaintiffs on three bases:

(i) An outstanding debt for legal costs owed by the plaintiffs to BAL of $93,643;
(ii) The cost of making good the site occupied by the College until December 2002 - $181,244;
(iii) Damages generally for the deceptive, misleading and negligent conduct of the College in undertaking the covenants in the lease thereby inducing FAC to grant the lease.

Factual background (to 31 December, 1998)

17 In 1992 the second plaintiff and Mr Adada had with others been directors of a company called the “Al Noori Muslim Primary School Limited”. This company operated a primary school for children of the Muslim faith at Greenacre. As of 1993 approximately 90-100 students attended that school. The second plaintiff was at that time acting principal of the school.

18 Conflicts arose between the directors of that company, which culminated in two of them being removed in November 1993 – Messrs Siddiq Buckley and Dawood Goddard. Those directors challenged their removal in proceedings before O’Keefe J in this Court. As a result of those proceedings, Messrs Goddard and Buckley were reinstated as directors and a receiver was appointed to the company.

19 A costs order was made against Mr Adada and the second plaintiff. At a special meeting of that company in February 1994, neither Mr Adada nor the second plaintiff stood for positions on the board and as of that date they ceased to be involved with the company. A deed of release dated 3 February 1994 set out the terms under which their relationship with the company and the school ceased.

20 As early as 1990 the second plaintiff and Mr Adada had in contemplation the setting up of a larger school for students of the Muslim faith, which would include instruction for high school students as well as primary. To that end the second plaintiff had been looking for suitable sites for either lease or purchase in the western Sydney area. As of August 1994 those attempts to find a suitable site had been unsuccessful. To better understand correspondence originating from the second plaintiff, it should be noted that she was the proprietor of a business name “Noor Ul Ilm”.

21 Inquiries were made in relation to a site at Drummoyne (formerly the Drummoyne Boys High School), a site known as the “Dog Track” at Panania, a site known as “The Towers” in the Canterbury/Belmore area, the former Hurlstone Park Primary School, a property at Campbelltown and a property at Croydon being the former Evandale School. Inquiries had also been made as to suitable properties in the Liverpool area, at Burwood and at Bexley.

22 It was stated by the second plaintiff, both in an affidavit of 27 September 2004 and in her oral evidence, that in late 1994 she had under consideration other properties in Western Sydney which would have been suitable for a school. I am not so persuaded. Neither the second plaintiff nor Mr Adada could identify any alternative suitable site which was available as of late 1994 when negotiations were taking place in relation to the occupation of the Bankstown Airport site.

23 I find that as of August 1994 neither the second plaintiff nor Mr Adada had any suitable property under consideration for their proposed school (letter second plaintiff to FAC, 16.8.94 – tab 5, second plaintiff’s affidavit 15.11.02).

24 By August 1994 the need to obtain a suitable site for the school had become urgent since approval for Commonwealth recurrent funding had been obtained for the 1995 school year. Although that approval had been obtained in relation to the Drummoyne site, the second plaintiff and Mr Adada hoped that it could be carried over to a new site, if one could be located. This in fact occurred.

25 In August 1994 the second plaintiff contacted Ms Williams, who was employed by FAC, and was the administration controller for the Bankstown Airport. The second plaintiff both in writing and by telephone indicated to Ms Williams what the land requirements were for the proposed school (letters, tabs 5, 6 and 7, second plaintiff’s affidavit 15.11.02).

26 In late September or early October 1994, a meeting took place between the second plaintiff, Mr Adada and Ms Williams. That meeting took place at Bankstown Airport. In the course of the meeting Mr Knox, the Airport Manager, attended and for some period of time participated in the conversation. There is some dispute as to how many meetings took place. The second plaintiff asserted three meetings but Ms Williams and Mr Knox could only remember one. Nothing turns on how many meetings took place.

27 There is also a dispute as to whether at the end of the meeting or at the end of a meeting, the second plaintiff and Mr Adada were driven by Mr Knox and Ms Williams to a location at the eastern end of the runway to be shown the suggested location for the school. Neither Mr Knox nor Ms Williams could remember such a car trip. Ms Williams was definite that she was not authorised to drive near the runway to the location described by the second plaintiff and Mr Adada.

28 The significance of the drive to the proposed school site arises from representations said to have been made by Mr Knox and Ms Williams during the course of that journey. The dispute on this issue highlights a particular problem in the matter.

29 The evidence in chief, on behalf of the second plaintiff and Mr Adada on the one hand, and Ms Williams and Mr Knox on the other, was primarily contained in carefully crafted affidavits prepared by lawyers. It would be fair to say that under cross-examination none of those persons adhered to the specific detail, particularly as to conversations, set out in those affidavits. In making that observation I do not wish to be critical of the honesty of any of the deponents.

30 What became clear is that memories had faded with the effluxion of time. Whereas the deponents could remember that particular topics had been raised and in some cases could remember some specific details, none had a comprehensive and accurate recollection as to detail, particularly in relation to actual words used.

31 I was impressed with both Ms Williams and Mr Knox as witnesses of truth. Having said that, Mr Knox had been experiencing health problems in early 2000 and had subsequently retired for health reasons. His recollection as to detail was not particularly good.

32 By way of illustration, it seems fairly clear from a reading of the letters at tabs 6 and 7 of the affidavit of the second plaintiff of 15 November 2002 that some inspection of the proposed site must have taken place and this could only have occurred in the presence of someone authorised by FAC to provide access to such land. That person would logically have been Mr Knox or somebody at his direction. Accordingly, I am satisfied that at a meeting some inspection of the proposed site did take place. That finding does not reflect adversely on the credit of Mr Knox or Ms Williams. It simply means that they had no recollection of such an inspection.

33 I am less sure of the impartiality of Mr Adada and the second plaintiff. It was apparent from the overall tenor of the evidence of Mr Adada that he is not a person who is concerned with detail. He approached matters in a broad brush way. On many issues where he would be expected to have detailed knowledge (ie actual works carried out) his evidence was vague. Accordingly, I regard his evidence as to actual conversations, particularly in his affidavit, as unreliable.

34 The second plaintiff was more precise and detailed in her recollections. Since she is passionately dedicated to the success of the College, and since the outcome of this case will largely determine the future of the College, she had a clear motivation to give her evidence particularly as to conversations in such a way as to assist the College. An area of clear unreliability was at paras 49-51 of her affidavit of 27 September 2004 (T.280-281). Nevertheless I found her oral evidence generally reliable. Where, however, it conflicted with that of Ms Williams I prefer the evidence of Ms Williams.

35 Ms Williams, like Mr Knox, is no longer employed by FAC or by BAL. I found her evidence under cross-examination at T.830-837 to be reliable and of particular assistance. She was prepared to make concessions where appropriate and where she could not remember details she said so and did not try to reconstruct.

36 Applying the above qualifications I find that in a meeting, which took place in late September or early October 1994, Ms Williams was careful to point out to the second plaintiff and Mr Adada that there were difficulties with the site, from the point of view of setting up a school. In particular she brought to their attention that there were noise issues and that the proposed site had no services. Ms Williams said that the Bankstown Airport could not assist with the provision of services. Her approach is set out at T.836.11:

“They really had to go away and do their homework to see whether or not it was going to be a suitable site for them. I wasn’t sure that it was, given that it had, you know, a number of problems associated with it, such as no services. It might have cost a huge amount of money to bring them onto the airport.”

37 It follows from my acceptance of that evidence that I reject the evidence of Mr Adada and the second plaintiff to the effect that positive representations were made either by Mr Knox or Ms Williams that the proposed site was suitable for a school, that noise levels were quite acceptable, that they need not be concerned about safety issues such as plane crashes and that by reference to the Bankstown Grammar School (a school which was successfully operating from another site at the airport) a representation was made “that is where you will be up to in a few years”.

38 I accept that at a meeting the second plaintiff specifically referred to a system of construction known as “earth integration”, which was used for the Greenacre School. I accept that this reference was made in the context of that method of construction being suggested for the site of the proposed school at the Bankstown Airport. I also accept that when that suggestion was made, Mr Adada said that such a method of construction was too expensive. I reject the evidence that when the suggestion was made Mr Knox and Ms Williams said “that would be a good way to proceed on this site”.

39 I accept that at a meeting the second plaintiff raised the question of FAC granting to the College a twenty-five year lease. I accept that this was done in the context of informing Ms Williams and Mr Knox that such a lease was necessary before capital funding could be obtained from the Commonwealth Government. I reject the evidence that either Mr Knox or Ms Williams in any way suggested to the second plaintiff that subject to the College being financially viable, it could expect to be granted a twenty-five year lease. I find that both Ms Williams and Mr Knox made it clear that such a lease could only be approved by the board of FAC and that such an approval could not be guaranteed. (T.293.18-20,.33-35, T.311.25-30).

40 Not only was that the oral evidence of the second plaintiff but it was clear from the evidence of Mr Knox that FAC board could be difficult and rather unpredictable when it came to granting of such approvals. This was particularly so in relation to tenants conducting non-airport related activities. A public servant of his experience would have been careful not to make a commitment that approval of a twenty-five year lease by the board was likely.

41 One matter which was agreed between the parties was that Ms Williams and Mr Knox advised the second plaintiff and Mr Adada that Mr Knox had authority without going to the board to grant a seven year lease of the Bankstown site. It is clear from correspondence that this was acceptable to the second plaintiff and Mr Adada in the short term, although the ultimate intention for the College was to obtain a twenty-five year lease. The prime motivation for seeking such a long lease was not so much the advantages of the Bankstown Airport site, but rather the opportunity which it gave to the College to obtain capital funding from the Commonwealth.

42 A matter of dispute between the parties was whether, apart from the reference to the method of building known as “earth integration” previously referred to, any discussion had taken place between the second plaintiff and Ms Williams concerning the use of perimeter earth mounds as a means of construction of the proposed school and as a means of reducing the effect of noise. I am of the opinion that no such discussion took place. It seems clear from the letter from the second plaintiff to FAC of 7 October 1994 that the matter of “perimeter earth mounds” was a fresh proposal and had not been previously discussed (tab 7, second plaintiff’s affidavit, 15.11.02).

43 It is common ground that nothing was said about contamination in any of those discussions relating to the use of land at the airport by the College.

44 As a result of the discussions between the second plaintiff and Ms Williams the position reached by early November 1994 was that the College and FAC had in contemplation a seven year lease of a specified site at the airport from which a school could be operated. Because of the length of the lease demountable buildings, rather than permanent buildings, would be used. The construction of permanent buildings was in clear contemplation but was contingent on a long lease being granted as a result of a future successful application to FAC board. This is evident from the letters of 4 November 1994 – FAC to the second plaintiff, and 10 November 1994 – second plaintiff to FAC (tabs 8 and 9, second plaintiff’s affidavit, 15.11.02 and clause D in the annexure to the lease of 1 December 1994 at tab 1).

45 As indicated, the College was incorporated on 24 October 1994. The structure of the College which gave to Mr Adada and the second plaintiff a controlling interest was decided upon to ensure that there were no divisive disputes relating to the control and conduct of the proposed school as had happened with the Al Noori Muslim Primary School (T.98.52-58, T.99.1-9).

46 The draft lease documentation was sent to the College’s solicitor, John Burrell, on 16 November 1998. It is clear that the lease was discussed by Mr Burrell with the second plaintiff before a substantial list of amendments were requested from FAC’s solicitors by letter dated 22 November 1994. The second plaintiff and Mr Adada said that they did not read the lease carefully and in the case of the second plaintiff, left everything to the solicitor.

47 Mr Burrell did not give evidence. His conveyancing file was tendered (exhibit 15, tab 42). It makes clear that there were a number of conversations between him and the second plaintiff. The references to conversations are in note form and consequently it is not possible to ascertain exactly what was said by Mr Burrell by way of advice or otherwise to the second plaintiff.

48 Even if one accepts the evidence of the second plaintiff and Mr Adada that they did not pay particularly close attention to the contents of the lease, it is clear that they understood that the document was setting out the mutual obligations of the College and FAC in relation to the occupation of the site (T.138-54, T.303.2). Their failure to properly read the lease does not assist the College (Toll (FGCT) Pty Ltd (formerly Finemores GCT Pty Ltd) v Alphafarm Pty Ltd (2004) 79 ALJR 129).

49 By January 1995 the second plaintiff appears to have become concerned at the delay, which was taking place in relation to the finalisation of the lease. By letter dated 11 January 1995 she advised FAC that Mr Burrell was no longer acting. The lease was eventually signed on or about 17 February 1995 with the second plaintiff acting on behalf of the College.

50 Accompanying the lease was a licence agreement which entitled the College to occupy the leased site from 17 November to 31 December 1994. The lease took effect from 1 January 1995. It was for seven years and was to conclude on 31 December 2001. An incorrect termination date of 31 December 2002 was inserted in the lease, but that was corrected by subsequent correspondence. The lease and licence agreement are at tab 1 to the affidavit of 15 November 2002 of the second plaintiff.

51 Considerable emphasis was placed by BAL on three clauses of the lease which for convenience I will set out:

“The Tenant acknowledges that:

(a) It has not relied on any representation from the Corporation as to how the premises may be used; and

(b) It has made its own appraisal of the suitability of the premises for the tenant’s business; and

(c) It is aware of all prohibitions and restrictions applying to the Premises under requirements and orders of all authorities and all laws including without limitation the Act and By-Laws.”

“The Tenant has made and relied on its own enquiries in relation to all matters relevant to its decision whether or not to enter into this lease and has not relied on any representation, warranty or undertaking (except as expressly contained in this lease) given by the Corporation in determining whether or not to enter into this lease.”

“The Corporation as landowner is not responsible or liable to the Tenant for anything in connection with:

(a) The process of design and/or construction;

(b) The Plans and Specifications and other documents prepared by the Tenant;

(c) Any error or omission in or from the Works.

The Tenant acknowledges that any information made available by the Corporation or its servants or agents as information furnished for the convenience of the Tenant, forms no part of the lease between the Corporation and the Tenant and that the Corporation is not responsible in any way for its accuracy or adequacy for the Tenant’s purposes and makes no representations and assumes no duties of care concerning any of the matters raised in this clause.”

52 The following clause was relied upon by the plaintiffs:

“The Corporation is not liable for damage to or loss of anything or injury to any person in or near the Airport due to any cause other than the negligence or default of the Corporation or any employee or agent of the Corporation.”

53 The College commenced operation in 1995. It had less than one hundred students. This low number of students meant that the College did not qualify for any Commonwealth funding. By May 1995 the College was unable to pay rent to FAC and was several months in arrears. The College only seems to have been kept afloat during 1995 by loans from parents, from Mr Adada and the second plaintiff. The College was using demountable buildings, some of which had been hired and some of which were second-hand and had been acquired by Mr Adada.

54 Although the second plaintiff had qualifications as a Bachelor of Arts and a Master of Educational Administration with a Diploma in Education, her only previous experience as a school principal had been at the Greenacre primary school. Her only experience with a secondary school had been as a teacher on a part-time basis for one term. She had never previously administered a secondary school.

55 Mr Adada had studied architecture but had not graduated. He had experience in building. When the College commenced, it was Mr Adada who arranged for and participated in the construction of trenches, which enabled electricity, drainage and sewer services to be connected to the demountable buildings.

56 Between 1995 and 1998 the number of pupils attending the College steadily increased. In 1996 the numbers were one hundred and forty one, in 1997 three hundred and eighty seven and in 1998 five hundred and fifty. The College received recurrent Commonwealth funding by reference to student numbers for the years 1996, 1997 and 1998.

57 During those years the College was inspected by representatives from the NSW Board of Studies. As of November 1995 significant health and safety issues were raised, particularly in relation to fire fighting equipment, drainage and the stability of some of the demountables. It was noted that the staff were generally inexperienced. School rolls were inadequate. By the end of July 1996 the situation had improved. Staff supervision had improved as had roll-keeping. There were still difficulties with toilet facilities. (Exhibit 15, tabs 9 and 10). It should be noted that in the years 1995-1996 the College was only offering instruction up to year 8. This increased to year 10 in 1997.

58 Although the number of students at the College was increasing and facilities were improving, the overall facilities at the College would seem to have been fairly rudimentary. Complaints continued to be made by parents concerning the physical conditions experienced by students at the College and recommendations for improvement continued to be made by the NSW Board of Studies.

59 In 1997 a fire took place at the College, which resulted in the destruction of a demountable building and the need to expend substantial moneys to bring fire-fighting equipment up to an acceptable standard. In 1997-1998 significant amounts (in excess of $200,000 in 1998) were owed by the College to the Australian Taxation Office. Nevertheless some improvement in the College’s profitability was occurring. In 1995 and 1996 losses of $115,000 and $88,000 had been incurred, but in 1997 and 1998 profits of $78,000 and $43,000 respectively had been achieved.

60 In 1998 the first application was made by the College to the Association of Independent Schools of NSW (AIS), which was the organisation which considered and made recommendations to the Commonwealth Government in relation to the making of capital grants to private schools. In making that application the College provided information as to its financial position in 1997 and made projections in relation to student numbers and its future financial position for the years 1998-2000. More will be said about the projected student numbers when considering damages.

61 The application for a Commonwealth capital grant in 1998 was unsuccessful. (Exhibit 15, tab 51, tab 75). Exhibit 15, tab 75 records the minutes of the AIS meeting which considered the College’s application:

“The Committee agreed that before it could finalise its consideration for a capital grant it would require the school’s response to the following issues all of which influence the overall viability of the College.

(i) Governance arrangements together with School Board membership.

(ii) Clarify doubts re: status of annual accounts.

(iii) The need for the College to establish a line of credit from a lending source (15 year borrowing).

(iv) Financial viability – the need for the College to describe what steps it has/will take to improve current projected deficits.

(v) The need to establish a professionally based Business/Financial plan.”

62 That decision was communicated to the College in somewhat more diplomatic terms by letter dated 29 September 1998 (exhibit 15, tab 51). The letter referred to the future viability of the school and recommended the production of a comprehensive business/financial plan for a five year period, changes to the management structure and changes to the reporting practises of the College. Of particular concern to AIS was that control of the College was in the hands of only two directors, one of whom was the principal of the school. The lack of any breadth of experience and financial expertise in those running the College was referred to.

63 Although it was not raised in that letter, one of the Commonwealth eligibility criteria was that schools applying for capital grants must either own their own properties or have a minimum twenty year lease on any property on which buildings were to be constructed with the assistance of a grant.

64 The College did not respond to the AIS letter of 29 September 1998 nor did it take any steps until 2004 to comply with any of the requirements communicated in that letter.

65 In the course of 1998 the College entered into another lease with FAC for some additional land which adjoined the existing lease site to the west (the 1998 lease).

66 After BAL had taken over control of the airport, the situation in relation to a twenty-five year lease changed. It was no longer necessary for the approval of FAC board to be obtained. Officers of BAL had the authority to enter into such a lease. Accordingly, by letter dated 11 August 1998 BAL offered the College a twenty-five year lease of the land covered by the 1994 and 1998 leases. This was accepted by the College but the lease documentation was never finalised.

67 In November 1998 the College requested that an additional area of land be added to that proposed for the twenty-five year lease. A meeting took place on 25 November 1998 in relation to that matter between the second plaintiff and Mr Adada, on behalf of the College, and Messrs Michael Rowe and John Campbell, on behalf of BAL. At that meeting Mr Campbell handed to the second plaintiff a letter dated 25 November 1998 (second plaintiff’s affidavit, 15 November, 2002, tab 23) offering a twenty-five year lease which referred to the additional area of land but which added certain conditions.

“Special conditions.

We advise that this proposal is further dependent upon your confirmation and the acceptance of the following:

(1) That the number of pupils attending the school will not exceed the number specified in the Master Plan submitted in June 1997 ie 1,000.

(2) That the additional area requested ie 2066 m2, as indicated on the attached plan, will be used for parking, sporting or recreational uses and will not be used to establish classrooms offices or other facilities which will add to the number of students or personnel on the site.

(3) That any excavated material will be tested for contamination and any such material found to be contaminated will be removed and disposed of in a proper manner. Bankstown Airport Limited agrees to pay the cost of any testing and removal of material found to be contaminated within the original lease area of 19,527 m2. The testing and disposal of excavated material within the additional lease area of 2066 m2 will be at your cost …”

68 Shortly thereafter Mr Rowe handed to the second plaintiff and Mr Adada a report prepared by Johnstone Environmental Technology Pty Limited (JET) entitled “Preliminary Soil Contamination Investigation for the Condell Park Islamic School “Noor Al Houda” Bankstown Airport 1998”. (Exhibit PB, tab 90 – “the JET report”).

69 This was the first occasion that the plaintiffs were made aware of there being any contamination or potential contamination affecting the site on which the College was located.

70 There is a dispute as to exactly what was said by each person at the meeting. I do not propose to resolve that factual issue since nothing turns on those conversations.

71 Either at that meeting or shortly thereafter, the second plaintiff noticed a reference in the JET report to an earlier report. A copy of that early report was requested from BAL and that earlier report entitled “Contamination Audit Bankstown Airport April 1994” prepared by Envirosciences Pty Limited, but authored by the same person who wrote the JET report, was subsequently provided to the plaintiffs in early December 1998 (exhibit PB, tab 8 – “the Envirosciences report”).

72 Having read both reports and having sought advice from their lawyers, the plaintiffs on 22 December 1998 wrote to BAL a letter in the following terms:

“Reference is made to your letter (25 November 1998 Your Ref: 12-10-656) regarding the negotiations on our new lease including the time limit of 30 days. Due to contamination report which was provided to us recently, we have been advised by our solicitors to conduct a more detailed investigation on the soil contamination prior to signing for the extension of the lease. Therefore we request that you allow us to begin organising this investigation and we will contact you as soon as we are aware of how long it will take us to obtain the results and then consider our lease in the light of these results.

We look forward to your co-operation in this matter.”

(Second plaintiff’s affidavit, 15 November 2002, tab 24).

Contamination

73 It is appropriate at this point to examine the state of knowledge of FAC at the time that it granted the lease to the College and the extent of contamination, or risk of contamination, of the land leased to the College and its suitability for conducting a school.

74 It is apparent from the early documents in exhibit PB, tab 1-7 that FAC was carrying out environmental investigations in relation to its airports including Bankstown. (Exhibit PB, tab 1.) It is also clear that FAC wished to carry out those investigations before discussing procedures to manage environmental risks with its tenants. It is clear from the memorandum from Peter Simpson, technical operations superintendent to Ms Lammerts, environmental officer, dated 7 October 1992 that the risk to tenants at Bankstown Airport from chemicals used on the airport was recognised.

75 The FAC memorandum of 9 July 1993 addressed to General Managers – Airports, Airport General Managers and Airport Managers – and also to Peter Simpson and Danny Eatock (an environmental officer employed by FAC at Bankstown) makes it clear that FAC appreciated the sensitivity of information which might be obtained as a result of “Environment Review reports” which it was intended to carry out. It directed that such reports should be general and should not contain “details of any more thorough investigations which may have been initiated when a problem was first detected”. The memo went on to direct that “to ensure confidentiality all Environment Review reports completed between now and the end of September should be forwarded to General Counsel with a covering letter seeking legal review and advice”.

76 In accordance with the program of conducting environmental reviews of its airports a Stage One Environmental Review Report was prepared in relation to Bankstown Airport in January 1994. A stage one report is a report which assesses the current situation. (Exhibit PB, tab 6.)

77 Contained in the report was section 3.5 headed “Rubbish Disposal – Historic Practices”. Section 3.5 referred to Bankstown Airport being used for many years as the dump site for the sanitary can waste (night soil) collected in the Canterbury and Bankstown areas until mains sewer connections were available. The location of such sites could be identified by areas of grass growth, which appeared to be extremely well fed. Fourteen such sites had been identified in the eastern area of the airport, each of which measured roughly 3.5 metres by 14 metres. The contents of each area were not expected to contain anything other than nutrients for grass growth, but the author of the report noted “it is desirable however to confirm this expectation and it is proposed to have tests undertaken for the purpose … If such testing indicates any areas of concern, it is proposed to supplement the testing to better define any environmental risk potential.”

78 A report entitled “Contamination Audit Bankstown Airport” was prepared by Envirosciences Pty Limited and was dated April 1994. The author was Lindsay Rockett. This was the Envirosciences report handed to the plaintiffs in December 1998. The report recorded instructions received from FAC to undertake a contamination investigation of three areas within the airport, one of which included “waste pits at the eastern end of runway 29R”. The objectives of the study were to identify contamination and to determine whether, if contamination was identified, off-site migration through ground water movements, was occurring. The report noted that the potential for contamination was caused by poor earlier work and poor waste disposal practices.

79 Section 3.2 of the report referred to information supplied to the author by FAC indicating that waste had been dumped in the ground during the 1940’s and 1950’s in an area to the east of runway 29R. That information was supported by evidence in two forms – excavation of waste during the construction of an extension of the taxiway to runway 29R, and aerial photographic evidence of the existence of an extensive network of trenches denoted by darker strips of thicker grass covering nearly five hectares (figure 3).

80 Somewhat unfortunately it was not until shortly before the trial that access was gained to the original April 1994 Envirosciences report (exhibit AA). Until then experts and others had been working from a rather poor photocopy of figure 3, which did not make clear the extent of the network of trenches. When the original colour photograph was examined (exhibit BB) it made clear that the network of trenches extended substantially into the northwestern portion of the land leased by FAC to the College in 1994. (See also figures 1.1, 1.2 to the report of Dr Swane of 20 June 2003 and the reworked version of figure 1.2 (exhibit 23), T.790.39-54).

81 Thirty-seven test pits were dug to natural soil material. Those relating to the eastern dump site can be seen in the charts on pages 6 and 11 of the report. A total of seventeen test pits were dug in the vicinity of the eastern dump site depicted by the network of trenches.

82 A number of the test pits contained waste material, including isolated fragments of asbestos cement sheet, nylon, wire and plastic. In test pit 14 a newspaper dated 4 April 1956 was recovered. In that same test pit, a small quantity of black odorous material was found which when tested showed significant contamination. In other test pits a layer of dark brown fibrous material was found at a depth of approximately .75 metres. Possible sources of this layer were thought to be original top soil covered by fill, night soil or other organic material. The author concluded (section 8.2) “If the contaminants detected are not leaching into the ground water the material can remain as is, that is, covered by fill and top soil.”

83 Although an analysis of ground water samples from the dump sites showed that the concentration of heavy metals, total petroleum hydrocarbons, BTEX products, polycyclic aromatic hydrocarbons and organochlorine pesticides were within limits recognised for the site, the report recommended that ground water quality be monitored at two monthly intervals.

84 The report concluded as follows:

The conclusions and recommendations presented in this report are based on necessarily limited inspection of conditions at specific isolated locations, chosen to be representative as possible under the given circumstances. It is, however, possible that these locations may not have encountered all areas of contamination. Inferences concerning the nature and continuity of soil quality from sample points are made but not guaranteed, due to the limited sampling program undertaken.

This report has been prepared for the particular investigations described and no responsibility is accepted for the use of any part of this report in any other context or any other purpose.”

85 It was common ground that the 1994 Envirosciences report was prepared at the request of Mr Eatock, an environmental officer employed by FAC. What happened to the report after it was received by Mr Eatock is not known. What is clear is that neither Ms Williams nor Mr Knox were aware of the report’s existence or content when they negotiated with the College in 1994 in the lead up to it leasing a site at the airport for use as a school.

86 Although Mr Knox and Ms Williams were unaware of the content of the report, I do not understand the defendant to argue that its content as a matter of law was not known to FAC. If such an argument is sought to be made, I reject it. Clearly FAC, through Mr Eatock and probably the other environmental personnel referred to in tabs 1-7 of exhibit PB ie Mr Simpson and Ms Lammerts, was aware of the report’s existence and its content. For reasons which were not explained (neither Mr Eatock, Mr Simpson nor Ms Lammerts was called to give evidence by the defendant), the information contained in it was not communicated to persons such as Mr Knox and Ms Williams, who were the employees of FAC charged with leasing portions of the Bankstown Airport and otherwise dealing with potential lessees.

87 It has been submitted on behalf of BAL that the effect of the receipt by FAC of the 1994 Envirosciences report needs to be assessed on the basis of how it would be interpreted by an intelligent layman without any particular expertise and in particular without the expertise of an environmental scientist. I reject this submission. It sits very uneasily with the contents of tabs 1-5 of exhibit PB, which identify employees of FAC as having some expertise in the environmental field and which also show a considerable sensitivity to the effect of such environmental information, particularly relating to contamination, on persons such as tenants.

88 A report was prepared by Dr Swane, an environmental scientist retained by BAL, dated March 2000 (exhibit DD). That report was only produced by BAL in the course of the trial after considerable argument. In it (pp 47-49) specific questions were put to Dr Swane as to what response should have been made to the 1994 report.

89 I set out that portion of the report.

“6.3 Opinions on Specific Issues

The following opinions are provided in response to questions raised by Phillips Fox.

1. Would anything in the 1994 report by Envirosciences Pty Limited indicate that:

(a) The Site at that time posed any risk to health;

(b) The Site at that time was not suitable for use as a school;

(c) Excavation could not be undertaken safely on the Site;

(d) The original design of the school could not have been safely constructed.

Answer

The results of the 1994 report were insufficient to indicate whether the Site at that time posed any risk to health. However, the investigation did establish that the Site was located at or near a former waste disposal site (referred to as “the eastern dump site”). The investigation also found levels of ground contamination that may have posed unacceptable risks to human health. These factors should have triggered the need for a more detailed investigation prior to allowing a school to become established at the Site.

The 1994 investigation tested three soil samples from within the Eastern Dump Site area, with two of these samples being described as composite samples. The report shows that levels of petroleum hydrocarbons, PAHs, copper, mercury and zinc exceeded the Soil Assessment Criteria (the criteria used in the 1994 investigation are in close agreement with the criteria used in the current investigation). These test data are summarised in table 6.1.

Table 6.1: Results from Envirosciences (1994) Investigation (mg/kg)

Sample C10-C36 PAHs (total) Copper Mercury Zinc

Comp 1
Comp 2
TP14
Not tested
Not tested
3,695
2.1
8.4
64.3
29
5,010
232
Not tested
Not tested
2.9
8.7
1,550
765

Soil Assessment
Criteria 1,000 20 100 1 200

TID test results also indicated that the sample from TP 14 generated elevated levels of volatile hydrocarbons.

The report indicates that composite sample Comp 1 was taken from test pits TP4 and TP5 between .65-7m, Comp 2 was taken from test pits TP7 and TP 13 between .5-.7m, the sample from TP14 from a depth of 1.5m. The test pit logs indicate that samples Comp 2 and TP14 probably consisted of Night-soil Fill.

While the exact location of these three samples cannot be determined from the report, the data provided in the 1994 report indicate that ground contamination at unacceptable levels was present in the general area of the Site. The contamination would have posed a risk to human health if the contaminated materials were present at the ground surface. However, the test pit logs indicated that the contamination was buried, although this was not clearly quantified by the report. The results of the current investigation have shown that at all locations investigated, the contaminated Night-soil Fill is covered by not less than .8m of “clean” soil.

(b) The results of the 1994 report were sufficient to indicate there was a possibility that unacceptable levels of contamination may have been present at some parts of the Site. On account of this uncertainty, the results of the 1994 report were sufficient to indicate the Site at that time was not suitable for use as a school unless further investigations were to be undertaken which indicated otherwise.

This opinion is based on the use of the “Precautionary Principle” which is an approach that the ANZECC and NHMIC (1992) guidelines recommend as needing to be used when considering management strategies for Site contamination. I interpret this principle as requiring the use of a cautious and conservative approach when dealing with uncertainties that arise when assessing contamination at a Site.

Since contamination was found in the general area of the Site, the Site should not have been used for a more sensitive land use until further investigations had been undertaken and any areas containing unacceptable levels of contamination had been removed.

(c) Refer to my answer 2(b).

(d) Refer to my answer 2(b).

(2) If your response to questions 1(c) and 1(d) is “yes”, could excavation and construction have taken place with appropriate management plans? If so, what management plans would have been necessary.

Answer

The information provided by the 1994 investigation should have prohibited any excavation and construction occurring at the Site until a more detailed investigation had been conducted at the Site.”

90 In his report of 20 June 2003, and in his oral evidence, Dr Swane sought to make the following distinction. He said that the opinion expressed by him in the March 2000 report was an opinion of an environmental scientist. It should not be taken as the opinion of an intelligent lay person. An intelligent lay person such as the employees of FAC, would not have formed such an opinion and would not have regarded the 1994 Envirosciences report as indicating a potential risk to persons seeking to use the site leased to the College as a school. (2003 report pp 20-21 para 2.3.12, T.844.53-58, T.845.26-28, T.846.28-56, T.871.24-48.)

91 Apart from the obvious criticism that Dr Swane has no expertise to express an opinion as to what was the reasonable response of an intelligent lay person when reading the report, the distinction which is sought to be drawn is misconceived.

92 As indicated, the persons who received the report were experienced in environmental and contamination issues. The report is expressed in relatively simple terms and its meaning is clear. The author of the report was expressing his opinion based on the existing user of the Bankstown Airport, ie as an airport. He had not been asked to consider a more sensitive use, ie as a school. One does not have to be an environmental scientist to reach the same conclusions in relation to the 1994 report, as those of Dr Swane in his report of March 2000. They are matters of common sense.

93 Given the limited nature of the investigation carried out in 1994 by Envirosciences in relation to the eastern dump sites and the clear qualification in the conclusion, a reasonable person even without any environmental qualifications or experience having read the report, would have concluded that further investigations should be carried out in relation to any specific site intended to be operated as a school. This is particularly so when it was known that some digging of trenches for the installation of services would be required and some question had been raised of using a form of “earth integration” as a method of building.

94 In the absence of any evidence from Mr Eatock or Ms Lammerts, and in the absence of any explanation as to why they were not called (the evidence revealed that Mr Eatock was currently performing work at the Coolangatta Airport T.1002.48), I conclude that the evidence which those persons could have given would not have assisted the defendant’s case. There was evidence that Mr Simpson had taken a job in Amman (T.826.41) at some time after 1994, but otherwise no explanation was offered as to why he could not give evidence.

95 For the above reasons, I find that the responses recorded by Dr Swane at pp 47-49 of his report of March 2000 generally reflect the response that employees of FAC would or should have had to the 1994 Envirosciences report had they been aware that a school was to be operated in the vicinity of the eastern dump sites. This is so even where it was anticipated that the buildings would be demountables. In this case it was clear that even though the initial structures would be demountable, the intention was to build permanent buildings if a twenty-five year lease could be obtained.

96 It follows from that analysis that until further testing was carried out, the effect of the 1994 Envirosciences report was to indicate to FAC that there was a risk to health for persons setting up and conducting a school in the vicinity of the eastern dump sites.

97 Although some testing of ground water took place in the vicinity of the Bankstown Airport, no further investigations were carried out in relation to the eastern dump sites and specifically in relation to the land leased to the College by FAC until 1998.

98 In the second half of 1998 Mr Rowe, the operations superintendent of BAL, was supervising some excavation work on land approximately eighty metres south west of that occupied by the College. That work did not concern the College. He observed some tins and bottles being removed from the excavation (affidavit paras 37-40, T.997.58, T.998.1-3, T.999.1-24). Because Mr Rowe was aware that the College was seeking to lease more land, he arranged for an organisation called Johnstone Environmental Technology Pty Limited (JET) to carry out tests of land to the west of the College’s existing lease site. Mr Rowe was referred to JET by Mr Eatock since Mr Rockett, who had prepared the 1994 Envirosciences report, was at that time employed by JET.

99 In October 1998 JET prepared a report entitled “Preliminary Soil Contamination Investigation for the Condell Park Islamic School “Noor Al Houda”, Bankstown Airport”. This was the JET report which was handed to the second plaintiff by Mr Rowe at the meeting on 25 November 1998.

100 The purpose of the report was:

“To undertake a soil contamination investigation on a site to be used as part of the Condell Park Islamic School … and this soil contamination investigation was undertaken because of the proposed expansion of the school onto the Bankstown Airport land …

The objective of the investigation was to determine whether any residual soil contamination was present on the existing and proposed school site and, if so, what remediation would be necessary to ensure the site is returned to a condition appropriate for its intended future use as school playground.”

101 The land to be investigated was described:

“The investigation area occupies an area of approximately 5000 square metres and the eastern section, which was formerly part of the Airport land, is currently occupied by the school and is used as a playground area. A wire fence separates this playground area from the western section of the investigation area which is open space on BAL land and is unused except for the access road to the runways as shown on figure 1. A row of demountable buildings is located in the playground adjacent to the wire fence as shown on figure 1.”

102 Eighteen test pits were dug. No organic matter, and in particular night soil, was found closer to the surface than .5m. The worst night soil contamination was found at pit IS4. This was found at a depth of 1m. At three locations in the leased area (IS10, IS12, IS13) the environmental risk based criteria was exceeded for copper and zinc. Those same three test pits also showed that environmental risk values were exceeded for dieldrin and/or DDT. There were exceedances for copper, zinc, dieldrin and/or DDT in other test pits on the additional land sought to be leased.

103 The conclusion was expressed as follows:

“From a health risk perspective the results are all satisfactory. Some exceedances of environmental risk criteria were found, particularly metals and pesticides. For the metals it should be noted that this may have thytotoxic effects on some plant species. It is noted that OCP exceedances of the environmental risk criteria were related to subsurface samples and provided that excavations are not carried out that may result in this soil being left at the surface, the environmental risk is considered to be very low. Attention is drawn, however, to IS4 and it should also be noted that excavation in this area will require specific disposal of this soil because of the high pesticide value.”

104 On 12 November 1999 a brief two page report was provided by Douglas Partners, a firm of environmental engineers, to the then solicitors for the plaintiffs, Messrs Coleman and Greig. That report was admitted in the trial, not as to the truth of its contents, but on the limited basis that it was a document which was received by the College and which the College may have acted upon. It was very much a preliminary report based on an examination of the 1994 Envirosciences report and the 1998 JET report. The report expressed a preliminary opinion that the site was contaminated and unsuitable for a school. No further investigation was ever carried out by Douglas and Partners.

105 These proceedings were commenced by the College in January 2000. It was in a litigation context that the report of Dr Swane of March 2000 was prepared for BAL. In the preparation of that report, Dr Swane had available the 1994 Envirosciences report and the 1998 JET report. At his direction further test pits and boreholes were drilled at the site in February 2000, ground water monitoring wells were installed and thirteen boreholes were drilled. On the basis of that material, Dr Swane proceeded to answer a number of questions.

106 Those questions were (exhibit DD, pp 49-53):

3. “Does the Site in its current state pose any risk to health?

Answer

It is considered that the contamination identified in Area D of the Site does not pose a significant risk to human health in its present condition due to the presence of the 'clean' soil capping layer. It is also considered that the contamination will not pose a significant risk to human health in the future provided the Night-soil Fill layer remains undisturbed and buildings are not erected over the school playground in Area D.

While the site investigation found concentrations of petroleum hydrocarbons above the human health Soil Assessment Criteria, the contamination was found in the Night-soil Fill layer that was buried at a minimum depth of 0.8m.

4. Is the Site suitable for its current use as a school?

Answer

The available information indicates that the Site, in its present form, is likely to be suitable for its current use as a school provided:

(a) Areas A, B and C of the Site are validated. While the available historical information indicates the former waste disposal trenches were not present in these areas, it is considered that these areas be investigated and validated given the proximity of these areas to the former waste disposal operation, the sensitivity of the current land use, and the fact that investigations appear not to have been previously conducted in these areas.

(b) The following controls are placed on the use of Area D:

- No works are to be undertaken in Area D that would disturb the soils below a depth of 0.3m.
- No buildings are to be erected in Area D.
- Any depressions that form in the footprints of the former waste disposal trenches are to be filled in with 'clean' topsoil and grassed.
- No large trees are to be grown in Area D.

- These controls should be placed on a suitable notification mechanism such as a Section 149 Certificate.

5. Assuming that the Site is in its current state and is used as it is presently, with no works undertaken on the Site, are management and/or monitoring plans necessary? If so, what management plans are necessary.

Answer

- No works are undertaken in Area D that would disturb the soils below a depth of 0.3m.
- No buildings are to be erected in Area D.
- Any depressions that form in the footprints of the former waste disposal trenches are filled in with 'clean' topsoil and grassed.
- No large trees are to be grown in Area D.
- These controls are placed on a suitable notification mechanism such as a Section 149 Certificate.

6. If excavation were to be carried out on the Site.

(a) Would the excavated soil require treatment prior to removal or storage? It so, what treatment,,
(b) Would any remediation works, such as treatment, off site disposal or capping, be required for the night soil affected fill that may be exposed during excavation? If so, what are the remediation works required;
(c) Would any remediation works be required for the night soil affected fill that is to remain on Site to contain any odour emitted? If so, what are the remediation works required;
(d) Would the Site require any further remediation before the school could resume operations? If so, what is the remediation required;
(e) What management and/or monitoring plans, if any, would be necessary to
(i) undertake the excavation works; and/or
(ii) manage the Site following completion of the excavation works?

Answer

(a) The data obtained by the current investigation indicates that the stratigraphy at the former waste disposal trenches consists of four main soil types - a Topsoil Fill layer, a General Fill layer, a Night-soil Fill layer, and a Residual Soil layer. All soils, other than the Night-soil Fill, have been found to be 'clean' and not odorous. However, the Night-soil Fill has been found to be contaminated at unacceptable levels for the current land use of the Site, and to be odorous.

Selective excavation of the soils at Area D would mean that all soils, other than the Night-soil Fill, should not require treatment prior to removal or storage. However, these soils would still need to be sampled and tested following their excavation as part of an overall validation program that would be required if the Night-soil Fill was to be disturbed in Area D.

An alternate option to disposing of the Night-soil Fill to an EPA-licensed landfill is the burial of the material at a suitable location at Bankstown Airport that is well removed from the College. However, given the relatively small volume of material involved, it is considered that the landfill disposal option is the preferred approach.

(c) It is considered that no remediation works would be required for the Night-soil Fill that is to remain on Site to contain any odour emitted.

This is because the available information indicates the Night-soil Fill is buried under a layer of 'clean' soil having a minimum thickness of 0.8m. However, a number of controls would need to be placed on the future management of the area, as previously mentioned.

(d) It is considered that no further remediation works would be required before the school could resume operations.

7. If the current construction is undertaken, do your responses to questions 6(a) to (e) change? If so, please explain why.

Answer

If the current construction is undertaken, it is recommended that all Night-soil Fill in Area D be removed, the ground between the former waste disposal trenches be excavated, and the whole area backfilled and compacted. Excavation of all soils down to the shale bedrock across the former disposal area in Area D will ensure that all unacceptably contaminated materials are removed from Area D, and the final condition of the soils across Area D will consist of a uniform engineered fill suitable for the support of future school buildings. If the loose fill materials were left in the former waste disposal trenches, then foundation problems could develop if buildings were constructed over the area due to the potential for excessive differential settlements and low bearing capacities.

8. If the original design is constructed, do your responses to questions 6(a) to (e) change? If so, please explain why.

Answer

9. Could the night soil affected fill be used to create the earth mound?

Answer

The Night-soil Fill would be unsuitable for constructing the mound since the levels of contamination exceed the criteria recommended by the NSW EPA for the protection of human health and the environment at land used for a primary school or landscaped open spaces.”

107 The plaintiffs’ then solicitors, Messrs Price Waterhouse Coopers Legal, obtained a report from Golder Associates Pty Ltd, environmental scientists, dated June 2001 (February 3, second plaintiff’s affidavit 15/11/02 – the Golder report). In preparing that report, Golder Associates Pty Ltd had available the 1994 Envirosciences report, the 1998 JET report and the Douglas Partners report. In addition, nine test pits were excavated to depths that ranged from 1.1 to 2.3 metres below ground surface using a backhoe. Five boreholes were drilled to depths ranging between .4 m – 1.4 m using a hand auger.

108 At section 7.4, Golder Associates Pty Ltd commented on the suitability of the leased site for school use and for a proposed additional classroom. The report said:-

“For reasons discussed above it is difficult to comment with confidence on whether the existing levels of contamination are such as to permit continuing use of the existing site for the purposes of a school. This is because the site investigation coverage is insufficient to provide confidence that there is consistently clean cover over contaminated horizons. There is also a risk of soils being disturbed and relocated to the surface by inappropriately managed excavation/foundation works. Consequently remediation will be required at the site and the remedial action plan (RAP) should be produced.”

109 Some remediation options were discussed. Indicative remediation costs were suggested at between $235,000-$300,000. The author of the Golder report, Mr Greenwood, was in the United Kingdom and was unable to be called in the plaintiffs’ case. Ms Lloyd, an environmental scientist who had participated in the preparation of the report, was able to give evidence. Under cross-examination she agreed with the opinion of Dr Swane in his 2003 report to the effect that provided the coverage of earth of approximately .5m was maintained over those parts of the leased site which contained night soil and other contaminants, there was no significant risk to the health of persons using that land as a playground or for other purposes associated with a school.

110 It became a moot point as to what activities were sufficient to disturb the earth cover over any contaminants. It was the plaintiffs’ case that the trenches which had been dug for the installation of services even for demountable buildings were sufficiently deep to have broken through that .5m coverage of earth. Mr Adada gave evidence that the trenches for services were approximately 1.2 metres deep (T.83.35-44). Mr Adada’s evidence on this issue was challenged. Photographs of the College taken in December 2002 and later were shown to him to demonstrate that such trenches as were dug for electrical and sewerage services were relatively shallow and did not reach that depth.

111 Mr Adada explained that in the vicinity of the demountable buildings, the trenches for services which contained pipes and wiring were shallow because they had to be connected to the buildings. Away from the buildings the trenches were much deeper, particularly in relation to sewerage and stormwater because they had to link up with existing connections which were at a deeper level.

112 It was significant that the photographs relied upon by BAL in exhibits 25 and 27 were taken in the vicinity of the demountable buildings and consequently showed the trenches containing electrical wiring and pipes to be relatively close to the surface. This was consistent with the evidence of Mr Adada.

113 I am satisfied that some of the trenches which provided the connection of services such as electricity, sewerage and stormwater to the demountable buildings were deeper than .5 of a metre, particularly when those services were at a distance from the demountable buildings. It follows that there would have been some disturbance of the covering of soil, even without the construction of permanent buildings on the site. The digging of those trenches had of course been largely completed by the time the plaintiffs learned of the potential contamination problem.

114 In the course of the evidence of Ms Lloyd it emerged that Golder Associates Pty Ltd had prepared two further reports which had not been served. One of those reports had been provided to the plaintiffs’ then solicitors, Messrs Price Waterhouse Coopers Legal, but it was not clear whether the other report had been so provided. There was no evidence that either report had been provided by the solicitors or by Golder Associates Pty Ltd to the plaintiffs. There was evidence that the cost of those additional two reports had been met by the College. The additional Golder reports, which were draft reports, were dated July 2001 and 31 July 2001 and were marked as exhibits 12 and 11 respectively.

115 The effect of the report of July 2001, exhibit 12, was that unless the surface coverage of earth was substantially disturbed there was little danger to persons using the site for normal above ground activities. The effect of the report of 31 July 2001, exhibit 11, was that twelve surface soil samples collected from locations above suspected waste trenches returned concentrations less than health risk based guidelines for both open space and residential use. Golder Associates Pty Ltd concluded that provided the surface grass coverage was kept intact there was an acceptable risk from exposure to the surface soils and that the College could continue to use the western area of the site as playing fields. Golder Associates Pty Ltd recommended appropriate health and safety precautions be taken should any subsurface work be conducted in the vicinity of the waste trenches.

116 The only report of Dr Swane which was served by the defendant prior to the commencement of the trial was that of 20 June 2003. The conclusion of Dr Swane that the College could continue to use the leased site for playing fields, provided the surface coverage remained intact, was in accord with the conclusions of Golder Associates Pty Ltd in their reports and the evidence of Ms Lloyd.

117 Dr Swane went somewhat further. In figures 1.1 and 1.2 he provided three overlapping overlays. The purple overlay indicated the extent of the 1994 lease, the blue overlay indicated the additional land leased in 1998 and the red overlay indicated his estimate of the extent of night soil trenches. A further figure, exhibit 23, was prepared by Dr Swane to correct wrong data in relation to the location of the Golder Associates Pty Ltd boreholes which was set out on figure 1.2.

118 The plaintiffs challenged the accuracy of the red overlay and argued that it should not have formed a dog-leg towards the northern side of the leased site and should have extended directly to the road. The dog-leg created by the red overlay excluded most of the College’s demountable buildings in the north-west corner.

119 Exhibit BB, being the aerial photograph which formed part of the original 1994 Envirosciences report, is persuasive evidence that the submission made on behalf of the plaintiffs is correct. Under cross-examination in particular between T.811 and T.817 Dr Swane conceded that he could not exclude the night soil trenches extending to include the four buildings of the College complex in the north-western corner. On the basis of exhibit BB I am of the opinion that more likely than not the night soil trenches did so extend as the plaintiffs submit.

120 A disturbing feature of the report of Dr Swane of 20 June 2003 is the difference between the opinions there expressed and those in the report of March 2000 and in draft reports prepared in 2001. They are significant. Under cross-examination Dr Swane explained the difference on the basis that between March 2000 and 20 June 2003 more information came to hand which enabled him to be more definite in expressing his opinion that there was little risk associated with the use of the leased site by the College and that the site was suitable for a school. (Compare ex DD pp 49-53 with June 2003 report pp 11-16, T.862-865 and T.877-879).

121 Dr Swane was carefully cross-examined to identify the additional information which had caused him to change his opinion. It was apparent from that cross-examination that the only additional information arose from some further test pits made in October 2000 and the service of the Golder report of June 2001. It was clear that the additional information provided by those examinations was not such as would produce such a change in opinion. (T.841.46-55 – T.842.7-40) It did not take Dr Swane’s knowledge very much beyond the level that had been achieved in March 2000.

122 Under cross-examination Dr Swane offered by way of further explanation that when he had reconsidered matters again he had changed his opinion.

123 One cannot help but think that the changed opinion and recommendations of Dr Swane in the 2003 report and at trial were to some extent influenced by the litigious process. In that regard I prefer the conclusions set out at pp 49-52 of Dr Swane’s report of March 2000 (see paras [89] and [106] hereof).

124 As with Golder Associates Pty Ltd, Dr Swane was of the opinion in both the March 2000 and June 2003 reports that excavation for the construction of permanent building if it took place in the vicinity of the night soil trenches would have to be properly managed otherwise it could present health risks. His primary position was, however, that such excavation would not be necessary:

“The new buildings could have been constructed by the College in the western part of the site over the former nightsoil disposal trenches by using appropriate design techniques. Such a design technique would have involved supporting the building on a pier and beam foundation, which involves the construction of drilled concrete piers in the undisturbed soils away from any night soil trenches. The piers would be found on the shale bedrock connected by concrete edge-beams at ground level. The ground floor slab would then have been supported on the edge-beams. This design would have eliminated the need for any part of the building to come into contact with the buried night-soil or for the night-soil to be disturbed in any way.”

125 This suggested method of construction was not costed. No estimate was given as to whether it was more expensive than conventional methods of construction. Because the method proposed is unusual, I suspect that it would have involved additional cost. How much additional cost is not known.

126 Another alternative suggested by Dr Swane (T.865) was that if in the course of construction of permanent buildings for the College it became necessary to disturb contaminated soil, ie go below a depth of .5m, the soil thus disturbed could either be reburied or removed from the site. It is obvious that if conventional building methods were used for the construction of permanent buildings such as classrooms, excavations in excess of .5m would have been required. It is for that reason that Dr Swane suggested the alternate construction method in para [124]. As was the case with the alternate construction method the cost of reburying disturbed contaminated soils or removing same from the site was not specified. It would clearly increase construction costs.

127 Even though the defendant had offered in its letter of 25 November 1998 to pay for the removal of such disturbed soil (para [67]), one can readily anticipate problems arising during construction if large quantities of excavated soil had to be dealt with in such a way that it would not come in contact with persons on the site, either workmen or children, and so that it could be conveniently removed. I do not understand BAL’s offer to pay removal costs to extend to additional costs of construction and delay if excavated soil had to be dealt with in that way. The “master plan” (exhibit A) and the staged development plans shown to Mr Rowe (exhibit F, p3) made it clear that permanent buildings were to be constructed on the western area of the leased site where night soil trenches were located.

128 It seems clear that if permanent buildings were to be constructed for the College on those parts of the leased site where contaminated soil was located, construction costs would have been significantly greater than those applicable to an uncontaminated site. One also needs to have regard to the estimate in the Golder report of the costs to remediate the site - $235,000 - $335,000 (p23).

129 The conclusion I have reached in relation to contamination is that so long as the College continued to conduct its operations from demountable buildings and provided there was no disturbance of the topsoil cover below a depth of .5m it was able to safely operate from the airport site. The College was not fully aware of that fact, even after receipt of the Golder report. It should be noted that after receipt of the Golder report, some parts of the leased premises were fenced off. The College was not provided with any expert reports to that effect by the defendant until 2003 after it had vacated the site.

130 In my opinion, the airport site was not suitable for use as a school if permanent buildings were to be constructed. The precautions which would have had to be taken, the stockpiling and removal of soil, the consequential delay and need to modify building techniques would have made such an undertaking impractical. Such modifications to building methods would have significantly increased costs. It would probably have been too dangerous to allow the College to operate while excavation was taking place.

282 Another assumption underlying the claim for loss of profits is that the more students who attended the College, the greater the potential profit. That proposition is supported by the calculations in exhibit R. Those calculations are based on per capita government funding (both State and Federal) from which estimated costs are deducted. If the case were entirely theoretical, those calculations might be persuasive. What I find more persuasive is the actual performance of the College between 1994 and the end of 2001. It is apparent from the financial performance of the College that significant increases in the number of students did not necessarily produce a profit. On the contrary, on occasions it produced a considerable loss.

283 Exhibit 43, which was prepared by the defendant’s accountant Mr Mentzalis, provides a clear indication of this pattern. What Mr Mentzalis has done in the top half of that analysis is to add back into the profit/loss of the College for the years 1998-2002, the legal fees which the College had paid. When that is done the following emerges. 1998 – 550 students - $43,000 profit. 1999 – 578 students - $11,000 loss. 2000 – 682 students - $117,000 profit. 2001 – 717 students - $137,000 loss. 2002 – 571 students - $25,000 loss.

284 There was no clear evidence as to precisely how the costs of the College were made up. Attempts to elicit this evidence resulted in more theoretical calculations without any reference to the actual figures, and I rejected that evidence (second plaintiff’s affidavit, 8 November, 2004). I suspect that the College was not being efficiently managed. That would not be surprising given the lack of experience on the part of the second plaintiff and Mr Adada, who appear to have been solely responsible for not only the running of the College as an educational institution, but also for its financial affairs. The actual financial results, as distinct from the theoretical calculations in exhibit R, make it clear that for the College an increase in student numbers did not necessarily mean an increase in profit. That assumption in exhibit R is not made out.

285 Before leaving the claim for loss of profits for the past, I need to deal with the years 2002 and 2003. 2002 was the first year in which the parents were told about the possibility of contamination. It can be inferred from the reduction in student numbers of 146, that this may have had some effect on student numbers, but that is not clear. No evidence was adduced from any parent that the communication of this information had that effect. What may have been of equal importance was that it was known the College was going to move at the end of the year. That latter consideration was directly related to the contamination issue in that the need to move only arose because of the College’s decision not to remain on what it considered to be a contaminated site. Accordingly, it seems likely that the reduction in student numbers to 571 was primarily due to the contamination issue.

286 Even with a reduction in student numbers in the year 2002, the actual loss by the College in that year was significantly less than the previous year when student numbers were larger by 146. Accordingly, I am not satisfied that the reduction in student numbers in 2002 affected the profitability of the College in that year, nor am I satisfied that any loss due to contamination or the risk of contamination was incurred by the College in that year.

287 The year 2003 was complicated by relocation costs. The number of students for that year was even lower – 307. The financial loss by the College was very significant - $1,117,000 if one included the relocation costs. The need to move the school and set up at a new location can be inferred to be the major reason for these low student numbers.

288 It is difficult to identify any reason for such a large financial loss other than the further reduction in student numbers. Even allowing that in earlier years there was no direct ratio between the number of students and the profitability of the College, this very significant reduction (264) in student numbers in 2003 must have contributed to the overall increase in the College’s loss for that year.

289 Unfortunately one cannot calculate that loss with any degree of accuracy since the approach which I have followed in relation to the College is different to the assumptions relied upon by Mr Carter in exhibit R. The loss of opportunity which I have found is the opportunity to occupy a smaller and less suitable site similar to that which is now occupied at Strathfield. There seems to be no argument between the parties that the maximum number of students which can be accommodated at Strathfield is 664 (exhibit R, para 70). Even so my quantification of the value of that lost opportunity is only fifty percent.

290 Doing the best I can, on the limited material available to me, it seems that the additional loss suffered by the College in 2003 due to loss of student numbers and overall disruption caused by the move would be in the order of $500,000. Applying as I do a fifty percent discount to that figure, I assess an actual loss suffered by the College for the year 2003 at $250,000.

291 I do not have any figures relating to the operation of the College for 2004. The only information I have is that 354 students were enrolled in the College in that year. I propose to include any loss in relation to 2004 in my calculation of loss of profit for the future.

292 Accordingly, I find that in relation to the past the only loss suffered by the College is $250,000 in respect of the year 2003. I reject the claim for any further loss of profit for the past.

Loss of profit (future)

293 In relation to future loss of profits, a series of somewhat complicated scenarios were proposed in exhibit R and in exhibit T. These scenarios all depended upon assumptions which I have rejected – that a similar alternate site would have been obtained, that the projection of student numbers was accurate, that any reduction below those projections was due to the contamination issue and that a reduction in student numbers would automatically involve a reduction in profit by the College.

294 Using those assumptions, exhibit R calculated future loss of profits by reference to the difference between 664 students (being the maximum which could be accommodated at Strathfield) and what would have been accommodated on the hypothetical alternate site. As an alternative scenario, exhibit R used the same approach but reduced the period of loss by assuming that by 2006 a further site would have been obtained by the College in addition to Strathfield on which it could expand so as to build up the numbers of students to the totals originally envisaged for the hypothetical alternate site.

295 On the findings which I have made, that approach is invalidated. That which was lost was the opportunity to occupy a smaller site similar to Strathfield from 1994 or some date thereafter. That does not mean that no loss has been suffered for the future.

296 If, as I have found, there was an actual loss suffered by the College during 2003 by the further reduction in student numbers to 307, one could anticipate a similar loss for the year 2004 when student numbers were only 354 and that some further losses would be suffered in the future until student numbers built up to the maximum which that site can hold – 664. By reference to the opportunity which I have found to have been lost, student numbers of 664 would have been achieved by the end of 2001, or at least 2002, so that what has been lost by the College for the future is any financial loss which it might incur between the present time and the future date when the number of students at the Strathfield site builds up to its maximum.

297 Exhibit R provides little assistance as to whether a loss has been suffered and if so its value. In para 70 of exhibit R, Mr Carter was asked to assume that Strathfield would reach its maximum numbers by 2009. No evidence was led to substantiate that assumption. Looking at the actual history of the College between 1997 and 2000, the numbers increased from 387 to 682, ie that increase occurred over a period of three years. Since the College has now been operating for ten years, I see no reason why a similar increase would not occur within three years at Strathfield, particularly since as at the end of 1997 the College had only been operating for three years.

298 The other difficulty is that to which I have already adverted, ie from the actual performance of the College, particularly between 1998 and 2002, an increase in student numbers does not necessarily mean an increase in profitability.

299 Despite the difficulty in calculation, if I am persuaded that a real loss has been suffered I am obliged by authority (State of New South Wales v Moss (2000) 54 NSWLR 536 at paras 66-87) to do the best I can to calculate the value of that loss. I am persuaded that the significant reduction in student numbers from 571 in 2002 to 354 in 2004 occurred as a direct result of the contamination issue and consequent move of the College. It also seems to me that as with the year 2003, such a significant reduction in student numbers would be productive of a loss of profitability, at least until those numbers built up to the 664 maximum capacity. On the basis of the past history of the school, I find that is likely to occur by the year 2007. Doing the best I can, I assess the future loss of profitability at $600,000. Applying the fifty percent discount for the loss of opportunity, I find a loss of future profit in favour of the College of $300,000.

Capital grants

300 Mr Carter in exhibit R was asked to assume that the only impediment to the College receiving capital grants from the Commonwealth in relation to the hypothetical site was the absence of a twenty-five year lease. On that basis he assessed a loss of capital grants to the College as follows:

Year Grant Received

$ 200,000

301 Mr Carter was also asked to assume that in the future capital grants would only be fifty percent of what they were in the past. On that basis Mr Carter calculated a further loss to the College because future capital grants would be fifty percent less than in the past.

302 There were other impediments to the College receiving capital grants from the Commonwealth for the past. In addition to a long term right of occupation, the College needed to have a business plan and management structure which was satisfactory to the committee which Mr Whitfield chaired. No such financial plan was ever prepared and none was tendered. The management structure of the College was a difficulty for the funding committee in that the control of the College was entirely in the hands of the second plaintiff and Mr Adada (para [61]). The committee required there to be a division between those actually teaching at the school and those controlling the school, and for the controlling board of the school to have where possible a broad level of skills and representation. (T.400.2-45)

303 That latter requirement may have presented a major difficulty for the second plaintiff and Mr Adada, given their unfortunate experience with the first school where they had been removed from the board. As Mr Adada freely admitted, they so arranged the voting structure of the College so that this could not happen again. There was no evidence by the second plaintiff or Mr Adada as to whether they would have been prepared to change the management structure of the College and if so, to what extent in order to obtain capital grants. It is of some significance that the controlling structure of the College was never changed between its incorporation in late 1994 and the date of the trial.

304 A further impediment was the requirement that the College raise funds of its own. The illustration given by Mr Whitfield is revealing – for a capital grant of $500,000 the College would have to raise $860,000. The only evidence of the College’s capacity to raise money by way of loan or otherwise, was a loan approval document from the Commonwealth Bank dated 6 October 1998 for $500,000 (exhibit M). There was no evidence of the College’s capacity to meet the interest and repayment obligations in relation to such a loan. The evidence of the second plaintiff was that the shortfall of $360,000 would be met by unpaid voluntary work by parents of the students. In the context of a $1.36 million stage of a school building program, I find the suggestion that $360,000 would be made up of such unpaid voluntary work to be unbelievable. I doubt the College’s capacity at any time in the past to raise sufficient funds on its own behalf to meet its financial obligation where a capital grant was made to it. If the College was successful in obtaining such a loan, I doubt that it could have serviced that loan.

305 The final impediment is of a similar kind. One of the matters which the Grant Committee took into account was the financial viability of the College (paras [61-7]). The reason why a capital grant had not been made to the College after its move to the present Strathfield premises was because of doubts about its financial viability (T.408.1-20). Given the various financial crises experienced by the College between 1995 and 2002, there has to be a real question mark about its financial viability from the point of view of a capital grant being made to it.

306 The assumption which Mr Carter was asked to make (exhibit R, para 120) that six capital grants of varying amounts would be made in consecutive years is not borne out by the evidence. Messrs Whitfield and Clarke agreed that depending upon need, more than one capital grant could be made over a period of six years. The reason why such grants were not made in consecutive years was that building work had to take place and to some extent be completed in relation to the particular phase for which the grant was made, before an application for another grant would be considered by the committee. It was also the evidence that a capital grant approved for one year may not be actually paid until two or three years later when the building works were underway (T.406.2-9).

307 Because the first application for a capital grant was made for the year 1998, I have concluded that at most the College would have been eligible for two grants between 1998 and the end of 2002. I reject the assumption by Mr Carter of six grants.

308 On the positive side, Mr Whitfield indicated that subject to the matters to which I have referred being satisfied, it had been decided by the committee to allocate a capital grant of $500,000 to the College in 1998. In line with my previous findings as to loss of opportunity, I am satisfied that by entering the 1994 lease, not only did the College lose the opportunity to establish the school on an alternate site such as the Strathfield site (the chance which I have quantified at fifty percent) it also lost the opportunity of successfully applying for two Commonwealth grants for such a site between 1997 and 2002. Because of the impediments to which I have referred, I quantify that loss of a chance at thirty five percent.

309 On the basis of those findings, I assess the loss of capital grants as follows. I find that the College lost the opportunity of obtaining two capital grants of $500,000 each. I have quantified the prospect of that opportunity eventuating at thirty five percent, which reduces the figure to $350,000. That figure, however, is based on another hypothetical lost opportunity, ie that an alternate site would have been obtained in relation to which the capital grant would be applied. I have quantified that likelihood at fifty percent. That further reduces the loss of the College in relation to capital grants to $175,000. I find that is the loss which the College has suffered in relation to capital grants for the past.

310 In relation to the future the evidence of both Messrs Whitfield and Clarke was that with the passage of time and the increase in the number of independent schools applying for capital grants, less money is being allocated to each successful applicant school. I find that to be a function of government policy and the current economic climate, and not to be causally related to any conduct on the part of BAL. I reject any claim for loss of capital grants by the College for the future.

Relocation costs

311 The estimate of relocation costs given by Mr Carter in exhibit R can be largely ignored. By affidavit dated 9 November 2004 Mr Adada sought to establish the actual costs incurred by the College in relocating to the Strathfield premises. One of the matters raised by Mr Carter, which is not otherwise dealt with, is a claim of $58,000 for staff redundancies. This is an estimate only. The only evidence to support that figure comes from the Administrator’s report, exhibit 44, section 2 “Summary of Position”, which indicates that there was approximately $862,183 by way of employee entitlements outstanding. There was no evidence as to how many employees were made redundant, although the reduction in student numbers between the end of 2001 and the beginning of 2003 from 717 to 307 must have involved significant redundancy payments. It seems to me that the amount of $58,000, which is the only calculation with which I have been provided, favours BAL. In those circumstances I allow that amount.

312 The affidavit of Mr Adada was challenged in a number of ways. The first attack related to the very basis of the claim. BAL submitted that the College had entered into a seven year lease and that is what it got. Accordingly, it was not entitled to any relocation expenses.

313 With due respect to BAL’s submissions that puts the matter at too simplistic a level. The College entered into the 1994 lease with the hope of obtaining a longer lease. When that hope eventuated, the nature of the contamination affecting part of the leased site was such that it became impossible in a practical sense to develop a school on the site with permanent buildings so that the College had no alternative but to move. Accordingly, the relocation costs were foreseeable and causally related to the breach.

314 The total amount claimed by Mr Adada in his affidavit was $446,000. The affidavit was made up of a number of components, each of which has been challenged by BAL. In relation to the expenditure of time by Mr Adada himself, and the accounts rendered under his business name – Eco Space Design – BAL submits that these are no more than self-serving documents which are inconsistent with his previous taxation returns. It submits that there is no way of assessing what work Mr Adada would normally have performed for the College and what additional work was directly associated with the relocation. Mr Adada was extensively cross-examined on the material in his affidavit.

315 Despite the scepticism of BAL, it is obvious from other material that the premises at Strathfield were in a rundown state and did require substantial remedial work which had to be carried out before the education authorities would allow the school to operate from that site (exhibits 49 and 50). It was also a term of the twenty-five year lease obtained by the College in relation to that site that restoration work would be carried out by it (para [145]). The matters referred to by Mr Adada in paras 8, 9 and 10 of his affidavit accord with that situation.

316 Nevertheless, the criticism made by BAL has some force. Even the form of the affidavit (para 22) makes it clear that the figures are at best estimates and are based to some extent on a reconstruction by Mr Adada. In relation to what has been described as “management fees” (tab 4) I propose to allow $45,000.

317 In relation to tab 5, I also agree to some extent with the criticism levelled by BAL. It is impossible from the material in tab 5 to determine what payments would normally have been made to Mr Ayad and what payments were specific to the relocation. I propose to allow $15,000 in relation to tab 5.

318 In respect of tabs 6, 7 and 8 those figures do seem reasonable and I propose to allow them in full. I follow the same approach with the material behind tab 9, even though some of those entries are not supported by invoices.

319 A significant part of the relocation costs ($193,070.99) is related to the written down value of the capital improvements made to the airport site as of the date of the relocation. BAL’s accountant, Mr Mentzalis, was asked how that amount should be treated and whether the loss of the value of those improvements was a proper relocation cost. He said that it was (T.1087.13-24). I found his explanation in that regard to be reasonable and I accept that amount as part of the relocation cost.

320 In relation to what is described as “repairs and maintenance of Brundah and Leigh Hall” (tabs 11 and 12) Mr Mentzalis made a distinction between immediate repairs which were necessary to enable the buildings to be used as a school and expenditure in the nature of a capital outlay, the benefit of which would be enjoyed over the next five to ten years. At least in the case of Brundah, some of the expenditure appears to be of a latter kind (T.1087.26-54). It is not possible, however, on the material available to me to differentiate between the two types of expenditure. Doing the best I can, I propose to deduct $15,000 from the figure claimed as properly attributable to long-term capital outlay, but otherwise allow the amount claimed.

321 In relation to tab 13, the submission of BAL has force in that some of the accounts relate to unpaid creditors and appear on the Administrator’s list of creditors. Some of the payments appear to relate to regular maintenance items. I propose to reduce the claim under tab 13, to $25,000.

322 In accordance with the adjustments which I have made to the matters referred to in Mr Adada’s affidavit, I propose to allow the following amounts as relocation expenses.

Tab 4 Management fees $ 45,000.00

Tab 5 Maintenance contract $ 15,000.00

Tab 6 Advertising $ 3,360.00

Tab 7 Strathfield development $ 8,000.00

Tab 8 Fire replacement $ 2,222.75

Tab 9 Relocation expenses $ 49,524.38

Tab 10 Benefit of capital outlay lost $201,297.93

Tab 11 R and M - Brundah $ 50,214.38

Tab 12 R and M - Leigh Hall $ 5,454.00

Tab 13 Miscellaneous accounts $ 25,000.00

323 A claim is made in BAL’s cross-claim for the restoration costs of the previously leased airport premises. The photographs and the evidence of Mr Judge demonstrate that those premises have not been restored and a significant cost will be incurred to carry out that restoration work. (Para [251].)

324 I am of the opinion that the cost of restoring the previously leased premises, like the relocation costs, is an expenditure which has been materially contributed to by the breaches of the FAC under s52 TPA and in negligence. Accordingly, I am of the opinion that whatever the cost of restoration this is a head of damage which can be properly claimed by the College.

325 As was indicated in my discussion of the cross-claim, the restoration of the leased premises was a contractual obligation incurred by the College in accordance with its obligations under the 1994 lease. The defendant is entitled to offset against the College’s entitlement under this head of damage, the benefit which it has under the lease so as to cancel out that entitlement. Accordingly, I propose to ignore in the College’s assessment of damages the cost of restoring the leased site.

Mitigation

326 BAL submits that the College through its own conduct has broken the causal chain or alternatively that it has failed to mitigate its damages. The argument is that there was no reason for the College to leave the airport premises. It could and should have entered into the twenty-five year lease offered to it in November 1998 and if it had done so, it would not have suffered any damage.

327 Although the defendant had collected a considerable amount of expert material from Dr Swane and other personnel from Sinclair Knight Merz (SKM), none of that material was made available to the plaintiffs until the report of 2003 was served. Most particularly, the report of Dr Swane of March 2000 (exhibit DD) was never made available. Consequently the College had to make its decision as to what to do in relation to the site on the basis of the material which it had available.

328 The College had the 1994 Envirosciences report, the 1998 JET report, some documents produced under the Freedom of Information Act and the Douglass Partners report which it received in late 1999. Based on that material, it commenced these proceedings in January 2000. In February 2000 BAL withdrew the offer of a twenty-five year lease. That offer was not renewed. The Golder report of June 2001 was qualified in nature but made it clear that to remediate the site would involve significant expenditure and that night-soil was present in a layer of up to .7m in thickness and was covered with soil material to a depth of between .75m and 1m (para 5.1). The report also referred to danger if users of the site came in contact with any of the night-soil material. There was no cause for concern provided portable buildings continued to be used, except where a building was positioned over a night-soil trench (para 7.2). Paras 7.4 and 8 made it clear that excavations in the areas of the night-soil trenches would present a health risk.

329 After receipt of the Golder report of June 2001, it would have been clear to the College that construction of permanent buildings was not viable on the site, unless and until further investigation had taken place. There was a risk of substantial remediation costs being incurred. Building costs would undoubtedly increase if special arrangements had to be made in relation to the soil (para 127-130). The effect of the Golder report can be seen from the fact that the College cordoned off and prevented access by students to a significant part of the leased area. There was also a reputation issue. Once it became known that contamination was a problem, regardless of assurances, parents may not have wanted their children to attend the school.

330 The only contribution by BAL to offset these considerations was the offer (para [67]) to the effect that it would pay for the removal of contaminated soil. There was no offer to remediate the site or pay additional building costs or otherwise assist the College.

331 I do not understand BAL to suggest that following its withdrawal of the offer of a twenty-five year lease in February 2000, it would have renewed such an offer had it been approached by the College thereafter. No attempt thereafter was made by BAL to renew the offer. The confrontational tone of the correspondence which emanated from the solicitors for BAL during 2002 when the question of extending the lease and departure from the premises arose, does not provide any basis for an assertion that had the College sought to negotiate in relation to the twenty-five year lease after February 2000 such an approach would have been sympathetically received.

332 The prospect of constructing permanent buildings, at least partly on top of or close to a former night-soil dump, does not from any perspective provide a formula for the successful development of a school. Even had the College carried out more extensive (and more expensive) investigations, it would only have confirmed what Dr Swane identified that special precautions had to be taken if one were to build on the site. Perhaps not surprisingly the site remains unoccupied.

333 I am of the opinion that it was reasonable for the College not to accept the November 1998 offer of a twenty-five year lease with the conditions attached to that offer. The information available to the College as of December 2001 when the seven year lease was meant to end, confirmed the reasonableness of the College’s decision to leave the airport site. The report of Dr Swane of March 2000 (exhibit DD) supported the reasonableness of that decision.

334 I find that there was no failure on the part of the College to mitigate its damages and that the conduct of the College in leaving the leased premises and in not taking up the twenty-five year lease which was offered to it in November 1998, did not break the chain of causation.

Incorporation of Noor Al Houda Islamic College (Holdings) Pty Limited

335 BAL challenged the College’s claim to damages on the basis that a new company had been incorporated – Noor Al Houda Islamic College (Holdings) Pty Limited and it was clear that this company had been incorporated to take over the conduct of the school. When this was put to the second plaintiff she agreed that this was an option but that no firm decision had been made. She pointed out that because of the financial position of the College, it was difficult to increase its board of directors since they might incur personal liability and it was unfair to place potential directors in that position. She candidly explained that much depended on the outcome of this litigation as to whether or not the College’s financial position would be sufficiently improved to be able to deal with its indebtedness.

336 I do not see how the incorporation of that company, or the cross-examination of the second plaintiff in relation to it, invalidates the College’s claim for damages and I reject that argument (defendant’s written submissions, paras 128 – 135).

Entitlement to damages of second plaintiff

337 The entitlement to damages of the second plaintiff is a difficult question. It was conceded on behalf of the plaintiffs that her claim would only be pursued if the damages recovered by the College did not exceed the amount of her loan - $603,153. In view of the findings which I have made, the College has recovered damages in excess of that amount and I do not propose to deal further with the claim by the second plaintiff.

Conclusion as to damages

338 I find that the College is entitled to the following damages:

(a) Past loss $ 250,000.00

(b) Future loss of profits $ 300,000.00

(c) Past loss of capital grants $ 175,000.00

(d) Redundancy payments $ 58,000.00

(e) Relocation costs $ 405,073.44
$1,188.073.44

The College’s entitlement to damages for the restoration of the airport site is fully absorbed by the defendant’s contractual entitlement in respect of the same amount.

339 I do not propose to make any allowance for interest in relation to the amount awarded in favour of the College for past loss and past loss of capital grants. In relation to the past loss, what the College has suffered is an increase in its indebtedness but there is no evidence that the indebtedness has been met or that a loan has been taken out to meet that indebtedness. In any event the loss was suffered in 2003.

340 Accordingly, I enter judgment in favour of the first plaintiff against BAL in the sum of $1,094,430.02.

341 I reserve my decision as to what order should be made in respect of the second plaintiff and as to what order should be made in relation to costs pending further submissions from the parties. Because of the way in which the matter was conducted with the late production of evidence by both sides, the argument as to costs is likely to be significant. Accordingly, I grant leave for the parties to restore the matter to the list on seven days’ notice for the purpose of obtaining directions as to how and when the costs argument will be dealt with.

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Cited Sections

CITATION:	Noor Al Houda Islamic College Pty Limited & Anor v Bankstown Airport Limited [2005] NSWSC 20
HEARING DATE(S):	25/10/04, 26/10/04, 27/10/04, 28/10/04, 29/10/04, 1/11/04, 2/11/04, 3/11/04, 4/11/04, 5/11/04, 8/11/04, 9/11/04, 10/11/04, 11/11/04, 12/11/04, 15/11/04, 16/11/04, 17/11/04, 18/11/04, 19/11/04, 22/11/04, 23/11/04, 24/11/04
JUDGMENT DATE :	24 February 2005
JUDGMENT OF:	Hoeben J at 1
DECISION:	Judgment for first plaintiff, costs reserved.

CATCHWORDS:	Trade Practices Act - s52, s74, s82, s87 - Transfer of liabilities in Airports (Transitional) Act 1996 - Negligence - content of duty of care - relationship with lease - effect of exclusion provisions - claim for economic loss - damages - loss of opportunity in hypothetical scenario - causation - mitigation.
LEGISLATION CITED:	Airports (Transitional) Act 1996 (C'th) Freedom of Information Act 1989 Limitation Act 1964 (NSW) Trade Practices Act 1974
CASES CITED:	Alpine Hardwood (Aus) Pty Limited v Hardys Pty Limited (2001) FCA 1876 Arbest Pty Limited v State Bank of NSW Limited (1996) ATPR 41-481 Blacker v National Australia Bank Limited (2001) FCA 254 at [51] Chapman v Luminis Pty Limited (No 4) (2001) 123 FCR 62 at 116-117 Costa Vraca Pty Limited v Berrigan Weed and Pest Control Pty Limited (1998) 154 ALR 714 Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 Demagogue Pty Limited v Ramensky (1992) 39 FCR 31 Fitzwood Pty Limited v Unique Goal Pty Limited (2001) 188 ALR 566 Franich v Swannell (1993) 10 WAR 459 at 474-5 Fraser v NRMA Holdings Limited (1995) 55 FCR 452 Henjo Investments Pty Limited & Ors v Collins Marrickville Pty Limited (1998) 39 FCR 546 at 557 Johnson Tiles Pty Limited v Esso Australia Pty Limited (2000) FCA 1572 Parkdale Custom Built Furniture Pty Limited v Puxu Pty Limited (1982) 142 CLR 191 Pritchard v Racecage Pty Limited (1997) 72 FCR 203 at 218-219 Rhone-Poulenc Agrochimie SA v UIM Chemical Services Pty Limited (1986) 12 FCR 477 at 84 Richard v Gendore Enterprises Pty Limited and Anor [2004] NSWCA 116 RW Miller & Co v Krupp (Australia) Pty Limited (1995) 11 BCL 74 Sent v Jetcorp of Australia Pty Limited (1986) 160 CLR 540 Toll (FGCT) Pty Ltd (Formerly Finemores GCT Pty Ltd) v Alphafarm Pty Ltd (2004) ALJR 129 The Commonwealth v Verwayen (1990) 170 CLR 394 Wardley Australia v WA (1992) 175 CLR 514 at 525 Warner v Elders Rural Finance Limited (1993) 41 FCR 399 at 401-2 Winterton Constructions Pty Limited v Hambros Australia Limited (1992) 39 FCR 97
PARTIES:	Noor Al Houda Islamic College Pty Limited - First Plaintiff Silma Ihram - Second Plaintiff Bankstown Airport Limited - Defendant
FILE NUMBER(S):	SC 20017/2000
COUNSEL:	P Taylor SC/A Casselden - Plaintiffs MD Young/N Sharp - Defendant
SOLICITORS:	Swaab Attorneys - Plaintiffs Phillips Fox - Defendant