Shahin Enterprises Pty Ltd v Virgo Industries Pty Ltd - [2019] SASC 94

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
SHAHIN ENTERPRISES PTY LTD v VIRGO INDUSTRIES PTY LTD
[2019] SASC 94
Ruling of The Honourable Justice Parker
5 June 2019
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - PLEADINGS - PARTICULAR PLEADINGS - DEFENCE
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PLEADINGS
This is a ruling as to whether the defendant should be granted leave to file and serve a third defence to the plaintiff’s third statement of claim. The plaintiff contends that in several respects the proposed third defence does not comply with the Supreme Court Civil Rules 2006 (SA).
Held, per Parker J:
1. While ordinarily it is not permissible to plead an allegation of law as a material fact, that is permissible where necessary for the sake of clarity and so as to ensure that the other party is informed of the case put against it (at [10]).
2. Clauses 15.3.1, 15.3.3, 15.3.4, 15A.1, 15A.2, 15A.3, 15A.4 and 15A.9 do not offend the rules and practice as to pleadings (at [11]-[40], [43]-[45]).
3. The defendant is to provide further particulars in relation to the matters referred to at cl 15A.6 (at [41]-[42], [46]).
Supreme Court Civil Rules 2006 (SA) r 100, referred to.
Kirby v Sanderson Motors Pty Ltd (2002) 54 NSWLR 135, applied.

SHAHIN ENTERPRISES PTY LTD v VIRGO INDUSTRIES PTY LTD
[2019] SASC 94

PARKER J: The subject of this ruling is whether the defendant should be granted leave to file and serve a third defence to the plaintiff’s third statement of claim. The plaintiff contends that in several respects the proposed third defence does not comply with the Supreme Court Civil Rules 2006 (SA). It is necessary to consider each of the objections separately as, to some extent, they raise different issues. Before doing so, it is necessary to briefly state the background.
The plaintiff redevelops and operates services stations under the trading name of “On the Run”. In 2017 it entered into a lease with the defendant to occupy certain premises. The plaintiff contends that the commencement of the lease was to be determined following remediation of the site by the previous tenant, Caltex. It is further alleged that it was a condition of the lease between the defendant and Caltex that the latter would provide a certificate to the defendant to the effect that remediation of the site had been completed. The plaintiff contends that the certificate provided by Caltex is defective and does not satisfy either the requirements of the defendant’s lease with Caltex or its lease with the plaintiff.
The plaintiff further contends that, in breach of its lease, the defendant accepted the certificate provided by Caltex and purported to set a commencement date for the lease between the plaintiff and the defendant. It is further alleged that the defendant subsequently withdrew its acceptance of the certificate because it did not comply with the terms of the lease to Caltex. The plaintiff also contends that as a result of the defendant revoking its acceptance of the certificate, the purported insertion of a commencement date by the defendant was in breach of the lease with the plaintiff.
The objections made by the plaintiff to the terms of the proposed third defence have been set out in correspondence between the parties and were the subject of oral submissions from counsel. Prior to the matter coming on for oral submissions, the plaintiff had abandoned some of its objections. This ruling deals with the outstanding objections.
In order to put the objections in context it is necessary to note that cl 6.3 of the third statement of claim states that cl 18.1(1) of the Caltex lease required Caltex to remediate the premises to a condition that is consistent with the “Environmental Requirements” and to use all reasonable endeavours to complete such remediation within 12 months of the termination date of the lease. The Caltex lease defined the phrase “Environmental Requirements” to mean such steps as are necessary to make the land reasonably fit for development as vacant land according to the standards required by any relevant authority, and to achieve a level of contamination below the then current maximum allowable concentration set or adopted by any relevant authority as at the termination date so as to permit any as of right ongoing or other proposed use of the land nominated by the landlord under the zoning existing at the termination date.
The Caltex lease also required that upon termination of its lease, Caltex was to appoint a competent environmental consultant to assess the premises as at the exit date and to provide a written report. The plaintiff alleges that the certificate provided was not adequate for the purposes of the Caltex lease.
It is apparently common ground between the plaintiff and the defendant that there was some leakage from underground fuel tanks while Caltex was in occupation of the premises, and that contamination has spread into the water table and caused contamination off site.
The significance of the environmental certificate is that if a commencement date is inserted into the lease in reliance upon the certificate, the plaintiff is taken to be in occupation of the premises for the purposes of the lease and also required to commence paying rent to the defendant. Furthermore, the plaintiff will become liable for any present contamination of the premises that should have been remediated by Caltex upon expiry of its lease and prior to commencement of the plaintiff’s lease.
Against that background I turn to consider the objections made by the plaintiff to the proposed third defence.
Pleading a conclusion of law
A number of the objections made by the plaintiff to the terms of the proposed third defence complain about pleading a conclusion of law. While ordinarily it is not permissible to plead an allegation of law as a material fact, that is permissible where necessary for the sake of clarity and so as to ensure that the other party is informed of the case put against it.[1] In my view, given that a central issue in these proceedings is the proper construction and legal effect of two leases the defendant has been justified in taking that approach in the proposed third defence.
[1] Kirby v Sanderson Motors Pty Ltd (2002) 54 NSWLR 135 at 142-143 (Hodgson JA); Bernard Cairns, Australian Civil Procedure (Thomson Reuters, 10^th ed, 2014) at [6.220].
Clause 15.3.1
Clause 15.3.1 of the proposed third defence asserts that Caltex has an ongoing liability for all contamination caused during its tenancy. The plaintiff contends that this amounts to pleading a conclusion of law. It is also says that the terms of the Caltex lease are irrelevant to the alleged breach of the lease between the plaintiff and the defendant. Counsel for the plaintiff indicated that it would not maintain the objection if it were provided with appropriate particulars explaining why it was contended that Caltex remained responsible for the condition of the premises.
The defendant contends that cl 15.3.1 is a proper pleading as it gives fair notice of its contention as to the effect of the Caltex lease. This defence is also relevant to the plaintiff’s contention that the defendant has become responsible for the condition of the premises.
I have revised the view that I provisionally expressed during the hearing of this interlocutory application. My revised view is now as follows.
In other circumstances cl 15.3.1 would be objectionable as it pleads a conclusion of law. I have already indicated why I do not accept that objection in this case. The clause gives fair notice of the defendant’s contention as to the effect of the Caltex lease by asserting a particular construction.
Clause 15.3.3
The proposed cl 15.3.3 contends that it is not the practice of the Environment Protection Authority (EPA) to exercise its statutory powers so as to require a current occupier to either cease trading or to undertake further environmental clean-up work to deal with contamination caused by others. That is said particularly to be the case where the original polluter (in this case Caltex) remains a commercial trading entity and the plaintiff already has in place planning approval to redevelop the land as a service station.
The plaintiff contends that the proposed pleading is entirely vague. Moreover, an estoppel cannot operate against the exercise of a statutory power. The plaintiff cannot be left to interpret what is the practice of the EPA in order to determine its reply. It should also not be required to examine the evidence in support of the defendant’s case to identify the issue. Instead, the plea should be clear on its face. The plea must identify by reference to a particular document, if there is one, the alleged practice of the EPA. Alternatively, if it is a matter of evidence, that can be identified in correspondence.
The defendant submits that plea in cl 15.3.3 is made in response to the plaintiff’s contention that the defendant is responsible for the condition of the premises, including any contamination that should have been remediated by Caltex upon expiry of its lease and before commencement of the defendant’s lease. The defendant says that the plea is directed to the argument as to whether the defendant would be exposed to the risk of civil or criminal proceedings. The issue is dealt with in the expert report of Mr Corbett of Golder Associates and, in fact, both experts give evidence in their reports about the practice of the EPA.
The defendant accepts that estoppel cannot operate against a statutory power. However, it is simply referring to the degree of commercial risk that might be inherited by taking up occupation of the site. The defendant also contends that the proposed clause is relevant to the alleged breach of contract.
I note that cl 15.3.3 refers to an alleged practice of the EPA rather than a formal published policy. While a formal policy could readily be identified in the pleading by reference to its title and date, the identification of a practice does not lend itself to that degree of precision. At trial that matter might be established by expert evidence and I note that the existing expert reports deal with the question. Alternatively, an appropriate EPA officer might be called. Clearly, the proposed evidence cannot be included in the pleading. That being so, I consider that the proposed pleading is sufficient to put the plaintiff on notice as to the contention made by the defendant. The plaintiff can admit or deny that any such practice exists or plead an alternative practice. I consider that cl 15.3.3 should be allowed to stand.
Clause 15.3.4
Clause 15.3.4 pleads that in light of the matters pleaded in several earlier paragraphs of the proposed third defence, the defendant denies that the plaintiff is “subject to any genuine commercial or legal risk” of becoming responsible for any contamination that should have been remediated by Caltex under its lease.
The plaintiff objects to this pleading on the basis that it is not a pleading of a material fact and is entirely speculative. A further objection is that the reference to “genuine commercial or legal risk” is entirely vague and does not enable the giving of a readily particularised plea in response.
The defendant seeks to justify the proposed cl 15.3.4 on the basis that it gives fair notice of its claim and is relevant. The notion of “genuine commercial or legal risk” is a concept that a judge can deal with.
I consider that each of the defendant’s contentions referred to in the preceding paragraph are correct. In my view the term “genuine commercial or legal risk” is sufficiently clear to inform the plaintiff of the defendant’s case and to enable it to respond.
Clause 15A.1
Clause 15A.1 is said to provide a further answer to the whole of the plaintiff’s claim. In this respect, the defendant seeks to plead that on a proper construction of the Caltex lease and the renomination by the defendant, Caltex was to undertake an environmental clean-up to the standard acceptable to the EPA, having regard to the future permissible commercial uses of the site. Additionally, it is alleged that the certificate contemplated in the lease was merely a “shorthand device” for Caltex to satisfy the defendant, and for the defendant in turn to satisfy the plaintiff, that the environmental clean-up had been conducted to the appropriate standard. In that respect, the defendant pleads that the requirement for the production of the certificate was “a matter of machinery only” and “not of itself a matter of substance”.
The plaintiff objects to cl 15A.1 on the basis that the entire pleading is a matter of law. It also objects to the use of the term “shorthand device” as it says that it does not know what it means. If this is a pleading of law, the plaintiff says that the defendant should identify any case or statute or other objective evidence that indicates what the term “shorthand device” means. The plaintiff makes a similar complaint about the use of the phrase “a matter of machinery only”.
The defendant submits that cl 15A.1 gives the plaintiff fair notice of the defendant’s case. This cannot possibly prejudice the plaintiff.
While ordinarily it is not permissible to plead an allegation of law as a material fact, as I have already said, that is permissible where necessary for the sake of clarity and so as to ensure that the other party is informed of the case put against it.[2] I consider cl 15A.1 to be a permissible pleading for the preceding reasons and also so as to properly inform the plaintiff of the defendant’s case.
[2] Ibid.
I consider that the plaintiff is being pedantic in its objection to the use of the phrases “shorthand device” and “a matter of machinery only”. The effect of the two impugned phrases, when read in the context of cl 15A.1, is to inform the plaintiff of the construction that the defendant contends should be put upon the relevant provisions of the Caltex lease. In that respect, the phrases serve to inform the plaintiff of the contentions to be advanced by the defendant. The two phrases are ordinary English expressions which the plaintiff should be well capable of understanding and responding.
Clause 15A.2
Clause 15A.2 pleads that by special condition 2.2 the plaintiff had authorised the defendant to insert a commencement date “upon completion of the Caltex remediation”. It further pleads that that was a reference to the completion of the physical clean‑up process, being a process which was separate to and distinct from any later provision of the remediation sign-off certificate.
The plaintiff has alleged that this pleading does not refer to a material fact, is a speculative pleading of a conclusion of law and also inconsistent with cl 15A.1.3. The latter clause pleads that the requirement for the production of a certificate was a matter of machinery only and not a matter of substance.
The defendant submits that cl 15A.2 gives fair notice of its case and is not inconsistent with cl 15A.1.3.
In my view cl 15A.2 expressly draws a distinction between completion of the physical clean‑up process and the later provision of the certificate. In contrast, cl 15A.1.3 pleads that the requirement for the production of a certificate was not a matter of substance. Thus, the defendant contends that the substantive obligation was to undertake the clean-up, whilst the obligations in relation to the certificate were merely procedural and evidentiary. I do not regard those two propositions as being in any way inconsistent.
Clause 15A.3
The defendant pleads in cl 15A.3 that if the Court is satisfied that Caltex has, in substance, satisfactorily completed its remediation obligations, then the lease should be treated as if it had commenced, notwithstanding the alleged absence of a formal or strictly compliant remediation sign-off certificate.
The plaintiff complains that the matters pleaded are not a material fact and are a speculative pleading of a conclusion of law. The plaintiff also complains that the pleading is entirely vague. By that it means that the standard by which “satisfactorily” is to be measured is not indicated and nor are the “obligations”. A further complaint is that it is unclear when the lease commenced. Additionally, the plaintiff complains that the plea in cl 15A.3 concerning commencement of the lease is inconsistent with the denial of commencement at cl 13AA.
The defendant says that cl 15A.3 gives fair notice of the defence and denies that there is any inconsistency between cl 15A.3 and cl 13AA. Clause 15A.3 is qualified by the opening words “if the Court is satisfied” that there has been substantial compliance with the remedial obligation. If so, the lease should be treated as if it had commenced. Clause 13AA deals with a different, albeit related, topic.
Clause 13AA contends that the defendant has done what it is required to do to facilitate remediation by Caltex and also the provision by Caltex of a complying certificate. The defendant also denies in cl 13AA that it has purported to commence the lease. I do not consider that there is any inconsistency between cl 15A.3 and cl 13AA. As the defendant says, they deal with different but related topics.
I also do not accept that the terms “satisfactorily” and “obligations” are entirely vague. The terms are capable of being addressed in the context of this litigation. As to the complaint that there is a speculative pleading of a conclusion of law, I consider that the contentions made in cl 15A.3 serve to give fair notice of the defendant’s case
Clause 15A.4
Clause 15A.4 contends that pursuant to cl 17.4 of the Caltex lease, Caltex has an ongoing obligation to comply with the requirements of the EPA arising from any breach of environmental law by Caltex during its lease.
The plaintiff contends that cl 15A.4 does not plead a material fact and amounts to speculative pleading of a conclusion of law. The pleading is also said to be vague in that it is unclear what contention is being made about cl 17.4 of the Caltex lease. The plaintiff suggested that these deficiencies could be addressed by way of particulars or through correspondence.
The defendant simply contends that cl 15A.4 operates to give the plaintiff fair notice of the defendant’s case. I agree with that submission. The clause simply operates to inform the plaintiff of what the defendant is alleging about the operation of the Caltex lease.
Clause 15A.6
Clause 15A.6 states that, in all of the circumstances, Caltex has complied with, or alternatively has substantially complied with, its clean-up obligations under its lease.
Counsel for the defendant conceded during the course of submissions that the plaintiff’s objections to the terms of paragraph 15A.6 could be addressed through the defendant providing particulars. On that basis, I do not need to make any decision about cl 15A.6.
Clause 15A.9
Clause 15A.9 alleges that the plaintiff’s contentions concerning the inadequate drafting of the certificate are a matter of semantics only. It further pleads that for that reason, the Court should decline to make the declaration sought by the plaintiff as it would serve no useful purpose.
The plaintiff complains that cl 15A.9 is vague and embarrassing as there is no pleading of material fact. It also questions what is meant by the reference to “semantics”. Finally, the plaintiff submits that the grant of declaratory relief by the Court would have utility in that, upon the making of the declaration, the plaintiff could terminate the lease for breach.

I consider that the reference to semantics in cl 15A.9 is sufficiently clear to inform the plaintiff of the defendant’s position, i.e. that the complaints made by the plaintiff about the drafting of the certificate do not raise any substantive issue and are merely concerned with the form of words used. The competing contentions about the utility of a grant of declaratory relief speak for themselves.
Conclusion
I dismiss each of the plaintiff’s objections to the proposed third defence to the plaintiff’s third statement of claim. In accordance with the concession made during submissions, the defendant is to provide particulars in relation to the matters referred to at cl 15A.6.