Tetra Pak Manufacturing v Challenger Life Nominees
[2013] NSWSC 349
•16 April 2013
Supreme Court
New South Wales
Medium Neutral Citation: Tetra Pak Manufacturing v Challenger Life Nominees [2013] NSWSC 349 Hearing dates: 25/03/2013, 26/03/2013, 27/03/2013 Decision date: 16 April 2013 Jurisdiction: Equity Division - Commercial List Before: McDougall J Decision: Separate questions answered (see at [110]). Proceedings dismissed with costs.
Catchwords: CONTRACTS - indemnity clause - construction of indemnity clause - indemnity not to be construed as extending beyond the assigned risk unless words intractable.
CONTRACTS - indemnity clause - onus of proof - party relying on indemnity clause bears the onus of establishing it applies.
EVIDENCE - standard of proof - on balance of probabilities - whether land contaminated with particular pollutant at time of sale - tribunal of fact must feel actual persuasion - date of relevant spill not established by the evidence.Legislation Cited: Contaminated Land Management Act 1997 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)Cases Cited: Blatch v Archer (1774) 98 ER 969
Briginshaw v Briginshaw (1938) 60 CLR 336
Nguyen v Cosmopolitan Homes [2008] NSWCA 246Category: Principal judgment Parties: Tetra Pak Manufacturing Pty Limited (Plaintiff)
Challenger Life Nominees Pty Ltd (Defendant)Representation: Counsel:
TGR Parker SC / JAC Potts (Plaintiff)
JB Simpkins SC / JR Williams (Defendant)
Solicitors:
Allens (Plaintiff)
Corrs Chambers Westgarth (Defendant)
File Number(s): 2011/15762
Judgment
HIS HONOUR: From 1972 until 2006, the plaintiff (Tetra Pak) or its subsidiary Lamiprint manufactured food and beverage containers on land which they owned at Yennora. Tetra Pak and Lamiprint sold that land to the defendant (Challenger) by contract made on 31 December 2001, settled on 14 May 2002. As the contract provided, Challenger leased the land back to Tetra Pak. That lease commenced on 15 May 2002 and expired on 14 May 2009.
At the time of sale, the land was contaminated by residues from Tetra Pak's manufacturing operations (Lamiprint can be subsumed within Tetra Pak for present purposes). The known extent of contamination was disclosed in the contract for sale. Challenger accepted the land in that condition.
The contract for sale and the lease each made provision for liability for the costs of dealing with contamination. The relevant governmental authorities require action to be taken. The basic question, as between Tetra Pak and Challenger, is which of them is responsible for the costs incurred and to be incurred in relation to that contamination.
The issues
On 18 August 2011, I ordered that what might be called the liability issues should be determined separately from and before what might be called the quantum issues. Thus, the issues for decision are (and I restate slightly the issues that were the subject of my earlier order):
(1) what is the proper construction of cl 50.6 of the sale contract; in particular, is the indemnity for which it provides limited to costs arising from contamination existing, or attributable to activities occurring prior to, completion of the sale contract?
(2) what is the nature and extent of the contamination presently on the land?
(3) did any of the contaminants presently on the land exist, or are they attributable to, activities occurring prior to completion of the sale contract?
The first issue, which the parties called the "construction issue", involves not just a question of construction but also a question of onus of proof. Thus, it was common ground that if the construction issue should be answered "yes", an issue would arise as to which of the parties bore the onus of proof in respect of the third issue (which the parties called the "timing issue").
Finally (in relation to identification of the real issues in dispute), the parties agreed that the land (or the property, as I shall call it from time to time) has been and remains contaminated with chlorinated hydrocarbons (CHCs); in particular, a CHC known variously as tetrachloroethene or perchloroethene (PCE). (To add to the confusion, PCE is also known from time to time as tetrachloroethylene or perchloroethylene, and indeed by other names.)
Relevant provisions of the contract for sale and the lease
Clause 42.1 of the contract for sale required that on completion, Challenger as lessor would grant to Tetra Pak as lessee a lease of the property on terms set out in a draft lease which was annexed (as annexure "G") to the contract. The hearing proceeded on the basis that the lease actually granted was, as to its relevant provisions, identical with annexure "G".
Clause 50 of the contract, according to its heading, dealt with the question of "Environmental reports". Subclause 1 contained definitions which need not be set out. Subclause 2 identified some seven reports prepared by geotechnical and other consultants at various times from November 1994 to June 2001. Those reports described, among other things, various forms of contamination that had been found on the land.
Clauses 50.3 to 50.7 read as follows:
50.3 The vendor discloses all the information contained in the Reports and the purchaser acknowledges that the vendor has made the purchaser aware of all the information contained in the Reports.
50.4 The vendor does not represent or warrant the completeness or correctness of the information contained in the Reports.
50.5 The purchaser must take title subject to, and must not make any requisition, claim for compensation, delay completion or purport to rescind or terminate this contract in respect of any matter or thing relating to or arising from the Reports.
50.6 Notwithstanding anything contained in the Reports, on and from completion, the purchaser must, at its own costs and expense, assume all responsibility for and indemnify the vendor from and against all actions, claims, demands, costs and charges and expenses including legal costs and expenses on a full indemnity basis or solicitor and own client basis, whichever is the highest, arising from:
(a) the presence of any Contaminant found on, in, above or under the property which was existing either before or after completion:
(b) non compliance with the requirements of all Environmental Laws and all other relevant legislation, regulations, requirements, or directions of or administered by any Authority in respect of any Contaminant; and
(c) the conduct and performance of any work required by any Authority in respect of any Contaminant or other Environmental Laws.
50.7 The provisions of this clause 50 do not merge on completion.
Before leaving the contract, I should note that Mr Parker of Senior Counsel, who appeared with Mr Potts of Counsel for Tetra Pak, relied also on cl 30.7 (cl 30 dealt with "Interpretation"). That subclause reads:
30.7 rules of construction
No rules of construction apply to the disadvantage of the party on the basis that that party was responsible for the preparation of this contract or any part of it.
Clause 15 of the lease dealt with the topic of "Indemnities and Releases". Mr Simpkins of Senior Counsel, who appeared with Mr Williams of Counsel for Challenger, relied on cls 15.2 and 15.3. They read:
15.2 Indemnity
The Tenant is liable for and irrevocably and unconditionally indemnifies the Landlord against all liability, loss, penalties, payments, costs, charges and expenses directly or indirectly arising from or incurred in connection with:
(a) damage to or loss of any property or injury to or the death of any person:
(i) caused or contributed to by the act, omission, negligence or default of the Tenant or the Tenant's Associates; or
(ii) occurring on or caused or contributed to by anything occurring on the Premises except to the extent it is caused or contributed to by the negligence or default of the Landlord or the Landlord's Associates; and
(b) the Landlord doing anything which the Tenant must do under this lease but which the Tenant has not done or which the Landlord reasonably considers the Tenant has not done properly except to the extent it is caused or contributed to by the negligence or default of the Landlord or the Landlord's Associates.
The costs, charged and expenses referred to in this clause 15.2 include but are not limited to reasonable legal costs, charges and expenses whether incurred by or awarded against the Landlord.
This indemnity is independent from the Tenant's other obligations under this lease and comes to an end on the later to occur of 12 months after:
(i) the lease expires or is terminated; and
(ii) the Tenant vacates the Premises
It is not necessary for the Landlord to incur expense or make a payment before enforcing this indemnity.
15.3 Release
The Tenant releases the Landlord from and agrees that the Landlord is not liable for liability, loss, penalties, payments, costs, charges and expenses directly or indirectly arising from or incurred in connection with:
(a) damage to or loss of any property or injury to or the death of any person except to the extent it is caused or contributed to by the negligence or default of the Landlord or the Landlord's Associates;
(b) the Landlord doing anything the Landlord is required or permitted to do under this lease; or
(c) a Service not being available or not working properly.
Clause 18 dealt the topic of Tetra Pak's rights and general obligations. By clause 18.3(a), Tetra Pak agreed to:
18.3 (a) comply with all laws and the requirements of all authorities in connection with the Premises, the Tenant's Business, the Tenant's Property and the Tenant's use and occupation of the Premises unless the need for that work is caused or contributed to by the act, omission, negligence or default of the Landlord or the Landlord's Associates;
Clause 18.5 dealt with the topic of "Environmental Protection". It reads:
18.5 Environmental protection
(a) If after the Commencement Date the Tenant contaminates the Premises by anything noxious or hazardous to the environment, the Tenant must promptly:
(i) undertake all audits, test, surveys and other investigations necessary to determine the nature and extent of the contamination;
(ii) notify the Landlord immediately of the nature and extent of the contamination and steps the Tenant proposes to take control and remove the contamination;
(iii) do everything necessary to control and remove the contamination from the Premises to the standard required by law for land used for similar purposes as the Premises; and
(iv) pay the Landlord's costs, charges and expenses in connection with:
(A) monitoring the Tenant's actions; and
(B) satisfying the Landlord that the Tenant has complied with the Tenant's obligations;
(C) performing any of the Tenant's obligations under this clause 18.5 after the Landlord has given the Tenant prior written notice and the Tenant has failed to perform these obligations to an appropriate standard or within a reasonable time,
under this clause 18.5.
(b) The Landlord and Tenant acknowledge and agree that:
(i) at the Commencing Date the Premises was subject to the contamination disclosed in the Environmental Reports; and
(ii) the Tenant is not obliged to do anything to control and remove that contamination from the Premises.
(c) The Tenant indemnifies the Landlord from and against all actions, claims, demands, costs, charges and expenses including legal costs on a full indemnity basis on solicitor and own client basis whichever is the higher, arising from the presence of any contaminant found on, in, above or under the property which came into existence during the Term.
By clause 29.1(d), Tetra Pak was obliged, on leaving the premises (on or before the Expiry Date) to:
give the Premises back to [Challenger] in the condition they were in at the Commencement Date having regard to the Condition Report...
First issue: construction of cl 50.6
The parties' submissions
I do not propose to set out at length the detailed and very helpful submissions (both written and oral) of counsel. It is enough to summarise the essential points made. Nor do I propose to refer to the many cases, dealing with the relevant principles of construction, on which those submissions relied.
Mr Parker submitted that on its face (and leaving aside for the moment cl 18.5(c) of the lease), cl 50.6 applied to contamination whenever caused. He noted that there were three specific promises to indemnify, contained in each of paras (a), (b) and (c) respectively. He submitted, correctly, that Tetra Pak relied on each separate promise of indemnity.
In substance, Mr Parker submitted, the indemnities given by cl 50.6 (I repeat, at this point considered in isolation from cl 18.5(c)) contained no limitation other than that the "Contaminant" be found on, in, above or under the property. Specifically, he noted, there was no express temporal limitation. Further, Mr Parker submitted, the words "which was existing either before or after completion" showed that there was no implicit temporal limitation.
Mr Parker submitted that when cl 50.6 was considered in context (and assuming for the present that the context included the draft lease and thus, cl 18.5(c)), nothing changed. He submitted that the parties could not have intended to introduce a permanent qualification to or restriction on the wide words of cl 50.6 through the device of a "counter-indemnity", the duration of which was limited to the term of lease and any extension, and which was effective, as between Challenger and Tetra Pak, only as long as they remained lessor and lessee.
Mr Parker pointed to various textual considerations which, he submitted, supported his approach; and to what he said were absurd or capricious consequences that would follow if the approach advocated by Mr Simpkins were applied.
Mr Simpkins took as his starting point the proposition that cl 50.6 could not be isolated from cl 18.5(c). He submitted that, reading the contract for sale (including both the cl 50.6 indemnity and the cl 18.5(c) counter-indemnity), a clear pattern of risk allocation was set out. Challenger accepted all risks arising from contamination (whether disclosed or not) up to the time of sale. Tetra Pak accepted the risk of contamination, at least caused by its activities on the land during the term of the lease, thereafter.
I note at this point that it is not necessary to consider whether there was any material difference between the extent of contamination as at the date the contract was made and as at the date of completion.
Further, Mr Simpkins noted that cl 50.6 was a contract of indemnity. Thus, he submitted, it should be construed strictly in favour of the indemnifier and against the party indemnified. (It was in response to this submission that Mr Parker invoked cl 30.7 of the contract.)
Mr Simpkins, too, pointed to what he said were capricious or absurd results flowing from the construction adopted by Tetra Pak.
Decision
The factual background, as it appears from the contract and the documents referred to in it, is clear. The land was contaminated at the date of sale. The available reports disclosed what was known of the extent of contamination. It was at least suspected (and, I would be inclined to say, on very sound grounds) that the extent of contamination might be greater than disclosed in the reports.
At a level of some generality, Challenger agreed to buy the land accepting the risk of all contamination, disclosed or undisclosed, at the date of sale. One might think that, as part of the acceptance of that risk, it was natural (and necessary) that Challenger would indemnify Tetra Pak against the consequences of that existing contamination.
The parties understood, further, that Tetra Pak would continue its manufacturing activities on the land, after completion, pursuant to the terms of the lease. Thus, they must have perceived at least a risk that further contaminants would be generated. In those circumstances, it is easy to understand why Challenger would not accept the risk of future contamination arising from those activities, and why it would require Tetra Pak to indemnify it against that risk.
Finally, it should be noted that on the evidence, the only source of contamination on the land as at the date of sale was the activities carried on by Tetra Pak or by a contractor to it called David Graphics. David Graphics appears to have occupied part of the land for the purposes of its activities for a period from 1998 to 2003.
I mention those facts because some of the submissions of the parties referred to capricious or absurd consequences that would follow if the land were contaminated by third parties (presumably, trespassers) or, indeed, by Tetra Pak outside the terms of its use permitted by the lease. I do not think that it is helpful to investigate such speculative concepts. The parties were addressing contamination that undoubtedly arose from Tetra Pak's activities on the land up to the date of sale, and the possibility of further contamination that might arise from Tetra Pak's activities on the land after the date of sale. It is those activities, and their consequences, to which the indemnities were directed.
In my view, the proper construction of cl 50.6 is that it is limited to contamination on, in, above or under the property as at the date of sale. It is that contamination that was the subject of the reports in cl 50.3 and the warranty in cl 50.4. It is the risk of that contamination which was assigned to Challenger by those clauses.
The corollary, or counterpart, of that assignment of risk was the indemnity. It should not be construed as providing an indemnity beyond the assigned risk unless the words are intractable.
There are a number of points that can be made about cl 50.6. The first is that it is only in para (a) that the word "Contaminant" is qualified by the words "found on, in, above or under the property which was existing either before or after completion". On the face of things, it might be thought that paras (b) and (c), in which the word "Contaminant" is not expressly so qualified, operate more widely than does para (a). That to my mind would be a most extraordinary result. It can be avoided by construing the word "Contaminant" in the two latter paragraphs as meaning "Contaminant of the kind described in para (a)". (A similar result could be achieved by reading the word "such" between the words "any" and "Contaminant" in paras (b) and (c)).
The next point relates to the words "which was existing either before or after completion". Mr Parker submitted, and I agree, that those words qualify "presence". But I do not think that the words mean that the indemnity extends to contaminants which first came onto (or in or above or under) the property after completion. As the facts of this case show, contaminants can move. What the words in question do, I think, is give Tetra Pak a right to indemnity in respect of contaminants which first came to the property before completion, and which existed on the property either before or after completion, notwithstanding that, thereafter, they migrated off the property.
On that construction, it would be clear that Tetra Pak is entitled to be indemnified for costs relating to the management or remediation of off-site contamination where that contamination had been on the property (before settlement) and, either before or after settlement had migrated off the property.
I do not think that this reading of cl 50.6 diminishes in any significant way the value of the indemnity given to Tetra Pak. Clause 50.6 (indeed, the whole of cl 50) survived completion. The indemnity is unlimited to time. Thus, whenever Tetra Pak incurs expense arising from the presence of, or otherwise in respect of, any (pre-contractual) contaminant, it is entitled to be indemnified.
Clause 18.5(c) of the lease does not limit or qualify that right of indemnity. It provides for a different set of circumstances: indemnity to Challenger in respect of contamination caused by Tetra Pak's activities on the land during the term of the lease.
The assumption of risk evidenced by cls 50.3 and 50.4 of the sale contract is not unilateral, or one-sided. As between Tetra Pak and Challenger, the converse of Challenger's assumption of risk is Tetra Pak's discharge from the risk so assumed.
At the time the sale contract was made, there was a legislative regime for investigation and remediation of contamination. That was to be found in the Contaminated Land Management Act 1997 (NSW) (CLM Act). It seems to me that the parties, possessing significant resources and having available to them high quality legal advice, must be taken to have been aware of the provisions of that Act.
At the time the sale contract was made, s 11(I) of the CLM Act empowered the Environmental Protection Authority (EPA) to make an investigation or remediation order. If the EPA did so, it was required by 12(I) to "specify an appropriate person" as the subject of the order.
Section 12(2) specified, in descending order, those from among whom "an appropriate person is to be chosen". First in that order, and as one might expect, was "a person who had principal responsibility" for the contamination.
Applied to the facts of this case, it was obvious, and the parties must have appreciated, that at the time of sale, Tetra Pak was likely to have been the subject of any order for investigation or remediation under the CLM Act.
The effect of cl 50 of the sale contract, as between Challenger and Tetra Pak, was that Challenger assumed, and Tetra Pak was discharged from, the risk of contamination at the date the contract was made. That may be regarded in substance, although not in form, as an assignment of the risk. But that scheme could not be binding on the EPA. Nor could it prevent the EPA, if it were minded to make an investigation or remediation order, from designating (as s 12 of the CLM Act required it to do) Tetra Pak as the appropriate person who was to be the subject of any such order.
That potential liability seems to me to be among the class of liabilities in respect of which the clause 50.6 indemnities were given. No doubt, it was that potential statutory liability to which (in particular) paras (b) and (c) of cl 50.6 were directed.
Mr Parker called in aid s 67 of the CLM Act. That section operates in effect as a "reversal of onus" provision. I set it out:
67 Person responsible for typical contamination
In any proceedings under this Act to recover from a person the cost of carrying out an investigation or remediation order in relation to any land, the person is taken to have responsibility for contamination on that land if:
(a) the person carried on activities on the land, and
(b) activities of that sort generate or consume the same substances as those that caused the contamination or generate or consume substances that may be covereted by reacting with each other or by the action of natural processes on the land into substances that are the same as those that caused the contamination,
unless it is established that the contamination was not caused by the person.
Mr Parker submitted that if proceedings were commenced to recover the cost of carrying out investigation or remediation, it was likely that they would be directed at Tetra Pak. I agree. He submitted, further, that in that case, Tetra Pak would be assumed to be responsible for the contamination unless it could show otherwise. I think that must be correct; and in any event, am prepared to assume that it is.
Mr Parker built on this to submit, in effect, that the statutory reversal of onus strengthened the construction which he said should be given to cl 50.6. I do not agree. The subject of cl 50, generally, is contamination existing at the date of sale. It was Tetra Pak's activities on the land that had caused that contamination. Thus, the reversal of onus is unlikely to have any significant practical effect. But in any event, even assuming that the reversal of onus may have some practical as opposed to theoretical significance, it does not extend the ambit of the indemnity. By reference to the contractual scheme as a whole, that indemnity, being the counterpart or converse of Challenger's assumption of risk, is limited to contamination at the date of sale: that is, to the risk assumed.
For those reasons, I conclude that the indemnities granted by cl 50.6 of the sale contract are limited to costs arising from contamination existing, or attributable to activities occurring prior to, completion of the sale contract.
The onus issue
It follows that for Tetra Pak to succeed in its claim for indemnity, it must plead and prove that the costs claimed meet the condition of the indemnity, so construed. Thus, Tetra Pak bears the onus of proving that its claim is based on contamination existing at, or attributable to activities occurring up to, 14 May 2002.
Second issue: nature and extent of contamination at present
As I have said, it is common ground that the property is contaminated by, among other things, PCE; and that PCE has migrated, and is still migrating, off the property.
The parties do not require any further or more detailed findings.
Third issue: when did the contamination originate?
The competing contentions
Mr Parker submitted that if Tetra Pak did bear the onus of proof on this issue, it had discharged it. He submitted that the evidence, both lay and expert, was sufficient to enable the court to find that the relevant contamination had occurred, or been caused, before the date of sale.
Mr Simpkins submitted that the evidence did not justify the court's coming to that conclusion.
Mr Parker and Mr Simpkins agreed that the evidence did not justify a conclusion that the contamination had been caused, or occurred, after the date of sale.
The lay and documentary evidence
Tetra Pak's manufacturing activities on the property, from about 1972 on, included the use of solvents, some of which were (or included) CHCs. Such records as there are show that from 1995 to 1999, substantial quantities of a solvent known as Klenasol 75/25 were delivered to the land. Klenasol 75/25 comprises (I do not know whether by weight or by volume) 75% PCE.
The documentary evidence shows, further, that:
(1) over much the same period, substantial quantities of recycled Klenasol 75/25 were delivered to Tetra Pak at the property; and
(2) over part of that period (I think, in 1998 and 1999 only), substantial quantities of recycled Klenasol 75/25, and a lesser quantity of Klenasol 75/25, were delivered to David Graphics at the site.
Finally, and remaining with the documents for the moment, there is evidence that another supplier, Nowra Chemicals, delivered "pure PCE" to the site. There are no records of any such deliveries, or of the quantities involved. A subpoena directed to Nowra Chemicals produced no relevant documents.
Tetra Pak called two former employees, Mr Ken Lay and Mr Bryan Davis.
Mr Lay had been employed at the property from 1983 until about May 2009. Mr Lay described, in broad terms, the activities that had been conducted on the property over the period of his employment. He said that in 1997, Tetra Pak became accredited under an Australian Standard dealing with "environmental management systems". For a time, he was responsible for assisting in the management of the accreditation process. He proved processes and records dealing with the use and recording of chemicals and waste products.
The records identified by Mr Lay included environmental report questionnaires for each year from 1997 until 2006. Those questionnaires, which were distributed and completed and returned electronically, dealt among other things with the consumption and use of chemicals on "Tetra Pak's Red List". Those chemicals included PCE specifically, and what I think was a description of CHCs generically. For each year, the completed questionnaire showed that no chemical on the Red List had been used or consumed on the property.
Mr Simpkins submitted, correctly, that the completed questionnaires did not deal with the topic of storage of PCE, or other CHCs, on the property.
Mr Lay identified some Material Safety Data Sheets (MSDS). They showed, among other things, that PCE had been supplied by Nowra Chemicals for use in relation to a "Chambon" printing press. Mr Lay said that Tetra Pak had stopped using the Chambon press by the end of 2000.
Mr Lay said that his duties required him to participate in bi-monthly "environmental performance meetings". He said that he attended most of those meetings between 2000 and 2006, and that he did not recall any major spill being placed on the agenda of such a meeting. Nor did he recall directly observing any chemical spills.
Mr Davis had been employed as the building, grounds and safety supervisor for the property from February 1980 until March 2010. His duties included "a range of tasks concerning access to... environmental management, workplace safety, dangerous goods storage and waste management" (affidavit sworn 22 March 2012, para 3).
Mr Davis, too, gave evidence of manufacturing activities carried on at the property, including by David Graphics from early 1998 until late 2002.
In cross-examination, Mr Davis said that there was a requirement that all chemical spills be reported, but that discretion was allowed in some circumstances for "minor" spills. He quantified these as being spills of up to 10 litres of material that occurred within the production facility itself. If a spill occurred elsewhere, and in particular near drains, Mr Davis said, it was to be reported.
Within the production facility, any spill would be contained, in the sense that the facility had a concrete floor and masonry walls. Mr Davis said that the standard procedure was for absorbent materials to be used to take up the spilled material, and for the area to be cleaned. I am satisfied, on that basis, that such spills as occurred within buildings would be most unlikely to have escaped from the confines of the building.
There are no records of any spills outside the buildings, or near the drains. That no doubt reflects, in part, the fact that records have been destroyed since Tetra Pak closed down its operations at the property in 2006.
The expert evidence
Tetra Pak called Dr Gregory Dasey. Challenger called Dr Bernard Kueper. Each of them has impressive qualifications and experience in the field of hydrogeology. Each of them expressed opinions about the likely migration of contaminants through and off the property, based on both the investigations that had been carried out and were the subject of the reports annexed to the sale contract, and on subsequent investigations carried out by other consultants.
Mr Parker accepted that the expert evidence alone would not permit the court to make a finding that the contaminants in question had been on the site at the time of sale. His submitted, however, that an inference to this effect was available from the lay evidence, and that the expert evidence was consistent, or at least not inconsistent, with that inference.
Dr Dasey made two reports. As I understand his evidence, he regards the second report as setting out his current opinion on the process and timing of migration of contaminants. That is because it uses a different form of analysis (T71.17-.18).
The migration path of contaminants through (in this case) soil is often called a "plume". There were two plumes on the land: the northern plume and the southern plume. Dr Dasey's analysis related only to the latter.
In substance, Dr Dasey took data from other consultants' reports relating to the possible movement of a contaminant (PCE) from a measurement point inside the property known as MW 8, through second measurement point outside the property known as OMW 5, to a third measurement point, also outside the property, known as OMW 6. Dr Dasey used a computer program to estimate the "plume velocity" between those locations. He calculated that, based on an assumption that PCE had migrated (I return to this at [80] to [84] below) and on the distance between the locations, the length of time that would have been required for the hypothetical migration from MW 8 to OMW 6 was consistent with the process having started before the date of sale.
Dr Kueper pointed out that the calculations were based on a range of assumptions. He said that, in his opinion, some of the assumptions - including, critically, as to porosity and groundwater velocity - were unreliable. He said that the use of factors that he considered to be more reliable or realistic assumptions would have the effect of shortening dramatically the time of migration.
Dr Dasey assumed a porosity factor of 0.2. That was based on measurements and calculations of other consultants. Dr Kueper said that the value was an estimate only, and in his opinion was not likely to be accurate. He pointed out that, because the relationship between porosity and plume velocity is inverse, a change in the porosity factor from 0.2 to 0.1 would have the effect of increasing the plume velocity by a factor of 10.
As to groundwater velocity, Dr Dasey used a value of 2.533 metres per year, which he said was established by other consultants for the particular area. Dr Kueper criticised this, noting that the range of values established by the other consultants (once corrected for an arithmetical error) was from a minimum of 3.2 metres per year up to 164 metres per year, with a geometric mean (or geomean) velocity of 22.1 metres per year. On the basis of the geomean, Dr Kueper said (and I think it was common ground), the minimum plume age would be 3.1 years. Thus, if the geomean velocity had been fed into the calculation, the result could not have been consistent with the presence of PCE at MW 8 before the date of sale.
The validity of this last criticism is open to question, because Dr Dasey's calculation was concerned not with the overall spread of the plume but, rather, with the particular migration path from MW 8 to OMW 6.
There were other matters raised in the debate between the experts. I do not think that it is necessary to go to them in any detail.
I note at this point that, as Mr Simpkins submitted, whatever Dr Dasey's evidence might show as to the rate of migration of the southern plume, it showed nothing as to the rate of migration of the northern plume; and that there was no scientific evidence dealing with that.
Decision
Tetra Pak is required to prove, on the balance of probabilities, that the contamination existed on, in, under or above the property at the date of settlement of the contract for sale. The discharge of that onus requires more than "a mere mechanical comparison of probabilities independently of any belief in" the reality of the fact to be proved: Dixon J in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361 - 362. As his Honour said, what is required is a sense of actual persuasion of occurrence or existence of the fact. That requirement is not limited to cases (such as Briginshaw) where the fact in issue involves some serious reflection on the character of a person; it is a general incident of the fact-finding process in civil litigation: see Nguyen v Cosmopolitan Homes [2008] NSWCA 246 at [44] to, in particular, [55].
I start with the expert evidence. To my mind, Dr Dasey's evidence does not really assist Tetra Pak. I hasten to say that I reach this conclusion not because of any doubt as to Dr Dasey's qualifications and experience, or indeed as to his objectivity. On the contrary, I regard both Dr Dasey and Dr Kueper as eminently well qualified to consider the matters that they did and express the opinions they did; and I thought that each of them understood, and sought to perform, his duty to the court.
Dr Dasey's opinion (in his second report) is based on an apparent increase in the level of concentration of PCE in the destination point chosen by him: OMW 6. It is that change in concentration, over a period of time, that Dr Dasey has assumed to be the result of migration. He explained the nature of that assumption in his second report at paras 78, 79.
In the former paragraph, Dr Dasey noted that the change had occurred at a relatively low concentration. Thus, he said, "whether this change is significant is currently uncertain". He said (and Dr Kueper agreed) that "there is potential that the change is a function of factors (such as variability introduced during sampling, sample handling, laboratory analysis) not related to plume migration".
Thus, Dr Dasey said:
(1) "the following analysis assumes that the change is representative of plume migration (and not variability related to other factors)" (para 78); and
(2) "adoption of this assumption should not be interpreted as my acceptance that concentrations at OMW06 are increasing as a result of plume migration" (para 79).
Dr Dasey said, in the course of his oral evidence, that he did not regard the data "at the moment" as demonstrating migration (T75.24-.44):
HIS HONOUR: You say specifically that you rely on the assumption set out at the end of paragraph 78, but that your statement of that assumption should not be taken as an acceptance of the proposition that the concentrations in OMW06 are increasing at a rate of plume migration?
WITNESS DASEY: Yes.
HIS HONOUR: Forgive me if I'm wrong, I read that as saying you don't regard the data as showing that?
WITNESS DASEY: At the moment, no.
HIS HONOUR: Of course at the moment.
WITNESS DASEY: Yes.
Given Dr Dasey's inability to exclude other factors as responsible for the relatively low change in concentration at OMW 6, and given his express disavowal that his calculations showed the change was a result of plume migration, I conclude that his evidence shows no more than that the data (whether demonstrated or assumed) are not inconsistent with relatively rapid migration, and thus with relatively recent occurrence of the source contamination.
To put it another way: if the lay (or any other) evidence provided a basis for finding, on the balance of probabilities, that the contamination had occurred after the date of sale, Dr Dasey's evidence would not be inconsistent with that conclusion.
I return to the lay evidence. Taken at face value, that evidence suggests that the last deliveries to the property of solvents containing PCE were in about 1999, and that the use of PCE in the manufacturing process had stopped by the end of 2002. Thus, if the evidence allowed an affirmative finding to be made that all products being or containing PCE were removed from the site once they were no longer needed in the manufacturing process (and before the date of sale), there would be a basis for inferring that any contamination must have occurred before the date of sale.
Mr Simpkins criticised Tetra Pak's selection of the lay witnesses. He submitted that neither Mr Lay nor Mr Davis had ever had any role in relation to ordering, storing on site, using or disposing of PCE or products containing it. Neither of them could say that PCE or products containing it were not present on the site after 15 May 2002. Neither of them purported to do so.
That submission is factually correct.
Mr Simpkins relied on the well known observation of Lord Mansfield CJ in Blatch v Archer (1774) 98 ER 969 at 970 that:
It is certainly a maxim that all evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.
Mr Parker sought to deflect this criticism by suggesting that it should not be seen to be within Tetra Pak's power to produce more detailed proof. He relied on the proposition that manufacturing operations had stopped in 2006, and that many of the employees involved had been "retrenched".
I do not accept that submission. It was Tetra Pak that carried on operations at the site, and employed the relevant personnel (I leave aside, for the moment, the position of its contractor David Graphics). Tetra Pak knew who the relevant people were. There is no reason to think that Challenger did. It may be the case that the relevant personnel might not be keen to give evidence, having regard to the circumstances in which manufacturing operations were stopped and they lost their jobs. But the evidence falls a long way short of showing that.
Again, the relevant records were records of Tetra Pak. If Tetra Pak chose to destroy them because the operations had closed down, but knowing that there remained residual questions as to contamination and responsibility for it, that can hardly be something that would assist it in discharging its burden of proof. Certainly, the absence of such records should not be held against Challenger. (I am not to be taken as suggesting that, to the extent that records were destroyed, there was anything improper or underhand in this. It is the fact of destruction, to the extent that occurred, and not the motive that is important.)
To submit, as Mr Parker appeared to do, that the parties were in an equal position to call the relevant evidence strikes me as verging on the unreal. Tetra Pak had records of employees. Whether or not it still has those records I do not know. But there is no reason for thinking that Challenger ever had any such records, or access to them.
If anyone were in a position to prove what had actually happened on site after 2000 and before the date of sale, in relation to the retention, storage and disposal of PCE or products containing it, it was Tetra Pak.
The evidence of Messrs Lay and Davis is consistent, or not inconsistent, with a conclusion that it is more likely than not that any contamination occurred before the date of sale. But the question is not whether the evidence is consistent with that conclusion, but whether it, in conjunction with the documentary evidence, justifies the court in coming to that conclusion. I do not think that it does.
The fundamental gap in the evidence is as to the retention and storage on site of PCE or products containing it. In the absence of any evidence (let alone persuasive evidence) that all products containing PCE were consumed and returned for recycling, and that no stores were kept, I regard that gap as fatal to Tetra Pak's case.
It might be said that Tetra Pak would not keep PCE, or products containing it, once they had ceased to be used in the manufacturing process. There is some force in that, but, on the other hand, in the absence of evidence to say that this reflected reality, I do not feel inclined to draw that inference.
Further, there is some evidence that PCE was used for purposes other than the printing process - specifically, for cleaning electrical fittings. That appears in an MSDS prepared by Nowra Chemicals (the supplier of pure PCE). If, as that evidence suggests, PCE had other uses, it cannot be said to be unlikely or improbable that some was kept on site for use for those other purposes. Again, this is a matter that Tetra Pak could have dealt with, but did not.
In circumstances where it has not been shown that PCE was not retained on site, and in circumstances where there is no reason to infer that it would have been returned (because there is evidence that it could have been used for purposes other than printing), I do not regard the evidence of Messrs Lay and Davis, coupled with the documents, as supporting a conclusion, on the balance of probabilities, that PCE was neither used nor stored on the site by some date prior to the date of sale.
Mr Simpkins relied on registers kept by Tetra Pak known as the "MSDS index". Two such indices were in evidence. Each, on its face, relates to the period up to February 2004. One appears to have been prepared in about April 2004 (at least, it was transmitted within Tetra Pak under copy of an email dated 20 April 2004). The other appears to have been prepared in or after August 2004, because it contains entries of receipt of some chemicals in that month.
Each of the indices referred to receipt of PCE supplied by Nowra Chemicals.
Each index is in the form of an excel spreadsheet. One of the cells that is referable to the PCE listed in it contains the word "remove". Mr Simpkins submitted that this was a direction to remove the PCE from site. Mr Parker submitted that it was a direction to remove the listing from the index.
It is likely that the author of the indices was a Mr Balaschow. He was certainly the author of the email under cover of which the earlier MSDS index was sent; and he was the person named by Mr Lay as having responsibility for the preparation of such records.
Tetra Pak did not call Mr Balaschow. Nor did it suggest that he was unavailable to be called, or likely to be unwilling to give truthful evidence if called. In those circumstances, I do not feel inclined to draw the inference for which Mr Parker contended. It may be noted, as Mr Simpkins submitted, that if all that were required was deletion of the chemical from the record then (the record being in the form that I have indicated) this could have been achieved by a key stroke.
Nor do I feel comfortable in drawing the inference for which Mr Simpkins contended. If it were desired to have all stocks of PCE removed from the site, this could have been communicated in a somewhat more direct fashion: for example, by sending an email to the relevant person. Burying the instruction deep in an excel spreadsheet does not seem to me likely to have been an effective form of communication of such an instruction.
Nonetheless, putting aside each of the inferences for which counsel contended, it is possible to view each of the indices as consistent, or not inconsistent, with the proposition that there was present on the land pure PCE, supplied by Nowra Chemicals, at the date each index was prepared: that is, as late as August 2004.
I do not regard the MSDS indices as compelling the conclusion that there was PCE on the land at that time. But in conjunction with the undoubted evidence that PCE (including pure PCE supplied by Nowra Chemicals) had been delivered to the land from time to time, and in the absence of any evidence that once manufacturing operations ceased all stocks of PCE (or chemicals containing it) were removed, I regard those records as inconsistent with Mr Parker's submission recorded at [50] above.
I conclude that Tetra Pak has not shown, on the balance of probabilities, that PCE was not present on the site after the date of sale.
It follows that the third issue must be answered "no".
Conclusion and orders
I answer the questions the subject of the order under UCPR r 28.2 as follows:
Question 1: what is the proper construction of cl 50.6 of the Sale Contract; in particular, is the indemnity for which it provides limited to costs arising from contamination existing, or attributable to activities occurring prior to, completion of the Sale Contract?
Answer: The indemnity is limited to costs arising from contamination existing, or attributable to activities occurring prior to, completion of the sale contract.
Question 2: what is the nature and extent of the contamination presently on the land?
Answer: The property is presently contaminated. It is not necessary to give further detail.
Question 3: Did any of the contaminants presently on the land exist, or are they attributable to, activities occurring prior to completion of the Sale Contract?
Answer: The plaintiff, being the party bearing the onus of proof on this issue, has not proved that it was.
It was common ground that, if I were to come to those conclusions, the proceedings should be dismissed with costs.
I make the following orders:
(1) Direct that the answers to the separate questions be recorded.
(2) Order that the proceedings be dismissed with costs.
(3) Direct that the exhibits be returned.
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Decision last updated: 17 April 2013
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