The Trust Company Ltd v Commonwealth of Australia

Case •

[2025] NSWSC 502

•

23 May 2025

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: The Trust Company Ltd v Commonwealth of Australia [2025] NSWSC 502
Hearing dates: 10-14, 17, 20-21 February 2025; documentary tenders finalised 5 March 2025
Date of orders: 23 May 2025
Decision date: 23 May 2025
Jurisdiction:Equity - Commercial List
Before: Rees J
Decision:

Summons dismissed.

Catchwords:

CONTRACTS — Department of Defence owns very large site for a century, used as supply and distribution centre — sold and leased-back — lease required Defence to “remediate the Land to a standard suitable for on-going commercial / industrial use” and to return Premises clean and in good repair and condition at end of lease — land on-sold to developer — deed of surrender of lease — Defence vacates site – developer demolishes Defence buildings, roads and underground infrastructure – whether Defence obliged to pay $20M for the costs of dealing with contamination encountered in demolition and excavation.

INTERPRETATION — commercial contracts — whether lease incorporated definitions in Contaminated Land Management Act 1997 (NSW) or standards in National Environment Protection Measures (NEPMs) guidelines – context and business commonsense – principles at [62]-[71] — resolving inconsistencies at [210] — whether deed varied lease – obligations under lease remained but deed provided a release in certain circumstances – Defence released.

DAMAGES — causation – remoteness – difficulties in proof – principles at [429]-[431] – ‘geotechnically unsuitable’ soil had to be removed in any event.

Legislation Cited:

Contaminated Land Management Act 1997 (NSW)

Environmental Planning and Assessment Act 1979 (NSW)

National Environment Protection Council Act 1994 (Cth)

National Environment Protection Council (New South Wales) Act 1995 (NSW)

National Environment Protection (Assessment of Site Contamination) Measure 1999

Cases Cited:

191 Bells Pty Ltd v WJ & HL Crittle Pty Ltd [2024] NSWSC 297

AAI Ltd v Solarus Projects Pty Ltd [2014] NSWCA 168

Abergeldie Contractors Pty Ltd v Fairfield City Council [2017] NSWCA 113

Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57

Armory v Delamirie (1722) 1 Str 505

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

Australian Broadcasting Commission v Australian Performing Right Association Ltd (1973) 129 CLR 99; [1973] HCA 36

Bong Bong Town Centre v Illawarra Clay Target Club [2015] NSWSC 316

Brighton Automotive Holdings Pty Ltd v Honda Australia Pty Ltd (No 2) [2024] VSC 262

Burns v MAN Automotive (Aust) Pty Ltd (1986) 161 CLR 653; [1986] HCA 81

Cessnock City Council v 123 259 932 Pty Ltd [2024] HCA 17; 98 ALJR 719

Cherry v Steele-Park (2017) 96 NSWLR 548

Cirrus Real Time Processing Systems Pty Limited v Jet Aviation Australia Pty Limited (2023) 113 NSWLR 80; [2023] NSWCA 280

Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; [1982] HCA 24

Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7

Elisha v Vision Australia Ltd [2024] HCA 50; (2024) 421 ALR 184

Festa Holdings Pty Ltd v Adderton [2004] NSWCA 228

Fink v Fink (1946) 74 CLR 127; [1946] HCA 54

HP Mercantile Pty Ltd v Hartnett [2016] NSWCA 342

J Kitchen & Sons Pty Ltd v Stewart's Cash and Carry Stores (1942) 66 CLR 116

JR Consulting & Drafting Pty Ltd v Cummings (2016) 239 ALR 625; [2016] FCAFC 20

Kane & Co (NSW) Pty Ltd v Idolbox Pty Ltd [2024] NSWCA 278

Koufos v C Czarnikow Ltd (The Heron II) [1969] 1 AC 350

Lewandowski v Mead Carney-BCA Pty Ltd [1973] 2 NSWLR 640

Liberty Mutual Insurance Company Australian Branch (t/as Liberty Specialty Markets) v Icon Co (NSW) Pty Ltd (2021) 396 ALR 193; [2021] FCAFC 126

Lym International Pty Limited v Marcolongo (2011) 15 BPR 29,465; [2011] NSWCA 303

Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181

Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633

MalagoPty Ltd v AW Ellis Engineering Pty Ltd [2012] NSWCA 227

McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579; [2000] HCA 65

McGrath v Sturesteps; Sturesteps v HIH Overseas Holdings Ltd (in liq) (2011) 81 NSWLR 690

McRae v Commonwealth Disposals Commission (1951) 84 CLR 377

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37

Newey v Westpac Banking Corporation [2014] NSWCA 319

Onley v Catlin Syndicate Ltd (as the underwriting member of Lloyd’s Syndicate 2003) (2018) 360 ALR 92; [2018] FCAFC 119

Opal Group Holdings (Australia) Pty Limited v Franklins Limited [2002] NSWCA 169

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35

Queensland Phosphate Pty Limited v Korda and Shepard (as joint and several liquidators of Legend International Holdings Inc (in liq)) [2017] VSCA 269

Reardon Smith Line v Ministry of Agriculture [1963] AC 691

Robinson v Harman (1848) Ex 850

Rockment Pty Ltd t/a Vanilla Lounge v AAI Limited t/a Vero Insurance (2020) 282 FCR 561

Star Entertainment Group Limited v Chubb Insurance Australia Ltd (2022) 400 ALR 25; [2022] FCAFC 16

Tabcorp Holdings Pty Ltd v Bowen Investments Pty Limited (2009) 236 CLR 272; [2009] HCA 8

The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64; [1991] HCA 54

Timmerman v Nervina Industries (International) Pty Ltd [1983] 2 Qd R 261

Wenham v Ella (1972) 127 CLR 454; [1972] HCA 43

Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17

Texts Cited:

David Hughes, Lord Justice Lewison, Interpretation of Contracts in Australia, (2nd ed, 2024. Thomson Reuters)

Category:Principal judgment
Parties: The Trust Company Ltd (First Plaintiff)
Qube RE Services Pty Ltd (Second Plaintiff)
Commonwealth of Australia (Defendant)
Representation:

Counsel:
M Ashhurst SC / G Farland / J Rodgers (Plaintiffs)
J Steele SC / L Robb Vuycic (Defendant)

Solicitors:
Pinsent Masons (Plaintiffs)
Clayton Utz (Defendant)
File Number(s): 2021/351160

JUDGMENT

Summary

Witnesses and documents

Early land use

Preparing for sale

Regulatory regime

Reports obtained by Defence

Sale and lease-back

Principles of construction

Provisions of the lease

Focusing on cl 17.2

Conclusion

After the lease

A clean-up

Developer’s preliminary investigation

New lease

NEPM (2013)

Preparing for development

Developer’s detailed investigation

Geotechnically unsuitable soil

Preparing to leave

Surrender of lease

Provisions of the deed

Focusing on cl 4.3

Conclusion

Site audit report

Compliance with the deed

Expert evidence

Conclusion

Moving on

Development approval

Stage 1 demolition

Waste classification reports

Hazardous chemicals

Stage 2 demolition

Tenanted warehouses

Preconstruction contamination assessment

Breach of remediation obligation

Submissions

Expert evidence

Conclusion

Breach of ‘make good’ obligation

Submissions

Expert evidence

Conclusion

Damages

Submissions

Principles

Quantification evidence

Conclusion

Orders

ADDENDUM 1 – waste classification and clearance reports

ADDENDUM 2: DAMAGES

JUDGMENT

  1. HER HONOUR: This is a claim for contractual damages. The plaintiffs (the developer) seek $20 million from the Department of Defence for breach of a lease, under which Defence was obliged to remediate land and ‘make good’ the leased premises at the end of the lease.

  2. The developer has since redeveloped the land, together with adjoining land, into an intermodal terminal facility. The developer seeks the costs of dealing with asbestos contaminated soil and hazardous chemicals encountered during demolition and excavation works undertaken to build that facility.

Summary

  1. For nearly a century, Defence owned land in Moorebank, New South Wales, which it used as a supply and distribution centre. The site was 83 hectares – roughly the area of Darlinghurst – with 66 buildings including warehouses and administrative offices.

  2. In 2003, Defence sold the land to a major bank with a ‘lease back’. The lease required that, by the expiration of the lease, Defence would “remediate the Land to a standard suitable for on-going commercial / industrial use.” The bank on-sold the land to (ultimately) the developer. The developer and Defence later renewed the lease, but in the same terms.

  3. In 2015, Defence executed a “Deed of surrender of lease” and vacated the site. The deed obliged Defence to provide a site audit statement (being a document provided by an independent auditor accredited by the NSW Environmental Protection Authority (EPA)) certifying that the land was suitable for commercial/industrial use, either unconditionally or subject to compliance with an environmental management plan (EMP). This was done.

  4. In 2016, the developer obtained approval to construct an intermodal terminal facility on the Moorebank site and adjoining land. The facility is intended to move 1.5 million shipping containers annually by rail instead of road, serviced by automated technology which will see driverless shuttle carriers collect and transport containers around the precinct to be processed, unpacked and stored on-site or distributed in smaller consignments. The development includes an intermodal rail terminal, rail link connections to Southern Sydney Freight Line (which enables the transfer of containers from Port Botany), warehouse and distribution facilities, and a freight village including ancillary services.

  5. From 2017 to 2019, the developer took the site apart. No stone was left unturned. Buildings were demolished. Vegetation and topsoil were removed, being “geotechnically unsuitable” for the major building works which were to follow. Underground infrastructure was dug up and removed, including stormwater pipes and telecommunication pits. Hardstands, roads and pavements were removed. This can be seen in the following ‘before’ and ‘after’ aerial photographs taken in October 2015 and November 2018, where north is at the top of the photograph:

  1. In the ‘after’ photograph, a new warehouse can be seen under construction in the north-west corner and a new railway under construction in the south-west corner. The only Defence buildings which remain are the warehouses in the north-east corner, called the “tenanted warehouses”, which are leased to third parties. Some 600,000 m3 of new fill was imported, to raise the level of the site by some 2 m, before covering much of the area with concrete hardstand.

  2. In the course of undertaking these works, the demolition contractor encountered asbestos containing material (ACM) in topsoil, in backfill around underground infrastructure and under hardstands. ACM was also found in a pit on the southern portion of the site, in which Defence had buried various equipment, supplies and rubbish after World War II. Some hazardous chemicals were also found in some tanks in some buildings. The developer spent $20 million in dealing with these contaminated materials.

  3. The question is whether Defence breached the lease and / or the deed when vacating the site. The issues are straightforward:

  1. What were Defence’s contractual obligations to remediate the land and ‘make good’ the premises?

  2. Did the deed affect those obligations?

  3. Did Defence perform its obligations?

  4. If not, are the damages sought caused by any breach or simply development costs?

  1. The parties agreed on only three things. First, the case could be resolved having regard to a handful of documents (which may not explain the 83-volume court book). Second, the parties’ cases passed like ‘ships in the night’. Third, Defence accepted that, if it was wrong about everything else, then it should pay damages of some $360,000.

  2. In the result, the developer’s claim fails. The remediation obligation under the lease was generally expressed and obliged Defence to remediate the site to a standard suitable for what the Moorebank site was already being used for, but not for any commercial / industrial use, nor for development activities to enable the site to be used for any such use: see [102], [144]. The deed did not amend the remediation obligation but released Defence from any claim in respect of non-performance of that obligation, on Defence procuring the site audit statement: see [221]. Defence was so released.

Witnesses and documents

  1. The parties adduced a staggering amount of lay, expert and documentary evidence. In what follows, I have endeavoured to refer only to that portion of the land referred to in reams of reports that actually formed part of the Moorebank site. This was not always obvious, where the intermodal terminal development included adjacent sites, the ‘zones’ referred to by various contractors were not the same and the nomenclature changed over time.

  2. As for lay witnesses, the developer relied on the evidence of construction project manager John Mettam, contract administrator Mehul (Max) Raval, environmental engineer Seth Molinari, environmental consultant Lauren Holmes (née Luedecke) and occupational hygienist and asbestos assessor Kerrin Alamango. Defence relied on the evidence of solicitor Claire Smith. All except Mr Raval and Ms Smith were cross-examined.

  3. No issues of credit arose; all gave evidence in a fair manner and were knowledgeable and impressive. Mr Molinari was in the slightly invidious position of having ‘signed off’ the contamination status of the site in 2013, before returning to ‘clean up’ the contamination which was then encountered. In these circumstances, he was highly critical of some of the earlier reports on which he relied, or which were not made available to him at the time. These criticisms were likely brewed in hindsight. But his criticisms were not pleaded issues. Mr Molinari was a ‘late’ witness, called to address objections made by Defence to the admissibility of his contemporaneous reports. In these circumstances, Defence had not served evidence to answer Mr Molinari’s criticisms, for example, by calling the authors of the earlier reports. I am in no position to make findings in respect of Mr Molinari’s observations.

  4. As for expert evidence, the parties served 19 expert reports and five joint expert reports. The developer relied on the expert opinion of environmental engineer Dr Ian Swane and quantity surveyor David Madden. Defence relied on the expert opinion of environmental scientists Dr Jackie Wright and Rebecca Organo, environmental consultant and site auditor Jason Clay and contaminated land remediator Nick Cowman. Mr Madden was cross-examined. His evidence was fair, reasonable and precise.

  5. Three expert conclaves were held involving Dr Swane on the one hand and variously Dr Wright, Mr Clay and Ms Organo on the other hand. I generally preferred the evidence of Dr Wright and Mr Clay to the views of Dr Swane and Ms Organo, where the latter both gave evidence with an air of advocacy. Defence’s experts clearly disagreed most strongly with Dr Swane’s key premise, which did appear extreme when compared with their collective views. Dr Swane considered that Defence was required to remove the top 10cm of topsoil, all trees and to demolish buildings in order to check whether there was any asbestos. Ultimately, I have not accepted his view.

Early land use

  1. The history of Defence’s use of the Moorebank site sheds light on how the contamination came to be. The Moorebank land has been used for defence-related purposes since the late 1800s. Since at least 1905, the site has been used for military manoeuvres, including the Australian Light Horse training. In 1912, Defence formally acquired the land.

  2. During World War I, the site was used for storage and initially known as the Mobilisation Stores. During World War II, the site accommodated the 2nd Base Ordnance Depot and 2nd Base Workshops. At the end of World War II, general stores from the 21 Supply Battalion were disposed of in trenches on site, using a method described as “burn, bash and bury”. These are the “burial pits” referred to in various reports, which were thought likely to contain contaminated material.

  3. By the end of World War II, there were 20 timber post and beam buildings on-site, as part of the widespread expansion of Army support facilities during the war. In the early 1990s, the site was upgraded to accommodate the Defence National Storage Distribution Centre (DNSDC), which became the central warehouse for all three of Australia’s armed services “including everything from electronic gadgets, army rations, food supplies, naval guns, aircraft wings and bodies. There [were] also maintenance sections dealing with automotive engineering, electronics, vehicle repairs, small arms and heavy precision engineering.”

  4. According to a heritage report later commissioned by Defence, “At this time the majority of the World War II timber post and beam buildings and composite steel and timber buildings were reclad, to remove the original fibro asbestos sheeting.” Five of the buildings were demolished and replaced with larger modern steel frame warehouse buildings. A large portion of material in the burial pits was also removed by contractors for proper disposal. It is thought that, at this time, ACM fragments were deposited on the ground surrounding the buildings, and perhaps further afield, as a result of poor disposal practices when removing the asbestos cement roofs.

  5. In 1999, AGC Woodward-Clyde Pty Ltd and Hibbs & Associates undertook a survey of hazardous building materials on the site. Asbestos was found to be present in 15% of all existing buildings. From this survey, an asbestos register was developed for the site.

Preparing for sale

  1. In 2000, Defence’s Major Property Disposal Unit began to consider the feasibility of disposing of the Moorebank site. To that end, a series of reports were commissioned, apparently to support the re-zoning of the land. Some of these reports appear to have formed part of a due diligence package made available for review by interested purchasers. These reports both indicate Defence’s knowledge of contamination on the site and, more importantly, provide the commercial context for the lease.

  2. Viewed in isolation, it is not always apparent why Defence would have obtained these reports. Viewed against the regulatory regime in respect of planning and development control, commissioning these reports makes more sense. It is convenient to briefly describe that regime.

Regulatory regime

  1. The planning and development control process was (and is) governed by the Environmental Planning and Assessment Act 1979 (NSW), which also played a role in the management of land contamination together with the Contaminated Land Management Act 1997 (NSW), “State Environmental Planning Policy No 55 — Remediation of Land” and other regulatory controls.

  2. Put shortly, SEPP 55 provided that a planning authority could not re-zone land without considering whether it was contaminated. If the land was contaminated, the planning authority had to be satisfied that the land was suitable in its contaminated state (or would be suitable, after remediation) for all purposes for which the re-zoned land would be permitted to be used. To that end, the planning authority was required to obtain a report specifying the findings of a preliminary investigation of the land, carried out in accordance with the contaminated land planning guidelines: cl 6(2).

  3. At the time, the contaminated land planning guidelines were “Managing Land Contamination, Planning Guidelines SEPP 55 – Remediation of Land” (1998). The guidelines described the site investigation process to be undertaken by the proponent seeking re-zoning (or development approval). Depending on the circumstances, one or more of the following stages may be appropriate:

  1. Stage 1 – Preliminary Investigation, which identified past or present potentially contaminating activities, provided a preliminary assessment of any site contamination and, if required, provided a basis for a more detailed investigation.

  2. Stage 2 – Detailed Investigation, which was necessary when the land was or had been used for a specified activity that may cause contamination (which included “Defence works”) and a land use change was proposed that had the potential to increase the risk of exposure to contamination. A detailed investigation was to define the nature, extent and degree of contamination; assess potential risk posed by contaminants to health and the environment; and obtain sufficient information to develop a remedial action plan (RAP), if required.

  1. Stage 3 – Remedial Action Plan, setting out the objectives and documenting the process to remediate the site.

  2. Stage 4 – Validation and Monitoring, to demonstrate whether the objectives stated in the RAP had been achieved.

  1. Each of these stages could be subject to a site audit, which was an independent review of the site investigation process conducted in accordance with the Contaminated Land Management Act 1997. A site audit would lead to the issue of a site audit statement, stating for what use the land was suitable. Only site auditors accredited by the EPA could issue site audit statements. The site auditor would also prepare a site audit summary report as required by the EPA, containing the key information and the basis of consideration which led to the issue of the site audit statement.

  2. Mr Clay explained that a site audit may also be commissioned on a non-statutory basis, often by the vendor or purchaser of land. In either case, the auditor was independent of either party. The purpose of the audit was to certify that the land was suitable for a certain use or that the level of residual contamination was adequately defined. Mr Clay added that a site audit statement applied to the current or approved uses of the site; if the site use changed, then a new site audit statement may be required.

  3. Guidelines were also issued by the National Environment Protection Council, called National Environment Protection Measures or NEPMs. These guidelines were made by under the National Environment Protection Council Act 1994 (Cth) and the equivalent provision of the National Environment Protection Council (New South Wales) Act 1995 (NSW). Relevantly, National Environment Protection (Assessment of Site Contamination) Measure 1999 (NEPM (1999)) established a nationally consistent approach to the assessment of site contamination.

  4. NEPM (1999) included “Schedule B(1) – Guideline on the Investigation Levels for Soil and Groundwater”. Health Based Investigation Levels (HILs) were set for soil, depending on the degree of access to the soil and the time spent in that setting by young children: at [3.1]. Table 5-A set out soil investigation levels for HILs, based on human exposure settings from “A” to “F”, where “A was a standard residential setting with garden / accessible soil and “F” was:

F.   Commercial/Industrial: includes premises such as shops and offices as well as factories and industrial sites.

  1. Where soil concentrations exceeded HILs for an exposure setting, the response would be determined on a site-specific basis and ranged from informing stakeholders, applying site management plans to large scale remediation: page 5, NEPM (1999). However, no HILs were specified for asbestos. The reason for this was explained in “Schedule B(7a) – Guideline on Health-Based Investigation Levels”, at page 24:

Asbestos

The major health risk is from inhaled asbestos fibres. …

No relationship between soil levels and air levels can be predicted for an asbestos-contaminated site. …

Since asbestos left undisturbed is not considered to present a risk to health from ingestion, there is no scientific basis for setting an 'acceptable' level in soil related to ingestion. The risks depend on the potential for disturbance and generation of airborne asbestos which may be inhaled.

  1. Consistently with this, the general position adopted by the NSW EPA, as noted by Defence’s environmental science consultants at the time, was that “no asbestos in soil at the surface is permitted”: see [43].

Reports obtained by Defence

  1. Some ten reports were obtained by Defence in the lead-up to the sale and ‘lease-back’ of the Moorebank site. These reports appear to fall into two broad categories: to support the re-zoning of the land for sale, and to catalogue existing facilities, fixtures and fittings for the ‘lease-back’.

  2. Turning to first group of reports, Defence began Stage 1 – Preliminary Investigation. Egis Consulting Australia was tasked with considering re-zoning the site for industrial, commercial or residential uses. In September 2000, Egis produced a “Stage 1 Preliminary Site Investigation” report, based on a detailed inspection of site facilities “and discussions with current and former site personnel to establish the operational areas and activities undertaken on site at various periods.” Egis completed a desk-based study of available public records and historical information, to establish “the potential sources and types of contamination present onsite and assess the risk of these contamination sources being present at the site”. Egis attached a report from “Milsearch” in respect of the possibility of unexploded ordnance.

  3. Egis concluded that historical and current activities on the site posed a risk for contamination, including asbestos. Whilst receipt, storage and distribution of the majority of items handled at the supply and distribution centre were relatively innocuous activities and would not be expected to result in any significant contamination, fuelling, workshop and disposal activities represented the greatest potential for widespread contamination. In addition, the site included various burial trenches, in which general rubbish had been disposed of over the years as well as, potentially, surplus medical supplies and munitions.

  4. As I read it, the principal focus of the Egis report was on hydrocarbon and lead contamination from workshop and re-fuelling facilities on the site. Whilst asbestos was identified as a potential contaminant, it did not feature prominently.

  5. Egis’ work was supplemented by environmental engineers, URS Australia Pty Ltd, who reviewed DNSDC buildings which were inaccessible when Egis prepared their report, not specifically referred to in the Egis report, or which URS considered worthy of further inspection. Emily Spencer and Mr Molinari completed the URS report. URS proposed to review the current and past uses of these buildings through inspection and personnel interviews. In February 2002, the engineers conducted a site inspection and personnel interviews. They reviewed Material Safety Data Sheets (MSDS) in relation to stored chemicals.

  6. In March 2002, URS produced its report, “Assessment of DNSDC Buildings – Supplement to Egis Stage 1 PSI of Areas A1 to A6.” The engineers described the activities undertaken in each of the buildings on site. They identified potential sources of contamination and associated chemicals of concern. Using the information obtained by Egis and their own research, URS identified where earlier buildings had been, prior to the demolition, construction and refurbishment of a number of the buildings in the 1990s. The engineers also identified areas of concern.

  7. The focus of the URS report was, again, on hazardous chemicals. Potential sources of contamination and associated chemicals of concern were listed, albeit asbestos did not feature. The only reference to asbestos was in respect of Building 40, which was described as an Asbestos and Minmag store, containing materials containing asbestos.

  8. Moving to the Stage 2 – Detailed Investigation, Defence engaged environmental scientists, HLA-Envirosciences Pty Ltd, to conduct a soil and ground water investigation at the site. The scope of the environmental investigation work was developed by URS as Principal Environmental Advisor to the Property Disposal Task Force of Defence. It included an intrusive soil and ground water investigation program comprising soil boring and test pitting, sediment and surface water sampling and a monitoring well installation and sampling program. The investigation was conducted to provide an additional data set to supplement information obtained in the Stage 1 Preliminary Investigation completed by Egis and the supplementary work undertaken by URS. Further, HLA-Envirosciences noted: (emphasis added)

The data collected during the investigation [was to] be used by [Property Disposal Task Force] and its Principal Environmental Advisor (PEA) [URS] to assess if the DNSDC represents a significant risk of harm to both human health and the environment and also to assess any potential environmental liabilities associated with the sale of the site.

… the scope of work specifically called for HLA to collect quality data about the DNSDC’s subsurface and present the results in a factual report. Interpretations from the report can be made about the suitability of the DNSDC for continued use as a storage and distribution facility.

  1. In September and October 2002, the investigation field activities were undertaken. A total of 203 soil samples, nine groundwater, two surface water and nine sediment samples were taken and submitted for laboratory testing. The data set collected for the soil and groundwater investigation was considered to be representative of soil and groundwater conditions at the DNSDC. Asbestos fragments were photographed on the surface of the ground near Building 43. Six surface soil samples and four fragments were collected from areas adjacent to areas where suspected AC sheeting was observed and submitted for testing. Asbestos was detected in four fragments and one soil sample.

  2. In November 2002, HLA-Envirosciences completed its report, “Soil & Groundwater Investigation”. As to the soil criteria which the authors had adopted, the report noted: (emphasis added)

HLA understands that one of the future land use options presently being considered by Defence is to dispose of the property and lease it back for continued ongoing use as DNSDC, which is primarily for the storage and distribution of Defence equipment and consumable items, as well as vehicle and equipment maintenance and servicing.

…

Based on the proposed future land uses of the site, for ongoing commercial land use, the analytical results obtained during the investigation have been compared to both the NEPM (1999) Exposure Setting “F” guidelines in conjunction with the NSW EPA (1994) Guidelines for Assessing Service Station Sites.

There is no NSW EPA published criteria for acceptable quantities for asbestos in soils on residential or other sites. However, at the time of report preparation, the general position adopted by NSW EPA (1 March 2000) is that “no asbestos in soil at the surface is permitted.

  1. In November 2002, URS took HLA-Envirosciences’ results and completed an Investigation Review Report. The report was authored by Mr Molinari and Martin Howell, who noted: (emphasis added)

“One of the future land use options presently being considered for [DNSDC] is to dispose of the property and lease back for continuing ongoing use as the DNSDC. Hence, the present land use would be ongoing and it is not proposed to redevelop the property for an alternative use.”

  1. To this end, the authors noted that investigations had been undertaken to assess whether DNSDC presented a significant risk of harm, as defined by the Contaminated Land Management Act, to DNSDC workers or to the general environment. In addition, investigations had been undertaken to assess potential environmental liabilities or issues triggered by sale of the property. Given the size of the DNSDC site “and the generally low risk of contamination resulting from the warehousing, distribution and maintenance activities conducted on-site, a judgemental sampling program was developed. The inputs into this decision included the previous work done by Egis and URS, and the current and likely future land use, understood to be current ongoing industrial use as the DNSDC”.

  2. URS reviewed the samples taken by HLA-Envirosciences and the laboratory tests obtained; URS validated the data. URS assessed the implications of the data to determine whether contamination on the site presented a significant risk of harm under the Contaminated Land Management Act. So far as asbestos was concerned, URS considered:

“It is not considered that the presence of asbestos in fragments of AC sheeting identified in the investigation indicate a significant risk to on-going use of the site for commercial/industrial purposes. However, the recovery of asbestos fragments present in open areas should be addressed in a [site management plan] in order to control potential exposure, and if burial pits are remediated asbestos should be considered as a contaminant of concern.”

  1. URS prepared various site plans, including an investigation location reference plan which identified areas of concern to be incorporated in a site management plan. The plans noted “AC sheet fragments noted in limited locations across the site.” URS concluded that the site did not represent a significant risk of harm to occupiers of the site under its current land use or to the off-site environment, with the exception of the potential of unexploded grenades in the south-east of the site. Environmental issues and uncertainties that warranted consideration for ongoing use of the site as a storage and distribution facility included the occurrence of AC sheeting fragments in limited locations on the site.

  2. URS recommended that a site management plan be developed to mitigate impacts from the site including: a procedure for collecting, storing and disposing of fragments of material that potentially may contain asbestos, when identified; and, a procedure for managing asbestos-containing materials when remediating burial pits and undertaking intrusive earthworks on the site. URS concluded that the DNSDC was suitable for use as a storage and distribution facility and recommended that a site management plan be developed and implemented for its ongoing use.

  3. Having completed Stage 1 and Stage 2, Dr William Ryall did a site audit and prepared a site audit report. In his report, Dr Ryall set out his independent review of the reports obtained by Defence. Dr Ryall noted, “The envisaged land use is the continuance of existing activities, possible with sale of the property.” In this context, the scope of works was to obtain data that could be used to assess whether the DNSDC presented a significant risk of harm to DNSDC workers or to the general environment, and potential environmental liabilities or issues triggered by sale of the property. Dr Ryall was of the opinion that the work plan proposed by HLA-Envirosciences met the requirement of relevant guidelines adopted by NSW EPA, was in accordance with good industry practices, allowed reliable and representative field samples to be collected and allowed reliable analytical results to be reported on the samples by the laboratory.

  4. Whilst much of Dr Ryall’s report focussed on contamination risks posed by the refuelling facility and a range of hazardous chemicals, Dr Ryall concluded that the soil sampling undertaken by HLA-Envirosciences was adequate to allow the environmental condition of fill and soil on the site to be determined in consideration of the history of use of the site and the proposed use for the site. Dr Ryall also noted URS’ investigation in respect of ACM:

Asbestos containing materials

Asbestos containing materials, principally fragments of sheeting (“fibro” or “AC sheeting”) were reported on the surface of the site adjacent to buildings clad with fibro and in test pits that encountered waste materials. URS noted “Asbestos was detected in samples comprising AC sheeting as the discrete sample or fragments of AC in soils. No asbestos was reported in soils.

  1. Dr Ryall concluded that the investigations undertaken on the DNSDC site identified only limited evidence of contamination; no issues were identified that would prevent the on-going use of the site. He noted that URS considered that environment issues for the on-going use of the site as a storage and distribution facility included the occurrence of asbestos-cement sheeting fragments in limited locations on the site. URS had identified the areas of environmental concern on the site plan but did not consider that soil contamination presented a significant risk of harm, as defined by the Contaminated Land Management Act, to occupiers of the site under its current land use or to the off-site environment.

  2. Dr Ryall noted that no contamination was identified to be migrating from the site, but he considered that petroleum hydrocarbons in groundwater at various parts of the site had the potential to do so. Additional investigation was required in those areas. Potential existed for contaminated sediment and stormwater to migrate from the site in stormwater drains, and this matter was to be addressed as part of the site management plan.

  3. Dr Ryall concluded that the investigation undertaken by HLA-Enviroscences and URS was undertaken in substantial compliance with the requirements of the work plan and with guidelines published by the NSW EPA. The investigation addressed identified areas of environmental concern on the site. In Dr Ryall’s opinion, the investigation was of adequate scope and reliability to determine whether the site was suitable for use for commercial or industrial purposes “where occupiers have minimal access to the soil and groundwater is not used.” Based on the results of the site investigation documented by HLA-Envirosciences and URS, Dr Ryall was of the opinion that the site was suitable for continuing commercial / industrial purposes, including use as a storage and distribution centre. Dr Ryall agreed with URS’ proposal that the environmental and ordnance issues be addressed by a site management plan.

  4. On 9 December 2002, Dr Ryall certified that he had completed a site audit, as defined in the Contaminated Land Management Act 1997. Dr Ryall certified that the site was suitable for commercial / industrial use, subject to a site management plan being implemented during the ongoing use of the site, to address the issues listed on Attachment 1 to the site audit statement. Attachment 1 included:

The following environmental issues identified on the DNSDC site and shown on the attached drawing are required to be addressed in the Site Management Plan:

…

4.   Additional investigations be undertaken in the filled areas in the south-eastern part of the site, inclusive of the areas adjacent the rail spur.

…

8.   A procedure be implemented for collecting, storing and disposing of fragments of materials that may potentially contain asbestos, when identified.

9.   A procedure be implemented for managing asbestos-containing materials when remediating burial pits and undertaking intrusive earthworks on the site.

…

  1. Dr Ryall noted that he certified the suitability of the DNSDC “for the proposed ongoing use as a storage and distribution centre.” He had not addressed the suitability of fill materials or soil for off-site disposal “or for any other purpose. Should the site be used for any other purpose in the future, its environmental condition should be assessed in accordance with appropriate guidelines adopted by NSW EPA.” Dr Ryall noted that he understood that his report was required for commercial purposes only “but may be used in support of a development application at a later time.”

  2. Finally, in October 2002, a heritage assessment was undertaken by Graham Brooks & Associates Pty Ltd for Defence “as part of the master planning exercise to secure the rezoning of the overall site, and the sale due diligence package.” The purpose of the report was to complement other environmental and planning assessments that had been prepared to “support the rezoning of the DNSDC site from solely military use to various employment generating uses”. The report noted the history of the buildings on site, including the re-cladding of the 1940s buildings in the 1990s: see [20].

  3. Turning to second group of reports, in March 2002, Egis produced a “Building Condition & Services Survey” on the DNSDC. The report was detailed and extensive, spanning some 1,500 pages, and accompanied by a spreadsheet of fixed plant and equipment. Each building and its existing services was inspected with a view to assessing the suitability of the buildings for leasing and its conformity with relevant codes and standards. “As-built” drawings, maintenance manuals and records were reviewed. Immediate or urgent capital expenditure items were identified. The authors noted that the buildings were then occupied and in reasonable condition.

  1. In December 2002, Egis’ work was supplemented “as part of the due diligence to support the disposal of the DNSDC”. Defence engaged GHD Pty Ltd to assess the condition of specific plant and equipment and site infrastructure at DNSDC, to supplement the work that had earlier been done by Egis in March and June 2002.

  2. Finally, in September 2002, another hazardous materials survey was conducted by Hibbs & Associates. The consultant undertook a qualitative analysis of the risk to occupants of the building in which asbestos was identified. The most common materials reported was asbestos cement (AC) sheeting. Other types of asbestos materials identified on the site included asbestos cement pipe, rope lagging, gaskets and electrical backing boards. The asbestos materials were observed to be in a good and stable condition. The consultant indicated that Defence should ensure that all asbestos materials were labelled to indicate the presence of asbestos, in accordance with the requirements of the Worksafe Australia Guidelines 1988.

Sale and lease-back

  1. By December 2002, Defence had assembled due diligence documents for those interested in the sale and lease-back of the Moorebank site. I do not have a list of the reports which were included in the due diligence package, but it appears to have included two memoranda prepared by Environmental and Earth Sciences in December 2002. The first memorandum reviewed reports pertinent to environmental investigations conducted at DNSDC. The second memorandum reviewed URS’s Investigation Review Report and Dr Ryall’s site audit statement.

  2. In January 2003, Defence exchanged contracts to sell the Moorebank site to an investment vehicle of a major bank. In March 2003, Defence completed the purchase and leased the site back for ten years, with an option to renew the lease for two further terms of five years each. The terms of this lease were relevantly the same as the subsequent lease entered into by the developer and Defence: see [142]-[143]. It is convenient to consider the terms of the lease.

Principles of construction

  1. The lease is a commercial contract and should be given a businesslike interpretation, paying attention to the language used by the parties, the commercial circumstances that the document addresses and the objects which it was intended to secure: McCann v Switzerland Insurance Australia Limited (2000) 203 CLR 579; [2000] HCA 65 at [22] (per Gaudron J); Liberty Mutual Insurance Company Australian Branch (t/as Liberty Specialty Markets) v Icon Co (NSW) Pty Ltd (2021) 396 ALR 193; [2021] FCAFC 126 at [151]-[152].

  2. The meaning of the lease is determined objectively, by reference to what a reasonable person would have understood it to mean having regard not only to the text of the document but to the surrounding circumstances known to the parties and the purpose and object of the transaction: Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451; [2004] HCA 35 at [22] (per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ); Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd (2017) 261 CLR 544; [2017] HCA 12 at [16]. As the developer submitted, the only conduct that is relevant to construing the contract is of the people at the time they entered into it.

  3. The context includes the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract: Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37 at [46] (per French CJ, Nettle and Gordon JJ) citing Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640; [2014] HCA 7; Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337; [1982] HCA 24.

  4. For example, in Kane & Co (NSW) Pty Ltd v Idolbox Pty Ltd [2024] NSWCA 278, the parties entered into a contract for the sale of land for a service station. The contract included a special condition, which required the vendor to obtain a Phase 2 Contamination Report from environment consultants, JBS&G Australia Pty Ltd. If that report “indicates that the property does not fall within the NSW Environmental Protection Authority guidelines in relation to the contamination levels in, on or under the property and which permits the property to be used as a Service Station then either party may rescind this contract”. In construing the contract, the Court of Appeal considered it necessary to understand the statutory and regulatory framework regulating contaminated land in New South Wales: at [23]. The Court concluded that the special condition conferred a right of rescission where the report indicated that contamination levels exceeded those specified by EPA guidelines for commercial / industrial use of land: at [77].

  5. The Court is entitled to approach the task of construction on the assumption that the parties intended to produce a commercial result, construing the contract so as to avoid making commercial nonsense or working commercial inconvenience: Electricity Generation Corporation v Woodside Energy Ltd at [35] (per French CJ, Hayne, Crennan and Kiefel JJ), citing Codelfa at 350 (per Mason J). As observed in Onley v Catlin Syndicate Ltd (as the underwriting member of Lloyd’s Syndicate 2003) (2018) 360 ALR 92; [2018] FCAFC 119, “It goes without saying that a construction that avoids capricious, unreasonable, inconvenient or unjust consequences, is to be preferred where the words of the agreement permit”: at [33] (per Allsop CJ, Lee and Derrington JJ).

  6. Where both parties submitted that their proffered construction was supported by the commercial context and accorded with business commonsense, it remains the case that primacy must be given to the text of a contract, “The starting point and the ending point of the construction of a written commercial contract is the language chosen by the parties to record their bargain”: Cherry v Steele-Park (2017) 96 NSWLR 548 at [72]. Leeming JA there repeated his observations in Mainteck Services Pty Ltd v Stein Heurtey SA (2014) 89 NSWLR 633 at [74]: “Very often, nothing in the context will come close to displacing the ordinary grammatical meaning of the legal text”. His Honour concluded, “The ultimate question is whether the written language of the contract, when considered in light of legitimately relevant surrounding circumstances, permits a constructional choice to be made between two different legal meanings”: Cherry v Steele-Park at [75].

  7. Similarly, in McGrath v Sturesteps; Sturesteps v HIH Overseas Holdings Ltd (in liq) (2011) 81 NSWLR 690, Bathurst CJ observed at [17]: (citations omitted)

Whilst it is correct in my opinion that context and the surrounding circumstances known to both parties can be taken into account, even in cases where there is an absence of apparent ambiguity, that does not permit the Court to depart from the ordinary meaning of the words used by the parties merely because it regards the result as inconvenient or unjust.

  1. Or as Moshinsky, Derrington and Colvin JJ put it in Star Entertainment Group Limited v Chubb Insurance Australia Ltd (2022) 400 ALR 25; [2022] FCAFC 16, “reasoning by reference to commerciality has its limits”: at [11]. This is because what is "business commonsense" is itself a topic on which minds may differ and in respect of which an imputed consensus is impossible: Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181 at [43]. Nor are judges best placed to assess the commerciality or otherwise of a particular construction: Cirrus Real Time Processing Systems Pty Limited v Jet Aviation Australia Pty Limited [2023] NSWCA 280; 113 NSWLR 80 at [87]-[88] (Leeming JA, who also noted that the High Court was divided as to whether a construction accorded with commercial commonsense in Ecosse). As the Full Court cautioned in Rockment Pty Ltd t/a Vanilla Lounge v AAI Limited t/a Vero Insurance (2020) 282 FCR 561 at [56]:

… references to a commercial result are not intended to invite a consideration of the actual financial consequences for each of the parties of a particular construction in the events which have occurred by the time that a dispute arises. Such inquiries would quickly descend into an assessment with hindsight as to what a fair and reasonable contract might provide given the circumstances that have unfolded. It would be contrary to the very certainties that the law of contract seeks to provide as to the allocation of risks, rights and obligations, if the meaning of agreements were to be adjudicated by reference to such an imprecise foundation.

  1. Similarly, in Newey v Westpac Banking Corporation [2014] NSWCA 319, Gleeson JA (with whom Basten and Meagher JJA agreed) said at [91]:

… there is no licence for ‘judicial rewriting’ of an agreement. The ability of courts to give commercial agreements a commercial and business-like interpretation is constrained by the language used by the parties. If, after considering the contract as a whole and the background circumstances known to both parties, a court concludes that the language of a contract is unambiguous, the Court must give effect to that language unless to do so would give the contract an absurd operation.

  1. Finally, the contract should be construed as a whole “since the meaning of any one part of it may be revealed by other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another”; commercial contracts should be construed fairly and broadly, without being too astute or subtle in finding defects: Australian Broadcasting Commission v Australian Performing Right Association Ltd (1973) 129 CLR 99 at 109 (per Gibbs J). Preference is given to a construction supplying a congruent operation to the various components of the whole: Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522; [2005] HCA 17 at [16] (per Gleeson CJ, McHugh, Gummow and Kirby JJ).

Provisions of the lease

  1. The lease began with rules for interpretation. Headings were for convenience only and did not form part of the lease or affect its interpretation: cl 1.3(3). There was an entire agreement clause: cl 1.3(7). Words of inclusion were not words of limitation: cl 1.3(8). The contra proferentem rule did not apply: cl 1.3(10).

  2. First and foremost, the lease addressed rent and outgoings. Clause 7 then dealt with the use of the Premises. Clause 7.1 provided:

7.1 Permitted Use

The Lessee must only use the Premises for the Permitted Use and any use reasonably incidental to the Permitted Use.

  1. Permitted Use meant (Item 5, Schedule 1):

Existing use rights for Defence Purposes together with all such other uses as may be permitted under the local planning laws.

  1. Defence Purposes, although capitalised, was undefined. The balance of the definition – “together with all such other uses as may be permitted under the local planning laws” – was not necessarily tied to Defence Purposes. Defence was entitled to sublet the Premises, either in whole or in part: cl 15.1. Defence was entitled to assign the lease to a Commonwealth statutory body: cl 15.2(1). With the lessor’s consent, Defence could also assign the lease to someone other than a Commonwealth statutory body: cl 15.2(2). The definition of Permitted Use was sufficiently broad to enable uses other than for Defence Purposes by, say, a sub-lessee or assignee of the lease.

  2. Clause 7.3 provided:

7.3   No warranty as to use

The Lessor does not warrant that at the Commencement Date the Premises:

(1)   is suitable for any purpose;

(2)   may be used for the Permitted Use;

(3)   is free from Contaminants, Asbestos or Hazardous Substances; or

(4)   complies with Official Requirements.

  1. This might be thought unremarkable in the circumstances, where Defence knew far more about the state of the site than the lessor, whose knowledge was presumably limited to what it had gleaned from due diligence. As to the embedded defined terms in cl 7.3, the definition of Asbestos was obvious and need not be set out. Contaminants and Hazardous Substances were defined as (cl 1.2): (emphasis added)

“Contamination” means the presence in, or under the Premises of a substance at a concentration above the concentration at which the substance is normally or naturally present in, or under that Land, being a presence that presents a risk of harm to human health if the Premises are continued to be used for their Permitted Use and “Contaminant” and “Contaminate” each have a corresponding meaning;

…

“Hazardous Substance” includes anything, which may create a risk to the health or safety of the Lessee’s Employees and is known to be hazardous …

  1. The definition of Contamination appears to have been based on the statutory definition in s 5 of Contaminated Land Management Act 1997, which then provided:

Contamination of land, for the purposes of this Act, means the presence in, on or under the land of a substance at a concentration above the concentration at which the substance is normally present in, on or under (respectively) land in the same locality, being a presence that presents a risk of harm to human health or any other aspect of the environment.

  1. As the statutory definition was modified in the lease, whether there was Contamination turned on whether the concentration of the substance presented a risk of harm to human health “if the Premises are continued to be used for their Permitted Use” and was not at large.

  2. Clause 8 concerned maintenance and repair of the Premises. Clause 8.1 provided: (emphasis added)

8.1   The Lessee’s duties

(1)   The Lessee must:

(a)   subject to fair wear and tear, keep the Premises in tenantable repair and condition having regard to their condition detailed in the Condition Report;

(b)   keep the Premises tidy, clean, safe and secure, and

(c)   maintain all gardens, landscaped areas and plants on the Land.

(2)   The Lessee’s obligation pursuant to clause 8(1)(a) requires the Lessee to only attend to routine and day to day maintenance of Lessor’s fixtures and fittings. The Lessee is not obliged to effect any maintenance or repairs of a Structural nature; or to improve any component of the Lessor’s fixtures and fittings.

  1. The Condition Report was the three-volume Building Condition & Services Survey prepared by Egis in 2002 and the report on fixed plant and equipment contained on a CD, which was exhibited to the parties when signing the lease: see [55].

  2. Premises was defined as the Land, Buildings, Plant and Lessor’s fixtures and fittings: cl 1.2. Land meant the whole of the Moorebank site: cl 1.2, Item 4, Schedule 1. Buildings meant all improvements on the Land other than the Lessee’s Property (being loose furnishings, fittings and equipment on the Premises at any time which were the property of Defence): cl 1.2. Plant meant air conditioning and ventilation systems, wires, cables, pipes, ducts, conduits, tanks, cisterns and mechanical plant and equipment required to provide utilities and services: cl 1.2.

  3. Lessor’s fixtures and fittings meant any improvements and property owned by the Lessor on the Premises, (including all Plant and infrastructure, all roads, sewers, drains, water reticulation systems servicing the Premises) at any time: cl 1.2. Maintenance or repairs of a Structural nature were in relation to walls, floors, windows, gutters, downpipes, facades, foundations, ceilings or roofs: cl 1.2.

  4. In sum, Defence had to keep the Premises in good repair – using the Egis’ 2002 Building Condition & Services Survey as the baseline – and also maintain the plants, gardens and landscaped areas. Defence’s obligation did not extend so far as to improve the Premises, but to routine maintenance only.

  5. Clause 10 concerned the parties’ compliance with Official Requirements, which was defined as follows: (emphasis added)

“Official Requirement” means any lawful requirement, notice, order or direction of any authority and includes the provisions of any statute, ordinance or by-law and in respect of any future development of the Premises”

  1. The definition contains the only reference in the lease to redevelopment of the site. Clause 10 provided: (emphasis added)

10.   WHO COMPLIES WITH OFFICIAL REQUIREMENTS

10.1   Lessor’s duties

Subject to clause 10.2, Lessor must, to the extent that it is bound by law, comply with any Official Requirement.

10.2   Lessee’s duties

(1)   At its expense, the Lessee must, to the extent required by law, comply with any Official Requirement to the extent:-

…

(b)   the Official Requirement arises from the Lessee’s particular use and occupation of the Premises.

…

  1. Under cl 11.1, Defence was entitled to make alterations, demolitions or additions to the Premises, including of a Structural nature. Defence had to consult with the Lessor if the works had a value of $100,000 or more, or were likely to impact on Structure or Lessor's fixtures and fittings (such that the provision of utilities and services was adversely effected).

  2. In sum, Defence, or perhaps an assignee, was only obliged to comply with an Official Requirement arising from their “particular use and occupation of the Premises”, being for Defence Purposes or “such other use as may be permitted under the local planning laws”. While Defence was entitled to make alterations, demolitions or additions to the Premises, including of a Structural nature, it is difficult to see Defence’s actions during the term of the lease as amounting to “future development”. Most likely, the developer would have to comply with Official Requirements in respect of any future development of the Premises. Defence would be under no obligation to assist, or to bear the costs of doing so. (Indeed, I think this may explain some of the provisions in the deed, which imposed an additional obligation on Defence in this regard: see [197]).

  3. Clause 17 concerned Contamination and Hazardous Substances, although little regard may be paid to the heading: cl 1.3(3). Clause 17.2 provided:

17.2   Obligations on expiration of Lease

By the expiration of the Lease the Lessee will remediate the Land to a standard suitable for on-going commercial/industrial use and so that no significant contamination is migrating from the site.

  1. This is the critical clause. The remediation obligation contained two elements, joined by “and”. I will return to this provision in detail shortly.

  2. Clause 19 concerned termination of the lease. Clause 19.1 provided:

19.1   Lessee’s duties

(1)   Before expiry the Lessee must, having regard to the condition of the Premises detailed in the Conditions Reports:

(a)   vacate the Premises and given them back to the Lessor clean and in good repair and condition (fair wear and tear excepted);

…

  1. There is a tension between Defence’s positive obligation under cl 17.2 – to remediate the site to a particular standard by the expiration of the lease – and the obligation in cl 19.1 to return the Premises in the same condition as detailed in the Condition Reports, fair wear and tear excepted. To some extent, this tension is abated by each clause focussing on a different aspect of the Moorebank site. The obligation in cl 17.2 applied to the Land only. The obligation in cl 19.1 applies to the Premises, which included the Land but also Buildings and Plant.

  2. Further, the Condition Reports informed the content of Defence’s obligations in cl 19.1. Defence was required to perform the obligation “having regard to the condition of the Premises detailed in the Conditions Reports”. The Condition Reports contain a detailed review of each building, its existing services and fixed plant and equipment. The Land does not feature. As such, the tension between cl 17.2 and cl 19.1 is more apparent than real. The obligation to return the Premises in good condition, fair wear and tear excepted, was focussed on improvements to the land, rather than the land itself.

  3. Finally, cl 29.3 apprehended that the lessor may on-sell the site.

Focusing on cl 17.2

  1. The developer submitted that cl 17.2 did not use any of the potentially relevant terms used elsewhere in the lease, such as Contamination, Asbestos or Hazardous Substances. While “remediation” was then defined in the Contaminated Land Management Act 1997, that did not mean that it had the same meaning in the lease and regard to that definition could be misleading: David Hughes, Lord Justice Lewison, Interpretation of Contracts in Australia, (2nd ed, 2024. Thomson Reuters), at 261; Festa Holdings Pty Ltd v Adderton [2004] NSWCA 228 at [56] (Mason P); Opal Group Holdings (Australia) Pty Limited v Franklins Limited [2002] NSWCA 169 at [43] (Sheller JA), cited with approval in AAI Ltd v Solarus Projects Pty Ltd [2014] NSWCA 168. Nor did the lease specifically refer to the Contaminated Land Management Act 1997, as in Kane & Co (NSW) Pty Ltd v Idolbox Pty Ltd [2024] NSWCA 278. In these circumstances, where “remediate” was neither defined nor used as term of art, it ought be given its ordinary meaning. The developer relied on the Macquarie Dictionary definition of “remediate” as “to correct or improve (a deficiency or impairment)”.

  1. On 11 December 2018, JBS&G classified 32 m3 from a surface scrape of ACM fragments east of Building 33 to a depth of 0.1 m, and surface scrapes at validation sample locations to 0.1 m deep. The material was classified as special (asbestos) waste.

  2. On 13 December 2018, JBS&G gave an asbestos clearance for part of Demolition Zone 9 comprising the footprint of Building 37, the topsoil removed from that building and Building 39, as well as stormwater and unexpected finds removal. Some 24 m3 of soil sourced from excavation of the unexpected find to a depth of approximately 1 m below the ground surface, being concrete stormwater pits with ACM formwork encountered during the removal of stormwater pipes, was considered for site re-use.

  3. On 19 December 2018, JBS&G provided an asbestos clearance of the eastern half of the Building 16 footprint, concluding that the area was safe for civil works to recommence, following the work undertaken by Liberty Industrial in October and November 2018. A “geotechnically unsuitable” stockpile had been created, inspected and assessed. Various ACM impacted stockpiles were loaded-out. Bituminous insulated pipes on the western side of the building had been cleaned up, removed and disposed of. These metal pipes were found stockpiled with building waste on the western portion of the building slab. An underground tank storage room, which had contained underground storage tanks that had been removed at an earlier time, was also removed from the north-eastern portion of the building footprint.

  4. On 20 December 2018, JBS&G gave an asbestos clearance for part of Demolition Zone 10, which comprised Buildings 31 to 35. The consultant noted that Liberty Industrial had undertaken the removal works from July to December 2018, scraping grass-covered topsoils, excavating asbestos impacted backfill materials from redundant underground services including stormwater infrastructure, removing ACM hotspots, removing ACM underground services including telecommunications pits, stormwater concrete pit ACM formwork and bituminous ACM insulated metal pipes, treating “geotechnically unsuitable” and ACM impacted soil by mechanical screening and emu-picking. Various unexpected finds were identified during these excavation works. During the removal of stormwater infrastructure backfill, materials were assessed for the presence of visible ACM and emu-picked when required. Following treatment by screening and emu-picking of “geotechnically unsuitable” stockpiles of ACM impacted soil stockpiles, processed materials were assessed by JBS&G for the presence of visible ACM. Laboratory sampling was also conducted to determine the presence of asbestos fines in processed material. When required, additional re-processing of bonded ACM impacted materials was carried out by emu-picking and then reassessed by JBS&G. Off-site disposal for “geotechnically unsuitable” material or material impacted with asbestos fines above the site criteria was undertaken when required. JBS&G concluded that the area was safe for civil works.

  5. On 31 December 2018, JBS&G classified 644 m3 of soils from the “geotechnically unsuitable” stockpile as suitable for site re-use after emu-picking of ACM fragments and laboratory testing of samples. A further 705 m3 was also so classified.

  6. On 24 January 2019, JBS&G provided an asbestos clearance for Demolition Zone 8, comprising the footprints of Buildings 42 to 45, areas of topsoil removal surrounding these buildings and a concrete roadway south of Buildings 44 and 45. The consultant noted that three unexpected finds of stormwater line, comprising ACM formwork sheeting on the outside of a concrete stormwater pit, had been appropriately removed.

  7. On 25 January 2019, JBS&G classified 548 m3, 495 m3 and 840 m3 of soil from the “geotechnically unsuitable” stockpile as suitable for site re-use.

  8. On 30 January 2019, JBS&G classified some 205 m3 from the “geotechnically unsuitable” stockpile as suitable for site re-use. Original assessment of the stockpile found asbestos fines above the site criteria in the southern portion of the stockpile, which was disposed off-site. The remaining surfaces of the stockpile identified no visible ACM and samples were tested in the laboratory. A further 640 m3, 660 m3, 158 m3, 243 m3, 357 m3 and 856 m3 from the same stockpile was also classified as suitable for site re-use.

  9. On 31 January 2019, some 273 m3, 470 m3, 423 m3, 552 m3, 475 m3, 554 m3 and 682 m3 from the “geotechnically unsuitable” stockpile was classified by JBS&G as suitable for site re-use.

  10. On 1 February 2019, JBS&G classified some 5 m3 of soil sourced from a stormwater pit excavation near Building 35 as suitable for site re-use. A further 10 m3 sourced from a stormwater pit excavation near Building 35 was also considered suitable for site re-use. The ACM was treated by emu-picking. Associated ACM containing pits were separated for off-site disposal. Following ACM treatment, visual inspection and asbestos quantification sampling did not identify ACM within the excavated soil. Some 400 m3 from topsoil scraping within the southern burial area, to a depth of 0.05 m below the ground surface, was also classified as suitable for re-use.

  11. Also on 1 February 2019, JBS&G classified some 672 m3, 572 m3, 672 m3, 677 m3 and 429 m3 from the “geotechnically unsuitable” stockpile as suitable for site re-use after removal of ACM fragments by emu-picking and laboratory testing of samples.

  12. On 18 February 2019, JBS&G classified some 565 m3, 483 m3, 1,012 m3, 696 m3 and 978 m3 of soil from the “geotechnically unsuitable” stockpile as suitable for site re-use.

  13. On 19 February 2019, JBS&G assessed 580 m3 from a topsoil stockpile, sourced from Stage 1, as suitable for site reuse, albeit minor ACM was observed on the surface of the stockpile and thus it was possible that fragments would be encountered when the material was reused. A further 1,585 m3 of topsoil sourced from Stage 1 was also so classified. A further 300 m3 from the “geotechnically unsuitable” stockpile was considered unsuitable for site re-use. Re-treatment to remove ACM fragments by hand-picking was required, given the significant quantities of visible ACM present on the surface of the stockpile. A further 252 m3 from the “geotechnically unsuitable” processed stockpile, with soils re-treated by hand picking, was classified as suitable for site re-use.

  14. On 22 February 2019, JBS&G gave an asbestos clearance for part of the access road to Warehouse 5, following the removal of a concrete roadway.

  15. On 1 March 2019, JBS&G classified some 30 m3 of a stockpile of material generated from Stage 2 lead excavation as special (asbestos) waste given the detection of asbestos fines during laboratory assessment.

  16. On 4 March 2019, JBS&G provided an asbestos clearance for the area referred to as the Resource Co carpark following the removal of the concrete pavement by Liberty Industrial. No visible ACM was observed during the removal of the concrete pavement or on the surface of the soil following removal. The area was safe for civil works to recommence.

  17. On 12 March 2019, JBS&G classified 204 m3 of topsoil sourced from a secondary scrape east of Building 45 as suitable for site re-use, albeit noting that it was possible that ACM fragments would be encountered when the material was reused.

  18. On 13 March 2019, JBS&G gave an asbestos clearance for a further portion of the access road to Warehouse 5 following the removal of the concrete roadway.

  19. On 18 April 2019, JBS&G provided a waste classification in topsoil and vegetation scraping in the former ecological endangered communities area within Demolition Zone 10, south of Resource Co carpark. Some 200 m3 was classified as general solid waste. No ACM was observed.

  20. On 23 April 2019, JBS&G classified some 84 m3 of excavated material in a stockpile, from a lead contamination hotspot east of the rail spur at the south of the site. The material was classified as special (asbestos) waste, where ACM fibres and fragments were observed during excavation of the hotspot.

  21. On 24 April 2019, JBS&G classified a further 80 m3 of topsoil and vegetation scraping within the former ecological endangered communities area within Demolition Zone 10, as well as to the east of the adjacent rail spur, south of Resource Co carpark. The material was classified as special (asbestos) waste, where two ACM fibre cement fragments were observed on a stockpile.

  22. On 29 April 2019, JBS&G provided an asbestos clearance for the former Endangered Ecological Communities and surrounding area, following the removal of trees and stripping of vegetation and topsoils. No visible ACM was observed on the surface of the soil. The area was considered safe for civil works to recommence. A further asbestos clearance was given to Buildings 17 and 18; no visible ACM was observed on the surface of the soil. The area was considered safe for civil works to recommence.

  23. On 3 May 2019, JBS&G gave asbestos clearance for the rail spur in the southern portion of the Stage 2 site, following the removal of the rail spur infrastructure, vegetation and topsoils and the lead contamination hotspot excavation works as identified by GHD. During excavation of the lead contamination hotspot, ACM fragments were identified in the fill materials. The excavated soils were stockpiled and remove elsewhere. The area was considered safe for civil works to recommence.

  24. On 20 June 2019, some 54 m3 of material generated from the lead excavation during benching of the excavation during backfill works, and topsoils and vegetation scraping south of the Fulton Hogan compound and west of the rail spur, was classified as general solid waste.

  25. On 26 June 2019, JBS&G classified 205 m3 from topsoils and vegetation scraping within the southern rail spur area. Visual assessment and laboratory analysis indicated asbestos fibre cement fragments. The material was classified as special (asbestos) waste.

  26. On 15 July 2019, JBS&G provided an asbestos clearance for the rail spur in the southern portion of the Stage 2 site, following the removal of the rail spur infrastructure including rails and ballast material. A vegetation scrap was also undertaken. No visible ACM was observed on the surface of the soil.

  27. On 22 July 2019, JBS&G gave an asbestos clearance in respect of the compaction pad removal area north of Sediment Basin 10 and south of topsoil stockpiles 1 and 2, located in the southeast portion of the Stage 2 site. The inspections followed the removal of soil from the compaction pad area. Vegetation was removed. The area was considered safe for civil works to recommence.

  28. On 5 August 2019, JBS&G assessed a stockpile of material generated from topsoils and vegetation scraping within the rail spur area. Some 205 m3 was assessed as suitable for site re-use.

  29. On 6 August 2019, JBS&G gave an asbestos clearance following the topsoil stripping and removal of an asbestos impacted stockpile 3Z in the Environmental Protection Zone in the southeast portion of Stage 2. The topsoil was not observed to be impacted with asbestos impacted material. The area was safe for civil works to recommence.

  30. On 23 August 2019, JBS&G confirmed that the final validation results following the excavation of lead impacted soils in historical test pit ‘TP062’, located adjacent to the rail spur in the southern portion of the site, complied with the Contamination Management Plan. This area had been identified by GHD in 2015 as a potential lead hotspot and management of the lead impacts had been addressed within the Contamination Management Plan and had been dealt with accordingly. All temporarily stockpiled material had been suitably classified for off-site disposal. The lead excavation area was considered suitable for continued commercial/industrial land use.

  31. On 19 October 2019, a further unexpected find of fragments of ACM was encountered during excavation of a stormwater pipe trench. The unexpected find was managed in accordance with the Contamination Management Plan. The ACM fragments were removed. During that clearance inspection, a further two fragments were identified and removed.

ADDENDUM 2: DAMAGES

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Decision last updated: 23 May 2025

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