Auckland Waterfront Development Agency Limited v Mobil Oil New Zealand Limited

[2012] NZHC 572

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-2138 [2012] NZHC 572

BETWEEN  AUCKLAND WATERFRONT DEVELOPMENT AGENCY LIMITED Plaintiff

ANDMOBIL OIL NEW ZEALAND LIMITED Defendant

Hearing:         23 March 2012

Counsel:         C T Walker and M C Smith for Plaintiff

J A Farmer QC and P Rzepecky for Defendant

Judgment:      29 March 2012

JUDGMENT OF MILLER J

[1]      This judgment responds to Mobil’s strike-out application.

[2]      Until November 2011 Mobil leased land in the Wynyard quarter from the plaintiff, AWDA.[1]     Mobil and its predecessors had occupied the land since the

1920s, using it as a tank farm.  The land no longer serves that purpose.  By 2011 the tank farm had been removed and Mobil’s head office (at Beaumont St) was the only remaining improvement.  Mobil held over under five leases which had been granted in 1985 and expired at the end of 1993.

[1] AWDA has been put to proof of its claimed succession from previous landowners, but for present purposes I may assume that it is their successor.

[3]      AWDA terminated Mobil’s occupation of the head office, from Mobil’s perspective abruptly and without explanation, by one month’s notice given on 30

September 2011.  Mobil vacated all the land about the end of November.  AWDA

has re-entered.  Counsel could not tell me what AWDA means to do with the land,

AUCKLAND WATERFRONT DEVELOPMENT AGENCY LIMITED V MOBIL OIL NEW ZEALAND LIMITED HC AK CIV-2011-404-2138 [29 March 2012]

but they agree that the highest and best use may no longer be industrial in character. The material before me suggests that AWDA wants the land fit for residential use.

[4]      The parties have known  for some  time that  a  dispute might  arise  about Mobil’s cleanup obligations.  The site having been used for many decades for storing petroleum products, the ground may be contaminated.  (Mobil appears to admit some contamination pre-dating its 1994 holding over, but it says such contamination poses no threat to industrial uses.)  The 1985 leases contain generally expressed obligations to keep the land “in good order and clean and tidy free from rubbish weeds and growth”, and to keep structures “in good and tentable repair”, and to deliver possession on termination “in good and tenantable repair and condition and clean and tidy to the reasonable satisfaction of [the lessor]”.   They also require that the lessee comply with applicable provisions of then-current health, local government, planning and dangerous goods legislation and any legislation passed in substitution for it.

[5]      This action for a declaration about the meaning of Mobil’s cleanup obligation was filed in April 2011, in a spirit of co-operation.  I refer to the details of the claim below.  In August the proceeding was set down for a five-day trial commencing on

25 June 2012.

[6]      On 19 December Mobil applied to strike the claim out, citing termination of the tenancies, saying that the factual context had changed, and suggesting that excavations associated with any AWDA redevelopment would resolve or substantially mitigate any cleanup obligation.   A declaratory judgment would no longer resolve the issues for questions must be answered about contamination, the extent of any cleanup needed, causation and loss.  AWDA should bring an action in the ordinary way.   Mobil evidently assumed that the claim was brought under the Declaratory Judgments Act 1908.  AWDA filed a notice of opposition.

[7]      On 2 March AWDA filed an amended statement of claim.  For my purposes it does not differ materially from the original claim.  The claim pleads that during Mobil’s  occupation  the  land  was  contaminated  with  petroleum  and  chemical products,  contaminants  that  are  hazardous  to  human  health  and  the  immediate

environment, which includes the adjacent marine area.   It pleads that the parties disagree, Mobil denying any obligation to remediate, and AWDA saying that Mobil must  deliver  the  land  in  an  uncontaminated  state  save  for  any  contaminants associated with a gasworks which preceded Mobil’s occupation.   The only relief sought is a declaration that the land must be delivered in an uncontaminated condition, so that it can be used for “any permitted activity”.

[8]      Mobil has filed a defence to the amended claim.  It pleads that the declaration ought to be refused because the Court does not know the extent of contamination, how it may be remedied, and what account should be taken of AWDA’s intended use of the land.

[9]      Before me Mr Farmer pursued the strikeout, saying that the claim is unsuited to relief under the Declaratory Judgments Act because there exists an actual controversy about which the Court will have no evidence, and arguing by analogy to the principle in Henderson v Henderson[2]  that AWDA must bring forward its entire claim in the one action.  Manifestly the Court will not grant the declaration sought in such  circumstances.    Appeals  are  inevitable,  for  very  large  sums  are  at  stake.

However,  Mr  Farmer  also  recognised  that  Mobil’s  concerns  might  be  met  by

amended pleadings coupled with further discovery and evidence.

[2] Henderson v Henderson (1843) 3 Hare 100.

[10]     Mr  Walker  opposed,  saying  that  the  Court  has  jurisdiction  to  grant  a declaration at common law, which is the jurisdiction invoked, and should decide at trial whether or not to do so.  The Court may settle evidential controversies when granting such a declaration about the meaning of a contract.  The evidence, which has not yet been exchanged, will extend to the commercial context and state of the land in the 1920s, in 1985, and when holding over began in 1994, but there is no reason to think that this “matrix” evidence will prove controversial.  The degree of contamination and extent of remediation are controversial, but they are not for trial now.   AWDA may frame its claim as it wants.   The principle in  Henderson v Henderson is irrelevant; in particular, it cannot be invoked against a first proceeding but only a subsequent one.  I took him to mean that AWDA accepts the risk of a later

challenge if another proceeding is brought.  He submitted that further proceedings

are not inevitable, but if brought they will be confined to whether Mobil left the land in the required condition and, if it did not, the cost of remediation.

[11]     The first question is whether the Court will feel confident that it may make the declaration sought, if confined to the “matrix” evidence that AWDA has in mind. In my opinion it may well not.  Care must be taken in this interlocutory setting to eschew any opinion about Mobil’s obligation to deliver the land in good and tenantable repair and condition and clean and tidy to AWDA’s reasonable satisfaction, but two points may be made.  First, the Court might think it necessary to determine the reasonableness of AWDA’s requirements as at termination date in

2011, as opposed to the several dates when leases were entered.  Second, the leases do not provide that land must be delivered in an uncontaminated state, which might be thought an absolute standard; rather, they provide for good repair and clean and tidy condition, which might be thought a flexible standard.  The obligation may also be informed by Mobil’s contractual duty to comply with certain legislation currently in  force.    Having  regard  to  these  points,  the  Court  might  think  that  Mobil’s obligations may depend not only on the factual setting in which the leases were executed but also (and by way of illustration only) the present character of the area, AWDA’s plans for the land, acceptable contamination levels for industrial and other uses, and the costs of making good to any given standard, relative to the benefits that remediation delivers to AWDA.   Indeed, some of these issues are implicit in the declaration sought, for AWDA would have Mobil deliver the land in an uncontaminated condition, fit for any presently permitted activity.

[12]     Mr Walker’s response to these points was that there is nothing to stop Mobil calling any evidence relevant to interpretation or the Court deciding disputed questions of fact.  I accept that, but I also accept Mr Farmer’s submissions that such evidence will be rather more extensive than the “matrix” evidence that AWDA has in mind and that, given the nature and extent of the evidence that may be called, interpretation is intimately connected to breach.  In particular, the Court may think it necessary to know, when deciding what the cleanup obligation means, the extent of contamination, its dangers, and how it may be remedied.  (Damages are a separate matter which might well await the Court’s definition of exactly what Mobil must do.)  I accept Mr Walker’s point that, generally speaking, a plaintiff may choose the

ground on which to fight.  But AWDA has already put breach in issue, for it pleads hazardous contamination that Mobil ought to have remedied on termination, but by implication did not.  To the extent that the scope of the trial depends ultimately on the relief sought, which is debatable, Mobil may put breach squarely in issue by seeking declarations of its own.

[13]     It follows from what I have said that this is not a proper case for striking out. The Court might strike out if satisfied that multiple proceedings were inevitable and would be an abuse, but Mobil’s concerns can be met by amending the pleadings to the extent necessary.

[14]    Two further questions arise.   The first is whether discovery relevant to interpretation (let alone breach) has been completed.  It seems likely that it has not; among other things, Mobil claims not to know what plans AWDA has for the land. The second question is whether the trial can be completed in the five days assigned. It seems likely that it cannot.  I was not called on to answer these questions, but they must be answered soon.

[15]     I make the following orders:

a)        The strike-out application is dismissed;

b)To the extent that leave is needed, both parties have leave to amend their pleadings;

c)       The proceeding should be called in the next available list to decide what amendments are to be made, what further discovery is needed, and whether the trial must be adjourned; and

d)       Costs are reserved.

Miller J

Solicitors:

Gilbert Walker, Auckland for Plaintiff

Greenwood Roche Chisnall, Wellington for Defendant