The Trust Company Ltd v Commonwealth of Australia

1. [1]

   LEEMING JA: The Trust Company Ltd and Qube RE Services Pty Ltd appeal from a judgment, following an eight day trial, dismissing proceedings brought by them seeking some $20 million damages representing additional costs associated with the removal and disposal of asbestos incurred during the redevelopment of land formerly occupied by the Commonwealth: The Trust Company Ltd v Commonwealth of Australia [2025] NSWSC 502. The land occupies some 83 hectares in Moorebank, and had been used for many years for various purposes by the Department of Defence, including as a “Defence National Storage Distribution Centre”, sometimes known as the “DNSDC”, prior to its being sold by and leased back to the Commonwealth. In this Court, the appellants make no challenge to the notional damages determined by the primary judge of $3,238,830. The claim was and is wholly contractual, based on the obligations in a lease and a deed of surrender to remediate and clean up the land.

Parties and nomenclature

1. [2]

   The critical documents are a 5 year lease dated 5 July 2013 and a Deed of Surrender dated 14 December 2015. Both were in respect of the same land at Moorebank. I shall refer to the Lease, the Deed and the Land.

2. [3]

   The parties to the Lease and the Deed were the same: The Trust Company Ltd and the Commonwealth. The parties’ submissions referred to the “Developer” and “Defence”. That usage was understandable, but imprecise.

3. [4]

   The first appellant, The Trust Company Ltd, is now the legal owner of the Land. The Lease states that it is the “custodian of the assets of the Moorebank Industrial Property Trust”. The second appellant is neither the legal owner of the Land nor a party to the Lease or the Deed, although the Lease referred to the second appellant as the trustee of the Moorebank Industrial Property Trust, stating that “[t]he Custodian enters into this Lease as custodian and agent of the Trustee”. When the entitlement of the second appellant to any damages was raised, senior counsel acknowledged it was difficult to see how any of the claims, based as they were on damages for breach of covenants in the Lease and the Deed, could result in a judgment in favour of the second, as opposed to the first, appellant. It is not necessary to reach any conclusion on this point, and the term “Developer” glosses over the fact that there are two appellants, neither of which seemingly is the beneficial owner of the Land or was directly involved in decisions connected with its development.

4. [5]

   The respondent is the Commonwealth of Australia, which has established a Department of Defence under the control of a Minister. But while it is common to refer to “the Department” or “Defence”, the Department of Defence lacks legal personality (cf Hocking v Director-General of the National Archives of Australia (2020) 271 CLR 1; [2020] HCA 19 at [36] and Ex-Christmas Islanders Association Inc v Attorney-General (Cth) (2005) 149 FCR 170; [2005] FCA 1867 at [45]).

5. [6]

   Despite the inaptness of aspects of each label, it will be convenient to adopt the usage of the parties and the primary judge and refer to the “Developer” and “Defence”, all the time bearing in mind that the claims are for damages for breaches of covenants in the Lease and the Deed to which the legal owner the Trust Company Ltd and its former tenant the Commonwealth were parties.

Background

1. [7]

   For nearly a century, Defence owned the Land. It was under Torrens Title. By the early 21st century, some 66 buildings including warehouses and administrative offices were located on the Land, which was used as a supply and distribution centre.

2. [8]

   In January 2003, Defence exchanged contracts to sell the Land to an investment vehicle of a major bank. In March 2003, Defence completed the sale and leased the Land back for ten years, with an option to renew the lease for two further terms of 5 years each. The initial rent was $14,000,000 per annum, payable monthly. The lease was registered.

3. [9]

   In 2007, the bank on-sold the Land to (ultimately) the Developer. The sale was subject to the 2003 ten year lease, and Defence continued to occupy the Land under that lease.

4. [10]

   The Developer and Defence entered into a further lease of the Land in 2013, with a term of 5 years and a single 5 year option. In this document, the lessee was described as “Commonwealth of Australia (Department of Defence)” but nothing turns on that. There were some other differences between the terms of this lease and those of the 2003 lease, including those mentioned above reflecting the sale of the Land to the Developer. It seems likely, and the appeal proceeded on the basis, that the differences were negotiated in connection with the exercise or threatened exercise of the first option under the original lease. However, there was no evidence before this Court concerning those negotiations, and it seems likely that there was none before the primary judge. (No criticism is implied; this reflected its status as a registered instrument.) It is this registered lease AH874146, dated 5 July 2013 and commencing 26 March 2013 with an annual rent commencing at $19,400,000, which is the Lease at the heart of this litigation. The Lease is the source of some of the contractual entitlements at the forefront of the appeal, and which were (in large measure) surrendered by the Deed of Surrender which gives rise to the remaining rights in issue in this appeal.

5. [11]

   The Developer’s submissions were confined to the contractual aspects of the Lease; indeed, they emphasised the fact that the first appellant had not been a party to the original ten year lease. No reliance was placed on the property rights created by either lease, or the entitlement of the first appellant under s 117 of the Conveyancing Act 1919 (NSW) as opposed to what flowed from contract. That is not a criticism; instead it reflects the dominance of contract in this area of the law, associated in this country with Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17; [1985] HCA 14. It is “now firmly established that a lease is a species of contract”: Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and Managers Appointed) (in liq) (2013) 251 CLR 592; [2013] HCA 51 at [39]; see also at [62]-[67] (the initial resistance to Tabali, and the decisions over the ensuring quarter century, are considered in Re Willmott Forests Ltd (in liq) (Receivers and Managers Appointed) (2012) 36 VR 472; [2012] VSCA 202 at [41]-[52] and [67]-[72]). Nor was it suggested that anything in this litigation gave rise to a need to consider anything other than contractual principles.

6. [12]

   There was also little or no evidence of the circumstances surrounding entry into the Deed. This reflected an important aspect of the Developer’s appeal. The Developer complained not only that the primary judge had misconstrued the Deed and the release it contained, but also that it had not been open to her Honour to dismiss the claim on that basis. It was said:

7. [13]

   A great deal of time in arguing this appeal was directed to what had been in issue, in litigation where both sides appear to have altered their focus as the trial proceeded. While the trial had occupied some eight days, the parties exchanged hundreds of pages of submissions. On the view I take, it will not be necessary to resolve that dispute.

8. [14]

   I pause to note the legal character of the demised land. The Commonwealth had been the legal owner of the Land from early in the 20th century. Presumably it had been acquired for defence purposes, thereby engaging s 52(i) of the Constitution, with the result that State laws could not apply of their own force. However, that status prima facie ceased when the Commonwealth sold the Land to the bank in 2003: Paliflex Pty Ltd v Chief Commissioner of State Revenue (NSW) (2003) 219 CLR 325; [2003] HCA 65. There may be a question how a sale and lease-back under a long-term lease impacts the status of the Land for the purposes of s 52(i), but if so it does not arise in this appeal and was not the subject of any submissions (I am conscious that it was held in Bevelon Investments Pty Ltd v City of Melbourne (1976) 135 CLR 530; [1976] HCA 49 that a 5 year lease to the Commonwealth did not, or probably did not, amount to the land falling within s 52(i)). But nothing turns on this. If the land continued to fall within s 52(i) after 2003, State planning laws applied by dint of the Commonwealth Places (Application of Laws) Act 1970 (Cth), and of their own force no later than the Commonwealth’s surrender of the Land.

9. [15]

   The planning background should be mentioned. The evidence (or at least, the documents in the appeal books) did not explain with any precision the process by which approval was undoubtedly given to the Developer to remove most of the structures on the Land, and construct the intermodal terminal facility at a cost of $490 million mentioned by the primary judge at [120]. The amount of expenditure means that the Developer would have been entitled to seek approval under the former Part 3A of the Environmental Planning and Assessment Act 1979 (NSW) thereafter proceeding pursuant to transitional provisions which were considered in AQC Dartbrook Management Pty Ltd v Minister for Planning and Public Spaces (2021) 105 NSWLR 152; [2021] NSWCA 112 at [73]-[81] which “permitted Part 3A to live long after its repeal in 2011”, or under the somewhat different regime which replaced that Part after its repeal. Nothing turns on this for present purposes save that the terminology is different (for example, “approval” as opposed to “consent”, and so on) and for that reason I shall refer in general terms to “planning permission”. The main reason for mentioning this is not terminological exactitude, but rather that the evidence fell short of addressing what role was played in the planning process by the Site Audit Statement and the Environmental Management Plan to which a great deal of the evidence was directed. Nonetheless, the appeal proceeded on the basis that planning permission had been sought and obtained to develop the Land for the Developer’s intermodal terminal facility, notwithstanding the breaches on which the Developer sued which turned on the presence of asbestos on the Land after the Commonwealth surrendered its lease.

10. [16]

    For many years, asbestos has been found on the Land. Evidently, at least one source of the asbestos was from the roofs of some of the buildings. Asbestos has been detected by various investigations, some of the surface, and at least one of which was intrusive into the top levels of the soil. The evidence was to the effect, speaking generally, that when asbestos containing material was found, it was picked up, and recorded in a document which became the asbestos register.

11. [17]

    The surface investigations included an “emu pick” undertaken within a 5 metre buffer zone around the footprint of various buildings and known transit routes between buildings. An emu-pick amounts to the manual collection or hand-picking of visible fragments or pieces of suspect materials by a systematic process of visual inspection across the surface of a site. The primary judge recorded at [398] that the emu pick was not conducted across the entirety of the Land, but focussed on the areas where asbestos-containing fragments were most likely to be.

12. [18]

    The term “emu pick” is also referred to as a “hand pick” or “emu bob” in the National Environment (Protection of Site Contamination) Measure 1999 (see, for example, Sch B1 s 4.8). The Measure achieved prominence in the parties’ submissions in the appeal, although without much analysis of its juristic nature. The Measure states in cl 4 that it is made pursuant to s 14(1) of the National Environment Protection Council Act 1994 (Cth). The Measure is a legislative instrument (s 21). Section 7 contains some statements concerning “the intention of the Parliament of the Commonwealth” concerning the implementation of any Measure; it is unnecessary for present purposes to analyse the legal effect of that section. The Measure also contemplated that it would be implemented by laws of other States and Territories, and states that it has been made under, relevantly, the National Environment Protection Council Act 1994 (NSW). That legislation also contains s 7 which is in similar terms to s 7 of the Commonwealth Act.

13. [19]

    The Measure was extensively amended by the National Environment Protection (Assessment of Site Contamination) Amendment Measure 2013 (No 1), with effect from May 2013, some two months before the new lease was executed. I shall follow the parties’ usage and refer to the Measure as amended after May 2013 as “NEPM 2013”.

14. [20]

    NEPM 2013 is a document of more than a thousand pages. Much is the same as the previous Measure, including the following portion of Schedule B1:

15. [21]

    However, Schedule B1 as amended in NEPM 2013 included Table 7, which the primary judge reproduced at [152]:

16. [22]

    Before the amendment, the Measure did not contain health screening levels for asbestos contamination. A footnote to the schedule (which had existed in the same form before the 2013 amendments) stated:

17. [23]

    Paragraph 4.8 of NEPM 2013 stated:

18. [24]

    The reason for mentioning this history is that NEPM 2013 was an important part of the Developer’s claim that the contractual duties which it alleged had been breached by Defence were informed by the standards contained in that Measure, noting that it came into force slightly before the execution of the 2013 lease. NEPM 2013 was relied upon to quantify the obligations to remediate and to clean the Land at the expiry of the Lease. In a nutshell, the Developer said that the breach of cll 17.2 and 19.1 occurred when the Commonwealth “failed to remediate the soil to a depth of 10 centimetres in the areas of known asbestos contamination prior to the expiry of the lease”.

19. [25]

    The essence of the Developer’s submission was that the discovery of widespread asbestos on site in 2011, as described in GHD’s reports at the time, together with the limited cleanup then undertaken, evidenced that Defence breached the Lease by leaving the Land without ensuring that the topsoil was free of asbestos. That required more than a limited emu-pick to a distance 5 metres around the buildings. The fact that Defence provided the Developer with the asbestos register in June 2015 made no difference, where Defence did not disclose that asbestos containing material was identified externally throughout the Land and Defence had not remediated that debris in the top 10 cm of the topsoil.

20. [26]

    Mr Ashhurst SC, who with Mr Farland appeared in this Court for the Developer as they had done at trial, explained at the commencement of his oral address:

Investigations prior to development on the Land

1. [27]

   In September 2012, the environmental consultant JBS&G Australia Pty Ltd began to conduct preliminary site inspections for the Developer.

2. [28]

   At around the same time, contractors engaged by Defence were engaged in a clean-up of asbestos, prior to the conclusion of the original 10 year lease. The primary judge summarised this at [121]-[135], in terms which were not criticised by either side. Nothing presently relevant turns on the details. The summary reflects the extent to which efforts were made to identify and remove asbestos containing materials, and was called in aid by Defence on its notice of contention when it asked this Court to conclude that all surface asbestos had been removed by the time the Commonwealth surrendered the Lease.

3. [29]

   The particular detail of that summary is unimportant. Defence emphasised the comprehensiveness of the steps taken over around three years to detect and remove asbestos, while the Developer emphasised the incompleteness of what was done, especially the building zones which had been identified but which were not the subject of an emu-pick.

Defence vacates the Land and a Site Audit Statement is obtained

1. [30]

   In 2015, Defence executed the Deed. Speaking generally, 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 – see further below) certifying that the Land was suitable for commercial/industrial use, either unconditionally or subject to compliance with an Environmental Management Plan or “EMP”. I shall return to the terms of the Deed below.

2. [31]

   Defence had retained GHD to undertake a variety of tasks concerning the Land, including preparing an prepare an Environmental Management Plan. The accredited auditor was Mr Andrew Lau of JBS&G. In May 2016, GHD provided their reports to Mr Lau for his consideration. He provided lengthy comments. In relation to asbestos on the Land, they included the following:

3. [32]

   GHD responded to the request in May 2016, and met with Mr Lau in June 2016. On 1 July GMD provided a draft Environmental Management Plan to Mr Lau, which included annual inspections, and stated:

4. [33]

   The Environmental Management Plan was issued on 26 September 2016. Part of it addressed asbestos, as summarised by the primary judge at [236]-[239]:

5. [34]

   On 12 October 2016, Mr Lau signed a Site Audit Statement. The statement certified that, in his opinion, the site was suitable for commercial/industrial use subject to compliance with the Environmental Management Plan prepared by GHD. Mr Lau listed the information sources for the site audit, including the reports of Egis Consulting Australia, URS, HLA-Envirosciences, Milsearch, Dr Ryall’s Site Audit Statement of 9 December 2002 and, more recently, GHD’s reports from 2014 and 2015, together with GHD’s Environmental Management Plan.

6. [35]

   As flagged above, in 2016, planning permission was obtained to construct an intermodal terminal facility on the Moorebank site and adjoining land. From 2017 to 2019, the Developer commenced initial construction work which included removing vegetation and soil, digging up and removing underground infrastructure, including stormwater pipes and telecommunication pits: see reasons of the primary judge at [309].

7. [36]

   In the course of undertaking those works, the demolition contractor encountered asbestos containing material in topsoil, in backfill around underground infrastructure and under hardstands. Asbestos containing material was also found in a pit on the southern portion of the Land, 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.

8. [37]

   It may be that what mattered to the Developer and its contractors when much of the topsoil was removed from the Land was the fact that the waste contained sufficient quantities of asbestos to cause it to incur additional costs. The Developer claimed to have spent $20 million in dealing with these contaminated materials. There was a deal of evidence, resolved by the primary judge and forming no part of the appeal, which reduced those damages to the $3,238,830 found notionally by her Honour, in accordance with the general rule to make findings in the alternative so as to avoid the need of a retrial if an appeal is allowed, as stated in decisions of this Court including Gulic v Boral Transport Ltd [2016] NSWCA 269 at [7], PPK Willoughby Pty Ltd v Baird [2021] NSWCA 312 at [15], Massoud v Nationwide News Pty Ltd; Massoud v Fox Sports Australia Pty Ltd (2022) 109 NSWLR 468; [2022] NSWCA 150 at [35] and Transport for NSW v Hunt Leather Pty Ltd (2024) 115 NSWLR 489; [2024] NSWCA 227 at [99]. In light of the Developer’s acceptance of that amount, it is unnecessary to summarise the evidence or her Honour’s reasoning which led to that finding.

9. [38]

   However, at trial and on appeal, two details achieved prominence: the precise location at which the asbestos was located, and whether it had been on the surface, or if not, how deeply below the surface it was located. This was a consequence of the facts that (a) some of the excavated topsoil was located outside the demised Land (and in particular, slightly beyond its southern boundary near what were known, accurately if somewhat unimaginatively, as the “southern burial pits”) and (b) the Developer did not maintain that the Commonwealth’s obligations extended to identifying and removing asbestos containing material which was sufficiently deeply buried in the soil.

10. [39]

    Waste classification reports indicated that, by and large, asbestos was not found on the surface of the soil but underneath it and only identified when excavation occurred. Whilst some waste classification reports refer to asbestos contaminated soils surrounding the footprints of buildings, the reports do not reveal whether the asbestos containing fragments were on the surface or below the surface and only revealed when the topsoil was scraped away, as the primary judge observed at [404]. Nonetheless, the primary judge concluded that, on the balance of probabilities, there was asbestos on the surface of the soil near the southern burial pits in three areas referred to by Defence’s expert: at [405]. Defence challenged this finding by its notice of contention.

Overview of reasoning of primary judge and issues arising on appeal

1. [40]

   Although there had been a trial fought on many issues, the Developer maintained that in this Court the claim was essentially one of contractual construction, with the Lease and the Deed falling to be construed on their own terms. In large measure, that accorded with the approach adopted by the primary judge, who summarised the issues and her conclusions at [10]-[12] at the commencement of her reasons for judgment:

2. [41]

   By way of non-exhaustive overview, the Developer agreed that the Deed did not amend the obligations upon the Commonwealth in the Lease, but said that those obligations were not discharged by obtaining a conditional Site Audit Statement. It said that the release in the Deed had not been the subject of pleading or submissions, and it was not open to the primary judge to have relied on the release it contained, and that in any event, her Honour’s construction of the Deed was wrong. On the other hand, the Commonwealth maintained by notice of contention that when it vacated the Land, all surface asbestos had been removed. It upheld the reasoning of the primary judge, but added, albeit belatedly, to its notice of contention the submission that the remediation obligation in the Lease was satisfied by the preparation and provision of an Environmental Management Plan, on the basis of which a Site Audit Statement certified that the Land was suitable for commercial/industrial use.

3. [42]

   On the view I take, the dispositive questions are questions of construction of the Lease.

4. [43]

   Rather than summarising the course of the trial, the more efficient course in light of the parties’ stances on appeal is to summarise the salient provisions of the Lease and the Deed, then to turn to her Honour’s reasons on the central questions of construction, and then to address the grounds arising under the notice of appeal and notice of contention, in a logical order, deferring the summary of some of the evidence insofar as it is necessary to resolve particular grounds until those grounds are reached.

Salient provisions of Lease

1. [44]

   Clause 7 of the Lease dealt with the use of the Premises. Clause 7.1 provided:

2. [45]

   “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. [46]

   “Defence Purposes”, although capitalised, was undefined. “Existing use rights for Defence Purposes” is apt to pick up such uses as could lawfully be continued under provisions such as (what was at the time) s 107 of the Environmental Planning and Assessment Act (see now s 4.66). What they were was unexplored, at least in the parties’ submissions in this Court. 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”, noting that there was an entitlement to sublet (cl 15.1) and to assign to a Commonwealth statutory body (cl 15.2), or to anyone else with the lessor’s consent (cl 15.2(2)). The primary judge concluded, favourably to the Developer, that 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. [47]

   Clause 7.3 provided:

3. [48]

   “Asbestos”, “Contaminants” and “Hazardous Substances” were defined as (cl 1.2):

4. [49]

   There was no issue that certain forms of asbestos presented a risk of harm to human health and thus could constitute Contamination as defined. The “List of Dangerous Hazardous Substances” was not before the Court, but the appeal proceeded on the basis that certain forms of asbestos were also Hazardous Substances as defined.

5. [50]

   Clauses 17.1 and 17.2 provided as follows:

6. [51]

   (The lower-case “contamination” in cl 17.2 is as per the Lease. It may be an oversight. Alternatively, bearing in mind that the definition includes a qualitative component (“that presents a risk of harm to human health”) it may have been thought that it was inapt to use the defined term in a clause which imposed its own qualitative measure (“significant contamination”). Neither side sought to make anything of this.)

7. [52]

   Clause 17.3 concerned where the Lessor had caused Asbestos, Contamination or Hazardous Substances to be introduced onto the Land after the Commencement Date, and in the case of Asbestos or Hazardous Substances, imposed an obligation on the Lessor to:

8. [53]

   Clause 17.4 dealt with apportionment of costs where the Lessee had contributed to the contamination that was the subject of the obligation in cl 17.3. Clause 17.5 required the Lessee on request by the Lessor to provide copies of all licences and consents which the Lessee had obtained from any relevant authority pursuant to any Environmental law, and to advise the Lessor “immediately of any Contamination which is reportable to any relevant authority pursuant to any Environmental Laws”.

9. [54]

   Clause 19 concerned termination of the Lease. Clause 19.1 provided:

10. [55]

    Two textual aspects of the critical clauses may be noted immediately. The term “remediate” in cl 17.2 was not defined in the Lease. The remediation obligation in cl 17.2 was in respect of the Land, but the obligation in cl 19.1 was in respect of the Premises. However, the definition of Premises included the Land.

11. [56]

    The Developer did not rely on any other provisions in the Lease relating to the remediation of the Premises.

Salient provisions of the Deed

1. [57]

   On 14 December 2015, Defence and the Developer executed a “Deed of surrender of lease”. Once again, the party was named “Commonwealth of Australia (Department of Defence)”. At this time, the Lease had some two years to run, and Defence had the benefit of a 5 year option. Nonetheless, the Lease was surrendered on Defence paying $25 million: cl 3.1; cl 1.1 (22) and (23). The circumstances that led to the negotiation of that payment were not before the Court.

2. [58]

   The parties agree that Defence ceased to occupy the Land on 14 December 2015. However, Defence was granted a licence to access the refuelling area (called “the Licensed Area”) for six months to comply with its remediation obligations and a further 12 months (“the Extraction Period”) to complete extraction and testing of that area. Defence was also given a licence to access the rest of the Land for six months in order to obtain a new Site Audit Statement.

3. [59]

   Clause 4.1 of the deed provided:

4. [60]

   Thus cl 4.1 brought forward Defence’s “make good” obligation in respect of the Premises in cl 19.1(1) to “prior to the Surrender Date”.

5. [61]

   Clause 4 continued:

6. [62]

   The opening words of cl 4.3 “Without limiting the Tenant’s obligations under the Lease”, and the words “this obligation includes but is not limited to” are words which are apt to exclude any inference that the new obligations under cl 4.3 concerning remediation and the provision of a Site Audit Statement are a replacement of the existing obligations to remediate under the Lease.

7. [63]

   Clause 7 provided:

8. [64]

   Clause 7.4 obliged Defence to dispose of any unexploded ordnance “found or identified on the Premises”.

9. [65]

   Once again, the words “Subject to clauses 7.3 and 7.4” in cl 7.2, and “Despite the release contained in clause 7.2” and the further reference to “the remediation of the Premises” and “the Tenant’s obligations under clause 19.1 of the Lease” are apt to mean that obligations of Defence to remediate and in cl 19.1 are not the subject of the release in cl 7.2.

10. [66]

    Clause 8 provided:

11. [67]

    The Deed then turned to granting access by Defence to the Land after the Surrender Date in order for Defence to comply with its obligations under the Deed. For the Land generally, the Developer gave Defence access to the Balance of the Land (being the Land other than the Licensed Area) during the Access Period to comply with its remediation obligations under cl 17 of the Lease and cl 4.3(3) of the Deed: cl 12.1(1). Access Period was the earlier of six months from the Surrender Date or the date when Defence complied with its obligations under cl 4.3(3) of the Deed: cl 1.1 (1).

12. [68]

    For the refuelling area in particular, the Developer granted Defence a non-exclusive licence to the Licensed Area during the Licence Period: cl 10.1. Licensed Area was the refuelling area identified by GHD on its 2015 Remedial Action Plan: cl 1.1 (14); Annexure C - Licence Plan. Licence Period was the earlier of 10 months after the Surrender Date or when Defence had complied with its obligations under cl 4.3 of the Deed: cl 1.1 (11). Defence was permitted to access the Licensed Area to comply with its obligations under cl 17 of the Lease and cl 4.3 (except for cl 4.3(3)) of the Deed: cl 10.1.

Reasoning of the primary judge on construction of the Lease

1. [69]

   The primary judgment was confronted with a fact-intensive appeal, with a great deal of expert evidence and many thousands of pages of documentary evidence. It is unnecessary to summarise all aspects of her Honour’s comprehensive judgment of 490 paragraphs, with an addendum of a further 124 paragraphs. Her Honour’s essential reasoning on the questions of construction of the Lease may be summarised as follows.

2. [70]

   First, the primary judge regarded the critical clause as cl 17.2. After reproducing authorities dealing with the construction of commercial contracts, her Honour said at [105]-[107]:

3. [71]

   Secondly, having regard to the requirement to remediate “to a standard suitable for ongoing commercial/industrial use”, her Honour said at [109]-[114]:

4. [72]

   On that basis, her Honour rejected the Developer’s submissions that the standard of remediation in cl 17.2 was informed by NEPM 2013, and that the use was broader than the sorts of uses, as a storage and distribution centre, for which Defence had used the Land for many years. Her Honour concluded this section of her reasons at [115]:

5. [73]

   Thirdly, the primary judge returned to the standard to which remediation was required, saying at [157] that it “remained generally expressed in the new lease and did not incorporate by reference the requirements of NEPM (2013)”. Her Honour said that the “word formed part of a phrase ‘a standard suitable for …’. The remediation obligation remains as earlier construed.”

6. [74]

   Fourthly, addressing the Deed, her Honour regarded cl 7.3 as “barely intelligible”, but said at [205]:

7. [75]

   Fifthly, her Honour addressed the effect of the acknowledgement in cl 8 at [208]-[211]:

8. [76]

   Sixthly, after dealing with the effect of cll 4.3 and 4.4 on the Deed, and Defence’s submissions that cl 17.2 of the Lease was impliedly amended by cll 4.3 and 4.4 of the Deed, her Honour concluded at [226] that:

9. [77]

   Seventhly, at [258]-[278], her Honour concluded that Defence had complied with its obligations under the Deed, thereby engaging the release.

10. [78]

    It is unnecessary to summarise the lengthy portions of the reasons of the primary judge dealing with planning permission, demolition and removal of topsoil. However, at [364]ff, her Honour considered the position which would obtain if she were wrong about the effect of the release under the Deed. After summarising the evidence bearing upon this, her Honour’s conclusions at [389]–[405] bear on both the construction of cl 17.2 and the finding (challenged by Defence) of the continuing presence of asbestos on the surface of the Land, and those paragraphs are best reproduced in full:

Issues arising on appeal

1. [79]

   The Developer’s notice of appeal contains 16 grounds, to which may be added the four grounds of Defence’s notice of contention. The latter was sought to be amended on the second day of the appeal. In light of the fact that oral submissions seemed unlikely to complete in any event in the two days that had been set down, the Court adjourned the appeal to a third day, which gave the Developer the opportunity to respond fully to the new grounds in the notice of contention. The Developer exercised that opportunity by full written and oral submissions, and ultimately neither opposed the amendment nor sought for additional documents to be included in the appeal books.

2. [80]

   The various grounds are logically addressed in the following order:

   1. (1)

      Did the primary judge err in finding that there was asbestos on the surface of the soil at the Surrender Date, and instead should have found that there was no asbestos on the surface of the soil and that the asbestos located by the Developer’s expert was not visible (Notice of Contention grounds 1 and 2)?

   2. (2)

      Did the primary judge err in construing cl 17.2? This included challenges from both sides. Defence (by grounds 3 and 4 of its notice of contention) submitted that the clause was not breached, having regard to the Site Audit Statement which issued. The Developer submitted that the primary judge erred in concluding that the obligation to remediate was limited to the actual surface of the land only (Appeal grounds 6, 7, and 8), coupled with an obligation to warn about the presence of asbestos (Appeal ground 9), erred in construing “ongoing commercial/industrial use” as being limited to the uses as a storage and distribution facility (Appeal ground 10), erred in taking into account the fact that the Developer “took the site apart”, that the future use of the site included major earthworks, or that Defence had to anticipate those earthworks when fulfilling its lease obligations (Appeal ground 11) and in taking into account post-contractual conduct (Appeal ground 12).

   3. (3)

      Did the primary judge err in construing cl 19.1 (Appeal grounds 13-15)?

   4. (4)

      Was it open to the primary judge to determine the matter on the basis that by cll 7.2 and 7.3 Defence was released from remediation and make good obligations under the Lease (Appeal ground 1)?

   5. (5)

      Was the primary judge correct to conclude that by cll 7.2 and 7.3 Defence was released from remediation and make good obligations under the Lease (Appeal grounds 2-5)?

3. [81]

   Whether or not there was asbestos on the surface at the expiry of the Lease is a question of primary fact which informs all of the obligations in issue. Whether Defence was in breach of its covenants under the Lease is logically anterior to the questions whether having regard to the running of the trial, it was open to Defence to rely on the release and, if so, whether it was an answer to the Developer’s claims. I shall proceed in that order.

Notice of Contention – Paragraphs One and Two

1. [82]

   These challenges were directed to the following paragraph in the reasons of the primary judge at [405]:

2. [83]

   The Commonwealth maintained that the finding on the balance of probabilities was in error. There were two aspects of this submission. The first was that the majority of the asbestos which was found “near the southern burial pits” was in fact found outside the southern boundary of the Land. The second was that the three areas referenced by Ms Organo reflected subsurface findings of asbestos.

3. [84]

   It is convenient to deal with Ms Organo’s references first. These were based on areas described “TS13”, “TS28”, “TS41”. TS13 was from a soil sample obtained after digging by hand tools to remove grass cover in a location northeast of building 82, which was part of a topsoil analysis. TS28 was from topsoil beneath a concrete hardstand. TS41 was said by Ms Organo to have been sampled “from soils present between the surface soils depths of approximately 0.2 metres”.

4. [85]

   The Developer’s written submissions maintained that the samples were evidence of the presence of asbestos contamination in topsoils. As much may be accepted. But it does not follow, as the primary judge held, that there was evidence of asbestos on the surface of the soil. The references suggest to the contrary. The better view is that TS13 was underneath grass, and it seems clear that TS28 was underneath a hardstand. TS41 is more equivocal, but the more natural reading of Ms Organo’s report, which states that the samples were “beneath” the surface soil, and refers to “depths of approximately 0.2 metres”, is that it was deeper than 10cm from the surface. This aspect of the notice of contention is made out, although until and unless the other limb of this challenge is made out, it is of little consequence.

5. [86]

   The first limb of the notice of contention is more complex. After the Developer acquired possession, much of the topsoil on the Land was removed. It appears to have been placed in a large number of stockpiles. The Court was told that each stockpile was sampled with a view to characterising the material (including how and at what cost it could be disposed of). Stockpile 199 was described as “soils sourced from topsoil scraping within the southern burial area within demolition zone 10 to a depth of approximately 0.05m below the ground surface”. That sample for asbestos and a laboratory analysis stated that the samples were below the site assessment criteria of below “0.001% w/w AF/FA” and “no respirable asbestos fibres were detected”.

6. [87]

   It is not clear on the face of the appeal books whether the entirety of the soil on the burial area was placed in stockpile 199 (this seems unlikely, assuming (from the numbering “199”) that there were hundreds of stockpiles), but it is some evidence of the absence of asbestos in that area. The September 2015 GHD “intrusive site investigations” study extended to the southern burial pits, where the authors identify hand grenades, fill-in plugs and fuse wells and the groundwater being contaminated with heavy metals, PAH and TPH. The scope of works was described as test pits dug to “depths ranging from 0.5 to 2.5 metres” and “Groundwater well GW077 was installed to the southern boundary of the site”.

7. [88]

   The summary of results and observations from the soils concluded with:

8. [89]

   Those eight samples were tested for the presence or absence of asbestos and some detected the presence of asbestos.

9. [90]

   Defence submitted that at least most of those eight locations were offsite. This is because the southern burial pits were partly on but partly off the Land. Defence accepted that two test pits (TP062 and TP056) were within the Land.

10. [91]

    There are difficulties in drawing inferences relating to this issue from the materials in the appeal books. One is that the plan on which Defence relied showed only the approximate location of the boundaries, and one of the test pits (TP076) is either precisely on the approximate boundary or only a few centimetres to the south.

11. [92]

    A larger difficulty is as follows. The title and scope of works and descriptions that appear in the 2015 intrusive site investigations make it plain that the focus was investigating ground water and digging test pits, rather than surface asbestos. There is nothing on the face of the document that there was any examination at that time for surface asbestos. Rather, what was found, and at no fewer than eight locations where people spent time near a test pit, was asbestos on the surface. Indeed, the authors of the GHD Intrusive Site Investigations thought it fit to remark that when they undertook the digging of 21 test pits, with the purpose of investigating contaminants under the surface, they found asbestos containing material on the ground surface “in some areas” including the areas of 8 of those pits.

12. [93]

    True it is that at least some and probably the majority of those test pits were (slightly) offsite. But it is also the case that asbestos was discovered on or near the surface even by people who were conducting subsurface investigations.

13. [94]

    The Commonwealth made a final submission, to the effect that because there had been so much investigation of the Land over many years, and at all times when asbestos was detected, it was removed, it should be inferred that there was very little left, or at least very little on the surface. I do not accept the submission. The Land occupied a large area. There is no suggestion that all of the Land was the subject of an emu-pick. Not all of the work originally proposed by GHD was completed, as the primary judge noted at [134]. The fact of the matter is that asbestos continued to be found on the surface of the Land, even in the most recent intrusive investigations, when surface asbestos was not what was being investigated.

14. [95]

    Added to the above is the known fact that when the Developer removed the topsoil, asbestos was found. It is inherently improbable that all of the asbestos that was found when the topsoil was removed had been located on the subsurface. It is inherently improbable that the previous investigations, all of which detected asbestos, had detected all the surface asbestos which was available to be detected. There had been many investigations before the September 2015 GHD intrusive site investigations, and that investigation did not find one or two pieces of asbestos, instead it found asbestos on the surface near at least 38% of the test pits which were dug (ie 8 out of 21), in circumstances where the investigation was directed to what was underground rather than what was on the surface. Further, one of the premises of the Environmental Management Plan was that asbestos would continue to be found into the future.

15. [96]

    In short, I see no basis for interfering with the findings made by the primary judge that on the balance of probabilities there continued to be asbestos on the surface of the Land.

16. [97]

    The result is that while there is force in Defence’s contention concerning a minor aspect of the findings of the primary judge (concerning three areas identified by Ms Organo), the substance of these grounds is not made out.

Clause 17.2 and the grounds of appeal based on it

1. [98]

   There was asbestos on the Land when the Lease came to an end, including on the surface, and its removal caused the incurring of additional costs. Was that sufficient to establish that, contrary to cl 17.2 of the Lease, the Commonwealth had failed by the expiration of the Lease to “remediate the Land to a standard suitable for on-going commercial/industrial use and so that no significant contamination is migrating from the site”?

2. [99]

   The starting point is the text of cl 17.2. First, clause 17.2 imposes two obligations upon the Commonwealth, both to be performed prior to or at the “expiration of the Lease”. The premise of both is that there is contamination on the Land. Both obliged the Commonwealth to “remediate” the Land. The first specified a standard (“suitable for on-going commercial/industrial use”). The second specified a criterion (“no significant contamination is migrating from the site”). The obligations were cumulative.

3. [100]

   Secondly, cl 17.2 did not on its ordinary natural meaning require the removal of all contamination or hazardous substances from the Land. No such obligation was express. Nor would any such obligation be implied, for that would be inconsistent with both limbs of the clause. For one thing, there are standards which are more demanding than “suitable for commercial/industrial use”, such as “suitable for residential use”. Thus remediation which would achieve suitability for on-going commercial/industrial use is apt to include remediation which would leave in place contamination which would have to be removed or otherwise addressed in order for the Land to be suitable for residential use. For another, the words “no significant contamination is migrating from the site” carry with them the possibility that small amounts, too small to be “significant”, of contamination may be migrating from the site, and that in turn entails the presence of contamination on the site.

4. [101]

   Thirdly, the primary judge favoured a dictionary definition of “to remediate” which had been proffered by the Developer. The choice of the definition “to correct or improve (a deficiency or impairment)” served to emphasise an important feature of cl 17.2, namely, that what mattered was not the word “remediate” in isolation, but the entire obligation expressed by the words “remediate the land to a standard suitable for on-going commercial/industrial use”. That may be seen by substituting the definition for the defined term in cl 17.2 in accordance with Kelly v The Queen (2004) 218 CLR 216; [2004] HCA 12 at [103]. The problem of ascertaining the legal meaning of the clause remains, for what does “the Lessee will correct or improve the Land to a standard suitable for on-going commercial/industrial use” mean? The resolution of the issue of the construction of cl 17.2 is not found in the meaning of individual words, but by the meaning of that phrase read as a whole and in context. That makes the clause no different from most legal language. After all, the joint judgment of Brennan CJ, Dawson, Toohey, Gaudron and McHugh JJ in Collector of Customs v Agfa Gevaert Ltd (1996) 186 CLR 389; [1996] HCA 36 at 396-397; stated:

5. [102]

   The approach commended by Lord Hoffmann and the High Court has been regularly applied: see for example Ghali v Chief Commissioner of State Revenue (2013) 85 NSWLR 378; [2013] NSWCA 340 at [21] and 2 Elizabeth Bay Road Pty Ltd v The Owners - Strata Plan No 73943 (2014) 88 NSWLR 488; [2014] NSWCA 409 at [82].

6. [103]

   Fourthly, there is the word “on-going”. The primary judge relied on this to qualify and confine the classes of “commercial/industrial use” to which the remediation obligation applied: at [111]. Her Honour rejected a submission that “on-going” merely referred to future uses, on the bases that (a) that would leave the word with no work to do and (b) demolition, excavation and construction activity was antithetical to “on-going” use. It will not be necessary to reach a concluded view on this issue. However, there is force in the Developer’s submission (reflected in ground 10 of its appeal) that the word did not have the confining effect attributed to it by the primary judge, and instead added little to the clause save to confirm that the commercial/industrial use was a use to take place in the future, after the expiry of the Lease. After all, “commercial/industrial use” is a very familiar term of planning and in particular zoning terminology, and was apt to describe the different use of the Land after Defence ceased occupation.

7. [104]

   Fifthly, the undefined word “remediate” is not merely used in cl 17.2. It is also used in cl 17.3, and in substantially the same context. That clause provides:

8. [105]

   Thus, if the landlord had introduced Asbestos or Hazardous Substances onto the Premises, it was required to “remediate or remove the Asbestos or Hazardous Substances in accordance with [the applicable regime] to remove any risk to health or safety”. Further, the obligation to “remediate or remove” Asbestos or Hazardous Substances was in contradistinction with the obligation to restore and detoxify Contamination, which involved the Contamination being “removed”. In cl 17.3, “remediate” prima facie has a different meaning from “remove”. Another way of putting this is that “remediate or remove” appears not to be a single concept or hendiadys, in part because the verbs are separated by the disjunctive “or”, in part because of the contrast with “remove” in the previous subclause where “remediate” is absent, and in part because cl 17.3(4) is directed to an end, namely, making the Premises safe, and that may be done by removal but also by other means which do not involve removal.

9. [106]

   There is a presumption, albeit one which is readily rebuttable, that words in a contract bear the same meaning: see The Trust Co (Nominees) Ltd v Banksia Securities Ltd (recs and mgrs apptd) (in liq) [2016] VSCA 324 at [42]. Here that presumption is relatively powerful. Clauses 17.2 and 17.3 are found in the same part of the Lease. One immediately follows the other. In both clauses, “remediate” is used in the same context – namely, responding to the presence of Asbestos and Hazardous materials so as to achieve a specified purpose. Putting the matter conversely, it would be strange if the remediation required in cl 17.2 to achieve on-going commercial/industrial use was different in nature from the remediation in cl 17.3 to remove risk to human health.

10. [107]

    Sixthly, the covenant is found in a registered lease. Some of the rules of evidence concerning the construction of written contracts inter partes do not apply, notably, those authorising regard to extrinsic evidence of commercial purpose: Phoenix Commercial Enterprises Pty Ltd v City of Canada Bay Council [2010] NSWCA 64 at [162]-[166]; Springrange Pty Ltd v Australian Capital Territory (2010) 177 LGERA 125; [2010] ACTCA 17 at [12]. This is a consequence of the Lease being registered pursuant to a legislative scheme entitling third parties (who, like the present appellants, might be assignees of the original lessor) to rely on the register: Westfield Management Ltd v Perpetual Trustee Company Ltd (2007) 233 CLR 528; [2007] HCA 45 at [5] and [37]-[42]; Deguisa v Lynn (2020) 268 CLR 638; [2020] HCA 39 at [2], [9] and [66]-[72]. But the exclusion of those rules of evidence does not deny the applicability of an approach which has regard to surrounding circumstances which may be known without evidence from outside the terms of the document: Phoenix Commercial Enterprises at [158]. The scope of that consideration is illustrated by the fact that in Royal Botanic Gardens and Domain Trust v South Sydney City Council (2002) 240 CLR 45; [2002] HCA 5 at [11] (as was observed in Phoenix Commercial Enterprises at [166]), in construing the words “additional costs and expenses” in a lease, regard was had to the facts that (a) the parties to the transaction were two public authorities, (b) the primary purpose of the transaction was to provide a public facility, not a profit, (c) the lessee was responsible for the substantial cost of construction of the facility, (d) construction was to occur under the lessor’s land and would not interfere with the continued public enjoyment, (e) the parties’ concern was to protect the lessor from financial disadvantage from the transaction, and (f) the only financial disadvantage to the lessor which the parties identified related to additional expense which it would or might incur immediately or in the future.

11. [108]

    In the present case, it is legitimate to have regard to the fact that Defence had been a long term occupant of the Land, that some of the structures were old, that there was at the very least a well-founded concern that there might be contamination and hazardous substances on the Land (making it no different from many other sites occupied by Defence over many years), and that the bank’s investment vehicle would likely either itself develop the Land or alternatively sell the Land to a future developer for a use apt to be described as “commercial/industrial”.

12. [109]

    Seventhly, cl 17.2 was in a section headed “Contamination and Hazardous Substances”. Further, the obligations in cl 17.2 to remediate the Land would be engaged if there was “contamination” on the land which was migrating. “Contamination” was defined in cl 1.2 of the Lease (which is reproduced above) in terms which were very substantially identical to the definition of the same term in s 5(1) of the Contaminated Land Management Act 1997 (NSW). That definition is:

13. [110]

    Importantly, the definition in the Lease was not in absolute terms, but instead was framed in terms of a concentration of a substance that presented a risk to human health if the Premises were “used for their Permitted Use”.

14. [111]

    Eighthly, the regulatory regime, including the Contaminated Land Management Act, addressed how land might be remediated in order to achieve a particular use. What would be a lawful land use turned in part upon the zoning. The primary judge recorded at [34]-[35]:

15. [112]

    Her Honour summarised the reports thereafter. None was included in the appeal books. I agree with the Developer that those reports in terms are not available to construe the Lease. However, the process by which the zoning of the Land might be altered was part of the surrounding circumstances to which regard may be had. After all, cl 17.2 speaks in the language of zoning: “commercial/industrial use”. It is self-evident that on a large site such as this at least some of the uses for which a purchaser might seek planning permission would require a change of zoning. When during the appeal I asked what the zoning was, I was told that it was not known. However, I have subsequently noticed that one of the GHD reports in the appeal books dated September 2015 states that the “Current Land Use Zoning” was “IN1 General Industrial (Liverpool Local Environmental Plan 2008)”, while the “Former Land Use Zoning” was “Defence 5(a) (Liverpool Local Environmental Plan (LEP) 1997)”. That tends to confirm that when the original ten year lease was executed, the land had been given a special zoning reflecting its long term ownership by Defence, which would be apt for change when that use ceased.

16. [113]

    Ninthly, as a matter of practically certain commercial reality, two things were clear. The first, which is a consequence of the sale and lease-back transaction, is that Defence had decided that in the medium term (10-20 years) it would cease to use the site. The second is that whatever was the highest and best use of the Land in the hands of some third party, it would probably be a different use from that conducted by Defence, and it would certainly involve investment and redevelopment of what was after all a very large site in south western Sydney. That meant seeking planning permission.

17. [114]

    The primary judge summarised the salient aspects of the regulatory regime at [25]-[33] as follows:

18. [115]

    That summary was in part drawn from the report of an expert retained by Defence (Mr Clay), who explained that the 2021 SEPP 55 had been replaced by the State Environmental Planning Policy (Resilience and Hazards) 2021. I did not understand it to have been controversial that the former and current SEPP required a decision-maker to take into account whether land is contaminated before giving development consent or planning approval. Nor did I understand it to be controversial that one mechanism used to carry out that assessment involved reports from site auditors.

19. [116]

    The role of a site auditor was, in 2003 and at all times thereafter, circumscribed by the Contaminated Land Management Act and regulations made under that statute. In particular, the form of a Site Audit Statement was prescribed. In 2003, (former) reg 12 of the Contaminated Land Management Regulation 1998 (NSW) required the statement to be prepared using Form 2. The essence of Form 2 was the following (the bold is in the original form, but the underlining has been added):

20. [117]

    It will be noted that one of the classes of use for which a site could be certified was “suitable” for “commercial/industrial use”. It will also be noted that the form involved a choice between options (a) “suitable” and (b) “not suitable”, and within the former, the default was suitability subject to specified conditions.

21. [118]

    Substantially the same regime appears to have been in place at all material times thereafter. Mr Lau’s 2016 Site Audit Statement, certifying suitability for “commercial/industrial use” subject to compliance with the Environmental Management Plan, was in the same form.

22. [119]

    There is a constructional choice in cl 17.2. The Court’s task is, having regard to the text and the matters to which regard may be had bearing in mind it is a covenant in a registered lease, to determine the objective intention to be imputed to the parties by the use of those words. That involves a process of drawing together the considerations identified above. Many works on the construction of contracts, while they are long on the various principles and rules, are short on how a court reconciles between the competing candidates for legal meaning that emerge when those principles and rules are applied. It is necessary to bear the various available constructions in mind, and consider the extent to which textual and available contextual considerations support or tell against each construction, and to that extent there is an iterative process; cf Lord Grabiner, “The iterative process of contractual interpretation” (2012) 128 Law Quarterly Review 41, and see Zhang v ROC Services (NSW) Pty Ltd (2016) 93 NSWLR 561; [2016] NSWCA 370 at [87]-[88]. But that of itself does not give much guidance to the resolution of the issue when the resulting considerations point in different directions. Helpful assistance may be found in the analysis in R Catterwell, A Unified Approach to Contractual interpretation (Hart Publishing, 2020), especially at pp 13-14 and chapters 5-6, identifying how to resolve questions of construction when text and context point in different directions.

23. [120]

    Happily, this is a relatively straightforward case, where legitimate contextual considerations point in the same direction. I conclude that cl 17.2 was satisfied, despite the continuing presence of asbestos containing material on the land, if a site auditor certified that the land was suitable for on-going commercial/industrial use. That certification could be unconditional or conditional.

24. [121]

    I acknowledge the possibility that there might be some conditions which were so substantial that they stood in the way of a conditional Site Audit Statement satisfying the clause (for example, a Site Audit Statement that said that only 10% of the land was suitable for commercial/industrial use, and the balance was not suitable and would require long-term measures which would preclude the land being used for any purpose for many years). But such extreme cases are well removed from the present case, where suitability is certified subject to compliance with the September 2016 Environment Management Plan. Indeed, the Site Auditor Guidelines (to which Mr Clay made extensive reference) required Site Audit Statements to be issued with as few conditions as practicable, and where the condition was compliance with an Environmental Management Plan, that compliance was required to be enforceable, notably, as a condition of development consent.

25. [122]

    I further acknowledge that questions not free from difficulty would arise if the site auditor had wrongly certified conditional or unconditional suitability for on-going commercial/industrial use (those questions would in turn depend on whether the mistake were innocent, negligent or knowing), but once again that does not arise for it was not suggested in this appeal that Mr Lau’s report was defective (although this had been in issue at trial).

26. [123]

    That construction reads the clause contextually with the regulatory regime. It is natural to give a clause which refers in terms to land usage and whose application bites at the conclusion of a lease where there has been a special use by Defence for many years, a meaning which picks up the planning regime. It also draws upon the identicality of “commercial/industrial use” in cl 17.2 and the mandated form of a Site Audit Statement, including its conditionality. Such a construction also accords with the purpose, which was to permit approval or consent under the planning regime to the changed use which would occur after Defence surrendered possession. And such a construction also provides certainty, which it is to be presumed the parties would be seeking when possession was restored to the landlord.

27. [124]

    That conclusion is dispositive of the appeal insofar as it turns upon cl 17.2. That conclusion does not involve acceptance of a number of the parties’ submissions.

28. [125]

    First, I respectfully agree with the Developer’s submission that nothing relevantly turns on the Ryall 2002 Audit, which is not mentioned in the Lease, and which is not available as an extrinsic material for the purposes of construction.

29. [126]

    Secondly, the Developer’s submission that the primary judge erred in having regard to post-contractual conduct must be upheld. To be fair, the Commonwealth flagged in its written submissions provided well in advance of the hearing of the appeal that it “does not resist ground 12”. Her Honour’s statement of principle at [155] relied upon what had been said in Lym International Pty Ltd v Marcolongo (2011) 15 BPR 29,465; [2011] NSWCA 303 at [124]–[126], Queensland Phosphate Pty Ltd v Korda and Shepard (as joint and several liquidators of Legend International Holdings Inc (in liq)) [2017] VSCA 269 at [37] and JR Consulting & Drafting Pty Ltd v Cummings (2016) 239 ALR 625 at 637; [2016] FCAFC 20 at [54]. The first was in a portion of the reasons which was directed to finding “the terms of a contract not wholly in writing”, which is not the present case, and neglected what was said later, at [142], to the effect that post-contractual conduct was not admissible. The second was confined to when the court is “determining whether a binding contract was in fact formed”, which once again is not this case. The third is a paragraph reciting what the judge at first instance in that proceeding had done, with the Full Court noting that that approach “was not challenged by either party”. Decisions are not authority for what was not argued, and the statement that neither side challenged what the primary judge had done is not to be understood as a tacit endorsement of its correctness.

30. [127]

    The position is clear. There is a general principle “it is not legitimate to use as an aid in the construction of [a] contract anything which the parties said or did after it was made”: Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [35]; Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (2022) 275 CLR 165; [2022] HCA 1 at [45]-[46], to which many other decisions could be added. There are minor exceptions to the rule, but none was applicable here.

31. [128]

    While conceding this ground, the Commonwealth also contended that ground 12 was “not even close to dispositive”. The Developer’s success on this ground does not alter the result I have reached based on the text of the Lease and the considerations to which regard may legitimately be had.

32. [129]

    Thirdly, the Developer said that “suitable” did not mean “conditionally suitable”. That submission is only superficially attractive, for the following reasons.

    1. (1)

       The “commercial/industrial use” of which cl 17.2 speaks was not confined to the existing uses on the Land (whatever they be and howsoever they be expressed). That is especially the case if (as the Developer contended) “on-going” did not restrict the class of lawful permitted uses. But it was not open to the landlord after the expiration of the Lease, or any new tenant, to conduct commercial/industrial uses lawfully, unless first development consent or approval had been obtained. That is simply a consequence of the planning regime applicable to the Land. It follows that at least one element of conditionality is inextricably embedded in cl 17.2. Another way of putting this is that cl 17.2 must mean “suitable for on-going commercial/industrial use assuming planning approval is sought and obtained for that use”.

    2. (2)

       The parties to this Lease chose to use the words “suitable for on-going commercial/industrial use” to delineate the scope of the covenant. It is reasonable to impute from their use of those words an intention to pick up the regulatory regime which mandates a Site Audit Statement that certifies that “the site is SUITABLE for … commercial/industrial [use] subject to compliance with the following environmental management plan”. It was no coincidence that the words in cl 17.2 so closely mirrored the mandatory language of a Site Audit Statement.

    3. (3)

       The planning regime was such that in order for a planning authority to grant approval or consent, it would be necessary to consider a Site Audit Statement, and the planning regime permitted consent to be granted conditionally, including on condition that there be compliance with an Environmental Management Plan.

33. [130]

    Fourthly, the Developer also said that in order to make that finding:

34. [131]

    I disagree. First, the conclusion does not turn on contemporaneous evidence; it is a question of construction which turns on the definition chosen by the parties of “Contamination”, which referred to safety to human health in terms which depended upon a particular use of the premises. One way of avoiding risk to human health is to remove all of the contamination, but another is to impose conditions upon what may be done on the land, including by an Environmental Management Plan. Secondly, “suitable for on-going commercial/industrial use” is apt to pick up the certification by a Site Auditor which was required to be in terms of what was “suitable” and which extended to “commercial/industrial” use, and which would be required for planning approval for a change of use as well as for the demolition and construction which a developer would inevitably engage in following the conclusion of the Commonwealth’s possession. Thirdly, this is not “novel”. It reflects the opinions of Mr Clay at trial. Not all of Mr Clay’s report was included in the Blue Books. However, the joint report in which he participated recorded under Question 30 (“Did asbestos contaminated soil need to be remediated to make the site suitable for ongoing commercial/industrial use as at the date to the Deed of Surrender?”):

35. [132]

    Finally, I return to the point which perhaps underlies the Developer’s submissions on construction. How, it may be asked, can the Land be regarded as “suitable” for ongoing commercial/industrial use if there is known asbestos on the surface? The answer is that the words in cl 17.2 are to be construed contextually, including that they represent a standard of remediation which accords with the position at the end of decades-long occupation of the Land by Defence, following which it is likely that planning permission will be required for a different use. While Defence was in occupation, the risks presented by the known presence of asbestos in the surface of the Land were addressed by implementing the Environmental Management Plan. There is no longer any challenge to the adequacy of the certification by the site auditor that, so long as the Environmental Management Plan was implemented, the Land would be suitable for commercial/industrial use. Any lawful commercial/industrial use would require planning permission. Any such planning permission would invariably be conditional, and one condition was apt to be the continued implementation of the Environmental Management Plan until and unless it were shown that such implementation was no longer required. Indeed the Site Auditor Guidelines required the site auditor to review the Environmental Management Plan to ensure that it was enforceable.

36. [133]

    For those reasons, I do not accept the Developer’s submission that “suitable” meant unconditionally suitable.

37. [134]

    Fifthly, the Developer emphasised that cl 17.2 should not be understood to entitle Defence to leave in place asbestos or asbestos-containing material which it knew, or ought to have known, was likely present on the surface or in the top 10cm of the soil. I do not agree. I do not accept that “remediate to a standard suitable for on-going commercial/industrial use” required either removing all asbestos from the top 10 cm of the soil, or raking the Land or laying down a concrete hardstand over the Land (which was the third alternative nominated by the Developer) in all areas where asbestos was known to exist. It needs to be borne firmly in mind that the remediation was to a particular standard, and that need not necessarily involve removal or screening. The issue is one of management of risk. This is recognised in NEPM (both as originally made, and as amended in 2013) which stated:

38. [135]

    The Developer’s submission comes close to a contention that the clause required giving an unconditional Site Audit Statement. But for substantially the same reasons already given concerning the rejection of the submission that “suitable” did not mean “conditionally suitable”, the parties should not be understood to have agreed to such a stringent standard.

39. [136]

    For those reasons, notwithstanding the continuing presence of asbestos-containing material on the surface and in the top 10 cm of the soil at the expiration of the Lease, Defence had not breached cl 17.2. The conditional Site Audit Statement and the extant Environmental Management Plan signified that the Land was in a condition which was suitable for on-going commercial use within the meaning of that clause.

Grounds of appeal based on cl 19.1

1. [137]

   It will be recalled that cl 19.1 provided that:

2. [138]

   The Developer had pleaded that the failure to remediate the Land was a breach of cl 19.1(a). This was not a large issue at trial. Relatively brief submissions on cl 19.1 were made in Defence’s written submissions in reply.

3. [139]

   The primary judge gave concise attention to this basis of the Developer’s claim. In part that reflected the absence of attention it had been given by the Developer. In part it was a consequence of her view of the release in the Deed. Her Honour proceeded to state the following at [418]-[419]:

4. [140]

   Grounds 13, 14 and 15 challenged this aspect of the judgment of the primary judge, under the heading of “wrong construction of cl 19.1”. These grounds were as follows:

5. [141]

   The Developer’s real complaint was its contention that cl 19.1 had a broader operation, so that the failure to remediate by removing asbestos containing material contravened cl 19.1 as well as cl 17.2. The Developer’s point was that although the primary judge addressed the removal of hazardous chemicals, that reasoning did not address the Developer’s claim based on the obligation to remediate the Land.

6. [142]

   However, her Honour had already considered the relationship between cll 17.2 and 19.1 at [92]-[93]:

7. [143]

   On that basis, her Honour’s consideration of cl 19.1 was sufficient. It was far from prominent in the submissions at trial, and on the view of the release taken by her Honour, was non-dispositive. In a case such as the present, where the parties raised a multitude of issues, and supplied written submissions exceeding 450 pages, it is open to a judge to give relatively brief reasons on minor non-dispositive points.

8. [144]

   Separately from the above, there is another reason why this ground does not assist the Developer. Even if the Developer established that the primary judge had failed sufficiently to address this point, that would not mean that Developer would succeed in the appeal. It is necessary for the Developer to establish that the point is well-founded in law, irrespective of any failure to provide adequate reasons. These points were made in Housman v Camuglia (2021) 104 NSWLR 615; [2021] NSWCA 106 at [33]-[34]:

9. [145]

   The same points were reiterated in Alexiou v Alexiou [2025] NSWCA 164 at [45]. On a question such as this, even if there was a failure to give reasons, if Defence was correctly found to be entitled to judgment, the appeal will be dismissed, and if it was not, the appeal will be allowed.

10. [146]

    Turning to the submissions on construction, the Developer contended that the primary judge misconstrued cl 19.1, because her conclusion “involved a misreading of the chapeau to clause 19.1”. The Developer submitted that the clause “does not say to return the Premises in the same condition as detailed in the Condition Reports”. But the primary judge did not hold that that was what it said. Her Honour carefully said at [93] that the Condition Reports “informed” the content of Defence’s obligations. That is, self-evidently, correct, having regard to the text of cl 19.1.

11. [147]

    Clause 17 was a specific provision concerned with contamination and hazardous substances on the Land. Clause 19 was addressed to the Premises, which were to be returned “clean and in good repair and condition (fair wear and tear excepted)” at the expiry of the Lease. In order to assess whether the Premises were “clean” and “in good repair and condition” subject to fair wear and tear, regard was to be had to the Condition Reports. All of this points against cl 19, which is a familiar clause in many commercial and residential leases (see for example Graham v Markets Hotel Pty Ltd (1943) 67 CLR 567 at 578; [1943] HCA 8), having any additional obligation insofar as it applied to contamination and hazardous substances, over and above what is required by cl 17.2. That is to say, there is no reason to strain cl 19.1 so that it not only applies to asbestos containing material on the Land, but further imposes an additional obligation upon Defence over and above the specific obligations in cl 17 dealing with contamination and hazardous substances.

12. [148]

    The force of that observation is enhanced by the fact that the qualified positive obligation in cl 17.2 to remediate the Land “so that no significant contamination is migrating from the site” necessarily contemplates that cl 17.2 may be satisfied notwithstanding the continuing presence of small quantities of contamination, so long as the Land is at a standard suitable for on-going commercial/industrial use and any contamination migrating from the site is not significant. As a matter of ordinary contractual construction, cl 19.1 is to be construed harmoniously with cl 17.2, which includes construing it so as to not undermine what is expressly permitted by cl 17.2.

13. [149]

    Another way of making this point is to observe that (1) the nature and extent of the obligations imposed by cll 17.2 and 19.1 are a question of construction, (2) the two clauses are to be considered together, appearing as they do in the same Lease and imposing obligations on Defence at the same point in time, (3) the clauses are framed in terms of different subject matters, one specific and one more general, (4) the more specific clause entitles Defence to leave some contamination on the Land. Why in those circumstances should the general clause, which is in effect boilerplate, be construed so as to be inconsistent with the specific clause which is bespoke to this Lease? That is to say, why should the parties be taken to have agreed that there were separate obligations such that satisfaction of the specific clause directed to contamination on the Land might not be sufficient to satisfy the general clause directed to whether the Premises were clean and in good repair and condition?

14. [150]

    That in substance was the reasoning of the primary judge, albeit expressed more concisely. These grounds are not made out.

Grounds of appeal relating to the Deed

1. [151]

   What remains in this appeal is the Developer’s challenge to the construction of the Deed, and the dispute between the parties about whether the pleadings and conduct of the trial permitted her Honour to rely on it. None of this will have any impact upon the outcome of the appeal.

2. [152]

   I respectfully agree with the primary judge that aspects of the Deed are poorly drafted. That may reflect no more than that it reflects the outcome of a negotiation. But its legal meaning turns on the language in the document executed by the parties.

3. [153]

   The Developer’s submission that if there was a breach of cll 17.2 or 19.1 of the Lease, it was not released by the Deed, assuming favourably to Defence that the conditions precedent (namely, compliance with the balance of the Deed) were satisfied, is not without force. However, there are considerations pointing in the opposite direction.

   1. (1)

      On the one hand, the release is in cl 7.2. That clause is expressly subject to cl 7.3. Clause 7.3 commences “Despite the release contained in clause 7.2”. The clause goes on to provide that “this Deed will apply to all provisions of the Lease except provisions relating to [remediation and cl 19.1]”. A literal meaning is elusive. What does it mean for the “Deed” to “apply” to a provision of the Lease? But the only relevant aspect of the Deed for present purposes is the release, and thus it seems natural to read “provision of the Lease” as a reference to a obligation or liability sourced in a provision of the Lease. Read that way, those words are to be understood as providing that the release contained in cl 7.2 does not extend to obligations or liabilities in certain provisions of the Lease, and those obligations or liabilities include those relating to remediation and cl 19.1 It may be acknowledged that at least part of the sense of cl 7 is that the known ongoing contamination issues which are the subject of elaborate provision in cll 10-12 (including concerning the “Licensed Area”) must fall outside the release. But it is difficult to see, based on the language of the Deed alone, how the release in cl 7.2 extended to the remediation obligation imposed by cl 17.2. This is the difficulty with the reasons of the primary judge at [227] that “the generally expressed remediation obligation in the lease was re-crafted into a set of bespoke obligations”.

   2. (2)

      On the other hand, telling against that construction is the ambiguity in cl 7.3 based on the word “which”. Is its antecedent the immediately preceding obligations numbered (1), (2) and (3), or alternatively “all provisions of the Lease except” those obligations? Further, cl 12(1) proceeds on the basis that the obligations under cl 17 of the Lease are not released. There is also the fact that Defence paid $25,000,000, but the Deed falls to be construed without regard to the context in which that payment was made. I acknowledge the force of the points made by the primary judge in the second half of [227] in this respect.

4. [154]

   It is in some respects unsatisfactory to resolve the meaning of a poorly drafted Deed without regard to context, especially having regard to the special principles governing the construction of or reliance upon a release: Grant v John Grant & Sons Pty Ltd (1954) 91 CLR 112; [1954] HCA 23. There is some controversy concerning this, but on any view when a release is relied upon, it is open to the releasor to point to the parties’ subjective intentions either as a matter of construction or in order to prevent what would be the unconscientious assertion of the release: see Reid v Commonwealth Bank of Australia (2022) 109 NSWLR 149; [2022] NSWCA 134 at [38]-[52]; Redbubble Ltd v Hells Angels Motorcycle Corporation (Australia) Pty Ltd (2024) 303 FCR 100; [2024] FCAFC 15 (stating at [38] that “there is appellate authority to the effect that a party’s subjective intention could inform the construction of a release: see, eg, Burness v Hill [2019] VSCA 94 at [78] per Kaye, McLeish and Hargrave JJA”), and see P Herzfeld and T Prince, Interpretation (3rd ed, 2024, Lawbook Co), pp 688-691.

5. [155]

   The absence of contextual evidence tends to emphasise the force of the Developer’s submission that the release had not been perceived by it to be relied on by the Commonwealth. In litigation where a vast quantity of evidence was tendered at trial, it is to be expected that steps could and would have been taken to adduce evidence which bore upon whether the release was an answer to its claim.

6. [156]

   However, the same considerations also tend to tell against reaching a final conclusion as to the construction of a poorly drafted release, in circumstances where as it happens the question arises with virtually nothing by way of surrounding circumstances save that one party paid the other $25,000,000, where that question does not affect the resolution of the appeal.

7. [157]

   The question of whether it was open to the primary judge to determine the litigation based on the release is even more removed from the issues that are dispositive, and even more arid. The Developer contended that it was denied procedural fairness by the primary judge basing her decision upon the release. But making every assumption favourable to the Developer on that issue, the question is whether the denial of an opportunity to adduce evidence and cross-examine and be heard on the point was material: LPDT v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2024) 280 CLR 321; [2024] HCA 12 at [12]-[16]. In the present case, it “can affirmatively be concluded that the outcome would inevitably have been the same”, to use the language of LPDT at [16], because of the proper construction of cll 17.2 and 19.1.

8. [158]

   Bearing the above in mind, I do not think it is appropriate to add to the length of these reasons to determine this issue. Merely summarising the parties’ submissions as to the shifting stances during the hearing, and whether or not the course adopted by the primary judge was open would take a deal of time and unduly lengthen these reasons, and would be directed to an issue of no interest to anyone other than the parties (and it may be doubted that the parties would have any abiding interest in an analysis which did not affect the appeal’s outcome).

Conclusion and orders

1. [159]

   For those reasons, which depart from those given by the primary judge, the appeal should be dismissed.

2. [160]

   That result reflects the fact that although when Defence surrendered the Land, there continued to be asbestos, including on the surface or within 10cm of the surface, the covenants on which the Developer sued were not expressed in absolute terms. The principal covenant (cl 17.2) required Defence to “remediate the Land to a standard suitable for on-going commercial/industrial use”. The Developer obtained the benefit of a Site Audit Statement certifying that the Land was suitable for commercial/industrial use, albeit subject to compliance with an Environmental Management Plan. True it is that the asbestos on the Land caused the incurring of costs which would not have been incurred had the Land been pristine. But Defence was not obliged to return the Land in pristine condition. Nor did the covenant to return the Premises “clean and in good repair and condition” impose any additional obligation concerning remediating the Land.

3. [161]

   The orders I propose will permit the parties to be heard as to costs of the appeal. There is good reason to depart from the usual order as to costs, in particular having regard to the facts that the appeal extended into a third day because of the belatedly amended notice of contention which, as it turns out, was dispositive. One possible exercise of the discretion as to costs would be an order that Defence pay the Developer’s costs of the third day of the appeal, and (having regard to the parties’ mixed success), an order that otherwise the Developer pay a fraction of the Commonwealth’s costs. Another possibility would be to determine that, bearing in mind all of the considerations relevant to costs, there be no order as to the costs of the appeal, with the intention that each side bears its own costs. The parties are entitled to be heard as to costs if they are unable to reach agreement, and the orders I propose will permit that to occur.

4. [162]

   I propose these orders:

5. [163]

   FREE JA: I have had the benefit of reading in draft the reasons for judgment of Leeming JA. I agree that the appeal should be dismissed, and with his Honour’s reasons concerning the first three issues identified by his Honour at [80]. In circumstances where that is sufficient to dispose of the appeal, I prefer not to express any view about the construction and application of the Deed.

6. [164]

   GRIFFITHS AJA: I agree with Leeming JA’s comprehensive reasons and the proposed orders.