In brief

The case of Albion Mill FCP Pty Ltd v FKP Commercial Developments Pty Ltd [2018] QCA 229 concerned an appeal to the Court of Appeal against a decision of the Supreme Court to award damages for a breach of contract as a result of the First Appellant's rescission of a sales contract. The First Appellant additionally appealed the Supreme Court's assessment of damages. 

The Court of Appeal held that the contents of the Appellant's due diligence report, which included a "Remediation Action Plan", demonstrated an understanding of the notification of contaminated land. The Court of Appeal also held that the Supreme Court's assessment of damages was correct.

The Court of Appeal therefore dismissed the appeal by the First Appellant.

Background

The First Appellant was Albion Mill FCP Pty Ltd; a corporate entity that was related to Fridcorp Projects Pty Ltd (Fridcorp) in that the same individual held all shares in both entities. The development director of Fridcorp was also the sole director of the First Appellant at the time the contract was executed. 

The Second Appellant was the director of Fridcorp.

The land, the subject of the appeal is located at 60 Hudson Road, Albion. The Respondent had obtained a preliminary approval to develop the land for a variety of uses with a height restriction of 20 storeys. 

The Respondent entered into initial negotiations for the sale of land with Fridcorp. The Second Appellant offered $25 million for the land on the basis that requested documents pertaining to certain matters which included "Environmental Site Assessment and Hazardous Material Reports" were provided. 

Fridcorp subsequently proposed a due diligence process and suggested that the files be shared through a Dropbox folder. In the documents provided, a report prepared for the Respondent stated that three of the 12 lots comprising the site were contaminated and that a site management plan would need to be developed and approved under the Environmental Protection Act 1994 (EPA). A certificate of approval of a site management plan issued under the EPA and the written results of a search of the Environmental Management Register and the Contaminated Land Register showing that each of the relevant lots had been registered were also provided. 

A due diligence report was prepared prior to the execution of the contract. The report included a paragraph titled "contamination", with specific detail of the nature of the contamination and attached a Feasibility Study which provided an estimate of the cost of "remediation". 

The Second Appellant ultimately entered into the "put and call" option contract with the Respondent on 17 July 2015, as it was nominated to be the buyer by Fridcorp's lawyers. Pursuant to a variation in the contract, the Second Appellant was required to pay five percent of the purchase price by a certain date but failed to do so. The Respondent subsequently gave notice of the default and, upon the failure to pay persisting, terminated the contract. 

The First Appellant relied on section 421(3) of the EPA to rescind the contract and claimed that the Respondent had not given proper notice that the land was registered in the Contaminated Land Register maintained under the EPA. The Respondent contended that it gave such a notice. 

The prior decision of the Supreme Court 

In the Supreme Court proceedings, the Respondent made a claim for damages for a breach of contract in the order of $5 million.

The First Appellant argued non-compliance with section 421 of the EPA on five grounds. It further argued that it had the right to rescind the contract pursuant to section 421(3) of the EPA due to the non-compliance. 

The Supreme Court found that sufficient notice had been given as required under section 421(3) of the EPA and dismissed the appeal on all grounds. The Supreme Court awarded damages for a breach of contract to the Respondent in the sum of $5,459,640.41.                                 

Issues in dispute

The First Appellant appealed to the Court of Appeal against the orders made by the Supreme Court on the basis that the Supreme Court had erred in its finding that notice had been given pursuant to section 421 of the EPA, and challenged the Supreme Court's decision to award damages.

Relevantly, the First Appellant contended as follows:

  1. the disclosed documents did not constitute sufficient notification that the particulars of the land were on the Contaminated Land Register but merely stated an historical fact;

  2. the disclosed documents could only be used to support an inference that the land was on the Contaminated Land Register;

  3. the inclusion of a "no responsibility" clause in the due diligence contract created the inference that the contents of the due diligence material should not be relied upon or, in the alternative, if the disclosed documents were capable of constituting statutory notice, the documents were not given to the First Appellant but rather a related corporate entity; and 

  4. the Supreme Court erred in its assessment of damages.

The Court of Appeal considered the grounds of the appeal and held that the grounds could not be sustained. 

Proper construction of section 421 of the EPA

The Court of Appeal held that "notice" for the purpose of section 421(2) of the EPA must have the following five characteristics: 

  1. it must be in writing;

  2. it must notify "that the particulars have been recorded in the Register";

  3. if the land is subject to a site management plan, it must notify the "details of the plan";

  4. the owner must "give" the notice to the "buyer"; and

  5. the notice must be given "before agreeing to dispose of the land".

The Court of Appeal found that there was no formality required for a notice under section 421 of the EPA. The notice need only be in writing and communicate the particulars of the land that has been placed on the Contaminated Land Register, and the details of any site management plans. The Court of Appeal also held that the form of written communication is immaterial and the essential matter is whether the writing reaches the attention of the buyer and informs them of the contamination. 

The Court of Appeal acknowledged that the First Appellant's submissions may have been more persuasive if it had made a case where those that had read the documents did not understand what they signified. The Court of Appeal however held that, in the circumstances, the actions of the First Appellant had constituted an understanding of the essential terms and therefore the argument could not be made. 

In its defence, the First Appellant admitted that an assistant had accessed the Dropbox folder and had downloaded the data. The First Appellant further admitted that it "had the benefit of and received the disclosure provided by the plaintiff [Respondent] through the Data Room and the documents downloaded therefrom before entering into" the contract and specifically stated that it had access to the Environmental Management Register and the Contaminated Land Register.

The Court of Appeal found that the First Appellant had received notice and had understood the essential terms which therefore constituted sufficient notification under the EPA. 

The Court of Appeal additionally dismissed the First Appellant's argument that the inclusion of a "no responsibility" clause diminished the documents reliability and held that the proposed "no responsibility" clause was not in the final version of the contract and could not constitute an improper notification. 

In relation to the First Appellant's submission that no notice of the essential facts were given to the actual purchaser nominated by Fridcorp, the Court of Appeal rejected this submission on the basis that at the time that the contract was signed, the First Appellant and Fridcorp had the same director and therefore had the relevant corporate mind for the purposes of the project. 

Calculation of damages

The First Appellant asserted that the Supreme Court had erred in its assessment of damages and submitted that the damages should be measured by the difference between the contract price of $25 million and the market value at two alternative dates being the settlement date and the relevant date of valuation. In support of the argument, the First Appellant submitted that the Supreme Court was wrong in accepting the valuation report tendered by the Respondent, without calling any contrary evidence, and based its argument upon an attack of the Respondent's valuer. 

The Court of Appeal disagreed with the First Appellant and held that the submissions were misconceived and that the Supreme Court was correct in its approach to the assessment of damages.

The Court of Appeal therefore dismissed the appeal with costs. 

This article has been published by Colin Biggers & Paisley for information and education purposes only and is a general summary of the topic(s) presented. This article is not specific legal or financial advice. Please seek your own legal or financial advice for any questions you may have. All information contained in this article is subject to change. Colin Biggers & Paisley cannot be held responsible for any liability whatsoever, or for any loss howsoever arising from any reliance upon the contents of this article.​

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