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Property: Contamination and proof

Property: Contamination and proof

By Russell Cocks

Personal Property 


Snapshot A vendor’s duty of disclosure in relation to contamination is based on the Environment Protection Act. Issues of contamination remain an area of uncertainty for property lawyers. The sale of real estate occasionally raises the issue of contamination affecting the land and there have been few cases to guide practitioners in dealing with such matters. Examples of common contaminants in a domestic or commercial environment are asbestos in homes and outbuildings or commercial premises and petroleum products in land previously used for commercial purposes but now perhaps desired to be used for residential purposes. The concept of “affecting the land” calls attention to the vendor disclosure obligations set out in s32 of the Sale of Land Act but a careful consideration of those provisions fails to reveal any statutory obligation, in the absence of a formal notice relating to the contamination, to disclose the existence of contamination. While the relatively recently introduced s48A of the Sale of Land Act may have extended remedies for breach of the Act, establishing a breach may itself prove difficult. Contamination may therefore be described as a defect, perhaps a latent defect, but certainly a defect as to quality and not as to title. The underlying principle in relation to quality defects remains caveat emptor and a purchaser who discovers contamination after entering into the contract or, indeed, after settlement may have limited recourse against the vendor. One exception to caveat emptor is misrepresentation, either fraudulent, negligent or innocent, but fraudulent misrepresentation is notoriously difficult to prove and the other varieties each have their own problems of proof. Statutory misrepresentation in the form of a breach of the Australian Consumer Law may well hold more fertile grounds, but the average purchaser of a domestic or small commercial site will often find the costs of such proceedings forbidding. Metropolitan Fire and Emergency Services Board v Yarra City Council [2015] VSC 773 involved combatants that were anything but the “average citizen”. These parties were able to fund a hearing that occupied 22 sitting days, two senior counsel and six junior counsel to determine whether Yarra Council was responsible for contamination on land that had been occupied by the former Richmond City Council and came into the hands of the Board after 100 years of use as a municipal tar pit and subsequently a quarry and an abattoir. The Environment Protection Authority (EPA) had issued a clean up notice and the Board sought damages for the cost of the clean up from the Council on the basis that the Council had caused or permitted the pollution. While the Board advanced many arguments to support its claim, only an argument based on Council’s liability under s62A of the Environment Protection Act was successful. It is the other, unsuccessful, arguments that are of more interest to property lawyers. These were, in summary: Statutory duty – the Board was not entitled to rely on the Council’s breach of s45 of the Environment Protection Act as that was the province of the EPA Planning duty – despite the Council being the responsible authority for planning, this did not create any additional duty to the Board Non-pollution duty – this was couched in terms of a tortious duty and rejected on the basis that the loss was not foreseeable, but reference was made to the underlying principle of caveat emptor, the touchstone of property lawyers Demolition duty – again, based on the Council’s various statutory duties Disclosure duty – which sounds like a property law argument but was also couched in tortious terms and relied on the case of Noor Al Houda Islamic College v Bankstown Airport Ltd [2005] NSWSC 20 involving non-disclosure of asbestos. This argument was rejected largely because the Court was satisfied that the Board had been aware of many reports relating to the contamination and had given release and indemnities to its vendor, the state of Victoria. The ratepayers of the City of Yarra may well feel hard done by as they have been fixed with responsibility for a very expensive clean up of pollution caused by the City of Richmond and the City of Richmond did not even receive the proceeds of sale as the state government had revoked the Crown grant and sold the land to the Board, wisely including releases and indemnities in that contract. Russell Cocks is author of 1001 Conveyancing Answers and the LIV Mentor of the Year 2015. For more information go to www.russellcocks.com.au.

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