Editorial » Citywide biodiversity overlay amendment package » Changes to the change rules » Enforcement and litigation under the Planning Act 2016 and Planning and Environment Court Act 2016 » Reasonable and relevant conditions Parklands Blue Metal Pty Ltd v Sunshine Coast Regional Council & Ors 2017 » Interest in land » Liquidators as Executive Officers for the purposes of the EP Act » Case Note United Petroleum Pty Ltd v Bonnie View Petroleum Pty Ltd EDITION #7 WINTER 2017 Table of Contents EDITORIAL 1 CITYWIDE BIODIVERSITY OVERLAY AMENDMENT PACKAGE 2 CHANGES TO THE CHANGE RULES 4 ENFORCEMENT AND LITIGATION UNDER THE PLANNING ACT 2016 AND PLANNING AND ENVIRONMENT COURT ACT 2016 6 REASONABLE AND RELEVANT CONDITIONS PARKLANDS BLUE METAL PTY LTD V SUNSHINE COAST REGIONAL COUNCIL & ORS 8 INTEREST IN LAND 10 LIQUIDATORS AS EXECUTIVE OFFICERS FOR THE PURPOSES OF THE EP ACT 12 CASE NOTE UNITED PETROLEUM PTY LTD V BONNIE VIEW PETROLEUM PTY LTD 14 BRISBANE Phone +61 7 3024 0000 Fax +61 7 3024 0300 Level 8 Waterfront Place 1 Eagle Street Brisbane QLD 4000 PERTH Phone +61 8 9211 8111 Fax +61 8 9221 9100 Level 27 Allendale Square 77 St Georges Terrace Perth WA 6000 Email [email protected] EDITION #7 WINTER 2017 Editorial SARAH MACOUN Welcome to our seventh edition of Envisage! The number seven is considered a special and lucky number by many, and the importance of this number is reflected, coincidentally, in this edition with its seven articles and seven contributing authors. We are very grateful to the readers of Envisage for their ongoing support – without which we would likely not have made it to edition seven. As always, we welcome your feedback and suggested topics for future editions. The timing of this edition follows the commencement of the Planning Act 2016 (and its supporting documents) and the Planning and Environment Court Act 2016 on 3 July 2017. Two of the articles in this issue of Envisage highlight changes brought about by the new legislation, namely with respect to changing development applications, approvals and with respect to enforcement and litigation. Change is also the theme of David’s article as he writes about the surprises contained in the Brisbane City Council’s draft biodiversity overlay amendment package. This draft amendment effectively seeks to restrict development in areas the Council wishes to ultimately revegetate (even if the area currently contains no vegetation and has no present environmental significance). James and Gemma have written about interesting case law which has developed around what is a sufficient “interest in land” to sustain a claim for compensation pursuant to the Acquisition of Land Act 1967, including potentially lessees of shops and owners of caravans in a caravan park. Three of the articles are case notes distilling key points in recent notable judgments of the Queensland Supreme Court, Victorian Supreme Court and the Queensland Planning and Environment Court. Robyn and Olivia’s consideration of the Parklands Blue Metal case will be of particular interest to those involved in projects requiring a haul route, as a focus of that case was the question of the timing of a condition that required upgrading the haul route. The case of Linc Energy discussed by Olivia sounds a warning to insolvency practitioners who are assisting a company in receipt of an Environmental Protection Order. Finally, Kimberley’s helpful summary of the United Petroleum decision of the Victorian Supreme Court highlights that a former owner of a service station site can be liable for the failure to remediate, especially in circumstances where a formal agreement provides for remediation of the site. Please enjoy our winter 2017 edition of Envisage (which we note can help you to usefully pass the time in between episodes of Game of Thrones, auspiciously, season seven). PAGE 1 The new mapping for the Biodiversity Overlay Code significantly extends the reach of the Code in two ways: a. by mapping areas as having high or general ecological significance that were not previously mapped; and b. through the inclusion of new overlay categories referred to as “High Ecological Significance Strategic” and “General Ecological Significance Strategic”. The latter areas do not presently have ecological significance but the Council deems that they should not be developed because, strategically, the Council wishes to see these areas rehabilitated to provide future wildlife corridors. The policy intention with respect to these areas is that no building or operational work occurs within them, or if it is allowed to occur, has offsets provided or paid to facilitate restoration of other areas that form part of the city’s green space system. In a nutshell, the main purpose of the amendment package is to effectively restrict development in areas that don’t have a high ecological significance, so that over time, they can be re-vegetated to a point of being of high ecological significance. Additionally, the amendments potentially trigger the payment or provision of offsets in affected areas which presently contain no vegetation. It is a somewhat bizarre outcome that a land owner would have to pay offsets for developing facilities in an area that contains no vegetation and has no present environmental significance. Unusually, the development of a dwelling house on a single lot is selfassessable, or as it is now known “accepted” development. The amended code intends to achieve the strategic intent by making the development Citywide biodiversity overlay amendment package DAVID NICHOLLS The Brisbane City Council released a Citywide Amendment Package - Biodiversity for public consultation earlier this year and the period for submissions ended on 6 June 2017. The submissions that were made are now under consideration by the Council. The changes proposed are very significant and will markedly impact on landowners rights with respect to the use of affected properties. 2 PAGE of new houses, or new premises other than houses, a code assessable development. Similarly, building work for an extension to an existing dwelling house, if the extended portion is in the high or general ecological strategic sub-categories, will become a code assessable development. Under the proposed citywide mapping, extensive areas where building work is not presently regulated will become regulated, and will require a development application to be made before a house or extension, out buildings or other facilities may be constructed. It is likely that such applications, when made, will be refused. The purpose of the code is stated to be achieved through a number of overall outcomes including: “(a) …restoration of the network of lands with in-situ values or areas of strategic biodiversity value within Brisbane.” (my emphasis) The clear strategic planning intent is to create biodiversity corridors on private land which presently do not have biodiversity values. An effect of the changes to the code will be that areas presently clear of vegetation and suitable for development of a house or other structure, may not be able to be developed at all if the amendment package proceeds in its present form. Another effect will be to contain all development on rural residential land within a 2500m2 building location envelope. That envelope will have to accommodate all structures as well as the waste water treatment area. Unfortunately, this new mapping is not about the biodiversity values of what is presently on the ground. Rather, it is about forcing the undertaking of rehabilitation to return the mapped land to its pre- 1788 status. This will be achieved through restricting land owners rights to reasonably use their properties. There is no ability to undertake ground truthing surveys and apply to have the mapping amended, as is the case with State vegetation mapping. The policy intent behind the amendment package is to increase Brisbane’s habitat cover to 40% of the City’s area. It will achieve this primarily at the expense of residents who live on larger allotments or on acreage in rural or rural residential areas of Brisbane. Overall, the package will potentially complicate simple development in un-vegetated areas that become mapped for strategic restorative purposes. The establishment of a swimming pool, tennis court, stables or equestrian arenas on a clear area of land will not be able to proceed if the area has been mapped as having strategic biodiversity value. The public consultation around the amendment package was fairly limited and many affected landowners will have missed the submission deadline. However, it is understood that the Council remains willing to consider informal submissions. Readers can access the proposed mapping to check the effects on their property through this link: https://www.brisbane.qld.gov.au/planning-building/planningguidelines-tools/brisbane-city-plan-2014/amendments-cityplan-2014/city-plan-amendments-progress/proposed-citywideamendment-biodiversity PAGE 3 Changes to the change rules GEMMA CHADWICK The ability to change approvals, both before and after an appeal period has ended, is one of the more practical elements of the planning legislation. Under the Sustainable Planning Act 2009 (SPA), we became used to the “permissible change” regime for changing approvals after an appeal period ended. The process around negotiated decision notices (which operates before an appeal period ends) has been entrenched for some time. Under the Planning Act 2016 (Planning Act), there are some notable changes to the change rules, which are discussed in this article. NEGOTIATED DECISION NOTICES The provisions dealing with changes during the appeal period are contained in sections 74 to 76 of the Planning Act. As was the case under the SPA, these provisions are intended to allow developers and Councils to resolve disputes about conditions and other matters outside of an appeal, through a negotiated decision notice. The process is largely the same as that contained in the SPA – written representations must be made to Council, there is still an ability to suspend the appeal period if more time is required to make the representations and, as before, an applicant then has 20 business days to make the written representations. Again, there is no timeframe for Council to decide the representations, but there is a new provision which is very important. Once the appeal period is suspended, and representations are made (within the 20 business day period) the suspension of the appeal period will only operate for a further 20 business days. After that, the balance of the appeal period will restart. This is an important change because it means an appeal period might be ticking away, even though the Council has not made a decision in relation to the change representations. There is an ability for an applicant and Council to agree to extend the suspension of the appeal period. Applicants should ensure this power is used, in order to make sure an appeal period does not inadvertently expire. MINOR CHANGES TO APPROVALS Under the SPA, a development approval could only be changed if it was a “permissible change”. The Planning Act uses the term “minor change”, which is defined to cover familiar concepts such as changes that would not result in a substantially different development, not trigger additional referral agencies and not trigger public notification if it had not previously been required for the development application. The important change here is that an assessment manager is no longer required to consider whether or not a person would make a properly made submission objecting to the change. This was an area of the permissible change test which generated difficulties for developers and Council alike. Its removal is a positive step forward. 4 PAGE OTHER CHANGES TO DEVELOPMENT APPROVALS The Planning Act now includes a process for changing approvals for “other changes” where those changes are not “minor changes”. This process can be used instead of making an entirely new development application. The change application is made to the Council, who will then assess and decide it. Public notification is required in some circumstances (i.e. if the change itself triggers public notice or the change involves a substantially different development). The real benefit of the new “other change” regime lies in the assessment provisions. A Council must assess and decide the change application “in the context” of the existing development approval. The reference “in the context of the development approval” is intended to convey that the proposed change should not be considered in isolation, nor should the entire development (including the change) be re-assessed. Instead, it is intended that the change be assessed with reference to the context of the existing development approval. The example provided in the explanatory notes states that, if there is an approval for a 10 storey building and a change application is made for a further two storeys, the additional two storeys are assessed in the context of a 10 storey building. This suggests the assessment approach is to assume the 10 storey building exists with its associated impacts, meaning the further two storeys are assessed in that context, rather than in the context of an undeveloped site. Further, when assessing the change application, the assessment benchmarks only apply to the extent relevant. The explanatory notes provide an example of an existing approval for a shopping centre, cinema and service station, with a change application which only relates to the cinema. It is unlikely that the assessment benchmarks relevant to the shopping centre and service station would be relevant to assessing the change application. The new “other change” process will assist in dealing with inconsistencies between overlapping approvals. Because the old change regime under the SPA limited changes to permissible changes, it was necessary to go back and obtain an entirely new approval for changes outside of that scope. Now, it will be possible to consolidate changes into a single approval. CHANGING COURT APPROVALS Finally, for development approvals that have been issued by the Planning and Environment Court (P&E Court), the Court will be responsible for assessing and deciding a change application only if: the change is a minor change; the approval was given because of an order of the P&E Court; and submissions were made properly for the development application. There are two important things to note here. First, the P&E Court can only consider “minor changes” to Court approvals. If the change is not a minor change, the alternative process for “other changes” applies. Secondly, the requirements are cumulative, so if there were no submissions made about the original application, it is not necessary to go back to Court to change the approval. A Council can assess and decide the change request, even if the approval was issued by the Court. Overall, the changes to the change rules are positive. They add flexibility to the change regime in ways that will be useful to both Councils and developers. PAGE 5 As is always the case with new legislation, some things change and some things don’t. When it comes to enforcement and litigation, there has been one or two big changes, a number of smaller changes, and a lot of re-drafting and refinement of terms and processes that we are already familiar with. Outlined below are some of the notable changes that you need to be aware of. MAXIMUM PENALTIES The maximum penalties for most offences against the Act have increased from 1,665 penalty units to 4,500 penalty units. This represents an increase in the maximum penalty for an individual from $210,039.75 to $567,675.00 and an increase in the maximum penalty for a corporation, from $1,050,198.75 to $2,838,375.00. DEVELOPMENT OFFENCES There hasn’t been any major changes to the development offence provisions, other than to remove the redundant offences relating to compliance assessment. The existing development offences have been retained in the Planning Act, albeit simplified. What you will see in the Planning Act is a simplified version of the four core development offences: 1. Carrying out prohibited development (s162) 2. Carrying out assessable development without a permit (s163) 3. Contravening a development approval (s164) 4. Unlawfully using premises (s165) INVESTIGATION AND INSPECTION POWERS FOR REFERRAL AGENCIES The Planning Act now prescribes investigation and inspection powers for referral agencies. These are similar to the powers afforded to authorised local government employees under the Local Government Act 2009 when carrying out compliance and enforcement. The powers of referral agencies for investigating alleged offences against the Planning Act will include; the power to enter land and businesses, the power to search, film, mark or take something, the power to use equipment on the premises, the power to stop and move vehicles, seize evidence and property and the power to require documents and information to be produced. CIRCUMSTANCES TO GO STRAIGHT TO AN ENFORCEMENT NOTICE The concept of issuing an enforcement notice without first giving a show cause notice is not something new. Where an enforcement authority reasonably considers that it is not appropriate in the circumstances to first give a show cause notice, it may issue an enforcement notice. What is different in the Planning Act is that greater flexibility has been given to enforcement authorities to proceed directly to the enforcement notice step by prescribing circumstances that warrant this type of action. The circumstances relate to: a State or local government heritage pace; works that are a danger to persons or risk to public health; the demolition of works; the clearing of vegetation; the removal of quarry material and other gravel, rock, sand or soil; extracting clay, gravel, sand or soil from waterways; and development causing erosion, sedimentation or an environmental nuisance. Enforcement and litigation under the Planning Act 2016 and Planning and Environment Court Act 2016 THOMAS BUCKLEY On 3 July 2017, the new Planning Act 2016 (Planning Act) and Planning and Environment Court Act 2016 (P&E Court Act) commenced and replaced the Sustainable Planning Act 2009 (SPA). 6 PAGE ENFORCEMENT ORDERS TO BE RECORDED ON TITLE The recording of enforcement orders on the title is a new concept brought in through the Planning Act and will be of particular interest to landlords who sometimes become responsible for the actions of their tenants. Where the Planning and Environment Court (P&E Court) or the Magistrates Court makes an enforcement order, the order will now attach to land and bind the owner, its successor’s in title, and any occupiers of the premises. There are two exceptions to this rule. The first is where the Court has specifically ordered that the enforcement order should not attach to the premises. The second is where the enforcement order is an order that only requires the respondent to obtain a development permit. In those circumstances, the order will not be recorded on the title. Once the Court has made the order, the obligation is on the respondent to apply to the titles office to have the order registered on the title. The respondent must do this within ten business days of the order being made. Failure to do so will constitute an offence. The enforcement order will remain on the title and will only be able to be removed if a person is able to obtain another from the Court (called a compliance order) stating that the enforcement order has been complied with. Only once the titles office receives the compliance order will it remove the enforcement order from the title. RESOLUTION AGREEMENTS The alternative dispute resolution processes offered by the P&E Court are prescribed in the new P&E Court Act. The P&E Court Act governs the constitution, composition, jurisdiction and powers of the P&E Court. Quite often planning appeals are resolved through Court facilitated mediations and are typically formalised through mediation agreements. These will now be called resolution agreements, which must be in writing and signed by the parties in the presence of the Court ADR Registrar. While the forum in which these agreements are negotiated is without prejudice, a resolution agreement can be enforced by making an application to the P&E Court. COSTS IN LITIGATION The most notable change that has come about in the litigation space, is the change to the costs rules. We have gone back to the rule that we had prior to 2012, which is that each party bears its own costs in P&E Court proceedings, subject to limited exceptions. Previously, the P&E Court had a general discretion to award costs. It was not the rule that is applied in the District and Supreme Courts, which is that costs follow the event for the successful party. In the P&E Court it was a discretion to award costs, subject to a number of factors that may influence the Court’s decision to award costs. Since that rule was introduced in 2012, the P&E Court has only awarded costs on a number of occasions. Despite this, the decision has been made to move back to each party bearing its own costs. There are exceptions to this rule, including where litigants commence proceedings without reasonable prospects of success, or conduct litigation for improper purposes. However, it will be very unlikely that any of those exceptions would be triggered in the typical planning cases that go before the P&E Court. Thus, it is likely that in most planning appeals going forward, parties will be able to conduct litigation without fear of adverse costs order. PAGE 7 Reasonable and relevant conditions: Parklands Blue Metal Pty Ltd v Sunshine Coast Regional Council & Ors [2017] QPEC 35 ROBYN LAMB & OLIVIA WILLIAMSON In late 2011, the Sunshine Coast Regional Council refused a development application made by Parklands Blue Metal Pty Ltd seeking a Development Permit for Material Change of Use for Extractive Industry and Environmentally Relevant Activity 16, in order to establish a hard rock quarry at Yandina. Parklands successfully appealed to the Planning and Environment Court and the matter was adjourned so that conditions consistent with the reasons for judgment could be formulated.1 1 Parklands Blue Metal Pty Ltd v Sunshine Coast Regional Council [2014] QPELR 479 Before conditions were formulated, the Council applied to the Court of Appeal for leave to appeal the Planning and Environment Court’s decision. That application was refused.2 On 22 June 2017, His Honour Judge Robertson delivered reasons for judgment with respect to proposed conditions of approval. Although there were many disputed conditions, we focus on the question of the timing of a condition that required upgrading the haul route. TIMING OF THE HAUL ROUTE UPGRADE It was accepted at the merits hearing that there was insufficient room on the site to store overburden in the preparation phase of the quarry. Accordingly, it would be necessary to remove that overburden from the site and prepare the site for business activity. At the conditions hearing, there was a focus on what commencement of the use meant in the context of a quarry operation. Parklands 2 Sunshine Coast Regional Council v Parklands Blue Metal Pty Ltd (2015) 208 LGERA 199 contended that the use would commence when the “extractive industry”, as defined in the planning scheme, commences. On that basis, Parklands submitted that the haul route could be partially upgraded during the 18 month preparation phase. The Court noted that the conditions preferred by Parklands would result in at least 110 large truck movements on a road system that presently experiences very low large truck movements, comprised significant unsealed parts and was well below design standards for traffic safety as agreed by the experts and accepted in the merits hearing. On the other hand, Council and the Yandina Creek Progress Association (the 3rd CoRespondent by Election) contended that the removal of overburden prior to commencement of the quarry business was relevant. The question for the Court was whether the conditions proposed by Council (to ensure that the haul route is fully upgraded before introducing a large number of heavy vehicles) were an unreasonable imposition on the development. It was common knowledge between the traffic engineers that the same safety issues would arise whether the trucks carry overburden or quarry products, and that there were very low heavy vehicle movements on the Councilowned part of the haul route. The Court also accepted expert evidence that introducing a large number of heavy vehicles with smaller vehicles on such a road that was in poor condition, created the potential for conflict. Even though there was insufficient room to stockpile overburden on the site, the Court noted that the need for the haul route upgrade was an issue of traffic safety and amenity impacts. Conditions that required full and adequate upgrading of the haul route were reasonably required as a consequence of the development. Whilst possible issues may arise (e.g. sourcing road building materials before heavy vehicles use the haul route), it was found to not be an unreasonable imposition on the development in light of traffic safety. Ultimately the Court preferred the evidence that the haul route should be fully upgraded, before a significant number of large heavy vehicles per day are introduced on the particular road system. 8 PAGE CONCLUSIONS The Court focussed on the impacts of the proposed conditions, rather than a technical approach about when the use would commence. The Court was also concerned that evidence accepted in the merits hearing would be adequately reflected in the conditions. Whilst the Court acknowledged that the preferred conditions may have convenience and cost implications for Parklands, this did not override traffic safety concerns. PAGE 9 Interest in land JAMES IRELAND & GEMMA CHADWICK 10 PAGE Pursuant to section 12(5) of the Acquisition of Land Act 1967 (Qld) (ALA), any person with an estate or interest in the whole, or part, of any resumed land has a right to claim compensation. Some interesting case law has developed around just what is a sufficient “interest in land” to sustain a claim for compensation. The term “interest” is not defined in the ALA but “land” is defined as meaning “land, or any estate or interest in land, that is held in fee simple, including fee simple in trust under the Land Act 1994” but excluding a freeholding lease under Land Act 1994. The term “interest” (in relation to land) is defined in the Acts Interpretation Act 1954 (Qld) as a “legal or equitable estate in the land” or “a right, power or privilege over, or in relation to, the land”. An “estate” is further defined in the Acts Interpretation Act as including an “easement, charge, right, title, claim, demand, lien and encumbrance, whether at law or in equity.” Those definitions are not particularly useful in determining whether or not an interest in land being resumed will justify a claim for compensation. In general terms, what is required is a connection between the landowners and other entities to use the land for a purpose, which has a value. Obvious examples of an “interest in land” are owners of the fee simple and lessees, but the ability to claim compensation also extends to the holders of an option to purchase land and, in some circumstances, contractual licensees. Interesting illustrations from case law include: A doctor who had a contractual licence with a medical practice for the exclusive use of a car parking space was able to claim compensation for the loss of use of the car park, once it was resumed for road purposes. There was a clearly identified proprietary right, with specific limits, and a value - Sorrento Medical Service Pty Ltd v Chief Executive, Department of Main Roads [2007] 2 Qd R 373 The licensee of a billboard sign, and the operator of the business renting it, who had lost the billboard and its revenue-earning capability after the resumption of the land - General Outdoor Advertising Pty Ltd v DTMR [2012] QLC 51 Lessees of shops where part of the common property were resumed in circumstances where the relevant leases, properly construed, provided contractual rights to use the common areas – LGM Enterprises Pty Ltd v Brisbane City Council [2008] 29 QLCR 176 and Moreton Bay Regional Council v Mekpine Pty Ltd & Anor [2013] QLAC 5 The owners of caravans in a caravan park, who were found to be tenants at will by virtue of being in exclusive possession of their respective caravan sites, and therefore had an “interest in land” pursuant to the NSW Land Acquisition (Just Terms Compensation) Act 1991 – Mooliang Pty Ltd v Shoalhaven City Council [2001] 114 LGERA 45 The company managing a golf course did not have an “interest in land” and was, therefore, unable to claim compensation after an easement across the golf course had been compulsorily acquired - Ironhill Pty Ltd v Transgrid [2004] 139 LGERA 398 In Queensland, any right to claim compensation is subject to section 18(3) of the ALA, which provides that compensation is not claimable by a lessee, tenant or licensee of any land taken, if the constructing authority allows the person’s estate or interest to continue uninterrupted. Further, in February 2009, section 12(5C) was inserted into the ALA, which provides that a person does not obtain a right to claim compensation in relation to an interest in land that is an interest under a services contract for the land (e.g. cleaning contracts). Identifying a relevant interest in land is important to both potential claimants and resuming authorities alike. A resuming authority should, at an early stage, determine what interests there are in the land and whether it wants (or needs) to take a particular interest. “...land, or any estate or interest in land, that is held in fee simple, including fee simple in trust under the Land Act 1994” The central figures in any resumption are generally the landowner and the resuming authority. However, claims for compensation are not limited to owners of the land. PAGE 11 Liquidators as Executive Officers for the purposes of the EP Act OLIVIA WILLIAMSON On 13 April 2017, the Supreme Court held that the liquidators’ disclaimer powers under the Commonwealth Corporations Act 2001 do not prevail over the relevant provisions to comply with environmental obligations under the Qld Environmental Protection Act 1994 (EP Act), including compliance with the requirements contained in an Environmental Protection Order (EPO). “ ...legislation operated to suspend the liquidator’s power to disclaim, because the disclaimer power was inconsistent with the specific provisions used to issue the EPO” 12 PAGE A summary of the facts are as follows: On 13 May 2016, the Department of Environment and Heritage Protection (DEHP) issued an EPO to Linc Energy Limited in relation to the company’s pilot UCG project at Chinchilla. Generally, the EPO required Linc to conduct a site audit and do basic environmental monitoring to characterise the current state of the site. The EPO also required that Linc not materially alter or dispose of any infrastructure on the site that was needed to ensure compliance with the EPO’s requirements without the DEHP’s prior written approval. On 23 May 2016, Linc’s creditors resolved that the company be wound up. Liquidators were accordingly appointed. On 30 June 2016, the liquidators gave notice “disclaiming” the Chinchilla land, the mineral development licence, the petroleum facility licence and the environmental authorities. The notice of disclaimer was made under the Commonwealth Corporations Act. Essentially these provisions enable liquidators to disclaim property and thereby be relieved from all liabilities in respect of the disclaimed property. Notwithstanding the disclaimer, the DEHP contended that Linc was obliged to comply with the EPO and the liquidators were obliged under section 493 of the EP Act to ensure that the company complies with the EPO where there are funds available in the winding up to do so. The liquidators applied to the Supreme Court of Queensland for directions in relation to the company’s liabilities under the EP Act. On 13 April 2017, the Supreme Court published its reasons for judgment in Linc Energy Ltd (in liq); Longley & Ors v Chief Executive Department of Environment and Heritage Protection [2017] QSC 53. Justice Jackson held that an insolvent company’s environmental obligations under the EP Act were unaffected by the liquidators’ disclaimer of related property and resource tenures. Further, the Judge observed that there was “no support” in the text of section 493 of the EP Act to limit the operation of that section by construing the definition of “executive officer” to exclude a liquidator. Nor was there any support for it in the balance of the EP Act or other relevant materials that may be taken into account when interpreting section 493. The Court decided that complex provisions in the Commonwealth Corporations Act regarding the priority between inconsistent Commonwealth and State legislation operated to suspend the liquidator’s power to disclaim, because the disclaimer power was inconsistent with the specific provisions used to issue the EPO. The effect of this case is that liquidators are executive officers for the purposes of the EP Act and as such are required to use available funds to cause the company to comply with its environmental obligations. It is important to note that an appeal in respect of this decision of the Supreme Court was filed on 10 May 2017. However, based on the current state of the law, where an EPO is issued to a company placed into liquidation, liquidators and other insolvency appointees assume the duties and liabilities of an executive officer under the EP Act. They are therefore at a risk of prosecution if they fail to cause the company to comply with environmental obligations under the EP Act. We await the Court of Appeal’s consideration of the issues. In the meantime, insolvency practitioners who are assisting a company in receipt of an EPO, or who may receive an EPO themselves, should seek legal advice as to their obligations. Liquidators as Executive Officers for the purposes of the EP Act OLIVIA WILLIAMSON PAGE 13 Key points: A formal agreement for remediation of the site was made between the parties in September 2010. The cost estimate for remediating the site to the standard required under that agreement was between $433,000.00 and $555,000.00. There were two breaches of the formal agreement, Bonnie View did not prepare a remediation action plan and Bonnie View went into voluntary administration and liquidation and became an externally administered body corporate. The Court held that there was a breach of the obligation by Bonnie View “to do all things necessary” to assist United in taking assignment of a lease. The total costs awarded comprised damages for remediation costs, the costs of preparing a new lease with a third party and the costs for the new settlement with the landlords. United were also entitled to an order against a director of Bonnie View for the variance between the total damages awarded and the total of a bank guarantee and retention amount held, amounting to $390,238.00. In a separate related judgment, United Petroleum were not entitled to a costs order against the liquidators, despite Bonnie View’s liquidators failing to do all things necessary to procure an assignment of the lease. The Court was not satisfied that, had the assignment occurred, litigation would have been avoided. Case Note: United Petroleum Pty Ltd v Bonnie View Petroleum Pty Ltd KIMBERLEY COTTERILL On 21 April 2017, the Victorian Supreme Court awarded United Petroleum $890,238.00 in damages after finding Bonnie View Petroleum Pty Ltd had failed to clean up contamination at one of its 19 retail petrol businesses it sold to United.1 1 United Petroleum Pty Ltd v Bonnie View Petroleum Pty Ltd [2017] VSC 185 THE FACTS Bonnie View Petroleum (BV) operated a retail and wholesale petroleum business, located in Sale, Victoria. The Sale petrol station (Sale site) was leased to BV in 2008 for a term of 15 years, with further options. In 2010, BV sold the Sale site along with 18 other businesses to United Petroleum (United). During due diligence, contamination at the Sale site was discovered. Subsequently, the parties entered into a “Side Agreement” whereby BV agreed to remediate the site and ultimately transfer the lease to United. The Side Agreement required BV to, amongst other things; appoint a United approved environmental consultant to prepare a remediation action plan within six months of settlement (settlement occurred 1 September 2010), commence “remediation works”2 within 12 months of settlement and complete the remediation within three years after commencement of the works. A retention amount of $100,000.00 was withheld from the purchase price and BV agreed to issue a Bank Guarantee in the amount of $400,000.00 in regards to its obligations under the agreement. In addition, a Director of BV, agreed to provide a personal guarantee. BV subsequently went into voluntary administration and later liquidation. United brought a claim against BV alleging various breaches of their agreement. Notably, for failing to remediate the land as specified and for failing to take necessary steps to assign the lease when United required it to do so. 2 The ‘Remediation Works’ were defined to mean “the work and steps set out in the Remediation Action Plan that are determined by the Environmental Consultant and which are approved by the Independent Environmental Auditor that are necessary to be taken to Remediate Contamination or an Environmental Problem at the Sale Site to achieve the Remediation Standards within the Initial Remediation Works Period and “Remediate” and “Remediation” both have a corresponding meaning” (cl 1.1). “United was entitled to be placed in the same situation with respect to damages as if the contract had been performed...” 14 PAGE FAILURE TO REMEDIATE THE LAND Before BV was placed into voluntary administration, it failed to prepare a remediation action plan or remediate the Sale site. United therefore claimed BV breached the terms of their Side Agreement. United claimed $470,000.00 in damages to remediate the site to the standards required by the Side Agreement. In 2010, United contracted SMEC Australia Pty Ltd to assess contamination levels at the Sale Site. The results of the Due Diligence Contamination Assessment (DDCA) showed groundwater contamination above allowed standards, including arsenic, copper, zinc, Total Petroleum Hydrocarbon,C6-C9 and benzene. The DDCA also found the site was ‘a source of offsite groundwater contamination’ and that the contaminated site did not comply with the state environmental protection policy. The cost of remediating the site was estimated to be between $666,000.00 and $799,200.00 in a subsequent report by SMEC. A later report commissioned by Kleinfelder Australia Pty Ltd concluded that groundwater quality had declined significantly since the groundwater was monitored in 2010 and listed various recommendations, one of which was to develop a remediation plan. In February 2015, United engaged further consultants to provide a strategy and cost estimate for remediation of the Sale site. An estimate of between $433,000.00 and $555,000.00 was provided to remediate the site which was tailored to the standard required under the Side agreement. In July 2016, following two court ordered mediations, United entered into terms of settlement with the landlords for entry into a new lease. BV claimed that United’s obligations under the new lease were significantly less than that imposed under the Side Agreement (United’s obligations being limited to removing contaminants that precluded the ongoing use of a petrol station). BV argued that the relevant measure of damages was the difference between economic value to United of the leasehold estate, with the site remediated to the standards required under the Side Agreement and the value of the estate without the site being remediated. They further submitted that due to the entry of the new lease, United had suffered no real loss and only nominal damages should be awarded. United countered BV’s arguments by submitting that the remediation obligations under the new lease were irrelevant and that the appropriate consideration for the court was the consequences incurred to United by BV’s breach of their agreement. United submitted that what was required was to restore United to the position it would have been in had BV performed its obligations under their agreement. In reaching its decision, the Court applied the principles enunciated in Tabcorp Holdings Ltd v Bowen Investments Pty Ltd3 and found that United was entitled to be placed in the same situation with respect to damages as if the contract had been performed, and it did not mean as good a financial or economic position as if the contract has been performed. The Court considered it irrelevant to consider the new rights and obligations of United under the new lease. As BV had failed to prepare a remediation action plan as obliged under the Side Agreement, United was entitled to seek rectification. Although the site was still “fit for purpose”, United nevertheless had “an interest in the risk associated with the contamination of the groundwater.”4 Notably, as an occupier, United was now liable to a receipt of clean up notices in the event of land or water being polluted under the Environmental Protection Act 1979 (Vic). The Court ultimately apportioned damages in the amount of $470,000.00 for rectification. 3 (2009) 236 CLR 272 (“Tabcorp”) 4 JGM Nominees v Tulip Investments [2013] 46 VR 709 PAGE 15 ASSIGNMENT OF THE LEASE As to the second specified breach, United claimed loss and damages in the amount of $448,437.00 comprising interest on lost profits resulting from the failure to assign the lease in April 2015. The costs of remedying BV’s breaches of the lease associated with obtaining the new lease as a method of mitigating in July 2016 and the costs of negotiating and documenting the settlement with the landlord. AWARD Ultimately, Justice Kennedy awarded United total damages of $890,238.00 comprising $470,000.00 for the remediation costs; $404,821.00 for the amount paid by United pursuant to the new terms of settlement (including unpaid rent for the property); and $15,416.00 for legal costs incurred when negotiating the settlement and the new lease. United were unsuccessful in their claim for deferred interest in the amount of $28,199.92 as a result of not having the benefit of the lease assigned to them. It was decided there was an absence of recent objective data to ascertain their loss in this regard. The Court also made a declaration stating that United was entitled to: a. demand the payment of the bank guarantee in the sum of $400,000.00 from BankWest; b. retain the proceeds of the bank guarantee which may be applied towards the damages as found to be owing by BV to United for breach of the Side Agreement; and c. retain and apply the retention amount of $100,000.00 under the Side Agreement towards the relevant damage. However, the Court noted there should be an appropriate declaration made that United is not entitled to enforce its judgment against BV without further leave of the court, other than by lodging a proof of debt for its claims in excess of the bank guarantee and the retention amount. United also successfully obtained an order against the director of BV in the sum of $390,238.00, being the difference between the damages awarded and the total of the bank guarantee provided and the retention amount provided. COSTS Following the primary judgment, the Court published subsequent reasonings on 22 July 2017 dismissing United’s application for costs against the liquidators of BV.5 Whilst Justice Kennedy had accepted that BV’s liquidators had failed to do all things necessary to assign the lease of the Sale site, the Court could not be satisfied that the timely assignment of the lease would have avoided litigation of the matter. This ruling is consistent with the general rule that costs orders against a non-party to a proceeding (for example, a liquidator) are only made in exceptional circumstances.6 Here, Justice Kennedy found that there was no conduct on behalf of the liquidators that would warrant a personal costs order against the liquidators. Cont. Case Note: United Petroleum Pty Ltd v Bonnie View Petroleum Pty Ltd KIMBERLEY COTTERILL 5 United Petroleum Pty Ltd v Bonnie View Petroleum Pty Ltd (In Liquidation) & Ors (No 2) [2017] VSC 334. 6 JGM Nominees v Tulip Investments [2013] 46 VR 709. 16 PAGE PAGE 17 hopgoodganim.com.au David Nicholls, Partner +61 7 3024 0368 [email protected] Sarah Macoun, Partner +61 7 3024 0367 [email protected] James Ireland, Partner +61 7 3024 0369 [email protected] Karen Browne, Partner +61 8 9211 8142 [email protected] Gemma Chadwick, Senior Associate +61 7 3024 0377 [email protected] Thomas Buckley, Senior Associate +61 7 3024 0406 [email protected] Olivia Williamson, Senior Associate +61 7 3024 0422 [email protected] Robyn Lamb, Associate +61 7 3024 0388 [email protected] to our seventh edition of Envisage!
The number seven is considered a special and lucky number by many, and the importance of this number is reflected, coincidentally, in this edition with its seven articles and seven contributing authors.
We are very grateful to the readers of Envisage for their ongoing support – without which we would likely not have made it to edition seven. As always, we welcome your feedback and suggested topics for future editions.
The timing of this edition follows the commencement of the Planning Act 2016 (and its supporting documents) and the Planning and Environment Court Act 2016 on 3 July 2017.
Please enjoy our winter 2017 edition of Envisage (which we note can help you to usefully pass the time in between episodes of Game of Thrones, auspiciously, season seven).
Enjoy.
