20 July 2016

Pollution: Mobil v. Development Auckland

Housekeeping rules in leases requiring commercial properties to be kept in a “clean and tidy” condition do not extend to liability for contamination the Supreme Court ruled.
Commercial development of Wynyard Quarter on Auckland’s waterfront requires some $50 million in remediation stripping out contaminated soil from reclaimed land polluted by industrial waste.  Rubbish tipped into the site as part of the original reclaimation last century contributed to some of the problem.  The rest was caused by leakage and spillage of petroleum products stored on site by both Shell and Mobil.
Development Auckland, part of Auckland Council, sued Mobil Oil demanding a $10 million dollar contribution to the clean-up.  Soil to a depth of 3.5 metres needs to be scraped off the 2.5 hectare site.  Mobil’s lease came to an end in 2011.  Auckland said the lease required Mobil to contribute.
The Supreme Court ruled lease terms requiring Mobil to keep the site in “good order” and “clean and tidy” applied to surface contamination only.  It did not include transforming the character of the land by removing all contaminants.
Auckland argued there was an unwritten term implied into the lease requiring Mobil to minimise contamination and to remediate any hydrocarbon pollution.  The Supreme Court said implied terms can be read into contracts to give them business efficacy.  These are terms which are so obvious “as to go without saying”.  That was not the case here, it said.  The lease agreement was perfectly effective without any implied term regarding contamination.  In fact, any implied term as to remediation both went beyond and contradicted Mobil’s simple written obligation to keep the site “clean and tidy” said the Court.  
Mobil v. Development Auckland – Supreme Court (20.07.16)

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