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)
16.114