NEW INGLISTON LIMITED AGAINST THE CITY OF EDINBURGH COUNCIL
OUTER HOUSE, COURT OF SESSION
[2017] CSOH 37
CA43/16
OPINION OF LORD TYRE
In the cause
NEW INGLISTON LIMITED
Pursuer
against
THE CITY OF EDINBURGH COUNCIL
Defender
Pursuer: Mure QC, D Thomson; Morton Fraser LLP
Defender: Lindsay QC, Ower; Burness Paull LLP
7 March 2017
Introduction
[1] In 2007 the defender compulsorily acquired some 22 acres of land from the pursuer at Gogar, Edinburgh, for the purpose of construction of the tram line to Edinburgh Airport. Agreement was later reached between the parties that 13.65 acres of that land, which was no longer required for the purpose for which it had been acquired, would be reconveyed to the pursuer. Missives of sale for the reconveyance were entered into in 2011. A dispute which thereafter arose between the parties was resolved in 2015 on terms set out in a formal settlement agreement. That agreement made provision inter alia for the joint instruction of an environmental report/audit with regard to two areas of land within the subjects reconveyed. One of those areas (“the Stockpile Area”) contained a mound consisting of the remains of fill material imported during the construction phase of the tram project. The other (“the Area of Previous Fill”) was an area where fill material had been stored during the construction phase.
[2] Prior to construction of the tram line, the whole of the land, including the two areas already mentioned, was in agricultural use. The pursuer avers that at the time of conclusion of the missives for reconveyance of the land, the parties were aware that the pursuer’s intention was (as it remains today) that the land, including the two areas, be developed for commercial and residential use. The pursuer had at the time of the settlement agreement, and continues to have, concerns that contamination of the two areas has occurred as a consequence of their use for storage of fill material. In this action, the pursuer seeks decree ordaining the defender to implement what are asserted to be its obligations under the settlement agreement regarding remediation of the two areas, decree ordaining the defender to implement its obligations under the missives, and declarator that the defender remains obliged in terms of the missives to give the pursuer entry to the whole of the land free of material stored or positioned on it. The action came before me for debate of the relevancy of both parties’ pleadings with regard to these matters.
[3] The pursuer also has a conclusion (3) for decree ordaining the defender to deliver certain files of documents. It is common ground that this aspect of the case cannot be resolved without proof, and this opinion is not concerned with it.
The Missives
[4] By missives dated 5 and 12 May 2011 (as amended by two letters dated 9 August 2011), the defender (“the Seller”) agreed to sell and the pursuer (“the Purchaser”) agreed to purchase the area of land (“the Property”) extending to 13.65 acres shown on a plan annexed to the pursuer’s offer. The following provisions of the missives are relevant to the current dispute.
[5] Condition 3 (Date of Entry) provided:
“The Seller shall give the Purchaser entry to, and vacant possession of and for the avoidance of doubt free of all material currently stored or positioned on the Property, the whole of the Property on the Date of Entry, the giving of such possession being an essential condition of the Missives.”
The Date of Entry was defined as the first working day falling 10 days after notification by the Purchaser of its satisfaction that the Works (see below) or any remedial works were complete.
[6] Condition 7 (Title, searches and settlement items) listed the documents to be delivered by the defender in exchange for payment of the price. These included (at Condition 7.1.8) a written statement from the defender’s environmental specialist confirming that all material stored or positioned on the Property had been removed and disposed of at a tip for uncontaminated material.
[7] Conditions 12 and 13 were concerned with completion of “the Works”. This expression was defined as “the works relating to the reinstatement and restoration of the Property to the condition, appearance and ground levels to tie in with adjacent land and with the surface thereof being generally flat but which shall not in any circumstances include any planting”. Condition 12 (Seller’s Works) stated:
“To the extent not completed by the Development Completion Date [ie the date of completion of construction of the tram line] the Seller shall proceed to complete the Works as soon as reasonably possible after the Development Completion Date in a good and workmanlike manner, free from the use of any deleterious materials, having complied with all statutory requirements (including the CDM Regulations), using good quality materials and in accordance with all necessary Consents.”
Condition 13 (Notify completion) provided:
“13.1 The Seller shall give the Purchaser not less than five Working Days prior notice of the date upon which the Seller intends to complete the Works, and within the period of five Working Days commencing with the date of receipt of such notice by the Purchaser the Purchaser may inspect the Property and may either give notice to the Seller:
- Advising the Seller of any defects in the Works, or
- Confirming that the Purchaser has no objection to the Works.
13.2 On receipt of a notice referred to in Condition 13.1(a) the Seller shall ensure the carrying out and completion of all remedial or additional works as may be necessary at the full cost of the Seller.
13.3 Following the completion of such remedial or additional works, to the reasonable satisfaction of the Purchaser and the notification to that effect to the Seller by the Purchaser, the Seller shall be deemed to have completed the Works.”
[8] Condition 14 (Site Investigations) is a key provision for present purposes. It provided:
“14.1 Following the Works Completion Date the Purchaser shall at the sole cost of the Seller instruct and obtain an Environmental Report/Audit.
14.2 The Seller shall co-operate with the Purchaser and the Purchaser’s Surveyor in arranging reports and surveys including providing letters of authority to ensure that access will be given to the Purchaser’s Surveyor for the purpose of inspecting the Property.
14.3 The Purchaser shall have an unfettered discretion to its satisfaction with all matters specified in Condition 14.
14.4 Should the Environmental Report/Audit disclose any matters which the Purchaser considers unsatisfactory, the Purchaser shall notify the Seller of such unsatisfactory matters. The Purchaser shall only notify the Seller of unsatisfactory matters if such matters relate to those areas of the Property which have been used or occupied by the Seller or affected by the construction of the Development.
14.5 If the Purchaser considers that action as required by the Environmental Audit is necessary to remedy the unsatisfactory matters the Purchaser may direct that the Seller carry out such action that is required to remedy the unsatisfactory matters. The Seller shall ensure that such action is carried out at the entire cost of the Seller as soon as reasonably possible.
14.6 Following completion of such action, to the satisfaction of the Purchaser and the obtaining of Environmental Report/Audit, to the satisfaction of the Purchaser and the notification to that effect to the Seller by the Purchaser, the Purchaser shall be deemed satisfied with the Environmental Report/Audit.”
“Environmental Report/Audit” is defined in Condition 1.1 as meaning
“an environmental report or audit relating to the Property including a contaminated land survey or similar investigation disclosing without limitation: (A) the extent (if any) of contamination within the Property, (B) the extent (if any) of contaminated material to be removed from the Property, and (C) whether legal requirements under Environmental Legislation have been complied with in relation to the Property: declaring that such environmental report or audit will only relate to those areas of the Property which have been used or occupied by the Seller or affected by the construction of the Development and will only relate to the period of the Seller’s ownership of the Property”.
“Environmental Legislation”, although capitalised in the above definition, is not a defined term.
The Settlement Agreement
[9] The pleadings contain no detail of the dispute that arose between the parties. In the settlement agreement dated 20 and 30 July 2015 it is narrated simply that the parties have agreed to resolve their dispute in relation to the missives and have undertaken to carry out various obligations aftermentioned. The agreement provided for payment of certain sums of money by the defender to the pursuer. Clause 5 (Environmental) then stated:
“5.1 Within 7 days of [15 July 2015], the Parties will jointly instruct (at [the defender’s] sole cost and expense) an Environmental Report/Audit of the Property (all as more particularly defined in the Missives) such instruction to be in the form of the appointment forming Part 7 of the Schedule.
5.2 The Parties’ instructions to the Report provider will require to specify that (i) the Environmental Report/Audit of the Property must be completed by no later than 12 weeks from the date of instruction being so issued; and (ii) the Environmental Audit/Report is to be carried out in accordance with the current British Standard and good practice relating to site investigation works and contamination testing.
5.3 In relation to the said Environmental Report/Audit of the Property referred to in the foregoing Clauses 5.1 and 5.2 of this Agreement (and Clause 14.1 of the Missives) the Parties agree and undertake that the scope and remit of said Environmental Report/Audit is as more particularly described in the Specification and Plan contained in Part 6 of the Schedule.
The terms of this Clause 5.3 are entirely without prejudice to the remaining terms and obligations of Clause 14 of the Missives and the terms of Clause 5.4 hereof.
5.4 The Parties agree and undertake to each other that (i) if the mound of earth on the Property [ie the Stockpile Area]… is found to be contaminated in terms of the said Environmental Report/Audit then the said mound shall be removed at [the defender’s] sole cost and expense and that to [the pursuer’s] satisfaction within 3 months of the said Environmental Report/Audit being issued and (ii) that otherwise the terms and conditions of Clause 14 of the Missives will require to be fully implemented and complied with in relation to the site investigations to be carried out on the Property and any remedial works required to remedy any matters disclosed.”
For the purposes of the settlement agreement, “the Property” means “the several plots and areas of ground shown outlined in red” on a plan in Part 4 of the Schedule; in other words, it means the Stockpile Area and the Area of Previous Fill.
[10] The Appointment Agreement forming Part 7 of the Schedule appointed EnviroCentre Limited (“ECL”) to provide the following services to “the Client” (ie to both parties):
- To prepare a proposal documenting the required scope of the site investigation works required at the Site for approval by the Client (such approval required separately from the defender and the pursuer);
- Preparation of an environmental report in respect of the Site to cover the scope agreed, all in accordance with British Standards and good industry practice and to be delivered to the Client within 12 weeks of the date of signing by ECL of the appointment.
[11] The scope and remit of the Environmental Report/Audit were set out in a Proposal Summary in Part 6 of the Schedule. The service to be provided by ECL was described as “Phase II Contaminated Land Assessment” and related to the Stockpile Area and the Area of Previous Fill. The scope of the works was stated to have been designed in line with a main investigation requirements [sic] under BS 10175 and consisted, in summary, of:
- in the Stockpile Area, drilling of eight x 5 metre boreholes and collection of samples;
- in the Area of Previous Fill, digging of trial pits to identify the presence of any remaining infill;
- sending samples for laboratory analysis;
- screening of results against standard generic contaminated land assessment criteria for residential land use, and review against hazwaste online criteria to establish waste classification; and
- provision of findings including borehole and trial pit logs in two standalone reports.
A plan annexed to the Proposal Summary detailed the locations of the boreholes and trial pits.
[12] Finally, clause 6.2 of the settlement agreement stated:
“The Parties confirm and agree that the statements and warranties provided by [the defender] in Conditions 3, 4, 6.1, 6.2 and 6.3 of the Missives will apply mutatis mutandis as at (i) the date of entry in the Disposition and (ii) the date of delivery of the Deeds”.
The ECL Reports
[13] ECL produced its reports in relation to both areas in September 2015. For present purposes it is sufficient to reproduce the conclusions in section 6 of each report, which were in the following terms:
Stockpile Area
“In August 2015, EnviroCentre undertook a phase 2 site investigation at the site in New Ingliston. It is understood that fill material was previously imported to the site in relation to the Edinburgh tram construction project, and was subsequently stockpiled on site. The aim of the assessment was to establish ground conditions with respect to potential contamination status of the imported infill material, and subsequent potential for contamination of underlying natural soils.
The investigation identified fill materials in all trial pits comprising a mixture of reworked soil, with occasional presence of anthropogenic materials (wood, brick, rags and metal) and occasional boulders. On a visual assessment of the material it did not indicate evidence of widespread contamination and as such could be retained on site in current and potential future development use.
Further detailed assessment of the soils was undertaken utilising chemical analysis. This identified that for the majority of soil samples and identified waste areas no exceedances of contaminants were present when assessed against generic residential human health screening criteria. All leachate samples analysed recorded concentrations below the corresponding assessment criteria. As such, on the basis of contaminated land assessment the site is considered suitable for current use (open space).
Should the site be progressed for redevelopment on a residential basis, then the majority of the site is deemed suitable for this land use, however some localised contamination issues were identified.
One hotspot areas [sic] of contamination were noted at the site as noted below:
- One slight exceedance of benzo(a)pyrene were recorded in TP1 at 5m depth.
Future redevelopment of the site may require mitigation measures to address this hotspot of contamination (depending on development design).
In relation to the potential remedial measures to address the elevated benzo(a)pyrene the following approach would be recommended:
- Benzo(a)pyrene principally represents a risk to human receptors via direct contact/ingestion or inhalation of dust.Therefore to address the identified low level exceedance of contamination, capping or placement of the material under a final hardstanding layer would be recommended to resolve the identified risk.”
Area of Previous Fill
“In August 2015, EnviroCentre undertook a phase 2 site investigation at the site in New Ingliston. It is understood that material was previously stored on the site in relation to the Edinburgh tram construction project, and was understood to have been removed. The aim of the assessment was to establish ground conditions and identify presence of any remaining infill and depth to natural soils prior to redevelopment of the site with mixed residential and commercial use. The investigation was also to determine if infill materials, if present, are likely to pose unacceptable risks to human health or to the environment or future liability issues in relation to the site use.
The investigation identified waste in a number of trial pits however where waste was observed it was generally noted to be infrequent and sparse and in some trial pits was considered to be related to the historic installation of field drains. Where residual fill material was noted it consisted of soils with some wood, brick and other construction rubbles. On a visual assessment of the material it did not indicate evidence of widespread contamination and as such could be retained on site in current and potential future development use.
Further detailed assessment of the soils was undertaken utilising chemical analysis. This identified that for the majority of soil samples and identified waste areas no exceedances of contaminants were present when assessed against generic residential human health screening criteria. All leachate samples analysed recorded concentrations below the corresponding assessment criteria. As such, on the basis of contaminated land assessment the site is considered suitable for current use (open space).
Should the site be progressed for redevelopment on a residential basis, then the majority of the site is deemed suitable for this land use, however some localised contamination issues were identified.
Two hotspot areas of contamination were noted at the site as noted below:
- Asbestos was recorded in TP19 at 0.3mbgl, which was just below topsoil.No visual evidence of asbestos was recorded at this location during the investigation, therefore the fibres recorded may be in relation to a former stockpile at the site, or previous infill.
- Two exceedances of benzo(a)pyrene were recorded in TP25 which was observed to have fill comprising boulder clay with occasional wood, brick fragments and boulders.Waste in this trial pit was noted to be sparse and it the infill [sic] appeared to end at 2.65mbgl where a band of light brown sandy clay was observed.The sample obtained at this depth also recorded an exceedance, therefore it is not known if the ground at this depth was natural ground or infill.
Future redevelopment of the site may require mitigation measures to address these hotspots of contamination (depending on development design).
In relation to the asbestos identification, the following requirements are identified:
- Quantification of asbestos to confirm potential risk and remedial requirements.
- Should quantification confirm risk, then either capping or offsite removal of localised shallow soils in the area of TP25 with subsequent validation.
In relation to the elevated benzo(a)pyrene:
- Benzo(a)pyrene principally represents a risk to human receptors via direct contact/ingestion or inhalation of dust.Therefore to address the identified low level exceedance of contamination, capping or placement of the material under a final hardstanding layer would be recommended to resolve the identified risk.”
Orders Sought by the Pursuer
[14] Leaving aside the matter with which this opinion is not concerned, the pursuer seeks the following orders:
1. Decree ordaining the defender to implement its obligations under clause 5.4 of the settlement agreement and clause 14.5 of the missives by removing the mound of earth within the Stockpile Area; by exposing and testing the indigenous subsoil below the mound to ensure that no leaching has occurred; and, if leaching has occurred, by digging out the affected area, removing the affected material and testing the soil again; by seeding the area to match the surrounding land; and thereafter by securing the delivery to the pursuer of a validation report and a collateral warranty in favour of the pursuer by any party having a design or contracting function in the foregoing works; all at the defender’s cost and to the pursuer’s satisfaction, within a period of three months or such other period as to the court seems reasonable.
2. Decree ordaining the defender to implement its obligations under clause 5.4 of the settlement agreement and clause 14.5 of the missives in respect of the Area of Previous Fill by removing and storing the top soil; by digging out and removing all fill material, exposing the indigenous subsoil; by testing to ensure that no leaching has occurred; by digging out and removing any affected material and testing the soil again; by importing clean soil and using it to make up the ground levels; by reinstating the topsoil if not contaminated; by tying the levels into, and by seeding the area to match, the surrounding land; and thereafter by securing the delivery to the pursuer of a validation report and a collateral warranty in favour of the pursuer by any party having a design or contracting function in the foregoing works; all at the defender’s cost and to the pursuer’s satisfaction, within a period of three months or such other period as to the court seems reasonable.
…
4. Decree ordaining the defender to implement its obligation under clause 12 of the missives to complete the Works, within a period of three months or such other period as to the court seems reasonable.
5. Declarator that in terms of clause 3 of the missives and clause 6.2 of the settlement agreement the defender remains obliged to give the pursuer entry to and vacant possession of the whole of the Property free of all material currently stored or positioned on the Property.
Argument for the Defender
[15] The defender sought dismissal of the action on the following grounds:
(i) The first and second conclusions were irrelevant because they lacked the requisite degree of precision for an order ad factum praestandum. Particular complaint was made about uncertainty in relation to expressions such as “leaching”, “stored material”, “indigenous alluvial clay subsoil”, “testing soil again”, “validation report” , “collateral warranty”, “pursuer’s satisfaction”, “removal of topsoil”, “fill material” and “testing remaining material”.
(ii) In any event the first and second conclusions were irrelevant because the works specified in them were not required by the ECL reports. In terms of Condition 14.5 of the missives, the defender was obliged only to carry out works required by ECL reports. No works were required by either report. If the pursuer was dissatisfied with the terms of the reports its remedy was to invoke a dispute resolution procedure in the Appointment Agreement.
(iii) The fourth conclusion was irrelevant because it sought to enforce obligations in the missives at a stage in the agreed contractual scheme when it was accepted that those obligations had been fulfilled. Instructing the ECL reports was inconsistent with the Works not having been completed because Condition 14.1 of the missives provided that an Environmental Report/Audit was only to be instructed after the Works had been completed. Having embarked upon the second stage of the contractual scheme, the pursuer had no entitlement to revisit the first stage by claiming that the Works had not been completed.
(iv) The fifth conclusion was irrelevant because the defender was under no contractual obligation to remove the mound of earth. The ECL report for the Stockpile Area did not require its removal, and the defender could not be compelled to remove it.
(v) The first, second, fourth and fifth conclusions were all irrelevant because they failed to distinguish between contamination that was present before the defender’s occupation of the land and contamination introduced by the defender. The missives and settlement agreement imposed no obligation to remove pre-existing contamination. Moreover, the conclusions were irrelevant in failing to distinguish between contamination which was contamination within the scope of the Environmental Protection Act 1990 and contamination not within its scope. The ECL proposal summary stated that the scope of works had been designed in line with the main site investigation requirements under BS:10175, and that laboratory results would be screened against standard contaminated land and hazardous waste criteria. When read with the definition of “Environmental Report/Audit” it was clear that references in the missives and settlement agreement to contamination were to contaminated land in terms of the 1990 Act.
(vi) In response to the pursuer’s arguments (ii) and (iv) set out in paragraph [16] below, the defender’s averment that the pursuer was personally barred from now contending that the defender had not fulfilled all of its obligations in respect of the Works was relevant for inquiry; and there was no reason why, in the circumstances of this case, the court should not exercise its discretion to refuse an order for specific implement to which the pursuer was entitled.
Argument for the Pursuer
[16] The pursuer sought decree de plano in terms of its first, second, fourth and fifth conclusions or, alternatively, exclusion from probation of certain specified averments by the defender, on the following grounds:
(i) The defender’s position in relation to the pursuer’s fourth conclusion, for an order for performance of the Works by the defender, appeared to be that the defender had been informed by its contractor that all material stored onsite that required to be removed had been removed. That was not a relevant or sufficiently specific defence.
(ii) No relevant defence of personal bar was pled. Joint instruction of the Environmental Report/Audit carried no implication that the Works were complete. There was no averment by the defender that the procedure in Condition 13 of the missives had been followed through. In any event the defender did not aver that it had altered its position to its prejudice as a result of reliance on any representation by the pursuer that it accepted that the Works had been carried out.
(iii) The defender’s argument proceeded on the unsound basis that the pursuer’s entitlement to have remedial environmental works carried out depended upon such works being “required” by the Environmental Report/Audit, in the sense that ECL directed that they be carried out. The scope and remit agreed in terms of Clause 5.3 of the settlement agreement did not extend to ECL prescribing the carrying out of any remedial works. The reports instructed were to be investigative only. It did not matter whether the ECL reports made any recommendations or stated any requirements since, on a proper construction of the missives and the settlement agreement, the parties had not conferred jurisdiction on ECL to make recommendations or to state requirements. In terms of the missives and the settlement agreement, it was for the pursuer to determine whether remedial works required to be carried out. Contamination having been identified in both ECL reports, it was for the pursuer to decide, in exercise of its unfettered discretion, what works were required. The only limits placed on the exercise of the pursuer’s discretion were concepts of honesty and good faith: cf Socimer International Bank Ltd v Standard Bank London Ltd [2008] 1 Lloyds Rep 558, Rix LJ at paragraph 66. In any event the mound had been found to be contaminated and Clause 5.4 of the settlement agreement required its removal. The defender’s averments to the effect that the two areas were not “contaminated” were irrelevant. They were dependent upon the current use of the land, an approach unsupported by the missives or settlement agreement. They also depended upon giving “contaminated” its statutory definition in the 1990 Act; there was no warrant for giving it that construction. Accordingly, the entirety of the defender’s averments regarding the pursuer’s entitlement to direct that the works identified in the first and second conclusions be carried out were irrelevant.
(iv) The defender’s averments in support of the proposition that the court should, in exercise of its discretion, refuse to grant an order for specific implement in terms of the conclusions, were irrelevant. There were no exceptional circumstances justifying refusal of an order (cf Highland and Universal Properties Ltd v Safeway Properties Ltd 2000 SC 297, Lord Kingarth at 311). The defender averred that the works in question would cost around £1 million but failed to provide any basis for that figure. There was nothing in the defender’s pleadings to found a contention that the cost of the works was disproportionate to any detriment to the pursuer. As regards the adequacy of the specification by the pursuer of the works required, this should not be judged under reference to difficulties at the borderline (Highland and Universal Properties, above, at 303-4 and 317).
Decision
Construction of the Missives and Settlement Agreement
[17] It is necessary to begin by reaching a view as to the proper interpretation to be given to the parties’ contract, as embodied in the missives and, subsequently, the settlement agreement. It was common ground that the court should adopt the approach enunciated by Lord Neuberger in Arnold v Britton [2015] AC 1619 at paragraph 15, applied in Scotland in @SIPP Pension Trustees v Insight Travel Services Ltd 2016 SLT 131 at paragraph 17:
“When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to ‘what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean’, to quote Lord Hoffmann in Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101, para 14. And it does so by focussing on the meaning of the relevant words… in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the lease, (iii) the overall purpose of the clause and the lease, (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions.”
[18] In the present case, it is necessary to consider the parties’ rights and obligations regarding remediation in terms of the missives, and to assess the extent, if any, to which those rights and obligations were varied by the settlement agreement. The key condition in the missives was Condition 14. The first question concerns the limitations, if any, on the pursuer’s “unfettered discretion” as to its satisfaction with all matters specified in Condition 14. There is an express limitation in Condition 14.4, in that the pursuer is only entitled to notify the defender of unsatisfactory matters if they relate to areas of the Property that have been used or occupied by the defender or affected by the construction of the tram line. Otherwise, I accept the pursuer’s contention that the discretion is limited only by general considerations of honesty, good faith and rationality (Socimer above, loc cit).
[19] It does not, however, follow, in my view, that the pursuer’s unfettered discretion under Condition 14 extended to determining what remedial works had to be carried out. Content has to be given to the words “action as required by the Environmental Audit” and “such action that is required” in Condition 14.5. The pursuer was accorded discretion as to whether such action was necessary in order to remedy matters that it considered unsatisfactory, but that discretion applied only to such action, if any, as was required by the Environmental Report/Audit. The language is straightforward and carries the necessary implication that it was a function of the Environmental Report/Audit to specify action required to address any issues arising from the investigation carried out by the person tasked with it. It accords with commercial common sense to place the decision as to what was “required” in the hands of the environmental expert rather than one of the parties to the contract. The pursuer’s discretion operated in relation to the decision whether the required action was necessary to remedy the matters that it considered unsatisfactory: as the defender submitted, it might be that the pursuer would not regard the presence of certain types of anthropogenic materials as unsatisfactory if, for example, it had a use for the fill in its proposed development.
[20] I reject the pursuer’s contention that it was not the purpose of the Environmental Report/Audit to identify “requirements” in respect of remedial works on the basis that the definition in Condition 1.1 showed that the report was to be investigative only. Reading the definition together with Clause 14.5, it is in my view clear that the report was to go beyond narrating the findings of an investigation and was to extend to expressing an opinion as to action required, including the extent to which contaminated material required to be removed from the Property. That too accords with commercial common sense: it would accord much less to construe the agreement as providing for the production of a report which identified environmental problems without specifying recommended remedial measures.
[21] I turn, then, to consider whether the parties’ rights and obligations with regard to environmental remediation were altered by the terms of the settlement agreement. The first point to note is that the definition of Environmental Report/Audit was carried into the settlement agreement by Clause 5.1. (I do not read the words “all as more particularly defined in the Missives” as referring only to the word “Property”, as was suggested; I have already noted that the word “Property” has different meanings in the missives and in the settlement agreement.) There is an obvious variation of the missives in respect that instead of a report relating to the whole 13.65 acres to be reconveyed, the parties agreed that a report would be instructed in relation only to the Stockpile Area and the Area of Previous Fill. But further confirmation that the parties intended in the settlement agreement to instruct a report of the kind described in the missives is provided by Clause 5.3 which refers to an Environmental Report/Audit “referred to in the foregoing Clause 5.1 and 5.2 of this Agreement (and Clause [sic] 14.1 of the Missives)”.
[22] As was the case in relation to the missives, I am not persuaded by the pursuer’s submission that in terms of Clause 5.3 of the settlement agreement, the scope and remit of the Environmental Report/Audit was to be investigative only. In the first place, the Proposal Summary in Part 6 of the Schedule, agreed by the parties in terms of the first bullet point in Schedule 2 to the Appointment Agreement to be the scope of the remit, clearly went beyond investigative activities, and included risk assessment using standard criteria and production of written reports. Secondly, Clause 5.3 is stated to be “entirely without prejudice to the remaining terms and obligations of Clause 14 of the Missives and the terms of Clause 5.4 hereof”: thus both directly and indirectly (through Clause 5.4), one is taken back to the definition of Environmental Report/Audit for the purposes of the missives. In my opinion it is clear, reading the settlement agreement in conjunction with the missives, that the parties intended that the reports produced by ECL would conform to the definition in the missives, ie that they would inter alia disclose the extent (if any) of contaminated material to be removed from the Property (albeit with its more restricted meaning), and whether statutory environmental requirements had been complied with.
[23] Nor is there anything in the settlement agreement to disturb the scheme of the missives which placed the decision as to what action was required in the hands of the environmental consultant rather than the pursuer. Clause 5.4 states expressly that, except as provided for in part (i) of that clause regarding the mound, “the terms and conditions of Clause 14 of the Missives will require to be fully implemented and complied with in relation to the site investigations to be carried out on the Property and any remedial works required to remedy any matters disclosed”. The phrase “any remedial works required” echoes the wording of Condition 14.5 where the word “required” means required by the Environmental Report/Audit. Clause 5 of the settlement agreement does not therefore, on a proper construction, confer upon the pursuer any greater entitlement to decide what remedial work is required to remedy any matter disclosed in the Environmental Report/Audit than was conferred upon it by Condition 14 of the missives.
[24] The position regarding the mound of earth on the Stockpile Area must, however, be separately addressed. It is in my view clear from the terms of Clause 5.4 of the settlement agreement that the terms of the missives, and in particular Condition 14, are overridden with regard to the mound. The test agreed in this regard is no longer whether action is required by the Environmental Report/Audit to remedy unsatisfactory matters: rather it is whether the mound was “found to be contaminated” in terms of the report. Attention is thus shifted from ECL’s opinion on required remedial measures to their factual findings regarding contamination. The consequence of the test being satisfied is also specified. It is not (as would be the case under Condition 14.5 of the missives) the carrying out of action required (ie by the Environmental Report/Audit) to remedy the unsatisfactory matters; it is simply removal of the mound.
[25] In so far as applicable to the Stockpile Area, Clause 5.4 superseded the missives in one further respect. Condition 3 of the missives obliged the defender to give entry and vacant possession of the Property (with its wider definition) on the date of entry “free of all material currently stored or positioned” on it. Clause 5.4 of the settlement agreement, on the other hand, requires removal of the mound only if it is found to be contaminated. That being so, senior counsel for the pursuer conceded, in my view correctly, that if the ECL investigation disclosed nothing by way of contamination, the pursuer would not be entitled to demand its removal. To that extent, therefore, the requirement in the missives that the Property be free of all material positioned on it has been superseded by the terms of the settlement agreement and is no longer enforceable.
[26] In all other respects, the terms of the missives in relation to environmental remediation, and in particular Condition 14, remain applicable not only to the Area of Previous Fill but also to the Stockpile Area. That means that as regards everything except removal of the mound, the pursuer’s entitlement to have works carried out to remedy matters disclosed in either of the ECL reports depends upon such works constituting action required by the report in question to remedy matters disclosed that are regarded by the pursuer as unsatisfactory. It also means that as regards everything except removal of the mound, Condition 3 of the missives remains in force obliging the defender to give entry and vacant possession at the date of entry in terms of the settlement agreement free of all material stored or positioned on the Property (with its narrower definition).
[27] Condition 12 of the missives, which obliged the defender to complete the Works (ie reinstatement and restoration of the Property – with its wider definition – to a condition, appearance and ground levels to tie in with adjacent land and with the surface thereof being generally flat) must also be regarded as modified by the terms of the settlement agreement in so far as any obligation to level the Stockpile Area is concerned. Otherwise, however, I accept the pursuer’s submission that the obligation in Condition 12 remained live after conclusion of the settlement agreement. I reject the defender’s contention that the instruction of the Environmental Report/Audit carried any implication that the Works had been completed. Even if it is correct to regard the missives as having created a two‑stage contractual scheme, that scheme was disturbed by the parties’ dispute and its settlement, and the context in which the Environmental Report/Audit was instructed in terms of the settlement agreement was different from that envisaged by the missives. It should be recalled in this regard that the obligation in Condition 12 applied to the whole subjects reconveyed, whereas the settlement agreement was concerned only with the two contentious areas. It is less clear to me what practical consequences flow from the continuing enforceability of Condition 12. Leaving aside issues of contamination which are otherwise addressed (see below), it is not averred by the pursuer that the condition, appearance or ground level of the Area of Previous Fill does not tie in with adjacent land or that its surface is not generally flat.
Practical Consequences
[28] What, then, in practical terms, are the obligations incumbent upon the defender in terms of the missives and the settlement agreement, read together?
The Mound
[29] The defender’s obligation in relation to the mound can be shortly stated: if it was found to be contaminated in terms of the ECL report on the Stockpile Area, then the defender must remove it. If it was not, no obligation subsists with regard to it. The question, therefore, is whether the mound was found to be contaminated in terms of the report. There is no contractual definition of “contaminated”. The defender’s position is that the word is used as a reference to “contaminated land” in terms of the Environmental Protection Act 1990. That expression is defined (section 78A(2)) as
“any land which appears to the local authority in whose area it is situated to be in such a condition, by reason of substances in, on or under the land, that—
- significant harm is being caused or there is a significant possibility of such harm being caused; or
- significant pollution of the water environment is being caused or there is a significant possibility of such pollution being caused.”
The defender refers in its pleadings to a letter dated 5 November 2015 from ECL expressing an opinion that neither of the contentious areas was considered to constitute contaminated land as defined in section 78A(2).
[30] The pursuer, on the other hand, refers in its pleadings to the dictionary definition of contaminated, ie “defiled, sullied, tainted or polluted”, and to the definition of contamination in BS 10175 (referred to in ECL’s Proposal Summary), namely “presence of a substance or agent, as a result of human activity, in, on or under land, which has the potential to cause harm or to cause pollution”. In oral submission, senior counsel for the pursuer went further and submitted that the presence in the mound of any form of anthropogenic material, such as wood, brick or even litter amounted to contamination and triggered the defender’s obligation to remove the mound.
[31] The test to be applied, as I have already noted, is what a reasonable person, having all the background knowledge which would have been available to the parties when concluding the settlement agreement, would have understood them to be using the expression “contaminated” to mean. It is difficult to reach a confident view on this on the basis of the documents alone. For present purposes, however, it is sufficient to reach the following conclusions. I reject the pursuer’s contention that the presence of any type of anthropogenic material is enough to amount to contamination. I do so because of the reference in Condition 7.1.8 of the missives to disposal of material stored or positioned on the Property at a tip for “uncontaminated material”. This, in my view, is a clear indication that in using the terms “contaminated” and “contamination” in the missives and in Clause 5.4 of the settlement agreement, the parties had in mind an agent which would preclude disposal of affected material in a manner permissible for material containing inert items such as wood, brick or small amounts of litter. Accordingly, although I find nothing to suggest that the parties had specifically in mind the definition of contamination in BS 10175 (which is a code of practice for investigation of potentially contaminated sites), it seems to me that the reasonable person would have understood the parties to have meant the expression “contamination” to mean something along the lines of that definition, ie the presence of a substance or agent with the potential to cause harm or pollution. On the other hand, I find no indication that the parties intended to import into the contract the statutory expression “contaminated land”, which would require “significant” harm or possibility of such harm. The sole reference to “Environmental Legislation” in the missives (in the definition of Environmental Report/Audit) is in the context of compliance with statutory requirements and not in relation to the definition of contamination. It follows that any opinion of ECL that neither of the contentious areas constituted contaminated land for the purposes of the 1990 Act would not, if accepted by the court, determine the question of construction with which I am concerned.
[32] The foregoing conclusions as to the proper interpretation of the expressions “contaminated” and “contamination” are sufficient, in my view, to enable me to reach a decision as to the parties’ rights regarding removal of the mound. As set out above, the ECL report on the Stockpile Area disclosed the presence of a contaminant with potential to cause harm to human health, namely benzo(a)pyrene. That is enough, in my view, bearing in mind that the site investigation consisted only of a sampling exercise, to amount to contamination for the purposes of Clause 5.4 of the settlement agreement. Had the site investigation disclosed only the presence of wood, brick, rags and metal, I would not have arrived at the same conclusion. On the face of it, the undisputed presence of a substance constituting contamination should entitle the pursuer to a decree ordaining the defender to remove the mound. There remains, however, an issue as to whether the contamination pre-dated the period of the defender’s ownership of the Property. It is implicit in the definition of Environmental Report/Audit that only contamination occurring during that period will give rise to the obligations in Condition 14 of the missives and, accordingly, those in Clause 5.4 of the settlement agreement. This matter is contentious and will require proof.
The Area of Previous Fill
[33] The defender’s obligation in relation to the Area of Previous Fill is as stated in part (ii) of Clause 5.4 of the settlement agreement: to implement and comply with the terms and conditions of Condition 14 of the missives in relation to any remedial works required to remedy any matters disclosed by the Environmental Report/Audit. As noted above, the ECL report in relation to this area of land recommended mitigation measures in respect of two matters: asbestos and benzo(a)pyrene. In relation to the latter, the report did not recommend remedial action other than to cap the area where the exceedance was observed with hardstanding. It follows that the pursuer has no entitlement to require anything to be done by the defender by way of remedial work to remove this contamination. In relation to asbestos, however, the report does state requirements: quantification of asbestos to confirm potential risk and remedial requirements and, should quantification confirm risk, then either capping or offsite removal of localised shallow soils in the area of the relevant trial pit with subsequent validation. Assuming that the presence of asbestos is a matter which the pursuer considers unsatisfactory, it is entitled in terms of Condition 14.5 of the missives to direct the defender to carry out the action specified in the ECL report. Condition 14.6 will then apply in relation to the pursuer’s satisfaction with the remedial work.
Remedies Sought by the Pursuer
[34] I turn then to consider whether, in the light of the foregoing conclusions, the pursuer has pled a relevant case in respect of each of the four conclusions set out at paragraph 14 above.
[35] The first conclusion relates to the Stockpile Area. The pursuer’s entitlement to decree in relation to this area cannot be determined without proof of whether the contamination found to be present by ECL occurred during the period of the defender’s ownership of the Property (as more widely defined), so as to fall within the scope of the Environmental Report/Audit. If so, the pursuer will be entitled to an order for removal of the mound in terms of Clause 5.4 of the settlement agreement. There is, however, in my opinion, no contractual basis for the much more extensive order sought by the pursuer in the first conclusion.
[36] The second conclusion relates to the Area of Previous Fill. The pursuer’s entitlement in relation to this area is to have the works required by the Environmental Report/Audit carried out to its satisfaction. Again there is, in my opinion, no contractual basis for the much more extensive order sought by the pursuer in the second conclusion.
[37] The fourth conclusion relates to both of the contentious areas. So far as the Stockpile Area is concerned, there is in my opinion no relevant case pled for invocation of Condition 12. As regards the Area of Previous Fill, it is not apparent to me that, as matters stand, a factual basis is pled for invocation of Condition 12, but I would wish to hear submissions as to whether this conclusion should be left standing until after the remedial works required in respect of this area of land have been completed.
[38] The fifth conclusion also relates to both areas. As regards the Stockpile Area, the question whether the pursuer is entitled to vacant possession free of all material currently stored or positioned on it is dependent upon the outcome of the proof regarding the defender’s obligation to remove the mound. As regards the Area of Previous Fill, the pursuer remains entitled in principle to decree as concluded for but, as there are no averments of storage or positioning of any material on this area, I would wish to be addressed on whether such a decree would have any practical utility.
Other Issues Canvassed by the Pursuer
[39] I turn finally to arguments (i), (ii) and (iv) on behalf of the pursuer narrated at paragraph 16 above, argument (iii) having been addressed.
{40] Argument (i) concerns the relevancy of the defence to the fourth conclusion. In the light of my decision regarding the relevancy of the pursuer’s case in support of this conclusion, no question arises of granting decree in terms of it, at least at this stage. In any event I do not regard it as a fair reading of the defender’s case that the only defence to the granting of decree in terms of this conclusion is that the defender had been informed by its contractor that all material stored onsite had been removed.
[41] Argument (ii) concerns the relevancy of the defence of personal bar. On behalf of the defender, it was submitted that a defence of personal bar was relevantly pled because it was averred that the pursuer’s offer jointly to instruct the Environmental Report/Audit gave rise to a reasonable and justifiable belief in the defender that the pursuer accepted that the defender had fulfilled all of its obligations in respect of the Works, and because the defender altered its position by joining in the instruction of the report. I reject this submission. As I have already observed in relation to the continuing enforceability of Condition 12 of the missives (see paragraph 27 above), any two‑stage contractual scheme created by the missives was disturbed by the parties’ dispute and its settlement, and the context in which the report was instructed in terms of the settlement agreement was not that envisaged by the missives. Apart from anything else, both parties were obviously aware of the continuing presence of the mound at the time when they entered into the settlement agreement, and I am unable to see how the defender could have entertained any reasonable belief that the pursuer accepted that the Works had been completed. Nor, in my opinion, has any intelligible basis been advanced for the proposition that the defender acted upon a belief to his prejudice by agreeing to the joint instruction of the Environmental Report/Audit as one of the conditions of settlement of the parties’ dispute. I therefore hold that the defender’s averments regarding personal bar are irrelevant and fall to be excluded from probation.
[42] Argument (iv) was that the defender’s averments in support of the proposition that the court should, in exercise of its discretion, refuse to grant an order for specific implement in terms of the conclusions, were irrelevant. Those averments are, in substance, that the cost of implementing the defender’s obligations in the manner specified by the pursuer was grossly disproportionate to the detriment caused by failure to implement them. As I have held that the pursuer is not entitled to the orders that it seeks, the relevancy of the defence to the granting of such orders has become academic. It may nevertheless be that the defender’s averments of disproportionality have no continuing relevance in the light of my decision on the proper construction of the contract. I would wish to hear submissions on that before reaching a concluded view.
Disposal
[43] Before pronouncing an interlocutor, I shall put the case out by order to hear parties’ submissions on the matters identified in this opinion and on further procedure. Expenses are reserved.