Dealing with the sale of contaminated land in Queensland – the importance of giving correct notice

The case of FKP Commercial Developments Pty Ltd v Albion Mill FCP Pty & Anor [2017] QSC 322 highlights the importance of ensuring the appropriate notice under section 408 of the Environmental Protection Act 1994 (Qld) (EPA) is given when disposing of land in Queensland which is contaminated.

In May 2015, FKP Commercial Developments Pty Ltd (FKP) entered into negotiations with Fridcorp Projects Pty Ltd (Fridcorp) to sell 12 lots of land comprising the Albion Mills site (three of the lots were contaminated lots). The heads of agreement between FKP and Fridcorp provided for a due diligence process and that if the sale proceeded the purchaser would be either Fridcorp or a wholly owned subsidiary of Fridcorp.

FKP established an electronic data room with Ansarada Pty Ltd.  Electronic documents were uploaded into separate folders in the data room. As part of this process, search responses and approved site management plans for each of the contaminated lots were uploaded to a folder named ‘Land Contamination’. These documents were accessed and downloaded.

A few days before the contract was entered into, Albion Mill FCP Pty Ltd (Albion Mill) was nominated to be the purchaser of the Albion Mills site.

In December 2016, Albion Mills rescinded the contract on grounds that:

• the provision of documents electronically by uploading them to the data room did not constitute written notice in compliance with the contaminated land notice provisions under section 421 of the EPA (now section 408 of the EPA);

• the provision of the EPA search responses for the contaminated lots were non-compliant;

• the provision of access to the search responses without specifically stating that doing so constituted written notice was non-compliant;

• because FKP had stated that the due diligence material should not be relied upon, any notice otherwise given was non-compliant; and

• notice to Fridcorp and not Albion Mill (the nominated purchaser) was non-compliant as notice should have been given to Albion Mill.

It was held that the process of uploading data to a data room in the form of files that can be viewed and downloaded by a specific recipient may constitute giving information by an electronic communication. The Court held that section 11 of the Electronic Transactions Act 2001 (Qld) permitted FKP to give the information regarding the contaminated lots by way of upload to the data room because, the development director of Fridcorp, Mr Roche, nominated the use of an electronic share file as the method of receiving the information.

The next question was whether the form of the notices (being the EPA search responses and approved site management plans) were sufficient. The Court held that an important point to note in this case is that although written notice is required by the EPA, there is no other requirement as to the form that the notice must take.

In terms of the form of the notice, the following relevant factors were taken into account in determining that this ground of appeal should not be sustained:

• although there were a large number of documents uploaded to the data room, the documents were clearly separated into labelled folders based on the various topics, including the separate folder labelled ‘Land Contamination’; and
• Albion Mill (through Mr Roche or someone else permitted by Mr Roche to access the data room) did access the disclosed information and were aware of the disclosed information when it entered into the contract.

It was held that there is no express requirement in the provisions of the EPA that requires a vendor to state that the notice is being given under section 421 of the EPA (now section 408 of the EPA).

In terms of whether the notice was given to Albion Mill as buyer, the Court determined that FKP did give written notice to Albion Mill by reason of the notice given to Mr Roche on behalf of Fridcorp. Mr Roche was appointed the sole director of Albion Mill shortly prior to the nomination of that company as the buyer and was well aware of what had been brought to the attention of Fridcorp.

Accordingly, Albion Mill was liable to pay FKP the difference between the purchase price under the contract and the value of the Albion Mill site at the date of settlement. Damages were assessed in the sum of $5.25 million for breach of contract, plus interest.

This case is set down to be heard on appeal shortly.

Key takeaway

This case demonstrates the importance of the method of delivery, the form of the notice and the identity of the person/entity that the notice is given to under section 408 of the EPA.

While the defendants were unsuccessful in arguing that FKP had failed to provide written notice under the provisions of the EPA, vendors should be particularly cautious when drafting notices under the EPA. The following considerations should be taken into account by vendors disposing of contaminated land:

• the method of communication of the notice – consider whether the recipient consented to the information being given by electronic communication;

• the form of the notice – the EPA does not prescribe any particular form of notice that must be given to the buyer. To avoid challenge later down the track, vendors should be diligent and state that the notice is being delivered to the buyer in accordance with section 408 of the EPA; and

• the person receiving the notice – the notice must be delivered on the correct buying entity. Caution should be exercised where there are nominated buyers or related subsidiaries of the buying entity.

When vendors are not clear in the delivery of notices under the requirements of the EPA, there may be grounds for a buyer to terminate the contract of sale.

Authored by: 
Stafford Hopewell, Partner
Sarah Day, Associate