The NSW Court of Appeal’s (NSWCA’s) recent decision in The Trust Company Ltd v Commonwealth of Australia [2026] NSWCA 90 serves as a timely reminder: if you want a remediation clause to deliver a specific environmental outcome, you need to say so expressly. The Court dismissed an appeal seeking approximately $20 million in damages for asbestos remediation costs based on the words the parties chose (and did not choose) to include in the relevant lease and deed, underscoring the importance of precision when drafting environmental and remediation obligations in commercial documents.
From leaseback to asbestos clean-up
The Commonwealth had owned some 83 hectares in Moorebank (the Land), which had been used for various purposes by the Department of Defence (Defence) for many years. In 2003, Defence sold the Land and entered into a 10-year leaseback arrangement. In 2007, the Land was on-sold to The Trust Company Ltd as the legal owner but subject to a trust arrangement (hereafter the Developer). The Land was sold subject to the lease. In 2013, the Developer and Defence entered into a further five-year lease of the Land (the Lease). Both parties entered into a Deed of Surrender on 14 December 2015 (the Deed) pursuant to which Defence would vacate and return the Land to the Developer.
Following the surrender, the Developer obtained planning permission to construct a $490 million intermodal terminal facility. However, as demolition and construction commenced from 2017 to 2019, the Developer’s contractors encountered widespread asbestos-containing material, allegedly amounting to 43 tonnes. After spending approximately $20 million in dealing with the contaminated materials, the Developer and Qube Re Services Pty Ltd (Qube) sought recovery from the Commonwealth for breaches of their contractual obligations to remediate the Land under the Lease and Deed. The dispute centred around the standard to which Defence was contractually obligated to remediate and return the Land to the Developer.
The Developer primarily relied upon two clauses from the Lease to hold the Commonwealth as tenant liable for the $20 million remediation costs the Developer incurred:
- Clause 17.2: “By the expiration of the Lease the Lessee will remediate the Land to a standard suitable for on-going commercial/industrial use and so that no significant contamination is migrating from the site”.
- Clause 19.1: “(1) Before expiry the Lessee must, having regard to the condition of the Premises detailed in the Conditions Reports:
(a) vacate the Premises and given them back to the Lessor clean and in good repair and condition (fair wear and tear excepted)…”.
The Deed provided a mechanism by which Defence could discharge its remediation obligation: by providing a Site Audit Statement (SAS) certifying the Land was suitable for commercial/industrial use, either unconditionally or subject to compliance with an Environmental Management Plan (EMP). The SAS obtained by Defence was conditional, certifying that the Land was suitable, subject to an EMP.
The EMP prepared by GHD Pty Ltd (GHD) in 2016 relied on limited sampling and expressly contemplated that asbestos-containing materials would continue to be found into the future. In response, the EPM mandated annual visual inspections of the accessible ground surface and removal of any identified suspected asbestos-containing material to a licenced waste facility.
At first instance, Justice Kelly Rees in the Supreme Court held the Lease only required remediation such that the Land could continue to be used in the way it had been (for commercial/industrial purposes), and not for redevelopment. The Developer and Qube appealed the decision, arguing, among other grounds, that clauses 17.2 and 19.1 of the Lease had been misconstrued.
The NSWCA decision
Justice Mark Leeming, Justice Stephen Free and Acting Justice John Griffiths unanimously dismissed the appeal. The key findings were:
“Remediate” does not mean “remove”
Given “remediate” was an undefined term in the Lease and Deed, it was given its ordinary English meaning, that is “to correct or improve (a deficiency or impairment)”. That definition did not equate to removal, a position which was reinforced by the fact that the Lease used those terms as alternatives.
The use was confined
Defence was only required to remediate the Land to a standard suitable for ongoing commercial/industrial use, meaning it was not necessary for Defence to remediate the Land in anticipation of earthworks to effect a change in the use of the site to a different commercial/industrial use, for example the development of the Moorebank intermodal terminal facility.
A conditional Site Audit Statement was sufficient
Defence was not obliged to return the Land in “pristine condition”. The requirements for a SAS had been drafted with similar wording to that set out in the NSW statutory contaminated land framework, which permits certification subject to an EMP. Accordingly, the clause was to be read in that statutory context. That meant Defence could satisfy clause 17.2 by providing a conditional SAS certifying the Land was suitable for ongoing commercial/industrial use subject to compliance with an EMP. Put simply, parties who require the land to be certified suitable and free of contaminants to the extent that no ongoing management measures are needed must expressly state this as part of the contractual terms. Given the absence of an express provision, on a proper reading of the Lease, Defence was able to satisfy clause 17.2 despite the continuing presence of asbestos-containing materials.
The general “make good” clause did not add anything
The “make good” clause, being clause 19.1, did not impose any additional remediation obligations on Defence beyond that already set out in clause 17.2. The Court construed the two clauses harmoniously, holding that a general provision should not be read so as to be inconsistent with what a specific provision expressly permits.
Although asbestos continued to be present on the surface of the Land and within 10 centimetres of the surface at the expiration of the Lease, the covenants on which the Developer sued were ultimately not expressed in absolute terms. Defence was not obliged to return the Land to the Developer in pristine condition. Rather, it had to ensure the Land met the standard articulated in clause 17.2, which could be satisfied by providing a conditional Site Audit Statement and accompanying EMP.
Defence had subsequently done all that was required of it to remediate the Land and could not be held liable for the $20 million asbestos remediation costs. The lesson being to be cautious, deliberate and specific when drafting environmental and remediation clauses and identifying the exact condition of the land at the end of any remediation activities.
If you would like to discuss how this decision may affect your arrangements, please contact us.