Contaminated Land – What constitutes notice to a buyer?

Queensland’s Environmental Protection Act (Section 421) requires a vendor of land recorded on the Environmental Management Register to give notice to a potential purchaser prior to signing any contract to sell the land. The Queensland Court of Appeal has recently affirmed what constitutes written notice.

The decision examined notice provided by a seller via a data room.

Ultimately, the court confirmed that:

• purchasers should not assume that a formal written notice is required; and
• the notice may take a variety of forms, so long as it comes to the attention of the purchaser and informs them of the risks required to be disclosed under the Environmental Protection Act 1994 (Qld) (EP Act).

What are the notice requirements for contaminated land?

Prior to selling land, owners are required to provide written notice to a purchaser if the land is:

• recorded on the Environmental Management Register (EMR), or Contaminated Land Register (CLR); or
• subject to a Site Management Plan.

An owner’s failure to comply entitles a purchaser to terminate the contract prior to completion.

What issues arose with the notice?

During the due diligence period, the seller uploaded numerous documents to a data room. These documents included a folder entitled Land Contamination which identified the contaminated lots.  The documents were accessible and downloadable by the purchaser.

Express formal notice of the contaminated lots was not provided to the purchaser. However, it was argued the purchaser had notice in the form of data room records. The purchaser also sent an email indicating awareness of the contamination.

Was the notice sufficient?

The unsuccessful buyer argued that access to the data room did not comply with Section 421 on 5 grounds;

1. Uploading documents electronically into a data room was not giving written notice. The Court held that where the buyer consented to information being conveyed in a data room, the seller was permitted to give information electronically.
2. Providing search responses among other information on a variety of subject matters was non-compliant. The Court held that the EP Act did not prescribe the form of notice so notice given with other information formed no basis for non-compliance.
3. Providing access to the data room without specifying that the notice was given under Section 421 was non-compliant. The Court found that Section 421 did not include a requirement that the notice had to expressly state that it was given under that section.
4. Because the seller stated that the due diligence material in the data room could not be relied upon and gave no warranty as to its accuracy, the buyer argued that the seller declined to contractually promise as to its accuracy. The Court held that there was no contention about the accuracy of the search results and that disclosing them was sufficient.
5. The buyer argued that notice was given to the holder of the option, and not the buyer under the contract. The Court held that the development director of the option holder was also the sole director of the buyer, so adequate notice had been given to the buyer.

The Ultimate Question

The Court of Appeal held that the purpose of Section 421 was to ensure that an intending purchaser was aware of the liabilities that may go with the acquisition. So, the ultimate question is “did that seller give notice in writing that the land was on the register?” If so, the form of written communication is immaterial.

What are the practical implications?

Sellers

• Notice can take many forms, however, best practice remains for a clear, separate notice to be given to the purchaser and any nominee before a contract is formed;
• The EP Act grants the seller an opportunity to rectify any failure to provide the required notice so long as this is given prior to completion and the purchaser does not rescind the agreement within 21 business days; and
• Notice must ensure it communicates the matters required by the EP Act, including:
  • The particulars of the land have been placed on the register; and
  • Details of any site management plan.

Purchasers

• Do not assume a formal written notice will be given. Check the documents provided by the seller and the data room.
• If the matters required to be communicated by the EP Act are disclosed in writing throughout the pre-contractual negotiations, whether explicitly given or not, the purchaser is unlikely going to be able to rely on the failure of a specific notice being given as a right to avoid the contract; and
• Accessing documents in a data room may be sufficient for awareness of the matters required to be communicated by the EP Act.

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Albion Mill FCP Pty Ltd & Anor v FKP Commercial Developments Pty Ltd [2018] QCA 229.

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