Jennings & Anor v Cheshire & Anor [2021] HCATrans 165 (15 October 2021)

Last Updated: 19 October 2021

[2021] HCATrans 165

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Adelaide No A10 of 2021

B e t w e e n -

JASON JENNINGS

First Applicant

HELEN JENNINGS

Second Applicant

and

ALICJA MAGDALENA CHESHIRE

First Respondent

DEREK GEORGE CHESHIRE

Second Respondent

Application for special leave to appeal

KEANE J
GORDON J
EDELMAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA BY VIDEO CONNECTION TO BRISBANE AND MELBOURNE

ON FRIDAY, 15 OCTOBER 2021, AT 10.32 AM

Copyright in the High Court of Australia
KEANE J: In accordance with the Court’s protocol when hearing matters remotely, I will announce the appearances for the parties.

MR P. ZAPPIA, QC appears with MR N.C. DOUR for the applicants. (instructed by WRP Legal &Advisory).

MR W.J.N. WELLS, QC appears with MR R.D. ROSS‑SMITH for the respondents. (instructed by St Ives Law).

KEANE J: Yes, Mr Zappia.

MR ZAPPIA: Thank you, your Honour. This application raises important questions of the statutory obligations of disclosure of vendors of land in South Australia. The statutory provision in question may be found at page 86 of the court book. It is part of a Form 1 which must accompany standard form contracts for the sale of real estate. The question is question (5), your Honours:

Is the vendor aware of an environmental assessment of the land or part of the land ever having been carried out or commenced . . .

If YES, give details of all environmental assessments that the vendor is aware of and whether they were carried out or commenced before or after the vendor acquired an interest in the land ‑

The Full Court construed that provision in a manner which required the vendors in this case to answer the question affirmatively. Our submission is that the Full Court was wrong in its construction and, as a result of its construction, it leads to an onerous and burdensome obligation on vendors, exposing them not only to civil proceedings but, potentially, criminal proceedings.

There were two errors essentially made by the Full Court on the question of construction. The first is the Full Court determined at paragraphs 71 to 75 of its reasons that question 2(5) is not confined to assessments of the land, and that the particulars to be provided are not to be narrowly confined to the land in question. The Full Court said that:

it is sufficient that the assessment . . . over an area that encompasses –

or includes the land, the subject of sale. We say that construction, with respect, your Honours, is wrong. It departs from the express language of the question. The subject matter of the environmental assessments should be of the land, the subject, not of some other land. So, the Full Court’s construction departs from the plain wording.

The Full Court adopted an expansive meaning of that expression by erroneously applying constructional aids. At paragraphs 72 and 74 of its reasons, the Full Court erroneously concluded that the definition of “environmental assessment” found in Form 1, which is set out in paragraph 65 of the Full Court’s reasons, expanded the scope of the question beyond an assessment of the land subject to sale. We say the definition does no such thing. On the contrary, it confirms that the subject matter of the environmental assessment is the land the subject of sale and not some wider area of land.

EDELMAN J: Mr Zappia, does the point really just simply come down to whether the construction of the word “of” means “relevant to”?

MR ZAPPIA: No – one might put it that way, but we say that is the way the Full Court approached the matter. We say it should not be construed in that way.

EDELMAN J: But that is an open.....construction, is it not?

MR ZAPPIA: That is potentially the question of construction. But what they did here was to say that “of the land” meant of an area, or over an area that encompassed the land, and what they have done is rely upon the definition of “environmental assessment”, which is found at paragraph 65 of their reasons, to get to that result. What we say is that it is impossible to get to that result by looking at the definition of “environmental assessment”. On the contrary, it simply confirms that the environmental assessment must be of the land the subject of sale, not some other subject matter, and to say that it is environmental ‑ ‑ ‑

GORDON J: Mr Zappia, is this not the difficulty for you, that this is delegated legislation and the Executive could change the form? I mean, if the Full Court really got it wrong, then it is very easy to change the form, is it not?

MR ZAPPIA: That may be so, your Honours, but there is no indication by the legislature that it is going to change the form, nor that any change will be retrospective, and it potentially has captured, and will capture, many, many vendors of land in the State of South Australia.

GORDON J: This is unique to South Australia, this form?

MR ZAPPIA: It is unique to South Australia, but it applies across the board in South Australia. It applies to all vendors to land in South Australia. It is an important question in that regard and its importance lies not ‑ ‑ ‑

EDELMAN J: Mr Zappia, there is a further problem, is there not? It is that you want to urge upon us a narrow construction of the word “of” in relation to a question on a form that is specific to South Australia, but you want us to do so in the context where there has been no real exploration of the other possible meanings of the word “aware”. It seems that the parties have assumed throughout that the word “aware” means actual knowledge and there is no argument been made about whether “aware” could be given a broader meaning, which might then support a narrower meaning to be given to “of”.

MR ZAPPIA: Yes. Your Honour, that deals with the second issue that we raise in our special leave application and the second issue is this, that “aware” means actual knowledge. Everybody proceeded on that basis and we say it is a correct basis on which to proceed, but actual knowledge of what? We say actual knowledge of two matters: actual knowledge of the constituent facts, as found by the Full Court in paragraphs 86 and 87, which are relied upon to conclude that this was an environmental investigation or an environmental assessment of the land.

So there needs to be an actual knowledge of those constituent facts and, in addition, there needs to be an awareness of the legal.....those facts, so that one understands the legal consequences, a concept of which, one must be aware, is an environmental assessment, a legal conception, and we say that therefore there are those dual requirements in order to establish awareness.

That matter was not foreclosed in the courts below. There was no consideration really of the issue of awareness before the trial judge because he determined that there was no assessment of the land. The Full Court having then taken a different view of that matter did come to the view that it needed to find awareness, but remarkably it appears it did not really explore the issue beyond simply upholding some findings of the trial judge.

It referred to Deming, and Deming is a case which we say supports the proposition that, in order for one to be aware of a statutory condition, one must have knowledge not only of the available facts but be conscious of legal consequence. We say that the Full Court referred to Deming but then did not apply it and here the fundamental problem and the injustice of the case is that there was simply no finding that they were aware of either matter – that is, that the vendors were aware of the constituent facts, which are set out in paragraphs 86 and 87, nor of any consideration of whether they were aware of the legal consequences of those facts.

EDELMAN J: Mr Zappia, would you accept that the narrower the approach that one takes to awareness, including confining awareness to actual knowledge and excluding any constructive knowledge – or even perhaps wilful blindness – requiring that awareness be an awareness of the legal consequences, the more there is a need to have a broader approach to the word “of” because otherwise the whole purpose of the provision could be very easily defeated?

MR ZAPPIA: No, we would not agree with that. We agree that if you are going to have an expansive definition of the expression “of the land”, rather than just focusing upon the word “of” – it is a compendious expression – if you are going to have an expansive provision “of the land”, then we accept what your Honour Justice Edelman has said – that you would therefore expect to have a narrower requirement of awareness, particularly given the criminal sanctions which followed. If one answers a question wrongly the criminal sanctions are quite draconian. Section 36 imposes upon the vendors – and the Jennings would be exposed to this – a one‑year term of imprisonment as a possibility.

So, one needs to certainly have regard to the way one considers the question – or the interpretation of “of the land” in considering the issue of awareness. We would say, if you accept the Full Court’s construction, then certainly there would be a narrower requirement for awareness.

But, going back to the question that your Honour Justice Edelman put forward, it is relevant to know, as it is always the case with a question of construction, other provisions in the relevant form. Here, we have the benefit, for example, on page 103 of the Court book, of a provision which the Full Court relied upon in giving meaning to the word – or the expression “awareness of an environmental assessment of the land” and they looked at paragraph 4(c). So, if you look at question 4 on the Form 1:

Does the EPA hold any of the following details in the public register in relation to the land or part of the land -

The Full Court seized upon those words as a basis for expanding the meaning of the words “of the land” in question 2(5). There is no occasion to use a differently worded section which has broader language as a basis for expanding the meaning of question 2(5). There is good reason why Parliament required that the subject matter of the environmental assessment be of the land and not of some wider area because, if you carry out an investigation of some wider area in which the land may be located, it may not say anything at all about the environmental conditions of the land. It depends on the purpose of the investigation and nature of the investigation. That is the first issue.

The second issue is.....that is relevantly accessible to a vendor and, in fact, probably would not be because there would be some confidentiality
regimes in relation to the actual investigation. The vendor has no control over it.

The third reason is that, if you have a broader investigation, there is no reason to think that a purchaser of land is not as able as the vendor to obtain information about it and this case is in point. The nature of the investigation here, apparently, was advertised on State‑wide television and on State‑wide newspapers and was on the websites of local councils.

It should not be readily presumed that Parliament intended question 2(5) to include, or to be construed as meaning an environmental assessment of an area which encompasses the land and it specifically chose the words “of the land” because it intended the assessment to deal specifically with the land, as the trial judge found.

The constructional aids which were employed by the Full Court also included a reference to the definition of “site contamination” in the Environmental Protection Act. When one looks at that definition, that does not support an expansive reading of the question. In fact, it is to the contrary.

All that section 5B does is define when site contamination exists at a particular site. The site in question here is defined by the question as being the land, at the land, and site contamination at the land requires at least a consideration of whether or not there are chemical substances on the land in excess of the surrounding areas. So, it rather tends to reinforce that there must be an environmental assessment confined to the land, not an environmental assessment over a different subject matter, namely an area which is greater than the land, but which encompasses the land.

They are the submissions that I wish to make, your Honours, unless there are any further questions.

KEANE J: Thanks, Mr Zappia. Yes, Mr Wells.

MR WELLS: May it please the Court. Could I ask the Court, if you would, to take up the application book at page 85, which sets out the item 2 questions with the item 1 definition in it. The item 2 questions the vendor, not about the vendor’s acquisition of required information, which is the subject of other parts of the prescribed particulars, for which this is a part, but it questions the vendor about the vendor’s acquisition of knowledge or awareness - I put aside for the moment if there is a distinction between the two - knowledge about specified matters.

In order to answer yes to the questions in item 2, the vendor, we submit, does not have to have a detailed knowledge of the environmental assessment, putting aside for the moment what that means. I invite the Court to note the note on page 86 at the bottom of the questions that are asked of the vendor about their awareness, and the second part of that note says that:

A “YES” answer to any of the questions in this item may indicate the need for the purchaser to seek further information regarding the activities, for example, from the council or the EPA.

The conclusion, we submit, is that the extent of awareness is that which is sufficient to be able to put the purchaser on inquiry. That is why the definition of “environmental assessment” is expressed in broad terms. As it were, it throws the net wide so that the vendor’s awareness need not be detailed and so that the purchaser can be put on inquiry.

The knowledge being interrogated is of past and current events on or affecting the land and, in the case of the.....the event is not necessarily something – that is the environmental assessment – that has been conducted on the land, and this, we submit, is the critical flaw in the applicant’s submissions and it is the critical point that was made by the Full Court in its judgment.

Your Honours will find that on page 62 of the application book, and in particular – I beg your pardon, page 64, at paragraph 72 where their Honours, addressing, in addition to question 2(5), the definition of “environmental assessment”, made the point that there is a critical difference between an environmental assessment conducted on the land and an environmental assessment whose purpose is to identify the potential for:

site contamination at the land.

That is the correct description and interpretation of the phrase “at the land” where it appears in the definition of “environmental assessment”.

Question 2(5) asks about an environmental assessment, whether already carried out or commenced but not completed, of the land, not carried out or commenced on the land, and that points to the correct interpretation of the word “of” and hence the reference by the Full Court to item 4 where similar questions were being asked in relation to the land, that is, environmental assessments.

The nature of an environmental assessment is such that it will rarely be focused on one piece of land, hence the definition of “site” in the phrase “site contamination”, and that definition, your Honours will find at page 104, where, for the Environmental Protection Act, “site” is defined to mean:

an area of land (whether or not in the same ownership or occupation) –

and the phrase that is introduced into the interpretation provision in the regulations in Form 1, that is, in item 1, is not the word “contamination” but the word or phrase “site contamination”, and that again identifies the nature of the environmental assessment as being an investigation designed to identify the potential for contamination of or at the land in question, including other allotments of land.

It is not, therefore, an assessment at the land, but an assessment of the potential, whatever or wherever its source, for contamination of the land, and that assessment may yet be in progress and not completed, as was the case here. The source of contamination is a matter of some messiness. Inevitably, in the nature of things, the source may be, as is recognised in the definition of “environmental assessment”, in the:

water on or below the surface of the land –

including moving water carrying the contamination, and the Court will be aware in that respect that there was a creek running near and adjacent to the rear of the applicant’s home, and there were other lines of water carriage to wetlands and the disposition of that line of carriage of water was from the RAAF base on the one hand through the suburb in which the applicant resided to the wetlands further along. So that is one source. The other source is, as I say, site contamination.

It is important to note that the Form 1 – in the form in which this Court is considering it – was amended to introduce the notion of site contamination at or about the same time as the Environmental Protection Act – where it was amended to include provisions about assessment of site contamination. As we say that is exactly the analysis that the Full Court undertook. This, we submit, leads to two observations ‑ ‑ ‑

EDELMAN J: Mr Wells, Mr Zappia referred to potential for criminal liability for an error that was made in relation to completion of the form. Is that criminal liability effectively a strict liability, or is it dependent upon intention and purpose in the making of any error?

MR WELLS: Your Honour, there are two provisions. One is section 14. Section 14 can be found, I think, in the annexures to the applicant’s submissions at page 87, down the bottom. There is a defence, section 16. The consequence of that – if we assume for present purposes that a statement which is inaccurate in the Form 1 is either a contravention or a failure to comply with provisions of the part, Part 2 – which is where section 7 is – section 7 is the section that lays down the requirement of a statement with prescribed particulars - then one can see that there are defences, including in effect onus on the defendant to prove either unintentional or not the result of a failure to take due care – that is due diligence.

But all that having been said, that makes perfect sense if one is talking about an obligation, in Form 1, to provide certain information which a vendor has to go and get. This is unusual because this is a case where what is being interrogated is the vendor’s state of mind. The availability of the criminal liability in those circumstances is extremely limited. It is really limited to the dishonest vendor, the vendor who says, “I am unaware”, when in fact they were aware.

Even there, there is some difficulty in ascribing criminal liability, as we see here because the finding of the trial judge in that respect was that, on the balance of probabilities, his Honour concluded, the Jennings were aware of the investigation which constituted the environmental assessment; so non constat that there would be a criminal offence committed simply because they stated “unaware” when they were in fact aware, given, as we contend, that awareness in that case is not a high bar in terms of detail.

The same point can be made with respect to section 36, which follows on page 88, which is where there is a false or misleading representation. That would arise, your Honour, for example, in this case where there was an auction and under section 11 of the Act, Form 1 has to be made available to bidders ‑ I think I am right in saying – some five days before an auction. So, it precedes the auction and one might perhaps find in those circumstances the possibility of seeing the Form 1 as a representation for the purpose of inducing a purchase.

In that respect, your Honours will see on page 89 that there is built into that a form of Proudman v Dayman defence and, in addition to that, there is the general defence ‑ which is not in the book and which we hope your Honours have been provided with at our request – section 37B, which again is in much the same form as section 16, namely, proof of absence of intention or proof of due diligence.

But again, for the same reasons, in our respectful submission, criminal liability has a very small part to play here and probably is confined as, we submit, to the dishonest vendor, in which it can be proved beyond reasonable doubt that the vendor, in giving an answer about a state of mind, was dishonest in that respect.

We would further, if the Court pleases, make the other point, which is in favour of the consumer protection purposes of the form and, indeed, of
the Act. The potential purchaser is left vulnerable to the vendor who indulges in studied ignorance- perhaps, I think as your Honour Justice Edelman suggested earlier, wilful blindness - a studied ignorance to avoid the risk of acquiring disclosable knowledge, and a studied ignorance then designed to enhance the chances of sale.

So, there is no, in our respectful submission, good reason to be reading any of this narrowly and, in that respect, your Honours, our respectful submission is that there are at least four reasons why the principle derived from Deming’s Case provides no assistance here.

If I can enumerate them briefly, the first appears in our submissions, written submissions, namely that there is, at best, a slightly better argument for suggesting that where the awareness is of a failure, the awareness has to extend not only to awareness of facts, but also the legal character of those facts, because to be aware of failure is to be aware of a standard which has not been reached, and that was effectively the decision of the majority in that case on that point.

But it was a decision that was reached, again, in favour of the purchaser. In that case, it was the purchaser who had to be aware of the failure and that was the trigger for a 30‑day limit on giving notice of statutory rescission of an off‑plan contract of purchase. So, it is probably not surprising that there was an insistence by the majority in that case that the 30‑day limit should run until there was that degree of awareness. That is, we respectfully submitted, not replicated in the case at bar.

We also, with respect, make the point that the decision in Deming on this issue - there were in fact four issues for which Deming has, over the years, been cited - but on this issue the decision of the majority in that case was doubted by the Privy Council a year later in the case of Boheto v Sunbird Plaza and, at about the same time, the legislature in fact reversed the decision of the majority of the High Court by legislation. So, it was, in fact, not seen as, in the end, reflecting the intention of the legislature and, in our submission, even less so here. Those are our submissions, may it please the Court.

KEANE J: Thanks, Mr Wells. Mr Zappia, anything in reply?

MR ZAPPIA: Just a couple of matters, your Honour. The submission accepted by Mr Wells that the criminal penalties apply to a dishonest vendor reinforces, in our view, a requirement of awareness, not only of the constituent facts but of the legal consequences of those facts. It is essentially a case of statutory fraud where a person provides an answer knowing that there is an environmental assessment, and answers no. So,
that tends to reinforce our submission that the findings and the conclusions of the Full Court in this case were wrong.

There was no finding made by the trial judge that the vendors were aware of the constituent facts which this, the Full Court, determined or relied upon to determine that this was an environmental assessment of the land. Those facts are set out by the Full Court at 86 and 87. They are quite detailed, but among other things they require a knowledge of the strategy behind the general investigation. There was simply no finding to that effect.

The highest the findings rose are the findings made by the trial judge at paragraphs 173 and 174 of his reasons, and all the Full Court did was uphold those findings. It did not expand those findings. The trial judge found nothing more than that the vendors were aware of an issue of PFAS contamination, and they were aware of an investigation, and the trial judge defined the investigation at paragraph 128 very narrowly, not to encompass the factors that the Full Court relied upon in paragraphs 87 and 88.

He defined the investigation as investigation as to the “extent of any PFAS contamination” in and around the RAAF Edinburgh Base, nothing more than that. That is what he concluded that they were aware of – nothing more. He did not conclude that they were aware of the investigation area, or that the property.....their investigation area. So, with respect, there are no findings.....complexion of those facts.

The last matter is this. Whether or not there is an assessment – an environmental assessment of the land - is not the same question as to how that assessment may be carried out. One does not answer it. They are separate questions. Whether or not you need testing on the land may depend on the nature of the assessment and what is being investigated. It may be possible to assess the land, the subject of sale, without undertaking any testing on it. It may not be possible to do that. It will depend on the technical expert evidence of what is being assessed.

Here, for example, there was no technical evidence led that an investigation of PFAS throughout the area and testing in one particular location, was evidence of the existence of PFAS at the land. They are the submissions in reply, your Honours.

KEANE J: Thanks, Mr Zappia. The Court will adjourn briefly to consider its decision in this matter.

AT 11.06 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.10 AM:

KEANE J: This application does not raise an issue of principle of sufficient general importance to warrant the grant of special leave to appeal. The application will be dismissed with costs.

Adjourn the Court.

AT 11.10 AM THE MATTER WAS CONCLUDED