191 Bells Pty Ltd v WJ & HL Crittle Pty Ltd [2024] NSWCA 221

16 December 2024

Summary

  • In 191 Bells Pty Ltd v WJ & HL Crittle Pty Ltd [2024] NSWCA 221 the court unanimously determined that, in a dispute regarding contamination found on land, a contractual obligation for a vendor to assist the purchaser “as far as possible in the due diligence process”:
    • does not create a positive obligation of voluntary disclosure of everything that might be relevant to the due diligence process; and
    • the vendor did not engage in misleading and deceptive conduct by its failure to disclose all matters relevant to contamination on the land.

Background

  • WJ & HL Crittle Pty Ltd, the first respondent (WJHL) was the owner of a large parcel of land in Meroo Meadow (Land). On 2 March 2022, a related entity of the not-yet-incorporated 191 Bells Pty Ltd, the appellant (191 Bells) entered into an Exclusivity Agreement with WJHL under which WJHL agreed not to engage with any other party in relation to the sale of the Land.
  • On 23 March 2022, 191 Bells and WJHL signed a Put and Call Option Deed (Deed) to acquire the Land.
  • Environmental reports obtained in draft prior to the Deed being signed, but finalised after the Deed was signed, found that there was significant contamination of the Land by reason of waste burial pits containing asbestos, tyres and deceased animals. The pits had previously been used as silage pits but were filled in and covered by a director of WJHL, Mr Crittle.

First instance decision

  • 191 Bells commenced proceedings in the Supreme Court of NSW alleging that WJHL and/or Mr Crittle engaged in the following conduct which was misleading or deceptive conduct within the meaning in the Australian Consumer Law:
    • for both respondents – failing to disclose the nature of contamination in the Land (Failure to Disclose); and
    • for WJHL – concealing the contamination (Concealment).
  • Justice Pike of the Supreme Court dismissed 191 Bells’ claim at trial holding that:
    • in relation to the alleged Failure to Disclose, at [190], “The terms of the Exclusivity Agreement do no more than impose obligations on the Vendor in relation to any due diligence which the Purchaser chose to carry out. They do not give rise to an obligation to disclose.”; and
    • in relation to the alleged Concealment, WJHL did not positively represent that it had disclosed that there was no contamination on the Land.

Appeal

  • 191 Bells appealed and sought that the Sale Contract be declared void and that the money paid by 191 Bells to WJHL pursuant to the Deed and the Sale Contract be refunded to 191 Bells.
  • The central issue on appeal was that 191 Bells said that Justice Pike erred in finding that the Exclusivity Agreement did not impose an obligation on the respondents to fully disclose the existence of the contamination.
  • The Court of Appeal (Ward P, Payne JA and Stern JA agreeing) dismissed the appeal, holding that that the obligation to assist “as far as possible” qualifies the extent of the assistance to be provided but did “not accept that “assistance” in the due diligence process imposes a positive obligation of disclosure which extends to a pro-active obligation to disclose matters to the appellant’s attention whether or not an enquiry had been made as to those matters” (at [125]).
  • Ward P’s view (Payne JA and Stern JA agreeing) was that the fact that WJHL and Mr Crittle knew that due diligence was being undertaking in relation to contamination (including that draft reports identifying contamination were available) did “not elevate an obligation of assistance to a positive obligation of disclosure” (at [126]).
  • Ward P observed that if the intention of the parties was that WJHL had to disclose certain information, then a clause to that effect could have been included in the Exclusivity Agreement.
  • The conclusion reached by the Court of Appeal meant that there was no conduct which was misleading or deceptive.

Key takeaways

  • Parties to contracts should use clear words to express their intention of the obligations imposed on one another. Parties should not lightly assume that the Court will intervene and imply terms into their contracts, especially terms requiring performance by the other.
  • Knowledge of the due diligence process will not be sufficient to elevate a contractual obligation to provide assistance to a positive obligation of disclosure, and a party will not be liable for misleading or deceptive conduct where it fails to disclose in those circumstances.
  • HWLE’s Construction and Infrastructure Team has expertise in advising clients in such situations – whether it be through assisting you with drafting clear and effective clauses or handling disputes that arise from matters such as these.

This article was written by Sonya Kroon, Partner, Peter Yacoub, Senior Associate, and Kaitlin Taylor, Solicitor.

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