Lambson Fine Chemicals Ltd v Merlion Capital Housing Ltd

The property had been used for the manufacture of chemicals since the 1860’s. By the late 1940’s it was owned by Laporte and used for the manufacture of sulphuric acid, sodium sulphate and salt cake. In 1975 the property, at that time largely derelict, was bought by the Claimant. The Claimant developed parts of the property for certain chemical manufacturing processes, and occupied the property until its sale to the Defendant in May 2004. The Claimant employed about 170 people at the property during this period.

The property is bounded on the north-west by the River Calder, and on the east by the River Aire. During the Claimant’s occupation, parts of the property, particularly the western and southern zones, remained largely derelict. The Claimant’s occupation was principally confined to the central area, sometimes referred to as the north or central zone, which was within Zone 1 as referred to in the ground investigation reports. The three construction projects referred to in Section B3 below were all carried out in that central area.

One chemical that had been brought to the property before the Claimant bought the site in 1975 was known as Blue Billy, which was used as feed for the production of sulphuric acid. The definition of Blue Billy at paragraph 2 of the Defence and Counterclaim was “a waste product from gas works which is bright blue in appearance. It contains high concentrations of cyanide and releases a strong odour.” It is also known as spent oxide. That definition was admitted in the Claimant’s Reply.

The oral evidence was in accordance with that agreed definition although, as Mr Crowcroft (the Claimant’s expert) pointed out, the brightness of the blue would depend on how mixed with the surrounding soil it was. He said that, when mixed, it became dulled. Certainly the sample produced in court was a deep, rather than a bright, blue.

B3 The Earlier Works

During the fifteen years or so before the Claimant’s sale of the property to the Defendant, three particular building projects had taken place in the central area which, on the Defendant’s case, were relevant to the pleaded issues because, so it is said, they must have demonstrated to the Claimant (and/or its director Mr Hall) that large parts of the central area of the property were contaminated with Blue Billy. Each project is identified below.

In about 1990, the Claimant constructed an Oil Additives Plant in the central area of the property. This was known as the ADX 410 plant. The foundation of the ADX 410 plant was a concrete raft. It was Mr Hall’s evidence that the raft was deliberately built on and above the surface of the ground, so as to avoid possible problems with contaminants in the ground, and that therefore no substantial ground excavations were required. In addition, there was nothing to suggest that any soil investigation was carried out prior to the construction of the ADX 410 plant.

It was the Defendant’s case that this was an unusual form of construction, and that it was more likely that the excavations for the raft were deeper, and therefore more likely to have revealed the Blue Billy below the surface. But that suggestion was contrary to Mr Hall’s recollection, which I have no reason to doubt, and was not supported by any cogent evidence. Mr Hall was adamant that the ADX 410 plant was built above ground. He was the only witness who saw that work carried out. I therefore accept his evidence, to the effect that the concrete raft for the ADX 410 plant did not involve any significant excavations in the ground at all.

The most significant building project at the site was the construction, in 1994 and 1995, of a sulphuric acid concentration plant (“the SAC plant”). This project involved a dedicated water treatment system just to the north of the ADX 410 plant, and a service road going right around the central area. The SAC plant, and associated infrastructure works, cost about £12 million. One of the main factors in its cost was the steel piling which was driven approximately 11 metres into the earth below the SAC plant building. Of course, given that the piling was going to be steel, the Claimant had to ensure that there were no materials in the surrounding ground which could corrode or damage the piles.

To that end, the Claimant commissioned Travers Morgan of Nottingham to investigate the ground conditions below the proposed SAC plant. Travers Morgan excavated six trial pits in the location of the proposed SAC plant and took various soil and ground water samples for analysis. Subsequently, Travers Morgan produced a number of reports, including two detailed reports both dated November 1993: one was the Chemical Contamination and Waste Classification Report (which I shall call “the first Travers Morgan report”); the other was the Geotechnical Interpretative Report (which I shall call “the second Travers Morgan report”). For reasons which will become apparent below, these two reports (and the connection between them and the subsequent URS report on which the Defendant relied when purchasing the property) assumed considerable significance in this case.

The first Travers Morgan report identified very heavy contamination in the central area by a variety of contaminants, including cyanide. Elevated concentrations of total cyanide were recorded in three locations. Paragraph 5.04 of the first Travers Morgan report stated in clear terms that the work proposed by the Claimant would not remove all the contaminated material in that location:

“We understand that the development proposal is to excavate the minimum of contaminated material from within the footprints of the proposed structures and replenish the excavated voids with clean, inert material and no measures are currently proposed to remediate the remainder of this area of the site.”

The second Travers Morgan report indicated that “the Made Ground contains a high degree of contamination”. It recommended that the foundations of the SAC plant be piled, and dealt at length with the difficulties of such a construction in highly contaminated ground. Paragraph 15.09 of the second Travers Morgan report stated:

“Chemical contamination testing has shown a high degree of contamination, and consideration must be given to the relative costs of total removal and replacement compared to partial removal and replacement in containing the movement of the remaining contaminants on site.”

There can, therefore, be no doubt that these two Travers Morgan reports identified Blue Billy/cyanide contamination in the central area of the property. Mr Chamberlain, the Defendant’s director, who admitted that he did not read the Travers Morgan reports until after he had purchased the property, rightly accepted in cross-examination that the Travers Morgan reports indicated the presence of Blue Billy in the central area.

It was Mr Hall’s evidence that, as part of the works carried out in connection with the SAC Plant during 1994/1995, a certain amount of soil contaminated with Blue Billy was excavated from beneath the piled foundations of the SAC plant, and from the areas excavated for the service road. The Blue Billy thus excavated was not removed from the property, but was stockpiled in a mound located in the northwest part of the property. I should say in passing that I reject the suggestion, at paragraph 103 of the Defendant’s closing submissions, that there is any significance in the fact that the amount of material in the stockpile was eventually twice the amount estimated at the outset of the works: that sort of discrepancy, so it seems to me, merely reflects the uncertainties of estimating the scope of any work in the ground. That mound was still present when the Defendant purchased the site in 2004. In addition, as we have seen, it was Travers Morgan’s understanding, set out in their first report and summarised in paragraph 13 above, that the excavation of this Blue Billy in the central area was limited to the impacted soil necessary for these works, and that there was no general or more widespread removal of contaminated material. Mr Hall confirmed in his evidence that that was also his understanding of what happened in 1994/1995.

Within the footprint of the SAC plant itself, the contaminated material that had been excavated was apparently replaced by clean material, into and onto which the steel piles were then driven. Following the completion of the foundations and the superstructure, the area surrounding the SAC plant was covered with plastic sheeting and top dressed with stone chippings for landscaping purposes. Mr Hall emphasised that there were large parts of the central area which were unaffected by the SAC plant itself, or the service road that was built at the same time.

In 2001, a third new plant, known as the SAR plant, was constructed, just to the north east of the SAC plant, and also within the service road built in 1994-1995. Mr Hall’s evidence was that, just as for the ADX 410 plant, the decision was taken to put the new building on top of the existing ground, without ground investigation or any real excavation below the surface. Again, I have no reason to doubt Mr Hall’s evidence: see paragraphs 9 and 10 above.

B4 Mr John Gladwyn

On 6 October 2003, Mr Hall received a telephone call from Mr John Gladwyn about the possible sale of the property. It appears that, although Mr Gladwyn was then employed by the Kier Group, he intended to form his own property company to purchase the site. This led to a certain amount of difficulty between Mr Gladwyn and Kier, which I consider to be irrelevant to the issues in this case. Mr Gladwyn subsequently formed his own company, Amenbury Property Limited. He provided the principal contact with Mr Hall during the period prior to the sale of the property in May 2004. The Defendant had no direct dealings with the Claimant until shortly before the sale itself.

During an early conversation between Mr Gladwyn and Mr Hall, it appears that Mr Gladwyn raised a concern about the possible contamination of the property as a result of its use for the manufacture and processing of chemicals for over a century. He therefore told Mr Hall that he required an environmental survey before he could proceed with the purchase. It was agreed that URS Corporation Ltd (who had previously made contact with the Claimant but not worked for them before) would undertake the environmental assessment. It appears that the use of URS was agreed during one of the early telephone conversations between Mr Hall and Mr Gladwyn: certainly it had been agreed by the 18^th November 2003, when Mr Gladwyn’s letter to Mr Hall referred to URS “turning the work around quickly”.

B5 The Heads Of Terms

Although Mr Gladwyn wanted an environmental survey, he did not let that stop the negotiation process. In the same letter of 18^th November, Mr Gladwyn sent Mr Hall a draft agreement entitled ‘Heads of Terms’. This identified a total purchase price for the property of £13.5 million, payable in three stages, with the first instalment being £5.5 million. On this proposal, the final instalment of £6 million was not payable to the Claimant until 3 years after the completion of the purchase of the property. It also proposed an exclusivity agreement, to ensure that, for a fixed period, the Claimant did not negotiate with anyone other than Amenbury.

Following changes to the draft Heads of Terms, the exclusivity agreement came into force in January 2004, for a period of 3 months. By the end of this period, the purchase price had been reduced to £12.25 million, but with the vast bulk of that sum being immediately payable to the Claimant on completion of the transaction, rather than in stages. It appears that that change, understandably, led to the reduction in the purchase price to £12.25 million. On the evidence, the only other interested purchaser of the property throughout the period between October 2003 and May 2004 were developers called Cherokee, and it does not appear that their interest was ever as serious or as detailed as that of Mr Gladwyn and the Defendant.

There was some debate as to who employed URS to carry out the ground investigation at the property, and whether they could be regarded in law as the agents acting on behalf of either party. I regard that debate as largely academic because, on the evidence, it would be fanciful to suggest that URS were acting as the agents of either the Claimant or the Defendant: they were independent ground investigation specialists. That said, the detailed (and changing) involvement of URS is an important part of the background, and I should therefore set out my findings of fact relating to URS. On the narrow question as to which party was responsible for their fees, it appears that, although the Claimant paid URS’s fees, this was only because, as the minutes of the meeting attended (amongst others) by Mr Gladwyn, Mr Hall and Mr Cullen of URS on 8 December 2003 made plain, URS could not undertake work directly for Mr Gladwyn as an individual, or Amenbury as his company, as he had no credit rating and no previous business history with URS. It was therefore agreed that URS would be paid by the Claimant, although the minutes of the meeting on 8 December 2003 make plain that the payment “would be underwritten” by Mr Gladwyn.

On the wider point of involvement and influence, I find that Mr Gladwyn took an increasingly important role in the direction and focus of URS in the months leading up to the sale of the property in May 2004. He fairly accepted in cross-examination that, not only did he have an input into the URS Report, but that he also had a hand in agreeing the scope of the work which URS undertook. I consider that the contemporaneous documents make plain the degree of Mr Gladwyn’s involvement with URS, and in particular his suggestions and amendments to the important letter which, after a number of drafts, URS sent out to Amenbury on 8 April 2004 in order to assist them to find a funder for the development of the property. This detailed involvement is dealt with in greater detail in paragraphs 44 - 52 below.

B7 The URS Desktop Report

URS were formally commissioned on 27 November 2003. That same day, they sent out a bibliography identifying all the reports upon which their desktop study was going to be based. This list included (amongst others) the two Travers Morgan reports identified in paragraphs 13 - 15 above.

The URS Desktop Study reviewed the historical uses of the site to identify previous potentially contaminating activities. It went through all the documents and reports made available to them by the Claimant (and listed in the bibliography). They referred to the Blue Billy material as follows:

“During the construction of the SAC plant, materials were excavated and tipped on the area of derelict ground on the northwest area of the site. The excavated materials, blue in colour, were thought to have originated from former sulphuric acid manufacture or possibly a former gasworks, although its presence has never been established. It is considered likely that Blue Billy spent oxide from gasworks was imported to the site as a raw material for use in the sulphuric acid production.”

It is common ground that, from the outset, Mr Gladwyn was aware of the soils impacted with Blue Billy, excavated during the SAC plant and infrastructure works and stockpiled in the mound in the north west area of the property. In addition, Mr Gladwyn was also aware that there was also a further area of Blue Billy impacted soils at the southern part of the site: this, apparently, was where Laporte used to stockpile this particular material. These two areas were to be featured heavily in the Final URS Report.

As a result of these findings in their Desktop Study, as well as other findings of chemical contaminants across the property, URS recommended the drilling of a series of bore holes to analyse the nature and extent of chemical and water contamination.

B8 The Landfill Directive

No later than early 2004, everyone was aware that, if the Blue Billy was to be removed from the property, it may well be more cost-effective for Mr Gladwyn (or whoever purchased the property) to remove such contaminated material before the middle of July 2004. This was because, at that point, a new Landfill Directive was going to come into force which required the pre-treating of hazardous waste prior to disposal, and was therefore likely to increase the cost of removal of contaminated soil.

In an email to Mr Abel of the Claimant on 7 January 2004, Mr Cullen of URS attached results from the first of URS’s soil samples and went on to say:

“I have spoken with Adam regarding potential land filling of the cyanide enriched material. Landfill costs may be in the region of £70 per cubic metre (roughly 2 tonnes) however this does not include for the import of fill to replace the voids, which would be subject to availability. This also assumes a landfill in relatively close proximity to the site that may accept hazardous waste.

The new legislation relating to land filling of hazardous waste does come into effect in July 2004. From this time on, all hazardous waste will require pre-treating prior to disposal. The definition of ‘pre-treatment’ is however open to some interpretation and has yet to be confirmed. Screening of materials to remove large particles may be sufficient enough to qualify as ‘pre-treatment’ however more extensive treatment may be required.”

A total of 37 bore holes were drilled by URS between 9 and 17 December 2004. For reasons which remain unexplained, only two bore holes (BH 325 and BH 329), were drilled in the central area, relatively close to the ADX 410, SAR, and SAC plants. No qualification or limitation was set out in the Final URS Report as to the number of boreholes or trial pits in this area, nor was there any mention by URS of any physical restrictions or obstacles which meant that fewer boreholes than they wanted had been drilled in the central area. Furthermore, it is clear from Mr Hall’s oral evidence that there were areas of open ground around the three plant buildings where further boreholes could have been drilled if required. And, whilst Mr Hall accepted that confidentiality was important to the Claimant, who did not want their employees to learn of the possible sale, it does not appear that he ever refused permission to URS to drill in any part of the property that they chose. Mr Hall confirmed in his evidence that URS could have done a further site investigation report at any time and that they had free access to the property prior to the sale and leaseback.

URS’s failure to drill more boreholes in the central area is even more significant in the light of the results of BH 325 and BH 329, the two boreholes closest to the central area, where the issues at trial were focussed. BH 325 was recorded as containing moderate chemical/effluent TPH odour. The total cyanide figure at BH 325 was higher than most of the other borehole results across that part of the site, at 164 ions. At BH 329, as the Defendant’s expert, Mr Sanders, accepted in cross-examination, the cyanide figure was very high indeed, at 2803 ions. However, although these findings at BH 325 and BH 329 were set out in the Final URS Report, no conclusions were drawn from them. This was a significant omission, given that, as Mr Sanders said, these results were obtained in the very area where the cyanide contamination was discovered after the sale of the property to the Defendant.

Two particular points need to be made about the URS findings at these two borehole locations. The first concerns the alleged difference between Blue Billy, on the one hand, and cyanide contamination on the other. I consider that this was a slightly artificial distinction, drawn by the Defendant to emphasise that its misrepresentation case was solely about Blue Billy, not other types of contamination at the property. It seems to me that I should not be drawn into making too neat a division between the two, given that Mr Sanders fairly accepted that it was “highly probable” that, at this particular property, the “high levels of cyanide” recorded in the various investigations (by URS and others) came from Blue Billy. That would therefore include BH 325 and BH 329.

Secondly, although Mr Chamberlain of the Defendant suggested that URS were concerned about their inability to drill further boreholes in the central area, and had expressed this concern to him, any such concern is gainsaid by the complete absence of any qualification or limitation to that effect in the Final URS Report, or in their subsequent detailed letter of 8 April 2004 (paragraph 51 below). Furthermore, Mr Hall made clear in cross-examination that neither Mr Chamberlain nor URS ever passed on to him any suggestion or concern as to the inadequacy of URS’s site investigation in the central area.

B10 The Final URS Report

URS produced their Final Report (albeit that it was called ‘Draft Report II’) in March 2004. The Final Report described both the Phase 1 Assessment (namely the Desktop Study) and the Phase 2 Intrusive Investigation (namely the boreholes). The Executive Summary also dealt with a conceptual site model, a quantitative risk assessment, and a lengthy passage dealing with remedial options. The relevant parts of the Executive Summary read as follows:

“Conceptual Site Model (CSM)

… Potential sources [of pollutants] included poor historic site practice relating to the storage of chemicals, the potential for spills resulting from site processes, and the presence of historic contamination such as ‘Blue Billy’.

Remedial Options

… Risks to human health may be mitigated by the off-site removal of the most heavily contaminated materials (Blue Billy), and the construction of a low permeability barrier (clay) across much of the site….At this stage it is not possible to estimate the scope and costs associated with the remedial strategy for the site with a reasonable degree of accuracy. To design an implementable remedial strategy it will be necessary to carry out additional investigation and ground water monitoring. The results of the additional works will be used to delineate the lateral and vertical extent of soil and ground water contamination, assess material volumes and if warranted carry out pilot trials to assess the viability of potentially cost effective sustainable remedial options. It will also be necessary to agree upon the scope of the remedial scheme with local and regional regulators.

At this stage it was URS’s opinion that a provisional sum of £4.5 million should be allocated to address the principal soil and ground water liabilities identified on site. This sum was said to be based on the following key assumptions:

“● Highly contaminated source areas (e.g. Blue Billy’s) are removed from site prior to the introduction of the new Landfill Directive in July 2004;

● The Environment Agency continues to adopt an element of pragmatism during the agreement of risk based cleanup levels for contaminated ground water, especially in relation to dilution. The Environment Agency have already been contacted and although the exact location of the site was not discussed, it was inferred that they would favourably view our assumptions in relation to the proposed remediation scheme;

● The construction of a clay cap across the site is considered an adequate remedial option by the Local Authority and protective of human health;

● Soil and ground water contamination does not increase in extent or concentration from that encountered during this investigation, potentially resulting from current or future operations; and

● The costs do not account for demolition of the existing facility or potential contamination resulting from these works.”

Moving on to the text of the Final Report itself, its detailed objectives were set out in paragraph 1.2. That paragraph reads as follows:

“1.2

OBJECTIVES

“The principal objective of the Environmental Assessment was to collate available data regarding the site and its environs and to assess the potential for further development of the site. In this context, the specific objectives of the assessment can be summarised as follows:

•

Complete a Phase I assessment of the site providing information relating to the historical land use, current land use and identify areas of potential environmental concern requiring further investigation;

•

Completion of a Phase II intrusive investigation to assess the potential for the ground and soil water contamination and comparison of the results with screening criteria;

•

Completion of a Geotechnical Investigation to assess the potential constraint and recommendations for further development of the site;

•

A Tier 2 quantitative risk assessment (QRA) for both Controlled Waters and Human Health to further assess the potential risk resulting from soil and ground water contamination;

•

A Flood Risk Assessment concentrating on the River Aire and the River Calder to assess the potential risk of flooding associated with the site.

The experts have agreed the objectives set out above and “irrespective of other possible uses to which the data which forms the basis of the Report might have been put, the Report has been drafted ‘to assess the potential for the further development of the site’”. However the experts originally disagreed on the meaning of ‘potential for further development’. Mr Crowcroft, the Claimant’s expert, considered that that meant or included development for new commercial or residential use. Mr Sanders, the Defendant’s expert, believed that it meant further development of the site for its use ‘at the time of the Report’.

I can deal with that point shortly. It is clear from the Final URS Report that it envisaged the possible development of the site. That further development was plainly not limited to any particular kind of development, whether it might be residential, commercial or the continued use of the site as a chemical works or manufacturing site. It must have embraced any possible development of the property, and I therefore agree with Mr Crowcroft that that must encompass commercial or residential use. Further, in his cross-examination, I understood Mr Sanders expressly to accept that proposition.

At Paragraph 2.4, the Final URS Report set out the Desk Top Findings and stated that “the following sources of information were referenced in completion of this report”. These included the two Travers Morgan Reports to which I have already referred, and a number of other ground investigation reports. The results from a number of the ground investigations recorded in these reports, including the Travers Morgan reports referred to above, were set out in table form in the body of the Final URS Report.

For the purposes of these proceedings, the other critical parts of the Final URS Report are those concerned with contamination generally, and cyanide contamination in particular. It seems to me that, in that context, the following extracts from the Final URS Report are relevant:

Paragraph 2.4.1 (Site History), which read as follows:

“… A high technology sulphuric acid re-concentration plant and dedicated water treatment system was constructed and opened in September 1995. During the construction of the SAC (Sulphuric Acid Concentration) plant, materials were excavated and tipped on the area of derelict ground in the north west area of the site. The excavated materials, blue in colour, were thought to have originated from former sulphuric acid manufacture or possibly a former gas works, although its presence has never been established. It is considered likely that ‘Blue Billy’ spent oxide from gas works was imported to the site as a raw material for use in the sulphuric acid production …”

Paragraph 2.8, which set out in detail the previous investigations. This part of the Report identified the high levels of cyanide disclosed in the first and second Travers Morgan Reports, referred to above, and also referred to other Travers Morgan Reports which I have not seen, but which, according to the URS summary, also talked about cyanide contamination.

Paragraph 2.11, which was entitled ‘Preliminary Conceptual Site Model’ and which stated, in respect of Zone 2 that “a site walkover indicated the presence of blue coloured ground in several areas across the lorry park and along the edge of the raised area to the far north of the western area of derelict land. This is suggested to be associated with former site activities such as the manufacture of sulphuric acid”. There was also a reference at paragraph 2.11.3 to cyanide from ‘Blue Billy’ as a ‘chemical of potential concern’.

Paragraph 3.3.2, which said that “evidence of contamination was encountered at numerous locations in the Main Ground and natural alluvium”. There then followed a table setting out, in respect of each borehole, the “observations of contamination”. A large number of these boreholes were recorded as having a strong chemical odour. It should be noted that BH 325 was described as “strong odour of TPH, moderate odour of chemical/effluent, oily, black”, whilst BH 329 was recorded as “strong TPH and chemical odour”.

Paragraph 3.5, which was entitled ‘Distribution of Contamination’. For Zone 1 this noted that “cyanide concentrations exceeded screening criteria in four locations”. This is important because Zone 1 included the central area with which this case is particularly concerned. In addition, there was a specific reference to BH 329 as being a borehole where an elevated concentration of cyanide was detected. The report expressly pointed out that BH 329 was located adjacent to the SAR plant, a point which I consider to be of particular importance. There were also references to other boreholes where cyanide had been detected in elevated concentrations in a number of other parts of the property. Furthermore, paragraph 3.5.2, dealing with Ground Water Contamination, noted total cyanide ‘slightly exceeding screening criteria’ in nine water samples in the central/northern region of Zone 1, which again included the central area. In addition, paragraph 3.6 made plain that cyanide in Zone 1 was detected above the Method Detection Limit in three instances in the soil, and three instances in the groundwater.

Section 4 of the URS Final Report which was entitled ‘Refined Conceptual Site Model’. This noted cyanide in a number of boreholes in Zone 1, including BH 329 but this time excluding BH 325.

Section 5 of the URS Final Report, which was entitled ‘Quantitative Risk Assessment’. This recorded at paragraph 5.2.3 that “elevated cyanide concentrations were found close to, and on the surface in certain areas of the site”. It was suggested that the potential risk from cyanide compounds visible on the surface “may best be controlled by removal of the cyanide from the site”. The same point, limited to visible contamination, was repeated at paragraph 5.3.2.

Section 6 of the URS Final Report, which dealt with remedial options. This linked remedial work to particular areas of contamination. These included the localised presence of Blue Billy in the area to the north-west (the mound) and in the south (the Laporte stockpile). It made no reference to any remedial work in respect of Blue Billy in or around the central area.

Moving away from Blue Billy for a moment, and looking at contamination generally, Mr Sanders accepted during his cross-examination that the Final URS Report showed contamination in the central area. As we shall see, URS subsequently confirmed in their letter of 8 April 2004 to Mr Gladwyn that there was “soil contamination across the majority of the site”.

At some point in about April 2004, the Defendant entered into discussions with Mr Gladwyn which resulted in the Defendant becoming the purchaser of the property, with Mr Gladwyn/Amenbury becoming the Defendant’s project manager. (Footnote: ¹) Subsequently, there was some debate about whether Mr Charles Chamberlain, the Managing Director of the Defendant, saw all of the Final URS Report before the purchase of the property: certainly, it does not seem that he saw the first and second Travers Morgan reports, an omission to which I have previously referred. However, it is plain from the evidence that the entirety of the Final URS Report was available to Mr Gladwyn (and therefore the Defendant) at all times following its completion, along with any documents to which it referred, including the Travers Morgan reports. There was no reason for URS to hide them. Accordingly, it seems to me that if Mr Chamberlain (or Mr Gladwyn on his behalf), did not have full copies of all the URS and Travers Morgan documentation, they only had to ask URS for any missing part. They did not do so, apparently because, as Mr Gladwyn put it, they relied on URS to summarise all the preceding reports. That is a point to which I will return later in this Judgment.

On 29 March, URS wrote to Mr Gladwyn following a meeting between them the previous week, and appeared to accept that the existing estimates of remediation costs, as set out in the Final URS Report, “may not have been robust enough to satisfy the scrutiny of your potential financiers”. The letter set out in detail the work that URS would undertake for Mr Gladwyn to produce a more detailed remediation strategy. This letter makes it clear that, no later than the end of March 2004, URS were reporting directly to Mr Gladwyn. The Claimant had no involvement at all in this further work.

On 31 March, URS wrote again to Mr Gladwyn. This was the first draft of their letter dealing with the range of remediation costs. The range was from £8.8 million down to £2.3 million. The latter figure assumed some Blue Billy remaining in situ. The letter also said that “a review of the ground investigation information recovered to date suggests potential uncertainties regarding the trial pitting data to the south of the site”, and a comparison was made between the “significantly higher concentrations of heavy metal contamination in the previous trial pitting exercise” and the results of the URS exercise. In view of the subsequent issues in this case, it is perhaps noteworthy that there was no similar comparison with or comments about the results obtained by Travers Morgan in the central area.

The last part of March and the first part of April was taken up with much toing and froing between Mr Gladwyn and URS as to the wording of URS’s letter dealing with the remediation strategy on site. The evidence was that this letter was important because it would be shown to prospective funders. Mr Gladwyn accepted in cross-examination that he wanted the letter worded in such a way that it did not frighten off potential funders. This meant that Mr Gladwyn had a major input into the terms of URS’s written advice in this letter, advice which he was then going to rely on, without disclosing his role in its drafting, in seeking to obtain funding for the project. In the next draft, dated 7 April 2004, URS dealt expressly with the stockpile of Blue Billy to the north west of the site, which might also extend to similar depths below ground level. The letter goes on to note that there was “soil contamination across the majority of the site”.

This draft of the letter assumed that, under a worst reasonable case, areas requiring excavation may include the two areas of Blue Billy to the north west and the south of the property, noted above. The key was the attitude of the Local Authority. URS said in this draft:

“The analysis is also based on a greater than 90% probability that the Local Authority will not request the removal of soil contaminated with Blue Billy residues to a maximum depth of 1.5 metres bgl in those areas identified to the south and north west of the site. The probability of being asked to provide a more complex cap is deemed to be a more likely scenario than full excavation. It is for this reason that the cost for the disposal of Blue Billy at depths greater 0.5 m bgl has not been included in the Worst Reasonable Case.”

In addition, this draft of the letter also talked about the removal of the soils contaminated with Blue Billy pre-July 2004. URS said that this:

“… could reduce the forecast worst case estimate to £7.5 million, although there is some doubt that disposal of the material could be completed before July 2004.”

It appears that, at least at this point, Mr Gladwyn was endeavouring to persuade the Local Authority that it might be possible to leave the Blue Billy, or at least some of it, in situ, and provide a capping layer instead. In the next draft, which apparently contained changes that emanated directly from Mr Gladwyn, there was a summary that dealt with this point in these terms:

“When analysing the information the biggest cost risk areas relate to the Local Authority’s attitude to the removal of the Blue Billy. Following consultation with the LA, we will be able to develop a management strategy in conjunction with yourselves that should be able to reduce the costs liabilities to a maximum of £7.4 million and hopefully even less. We are aware that Barrett Homes are dealing with a contaminated Blue Billy site in Southend and their solution is to leave the Blue Billy in situ, treat the soils and provide a cap for the gardens.”

By a sale and leaseback agreement dated 14 May 2004, the Claimant (“the seller”) sold the property to the Defendant (“the buyer”) for £12.25 million. Clause 4 allowed the granting by the Defendant to the Claimant of a lease from 14 May 2004 until 30 August 2005 on agreed terms, which were set out in Appendix 1 to the sale agreement. Under Clause 3.12.1 of that lease, referred to in the documents as “the first lease”, the Claimant agreed to carry out certain demolition works at the property prior to the expiry or termination of the lease. The scope of those demolition works was set out in a demolition specification appended to the first lease.

There were a number of other appendices to the agreement. Appendix 4 was the retention deed, referred to in Section C2 below. Appendices 5 and 6 were the first and second letters from Mr Hall to the Defendant, referred to in Section B13 above. Clause 13.10 said that the Claimant “shall” provide a letter in the form of the first letter, and procure from Mr Hall a letter in the form of the second letter.

There are a number of clauses of the agreement upon which the Claimant now relies as part of its defence to the counterclaim based on the alleged misrepresentation. Those clauses read as follows:

“9.

MATTERS AFFECTING THE PROPERTY

The Property is sold subject to such of the following matters as relate to it:

…

9.5

All matters recorded in any registers open to public inspection or revealed by searches and enquiries that the Buyer has made or a prudent buyer ought to have made;

9.6

All matters which would be evident on an inspection or survey of the Property …

13.

MISCELLANEOUS

13.1

The Buyer confirms that it is not entering into this agreement in reliance on any representation or warranty whether express or implied given by or on behalf of the Seller other than any contained in the Seller’s Solicitors’ written replies to enquires before contract made in writing by the Buyer’s Solicitors.

13.2

This agreement contains the whole agreement between the Seller and the Buyer relating to the sale of the Property and supersedes all previous agreements between such parties on such matter.

15.

ENVIRONMENTAL

15.1

The Buyer acknowledges that prior to the date of this agreement it has been given permission and an adequate opportunity to carry out its own investigation into the physical condition of the Property and the extent to which the Property is affected by the presence of substances and has been provided by all information necessary to assess the state and condition of the Property and the implications of any presence and as such has deemed to purchase with full knowledge thereof.”

C2 The First Retention Deed

The retention deed at Appendix 4 of the sale and leaseback agreement, referred to in the documents as “the first retention deed”, was designed to allow the Defendant to retain £500,000 from the purchase price. The deed is complicated (and some of its material provisions are set out below) but it was essentially designed to allow the Defendant to retain up to the maximum of £500,000 if the demolition works being carried out by the Claimant caused further contamination which had to be remediated.

The recitals to the first retention deed provided:

“A.

The parties have agreed to enter into this deed pursuant to an agreement dated [14 May 2004] wherein the Seller agreed that the Buyer would withhold £500,000 of the purchase price for the property as the Seller’s contribution towards the Clean-Up Costs of any further contamination caused by the Seller at the Property during the Period.

B.

The parties have entered into this Deed to give further clarification as to the terms upon which the Retention is to be held and the circumstances in which the Retention is payable to the Seller.”

Relevant definitions for the purposes of these proceedings were set out in clause 1 as follows:

“’Clean-Up Costs’ means the reasonable and proper additional clean-up costs that the Buyer or any successor is likely to incur in developing the Property for residential use in accordance with the environmental standards required by the local authority and the environment agency and taking into account common industry practice which result from the Further Contamination and for the avoidance of doubt such costs shall include costs such as loss of revenue arising from the Seller being unable to use any part of the Property due to the treatment of such Further Contamination …

‘Further Contamination’ means

(1)

in relation to those parts of the Property previously tested by URS and recorded in the URS Report – an increase in the level of contamination from that shown in the URS Report for the relevant part of the Property and

(2)

in relation to those parts of the Property on which the Demolition Works have been undertaken and which have been tested for the first time following the Date of Completion of the Demolition Works – an increase in the level of contamination from that shown in the URS Report for the parts of the Property immediately adjacent to the part of the Property on which the Demolition Works have been undertaken …

‘New Environmental Survey’ means a further environmental survey carried out by the Environment Expert to identify:

(a)

whether there has been Further Contamination;

(b)

whether the Further Contamination has been caused by the Seller during the Period and if the Demolition Works were carried out after the Period whether the carrying out of the demolition works have caused Further Contamination;

(c)

if relevant the likely level of Clean –Up Costs.”

The Defendant’s covenants were set out in Clause 2 as follows:

“2.1

To pay the Retention to the Buyer’s Solicitors and to direct that the Retention be held in the Howard Kennedy’s Client Account on trust for the Seller to be dealt with in accordance with this Deed with interest accruing to the Seller.

2.2

Within ten Working Days of the Date of Completion of the Demolition Works to instruct the Environmental Expert to carry out a New Environmental Survey.

2.3

That it has instructed Howard Kennedy that no monies may be withdrawn from Howard Kennedy’s Client Account save in accordance with Clauses 2.4, 4 or 9.2 hereof.

2.4

That it has instructed Howard Kennedy to telegraphically transfer to the Seller’s Solicitors Client Account the Retention with accrued interest:

2.4.1

within five Working Days of receipt by the Buyer of the results of the New Environmental Survey if the results of the New Environmental Survey either

2.4.1.1 confirm that there is no Further Contamination or are inconclusive; or

2.4.1.2 confirm that there is Further Contamination but does not conclude that this was caused by the Seller during the Period subject to clause 15;

2.4.2

within five Working Days of the expiration of the three month period commencing on the Date of Completion of Demolition Works if the Environmental Expert fails to issue the results of the New Environmental Survey to the Seller within such three month period.”

The Claimant’s covenants appear at clauses 3 and 4. In essence, they made the Claimant liable for the Clean Up Costs in circumstances where the New Environmental Survey identified Further Contamination caused by the Claimant during the Period or caused by the carrying out of the Demolition Works.

Clause 5 provided that, to the extent that the Clean-Up Costs exceeded the amount of the Retention, and did not arise from the carrying out of the Demolition Works, then such costs were due from the Claimant to the Defendant within twenty-one working days. Clause 6 provided that, should there be Further Contamination for which the Claimant was liable pursuant to Clause 3 then the Claimant’s liability for clean-up costs arising from the carrying out of the demolition works would not exceed £500,000.

In about September 2005, the parties entered into a second lease in which the Defendant demised to the Claimant a small part of the property containing four storage tanks. The term of the lease expired on 31 January 2006. By Clause 3.12 of the second lease, the Claimant agreed to carry out and complete the demolition works by that date.

There was also a second retention deed, agreed at about the same time. It was in very similar terms to the first retention deed. The recital stated:

“The parties have agreed to enter into this Deed whereby the Seller agrees to allow the Buyer to withhold £100,000 from the existing retention of £500,000 as the Seller’s contribution towards the Clean-Up costs of any further decontamination caused by the Seller at the Property during the Period.

The parties have entered into this Deed to give further clarification as to the terms on which the Retention is to be held and the circumstances in which the Retention is payable to the Seller.”

Since the central issue turns on the construction of the second letter, and since that was a contract document, incorporated into the sale agreement as Appendix 6, it is necessary for me to set out the particular factual background which I consider relevant to its construction, even if I conclude that the wording of the second letter is unambiguous and sensible: see, for example, Westminster CC v National Asylum Support Services [2002] UKHL 38; Static Controlled Components (Europe) Ltd v Egan [2004] EWCA Civ 392; and Chartbrooke Ltd v Persimmon Homes Ltd & Ors [2002] EWHC 409 (Ch). However, in undertaking this exercise I bear in mind what Buxton LJ said in Wayne Martin v David Wilson Homes Ltd [2004] EWCA Civ 1027:

“One has to remember, when looking at issues about the factual matrix, that although reference to that matrix is not limited to cases where the words are clearly ambiguous, the first place where one expects to find the meaning of the words and the intention of the draftsmen is in the words themselves. If they yield a fairly clear solution, and in my judgment these words do, then one has to pause long before concluding that at that point the draftsmen has used words with a meaning that do not fit in with the objective that he was seeking to attain.”

In addition, I should note that, whilst Mr Lofthouse QC quite properly set out a number of factors which he said formed an integral part of the factual matrix, I must not forget that certain matters of fact were within the peculiar knowledge of one side or the other and that, even where a piece of information was known by or available to each party to the transaction, commercial considerations might mean that it was regarded in very different ways by each side. I set out below what I consider to be the most important elements of the factual background to the second letter, and the sale agreement of 14 May 2004 into which it was incorporated.

Everyone was aware that this was, potentially at least, an extremely valuable property. It was large, bounded by two rivers, and close to the centre of Castleford. It had huge potential for residential development. I find that, for these reasons, originally Mr Gladwyn, and subsequently the Defendant, was very keen to buy it.

As a result of its potential, the property had a value which was generally unaffected by the particular amount and degree of contamination at the site. That is demonstrated by the fact that, long before the Final URS Report was available, the parties had agreed the purchase price at £13 million odd, which was subsequently reduced, not because of any concerns about contamination, but because the Claimant wanted payment in full on completion, rather than waiting up to 3 years for the bulk of the money. Once the Final URS Report, and their subsequent letter of 8 April, was available to the Defendant, with their wildly fluctuating range of potential levels of remediation cost, the proposed purchase price remained unchanged. I find that it is therefore part of the factual matrix that the value of the property (ie the amount that the Defendant was prepared to pay for it) was not directly affected by the amount or degree of contamination found, and the consequentially wide range of estimated remediation costs.

This is also borne out by the Savills’ report (paragraph 64 above) which contained only passing references to the contamination, and did not appear to make any express link whatsoever between their valuation and the nature and extent of the contamination at the property.

There is no doubt that both the Claimant and the Defendant were sophisticated commercial organisations, keen to get the best deal for themselves arising out of the sale of the property. In particular, the Defendant was an experienced developer, with a successful track record in developing large sites like this. Mr Chamberlain’s evidence was that, in his experience, there were always risks (for example, as to what was in the ground) which could never be eliminated completely. I therefore do not accept the validity of the attempt, in the Defendant’s closing submissions, to paint the Defendant as some sort of commercial innocent, entirely dependant on the information about the property provided by a cunning Claimant: such a picture is very far removed from the evidence of experience and commercial acumen on both sides of the sale agreement.

Disclosure

On a number of occasions during his evidence, Mr Hall was at pains to stress that neither he nor the Claimant had anything to hide in the run-up to the sale of the property. He referred to the fact that the Claimant had made all the information relating to the property available to URS and that that information had been utilised by URS in their Desktop Study and in the Final URS Report. That information, of course, included the evidence of Blue Billy contamination in the central area, as set out in the Travers Morgan reports. I find that the Claimant provided full disclosure and never sought to keep back information or to obstruct the Defendant, or URS, from obtaining whatever information they reasonably required prior to the sale.

I find that it was known to everyone involved that the property was heavily contaminated and that, as URS put it, there was widespread chemical contamination across the site. I also find that the parties were aware that this widespread contamination included cyanide: see those parts of the Final URS Report which I have set out at paragraphs 35-41 above. Similarly, I find that it was known to everyone that, in consequence of this widespread contamination, extensive remediation works were going to be required. As Mr Chamberlain agreed in cross examination, “the contamination issue was obvious”. The precise details of those remediation works were the responsibility of the Defendant, as the purchaser of the property: as Mr Hall repeated several times during his cross-examination, the Claimant was not responsible for the remediation, and had no involvement in any discussions about the likely scope, extent and cost of such work. In any event, the precise scope of the remediation works (and therefore the eventual cost) was out of the hands of the parties, being dictated in large part by what the local authority was prepared to accept and what remedial work the local authority insisted upon, once the Defendant had decided to develop the property as a residential site.

It appears that, right up to the meeting on 21 April 2004 between the local authority and Mr Cullen of URS, there were reasonable grounds for believing that they might allow some of the Blue Billy to be capped within the property and not removed. I heard no direct evidence about that meeting and I note that no-one from the Claimant or the Defendant was present at the meeting. There is no minute. Despite this, it seems that the meeting is of some importance to the Defendant’s case, because it is said that, at this meeting, the local authority insisted that all the Blue Billy be removed. This was plainly a matter of significance to the Defendant, because it was the Defendant that was going to have to pay for the remediation works. It appears that, although Mr Hall had previously been aware that the possibility existed of capping at least some of the Blue Billy within the site, he had been told, at some point shortly before the completion of the sale agreement, that the local authority had indicated that the Blue Billy would have to be removed if the development was residential. However, I accept Mr Hall’s evidence that, since he was not involved with or responsible for the carrying out of the remediation works, or indeed the development itself, the significance to the local authority of the presence of Blue Billy, and their view that there was a public perception problem which necessitated its removal (which had been anticipated as a possibility by URS in their Final Report and in their letter to the Defendant of 8 April 2004), was ultimately a matter for the Defendant. It was not something in which the Claimant had any direct or detailed interest at all.

Similarly, although Mr Hall was aware of the fact that the Defendant wished to clear the Blue Billy from the site prior to July, because the effect of the forthcoming Landfill Directive was likely to make the costs of remediation higher thereafter, this was again a matter which he reasonably regarded as being a matter for the Defendant. The Defendant was paying for the remediation works, so it was for the Defendant to try and ensure that those costs were kept to a minimum. I accept that this was, ultimately, nothing to do with the Claimant: as Mr Hall put it, “I was not concerned with remediation strategy. I was just concerned with the purchase price … the 21 July [the date that the new Landfill Directive came into force] was not a big issue [for the Claimant]. It did not change the price we would get.”

Everyone was aware (or must be taken to have been aware) of the content of the Final URS Report of March 2004. I consider that there are four matters in particular which are relevant to the principal issues in the case and which can be derived from the Report. They thus form an important part of the factual background. They are:

I must also note that, on the evidence of all the witnesses, various criticisms could justly be made of the Final URS Report. In particular, URS failed to emphasise the findings of the Travers Morgan reports and the likelihood that Blue Billy remained in the central area; Mr Gladwyn expressly accepted in cross-examination that URS should have asked more questions about the Travers Morgan findings. In addition, it appears that although, according to Mr Chamberlain, URS were concerned about the paucity of borehole information in the central area, they failed to express any such concern either in their Final Report, or in any other document (in contrast, for instance, to the points which they raised about the findings in the southern part of the site: see paragraph 45 above). They certainly never suggested to the Claimant that, for example, they had been denied access to any part of the site; nor, on the evidence, had they in fact been denied such access. And finally, of course, there was the absence of any reference at all in their summaries, or in their proposals for remediation, to the findings of cyanide contamination in their own boreholes BH 325 and BH 329, the two closest to the central area with which we are concerned.

These criticisms emerge naturally from the Defendant’s case; indeed they were made, either directly or indirectly, by the Defendant’s own witnesses. Mr Sanders, the Defendant’s expert, accepted that there had been a failing on the part of URS, and he also said that he could not explain why URS had not drilled more boreholes in the central area. He was emphatic that, contrary to what URS appeared to have done, he would not have relied on findings (those of Travers Morgan) which were 8 - 9 years old. Mr Crowcroft, the Claimant’s expert, also said that he was “very surprised” that URS did not drill boreholes in that area. It is therefore not unfair to note that one effect of the Defendant’s case now is that, if it were successful, it would make Mr Hall liable for matters which, on the Defendant’s own evidence, URS failed to note and/or emphasise in their Final Report.

Unsurprisingly, Mr Chamberlain’s evidence was that he relied on the Final URS Report, just as he would normally expect to rely on such a report in these circumstances. He repeated on a number of occasions that he had read the entirety of the Final URS Report and that he had relied upon it. However he accepted that, prior to the sale, he had not read the Travers Morgan reports. Mr Gladwyn said the same. Their general attitude appeared to be that articulated by Mr Gladwyn, namely that they assumed that URS had accurately summarised what they had read in the other reports. Thus if the Travers Morgan reports had not been accurately summarised by URS, or the right conclusions were not drawn from them, the fault would appear to lie with Messrs Chamberlain and Gladwyn, for not reading the Travers Morgan reports themselves, or with URS, for failing properly to summarise and/or draw the right conclusions from those earlier reports.

In addition, it should also be noted that Mr Chamberlain properly accepted that, when buying and developing a property such as this, “there was always a certain amount of uncertainty” in relation to what was in the ground. In other words, he acknowledged that it was not always possible to do what Mr Gladwyn wanted, which was, in the latter’s phrase, “to ringfence the risk”. As for this property in particular, Mr Chamberlain acknowledged that he knew that the contamination comprised “different pockets of different material” across the site.

It seems to me that, for the purposes of this case, the facts and matters set out at paragraphs 96 - 108 above comprise the critical elements of the factual background to the second letter and the sale agreement of 14 May 2004. I now turn to consider Mr Hall’s evidence about the letter, before going on to construe the letter and the sale agreement.

There was a lengthy passage in the cross-examination of Mr Hall which set out in clear terms the particular points made by the Defendant about the second letter and the matters of emphasis and importance relied on by Mr Hall in response. I therefore set out my notes of that passage of evidence as follows:

“Q: The Blue Billy needed to be removed from the central area before July?

A: My understanding is that it was the visible Blue Billy that was the concern. What was below the ground would be the subject of further investigation.

Q: There was no attempt or suggestion of removal anywhere other than the two areas [the north west area and the south area of Blue Billy]?

A: Correct.

Q: They could not get at the area round the SAC?

A: Yes, they could. Blue Billy was found close by. The URS Report simply did not test that area.

Q: You said that all the Blue Billy had been removed in the area of the infra structure?

A: No. The Travers Morgan report made clear that the material that was removed was just in the footprint. We did not do the total area.

Q: Are not the roads part of the infrastructure?

A: The SAC had a small footprint. There seems to be some confusion with the suggestion that we removed the whole area. We did not do so. The Travers Morgan report said that. For the construction of the roads, we had to excavate to a certain depth and we put clean fill in. It is all outlined in the report. What I am talking about is the footprint of the building which is small.

Q: The SAC plant?

A: We were aware of the Blue Billy beneath the SAC. That is because when the SAC was built we took out a minimal amount.

Q: So you knew there was Blue Billy underneath the SAC plant?

A: Yes. We had had to extract it.

Q: So how can you say there was no further contamination?

A: The Travers Morgan reports were cited within the URS Report. Those reports state exactly what we did.

Q: So “specifically identified” means reference to other reports?

A: Those reports were provided to URS. So they could get to a borehole strategy. Those reports were cited in the URS Report itself. So yes.

Q: That was your understanding at the time?

A: Yes.

Q: [The witness was then taken to the references in the URS Report to the Travers Morgan reports and, in particular, the references to high levels of cyanide.]

A: Cyanide at 19,300. That is at a high level. Cyanide equates to Blue Billy in the central area. On site the majority of the cyanide is Blue Billy.

Q: This was not picked up by URS in their conclusions?

A: They did not test the area so they used the tables from Travers Morgan.

Q: You said that you understood that it was there?

A: They must have incorporated it into their report.

Q: So you read the URS Report as saying Blue Billy was in the central area? By you knew that URS had not picked that up?

A: I had assumed they had picked it up. This is disclosed in the report.

Thereafter, Mr Hall made other points about the possibility of capping the Blue Billy and the various remedial options that might be open to the Defendant. Importantly, he confirmed that he was aware of Blue Billy in the central area “because of the tables in the URS Report”. He did accept that, in their remedial recommendations, URS had not apparently “picked up on” their own references to that Blue Billy.

I consider that, in giving this, and other evidence, Mr Hall was entirely straightforward and honest. He never sought to obfuscate or avoid Mr Lofthouse QC’s admirably direct questions. I formed a very positive impression of Mr Hall. That must inevitably colour my view of the Defendant’s case, particularly given that the principal allegation against Mr Hall is one of personal fraud and deceit.

The first point to make is that Mr Hall’s second letter provides a direct link between his own knowledge of any further contamination at the property, and the contamination specifically identified in the Final URS Report. In other words, the second letter is saying that, if the contamination was not specifically identified in that Report, Mr Hall had no knowledge of it.

The first issue, therefore, is: what constitutes the URS Report for this purpose? The answer to this question must be the whole of the Final URS Report referred to at paragraphs 35-42 above; it must include, for example, not only the recommendations in respect of the removal of Blue Billy in the two areas outside the central area, but also the findings of cyanide (one at a very high level) in the two boreholes BH 325 and BH 329, and the detailed reports from Travers Morgan in relation to the central area which are referred to, and the findings set out in, the Final URS Report.

It was a major part of the Defendant’s case that, because the Final URS Report did not make any recommendations as to the removal of Blue Billy/cyanide in the central area, the references to cyanide in BH 325 and BH 329, and the references to cyanide/Blue Billy in the two Travers Morgan reports referred to above, should in some way be put to one side, and left out of account when construing the second letter. In my judgment, that cannot be an appropriate way of interpreting Mr Hall’s representation in the second letter. It is contrary to commonsense to say that Mr Hall was referring only to parts of the Final URS Report and deliberately excluding others (Footnote: ²). The second letter referred to the Final URS Report without distinction, limitation or exclusion. Accordingly, the reference in the second letter must be taken to include all the references in the Final URS Report to cyanide/Blue Billy contamination in the central area, from whatever source and however described.

During Mr Chamberlain’s oral evidence, he suggested that URS had positively advised that there was no Blue Billy in the central area, a point picked up in paragraph 52 of the Defendant’s closing submissions. That is plainly wrong: URS were very careful not to give any such advice. They simply did not refer to it within their remediation recommendations. It was not the only time during the evidence called on behalf of the Defendant that a narrow negative point (there was no express recommendation by URS for remedial work in the central area) was transposed into a wide-ranging positive statement (URS advised that there was no Blue Billy in the central area).

Mr Lofthouse QC submitted that the word ‘specifically’ qualified the word ‘identified’ to such an extent that a proper construction of this letter was that the only Blue Billy contamination specifically identified in the Final URS Report was in the north west and southern areas, because those were the only areas where they recommended remedial work. Again, I am unable to accept that submission. Take, by way of example only, the very high level of cyanide contamination found at BH 329. That is set out in a detailed table of borehole results in the Final URS Report. That contamination is, therefore, as “specifically identified” in the Report as the other areas of Blue Billy contamination which were referred to in the Report, and which everyone accepts they knew about before the sale in May 2004.

Similarly, in relation to the contamination referred to by reference to the Travers Morgan reports, it seems to me clear that those references to contamination were also “specifically identified” in the Final URS Report. They were not only referred to in the text of the Final URS Report, but the cyanide levels found by Travers Morgan were also set out expressly, in table form, in the body of the Report itself.

For understandable reasons, the Defendant’s emphasis was upon the fact that URS made no remediation recommendations in relation to the central area at all and only drilled two boreholes in that location. But that was not Mr Hall’s responsibility, much less his fault. He gave all the relevant information to URS. They refer to that information in their Final Report. It would be quite wrong and unfair now to read the reference to it in the second letter as in some way excluding large swathes of the Final URS Report, or to interpret the letter as saying that Mr Hall was unaware of any Blue Billy contamination beyond that in respect of which URS had made specific remedial recommendations. That is simply not what the second letter said.

I find as a fact that Mr Hall had no knowledge of any further contamination (the words in the second letter) beyond the facts and matters set out in the Final URS Report which, for the reasons summarised at paragraphs 104-106 above, also included the Blue Billy contamination identified by Travers Morgan, and the findings of high levels of cyanide at BH 325 and BH 329. At one point it appeared that the Defendant was advancing a case that, because of Mr Hall’s detailed knowledge of the property during the three developments referred to in Section B3 above, he had knowledge of contamination that went far beyond the Final URS Report. To the extent that such a proposition remained any part of the Defendant’s case, I reject it: there was simply no evidence to suggest that Mr Hall was aware of any contamination not referred to, in one way or another, in the Final URS Report.

It is quite clear to me that the ADX 410 and the SAR plant did not involve any ground investigation or excavation and that therefore, if there was Blue Billy below those plants, neither Mr Hall (nor anyone else at the Claimant) had any knowledge of it. Whilst Mr Hall was aware that there may well be some Blue Billy below the SAC plant and the associated service road etc, that knowledge came from the investigations and recommendations set out in the Travers Morgan reports. For the reasons which I have given, those reports were referred to and incorporated into the Final URS Report and therefore incorporated into the representation in the second letter. In other words, Mr Hall’s knowledge was no greater than that which was (or should have been) shared by both URS and the Defendant.

Mr Hall was aware that there may well have been residual Blue Billy in the central area. In my judgment, for the reasons previously explained, any careful reader of the Final URS Report would have had that same knowledge. They would have had two particular sources for that knowledge: the detailed findings of Travers Morgan in their two reports referred to above, and the record of cyanide contamination in the URS boreholes 325 and 329. It should not be forgotten that, as set out in paragraph 41(e) above, the Final URS Report expressly pointed out that BH 329 (with its very high level of cyanide) was adjacent to the SAR plant.

I reject the contention, at paragraph 43 of the closing submissions of Mr Lofthouse QC and Ms Briggs, that Mr Hall knew that the Defendant was unaware of the Blue Billy/cyanide contamination in the central area. First, Mr Hall had no way of knowing what the Defendant actually knew, and none was suggested to him. Secondly, if the Defendant did not know that there might well be Blue Billy in the central area at the time of the sale agreement, that was because, by their own admission, neither Mr Chamberlain nor Mr Gladwyn had read the Travers Morgan reports nor, I suspect, had had regard to anything other than the URS remediation recommendations, as opposed to their detailed findings (ie BH 325 and BH 329). Thirdly and in any event, since Mr Hall’s knowledge was not greater than that which could be properly derived from the Final URS Report, he was reasonably entitled to assume that the Defendant’s knowledge was the same as his own.

As to the Travers Morgan references themselves, there was some suggestion that the careful reader would have assumed that all the Blue Billy in the central area had been removed as part of the works for the SAC plant. To the extent that that allegation was maintained, I reject it. It was completely contrary to the statement in the first Travers Morgan report, set out at paragraph 13 above, which made plain that the proposed excavation was going to involve “the minimum” amount of excavation of the contaminated material. There was no other document that suggested that, contrary to this proposal, all of the contaminated material across the whole of the central area was removed in 1994/1995. In those circumstances, I reject the Defendant’s case that a fair reading of either the Travers Morgan reports or the Final URS Report indicated that all of the Blue Billy contaminated material in the central area had been removed at the time of the works for the SAC plant.

My findings at paragraphs 123 and 124 above lead to this conclusion. I have already noted (Footnote: ³) that Mr Gladwyn was well aware that the mound of Blue Billy in the north west of the site (which on any view had to be removed), came from the central area. He would therefore have needed to reassure himself, as a prudent buyer, that the mound was the result of a comprehensive programme of removal of all the Blue Billy in the central area. One glance at the first Travers Morgan report or paragraph 3.5.1 of the Final URS Report (which spells out the continuing presence of high levels of cyanide in the central area close to the SAR plant), or one simple question to URS, would have demonstrated that it was not comprehensive, and that no-one had ever pretended to the contrary. This point becomes relevant again when I consider clause 9.5 of the sale agreement at paragraph 135 below.

As I have said, the Defendant’s case comes down to a very narrow point. As was put to Mr Hall in cross-examination, what is said is that the Defendant relied on URS’s recommendations as to the removal of Blue Billy in the north west and southern parts of the property and that, since URS made no recommendation as to the Blue Billy and/or cyanide contamination in the central area, the Defendant was entitled to ignore any direct or indirect references to that contamination. I think that the suggestion is that because, on his own evidence, Mr Hall was aware that there may well be residual Blue Billy and/or cyanide contamination in the central area, he should have expressly pointed that out in the second letter, and his failure to do so constituted a misrepresentation.

I reject that submission. It ignores the detailed contents of the Final URS Report, and all the other matters of factual background that I have set out above. In addition, the evidence made clear that it was not Mr Hall who came up with the basic form of words of the second letter and, in particular, the link between his knowledge of any contamination at the property, on the one hand, and the references to contamination which were contained in the Final URS Report, on the other. The original draft of the letter had been provided to the Claimant by the Defendant’s solicitors in an email of 11 May. Although some minor modifications were made to that draft (two of the important changes having been highlighted in bold in paragraph 62 above), the essential core of the representation sought by the Defendant, linking Mr Hall’s knowledge to the contamination identified in the Final URS Report, remained unchanged. For the reasons which I have given, Mr Hall’s representation was accurate. The fact that, with hindsight, URS can be criticised because they had failed to highlight the likely Blue Billy contamination in the central area, and had failed to advise that it required remedial work, and the fact that a different and more specific question had not been asked of Mr Hall, does not make Mr Hall guilty of fraud and deceit.

I also consider that the qualification to the letter – that the URS borehole test results indicated a level of contamination for the property as a whole and should therefore not be construed as meaning that there was only contamination at the location of the boreholes (Footnote: ⁴) – is significant for a number of reasons. First, it is a qualification which Mr Hall himself added; it was not in the draft sent out by the Defendant’s solicitors. Secondly, it was an indication that the Final URS Report could not be read too literally; that what mattered was the overall level of contamination on site, not the specific levels of contamination at individual boreholes. Thirdly, this qualification was entirely consistent with Mr Chamberlain’s express understanding that there were different pockets of contaminated material in different locations at the property and that it was impossible entirely to eliminate the risk of unforeseen problems in the ground.

Mr Chamberlain was asked about the qualification and what he understood it to mean in his cross-examination, but he did not answer the question directly. I regard the qualification inserted by Mr Hall as being not only accurate, but also entirely consistent with the factual background which I have set out, and my construction of the other parts of the second letter.

For the reasons which I have given, I conclude that the second letter does not contain an actionable misrepresentation, let alone one that evidences fraud or deceit on the part of Mr Hall. The Claimant had given full disclosure to URS of the information relating to contamination at the property. Mr Hall was asked to give a specific representation in relation to contamination other than that specifically identified in the Final URS Report, and he did so. I find that he was not aware of any contamination other than that identified in the Report. It is entirely artificial now to try and limit the contamination identified in the Final URS Report to the contamination that was the subject of the particular URS recommendations for remedial work, in order to render Mr Hall liable to the Defendant for the costs of remediation works which URS failed to recommend.

I find that, by his own admission, Mr Hall was aware that the Final URS Report might give rise to a potential difficulty for the Defendant because, although URS had identified possible Blue Billy/cyanide contamination in the central area, they had made no recommendations in respect of any related remedial work. But that was far outside the representation that Mr Hall was required to give. It was not suggested that Mr Hall had any other obligation, pursuant to the terms of the sale agreement or otherwise, to point out to the Defendant a possible omission or failure of emphasis on the part of the ground investigation specialists who had worked so closely with Mr Gladwyn for the two months prior to the sale agreement, and which omission or failure was, or should have been, as apparent to the Defendant as to the Claimant. As Mr Lofthouse QC and Ms Briggs rightly point out at paragraph 116 of their closing submissions, by reference to Interfoto Picture Library Ltd v Stiletto Visual Programmes Ltd [1989] QB 433, and other similar authorities, questions of good faith are likely to be subsumed into wider issues of fairness. For the reasons which I have explained, I consider that it is fair construction of the second letter that the risk of Blue Billy contamination in the central area (identified by URS in their Final Report) remained with the Defendant, as the purchaser of the property and the party who had been most closely involved in the advice given by those same ground investigation specialists. In my judgment, it is also fair that, as a result of this conclusion, Mr Hall is not rendered liable for the failures on the part of URS noted at paragraphs 105-106 above.

Essentially, the principal claim against Mr Hall and the Claimant is that, on a heavily contaminated site, where the degree of contamination made no difference to its value, there was one particular type of contamination (Blue Billy) in one particular location (the central area) which URS referred to in their Final Report both directly and indirectly, but which they omitted to emphasise in that Report or their (much–changed) letter of 8 April, and which is now said to be Mr Hall’s responsibility. For the reasons set out above, I reject this principal element of the Defendant’s counterclaim against the Claimant and/or Mr Hall. Mr Gladwyn was wrong to believe that the second letter in some way “ringfenced the risk” that the actual contamination was greater than set out in URS’s recommendations for remedial work. Thus, I conclude that there was no misrepresentation, whether fraudulent or otherwise, and no relevant collateral warranty or term of the sale agreement which would allow a claim against the Claimant or Mr Hall.

It was the Claimant’s case that the other terms of the sale agreement prevented any effective claim against the Claimant in any event. Whilst that argument is now somewhat academic, in the light of my finding that, on the true construction of the second letter, there was no actionable misrepresentation or breach of any kind, in deference to the parties’ detailed submissions on the terms of the sale agreement, I ought to set out, at least briefly, my conclusions on these issues.

It seems to me that the various clauses of the sale agreement upon which the Claimant relies fell into two distinct categories: first, those clauses which I consider provide further support for my view that the discovery of Blue Billy and/or cyanide contamination in the central area was a matter for which the Defendant accepted the commercial risk and, secondly, those terms which the Claimant sought to rely on to defeat the misrepresentation claim as a matter of legal exemption or exclusion, a defence which, for the reasons explored below, I reject. I deal in turn with each of these two categories below.

Clause 9.5 of the sale agreement made plain that the property was sold subject to all matters revealed by “enquires that the Buyer has made or a prudent Buyer ought to have made”. The enquiries actually made and the matters actually revealed included the information provided to and by URS which, on my analysis, included the various references to Blue Billy/cyanide contamination in the central area. In addition, I consider that a prudent buyer in the position of the Defendant ought to have enquired of URS what the current position was in relation to the Blue Billy contamination identified by Travers Morgan (which contamination was, I find, corroborated by the findings of cyanide at BH 325 and BH 329), in just the same way that URS should have asked themselves, or Travers Morgan, detailed questions about the Blue Billy contamination revealed in 1993, and what, if anything, was done about it (Footnote: ⁵). The property was sold subject to these enquiries, because they were prudent enquiries that ought to have been made. The only possible answer to those enquiries, to which the sale of the property was also subject, would have been the express confirmation that it was likely that residual Blue Billy contamination remained in the central area of the property at the time of the sale (Footnote: ⁶).

In addition, pursuant to Clause 9.6, the property was sold subject to all matters which were evident on inspection. That must again include all the matters referred to in the Final URS Report, including the references to Blue Billy contamination in the central area via the Travers Morgan reports, and the findings of cyanide at BH 325 and BH 329.

Still further, Clause 15.1 expressly acknowledged that the Defendant had been given an adequate opportunity to investigate the extent to which the property was affected by the presence of (amongst other things) Blue Billy/cyanide contamination, and had been given all information necessary to assess the implications of that contamination. It seems to me that the material provided by the Claimant to URS constituted full disclosure of all relevant information relating to Blue Billy/cyanide contamination, and that it was up to the Defendant to ensure that such information had been properly assessed in the Final URS Report. If, as may well have happened, neither URS nor the Defendant properly assessed this information, and its consequences, then that was not the Claimant’s responsibility under the terms of the sale agreement.

I conclude that Clauses 9.5, 9.6 and 15.1 of the sale agreement assigned the risk of unforeseen ground conditions fairly and squarely to the Defendant. The second letter was part of that sale agreement and must, if possible, be construed in a way that is not inconsistent with its terms. It seems to me that the second letter sought to pass a part of that risk to the Claimant/Mr Hall, but only to the extent that Mr Hall had knowledge of further contamination in the central area that was not specifically identified in the Final URS Report. For the reasons which I have given, I find that Mr Hall was not aware of any further contamination beyond that identified in the Report. Thus the risk of contamination identified in the Final URS Report, even if that contamination was not the subject of the URS remedial recommendations, remained with the Defendant.

I consider that my construction of the second letter, that Mr Hall was saying that he was not aware of any further contamination beyond that specifically identified in the Final URS Report, and that this included the references to Blue Billy by Travers Morgan, as well as URS’s own relevant findings of cyanide in the central area, is consistent with the meaning and effect of the clauses of the sale agreement noted above. This has the result that, because of the terms of the Final URS Report, it was the Defendant, not the Claimant, who bore the risk of URS’s failure to translate the references to Blue Billy contamination in 1993, and the findings at BH 325 and BH 329, into any recommendation for remedial work in the central area. Such a result is plainly in accordance with clause 9.5 of the sale agreement, for the reasons set out in paragraph 135 above.

At one point in his evidence, Mr Chamberlain suggested that it was his understanding that the second letter in some way over-rode the clauses of the sale agreement noted above. It was not clear whether that was his understanding at the time of the sale agreement, or whether he came to that view subsequently. Either way, it seems to me to be a view based on the misassumption that the second letter conflicted with these clauses when, for the reasons which I have given, I consider that they were entirely consistent.

Clause 13.2 is an ‘entire agreement’ clause. The Claimant sought to rely on that as excluding any reference to the second letter, thereby providing a further line of defence to the Defendant’s principal claim. Although it is irrelevant now (because I have rejected the Defendant’s claim for other reasons), I should make clear that I do not accept the Claimant’s submission on this point. Clause 13.10 expressly obliged the Claimant to provide a letter in the form of the second letter. The second letter then became Appendix 6 of the sale agreement. It was therefore part of that agreement. In consequence, the second letter was not part of the material superseded by the agreement; it was part of the sale agreement itself.

Similarly, I reject the Claimant’s suggestion that, if there had been a misrepresentation, Clause 13.1 operated to exclude reliance upon it. The second letter itself made clear that the Defendant was relying upon the letter, and it would be entirely wrong and artificial for the court to exclude any reliance upon the specific representation in the second letter by reference to the general terms of Clause 13.1. Moreover, Clause 13.1 was said not to apply to written replies made by the Claimant’s solicitors to enquiries raised by the Defendant’s solicitors. It seems to me that the second letter was a reply to a request from the Defendant’s solicitors, because they had sent their draft version on 11 May 2004, asking for it to be completed and returned. Therefore, the second letter could be said to be a written reply to an enquiry and thus survives the operation of Clause 13.1. As a matter of construction, therefore, the second letter could be relied on by the Defendant.

Accordingly, I reject the Claimant’s submission that Clauses 13.1 and/or 13.2 somehow operate to prevent the claim: they do not. This makes it unnecessary for me to deal with the parties’ respective cases on the principles of estoppel set out by Chadwick LJ in Watford Electronics Ltd v Sanderson CFL Ltd [2001] EWCA Civ 317 and EA Grimstead & Son v McGarrigan (27.11.99) C of A, unreported. Of course, my rejection of that part of the Claimant’s case is ultimately of no effect, since I have concluded that there was no actionable misrepresentation, and that, for the reasons which I have given above, Clauses 9.5, 9.6 and 15.1 make plain that the risk of residual Blue Billy contamination in the central area remained with the Defendant.

There was a certain amount of skirmishing during the trial over the Defendant’s case as to causation and loss. Information as to the actual and projected costs of Blue Billy removal was only provided by the Defendant shortly before the trial. In view of my rejection of the underlying claim, it is unnecessary for me to deal in any detail with the arguments as to causation and loss. I set out one or two specific points below.

The actual and estimated cost of removing the Blue Billy was put at a gross figure of £425,597. This is not disputed as a figure, although the relevant details were not provided until the week before the trial. However, I accept Mr Nicol’s general submission that it does not necessarily follow that, if I had found a misrepresentation, the figure of £425,597 would represent the damages recoverable by the Defendant. If there had been a misrepresentation, it is important to look at the position that would have existed if, during the negotiations, or in the second letter, Mr Hall had emphasised the Blue Billy contamination in the central area.

In those circumstances, the question would have been what, if any, difference this information would have made to the negotiations between the parties. It is difficult to see that it would have made any substantial difference given that, as I have already pointed out, the purchase price for the property was agreed long before the extent or degree of contamination had been ascertained by URS, and remained unchanged following the Final URS Report and the Savills’ report. This was so despite the huge range in the possible remediation costs provided by URS, from about £2 million to about £8 million, or higher. On this evidence, I might have been tempted to find that, even if such information had been provided, it may well have made no difference to the negotiations at all. I am certainly of the view that, had the Defendant attempted to reduce the purchase price at all by reference to the possible Blue Billy in the central area, then, at most, only a small discount from the agreed purchase price might have been offered by the Claimant. I find that such a discount would not have been anything like £425,000 odd. Furthermore, although at one point in his cross-examination, Mr Hall seemed to accept that ‘an indemnity’ might be appropriate, I consider that that was wholly at odds with the rest of his evidence.

Mr Hall went on to say that “we always said that contamination was for the purchaser to deal with. It was Merlion’s problem”. I consider that, on this topic, his most telling evidence was when he stressed in cross-examination that “we wouldn’t have sold the site if a price reduction had been suggested … we were selling the site regardless of remediation”. He repeated that answer in a number of different ways during his oral evidence. These answers confirm my view that, if there had been any agreed discount from the purchase price, it would have been modest.

For the reasons previously noted, I have found that the Claimant is liable to pay the Defendant the sum of £98,920.36 plus VAT (£116,231.42). That sum forms a part of the damages claim, based on the total remedial costs, of £425,597. A figure of £100,000 seems to me to represent the sort of small discount that I consider may have been allowed by the Claimant if the Defendant had realised at the last minute that there was greater Blue Billy contamination than they had realised. That means, therefore, that even if I had concluded that the Defendant had a claim for misrepresentation or breach of contract or breach of warranty, and even if I had concluded that that claim survived the express terms of the sale agreement, I would not have been minded to award any damages to the Defendant in excess of the £116,231.42 previously identified.

There was a suggestion that a development allowance in respect of affordable housing payments and/or corporation tax benefits may be available to the Defendant as a result of the remedial works. There was insufficient evidence in relation to those matters to allow me to reach a conclusion but it certainly seemed to me possible that the £425,000 odd was not necessarily a ‘straight line loss’ in any event, and that the net additional cost of the Blue Billy removal works would not be known until the end of the project. The absence of such evidence was, in my judgment, due equally to the late provision of the cost information by the Defendant, and the Claimant’s failure to identify the points earlier.

That would have been another reason why, had I found an actionable misrepresentation which survived the terms of the contract, I would not, on the evidence before me, have awarded the Defendant the £425,000 odd claimed. If I had found for the Defendant on liability, and if I was wrong to limit any recoverable damages in consequence to the £98,920.36 plus VAT referred to in paragraph 148 above then, in view of the lateness of both the Defendant’s evidence as to the actual and estimated remediation costs, and the Claimant’s identification of these benefit points, I would have decided, reluctantly, to adjourn any consideration of the quantum of the Defendant’s principal claim to a later date so that it could be argued out by reference to proper evidence and submissions. In view of my primary conclusions, of course, I do not need to do any such thing.