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This blog post focuses on a recent real-life case study highlighting a flaw in the planning process for an environmental audit that had serious repercussions for all stakeholders involved. We pass this information on to assist you and your clients avoid this particular pitfall.

Background

The case study relates to a ~2.1 hectare former caravan park site at 222-238 Kororoit Creek Road, Williamstown North for which a subdivision planning application was made to redevelop the site into residential housing (107 townhouses). The site had an environmental audit overlay (EAO) flagging a potentially contaminated land issue thus triggering the requirement for an environmental audit.

An environmental audit subsequently identified that soils on site were contaminated from the historical placement of imported fill – a widespread practice for landscaping or site levelling purposes. As the contamination was relatively minor, the environmental audit statement stated that the site could be safely redeveloped so long as the contaminated fill was managed appropriately, i.e. installation of marker and barrier layers prior to building construction (via a Construction and Environmental Management Plan (CEMP)).

The requirement to implement the audit statement recommendations was integrated into a Section 173 agreement by the responsible authority (Hobsons Bay City Council).

What went wrong?

Basically, the developer did not install the contaminated land marker and barrier layers across the site (wilfully or not), and this wasn’t noted until after the first phase of the development (Piccolo Circuit) had been built and sold. The issue wasn’t picked up due to failures at various stages in the planning & build process, as follows:

  • The council planning department didn’t verify that the environmental audit statement conditions had been complied with prior to commencement of construction.
  • The section 173 agreement was not included in the land contracts of sale or build contracts, so the builder and new owners were unaware of the contaminated land issue.
  • The building surveyor issued occupancy permits for Piccolo Circuit, unaware of the contaminated land issue.

Fallout

After Piccolo Circuit had been built, a new owner picked up on the unresolved contaminated land issue and became a whistleblower, highlighting the potential adverse health risks & property value impacts, and in doing so, generated media coverage. See link to an article in the local newspaper.

The case necessitated the environmental regulator (Environment Protection Authority (EPA) Victoria) to get involved to enforce the ruling that the environment audit statement conditions were still pertinent and needed to be implemented. Somewhat contentiously, it was subsequently determined that liability for this passed on to the new townhouse owners under the Section 173 agreement. Occupancy permits would not be issued until the contaminated land marker and barrier layers were installed which would mean significant delays and payment of additional remediation costs (approx. $20k per owner) levied by the builder.

For those townhouses already built at Piccolo Circuit, installation of the marker and barrier layers would have to be undertaken by owners on a retrospective basis in affected areas of each individual property. In consultation with the EPA, the development of an appropriate methodology is still ongoing with owners in limbo meaning more delays and costs.

It is highly likely that the new townhouse owners will instigate a class action to claim for compensation, dragging in the various stakeholders and incurring significant legal costs for all parties.

Learnings

This case study highlights the importance of the implementation and verification of environmental audit statement conditions. If not undertaken, there is a distinct risk of litigation or prosecution as the Environment Protection Act 2017 allows an occupier to make a claim as “persons who generate pollution and waste should bear the cost of containment, avoidance and abatement” under the polluter pays principle. Application of this principle takes into account a party or parties that ‘directly allowed’ as well as caused the pollution. Better to be safe than sorry and do not cut corners.

Unfortunately, this issue does not occur on an isolated basis and has been tagged by environmental auditors and the EPA as an issue that requires urgent review. It’s not only relatively low-risk contaminated land sites that have been affected but also potentially high-risk ones as well, i.e. un-remediated sites with landfill gas or other volatile contamination issues.

Primarily, the cause of the problem seems to stem from negligence or incomprehension on the part of some developers / builders in regard to meeting their duty to manage contaminated land; exacerbated by an inconsistent approach to the management of contaminated land by some responsible authorities. In some cases they don’t have the capability or capacity to undertake their due diligence (due to being under-resourced or lack of training / knowledge).

In addition, there is a broader state policy issue in that other regulatory bodies such as the Victorian Building Authority (VBA) need to be brought into the fold to ensure a collaborative and consistent approach to the management of contaminated land.

Next steps

If you want more information on the subject of potentially contaminated land, the environmental audit system and how it might relate to your site, download our fee guide ‘What Every Property Developer Needs to Know About Potentially Contaminated Land: the complete handbook.’
In here you will learn more about:

  • What potentially contaminated land is and the associated risks to your business;
  • What steps you need to take to mitigate potential risk and the entities you need to work with; and
  • What the implications are from a cost and management perspective.