Liability of commercial lessees for historical contamination of land following Mobil Oil in the Supreme Court

Abstract

The decision in Mobil Oil New Zealand Ltd v Development Auckland Ltd [2016] NZSC 89 (Mobil Oil) appears to be the last chapter in the long-running disputes between Waterfront Auckland Ltd (and its predecessors) and the various oil company lessees of land in the “tank farm” adjacent to Wynyard Wharf in downtown Auckland. Since the 1920s various oil companies have leased land in this area for storage and processing of hydrocarbon products and chemicals. The land and subjacent subsoil has become contaminated to an extent that significant remediation is required to make the land suitable for the mixed commercial and residential uses for which it is now being redeveloped. The earlier case of BP Oil New Zealand Ltd v Ports of Auckland Ltd [2004] 2 NZLR 208 (BP Oil) involved similar contamination issues in respect of land leased by BP Oil from Ports of Auckland Ltd (POAL). POAL had declined consent for BP to assign its leases to a developer, or to agree to demolition and removal of structures, unless BP entered into a remediation agreement. The High Court held that BP Oil was not liable for the historic contamination, and that POAL was acting unreasonably by requiring BP Oil to agree to onerous remediation requirements as a precondition to granting consent to assignment (see casenote at (2003) 5 BRMB 57 (Grinlinton)). The recent line of decisions and appeals culminating in the Mobil Oil decision concerned the liability of Mobil for historic contamination of several of its leased sites in the tank farm. The decisions required close consideration of the specific terms of the leases and their context, repair obligations, end of lease remediation obligations, and the doctrine of waste. This comment will not review all aspects of the Mobil Oil decisions as they have already been the subject of extensive notes in this Bulletin to which the reader is referred. Rather it will focus on the implications for liability of lessees such as Mobil for historic contamination through the effect of repair and remediation clauses, the applicability of the doctrine of waste to such cases, and the potential liability of lessees for historic contamination under the Resource Management Act 1991 (RMA).