Oil giant Mobil has escaped a $10 million bill for the clean-up of a heavily contaminated area of Auckland's Wynyard Quarter after winning an appeal in the Supreme Court.
Publicly-owned Waterfront Auckland must now also pay Mobil close to $1 million in court costs for its failed attempt to get the oil company to foot the bill.
Mobil Oil leased two properties in Auckland's waterfront 'tank farm' for more than 50 years.
When Mobil's lease for the two sites ended in 2011, it was found the land they were on had been heavily contaminated.
While it was established the company was not solely responsible for contamination to the land - other oil companies as previous tenants and neighbouring tenants all contributed too - Waterfront Auckland claimed Mobil had to deliver the land in a completely "uncontaminated condition" at the end of its lease term.
It took the oil company to the High Court at Auckland, where it was decided that if Mobil was liable, it would pay the council-controlled organisation $10 million in damages.
But that court in 2014 decided that Mobil was not contractually obliged to decontaminate the subsurface of the land.
Waterfront Auckland - now called Panuku Development Auckland - then challenged the decision and last year the Court of Appeal reversed it, awarding a $10 million judgment to the council-controlled organisation.
The Supreme Court - in a decision released this morning - overturned the Court of Appeal's decision and found in Mobil's favour.
Under a 1985 tenancy agreement, Mobil was required to keep the area in question "in good order and clean and tidy" and deliver this land in such a state upon its termination.
Waterfront Auckland argued the clean and tidy clause covered subsurface contamination.
This was rejected by the High Court but persuaded the Court of Appeal, which found the clean and tidy condition did extend to subsurface contamination.
The Supreme Court, however, has sided with the oil company.
"We consider that Mobil's interpretation is more consistent than that of Development Auckland with the natural and ordinary meaning of the words used in the clean and tidy condition, that is "keep", "good order" and "clean and tidy"," Justices Sian Elias, William Young, Susan Glazebrook, Terence Arnold and Mark O'Regan said.
"In their totality, these words are not easily susceptible to an interpretation which would require Mobil to transform the character of the land. Further, for the reasons explained, Development Auckland's interpretation would require that the words "good order" and "clean and tidy condition" have one meaning in respect of the obligations to which Mobil was subject during the tenancies and another on termination. We see no commercial or other context which would require such an approach...We therefore conclude that in this case the clean and tidy condition did not impose the remediation obligation contended for by Development Auckland," the quintet said.