Contaminated land and the transfer of liabilities…

Legal framework for remediating contaminated land

Part IIA of the Environmental Protection Act 1990 (“the 1990 Act”) provides a framework for identifying contaminated land and allocating responsibility for remediation. It was enacted by way of amendment to the 1990 Act on 19 July 1995.

Section 78F defines who may be an “appropriate person”, i.e. a person liable to remediate the contaminated land. In summary, a person is liable if they “caused or knowingly permitted” the contaminating substance(s) “to be in, on or under” the land in question. If no such person, “after reasonable inquiry”, can be found, the responsibility for remediation falls to the owner or occupier of the land.

In this sense, Part IIA seeks to attach liability based on the “polluter pays” principle, namely that the person responsible for contaminating the land should be the person primarily liable to pay for its decontamination. The regime is one of strict liability for historic contamination. It extends not only to an original causer of the pollution, but also to someone who “knowingly permitted” the risk of harm through contamination, e.g. a housebuilder who failed to remediate contaminated land before developing the land and selling it on to individual homeowners. Failing that, an owner/occupier, through no fault of their own, can be liable.

The regime is retrospective in the sense that it imposes liabilities in respect of acts done in the past which did not give rise to such a liability as the law stood at the time the acts were performed.

It is fair to say that the regime has not been utilized by local authorities as much as might have been anticipated. Part of the reason for this may be that the process envisaged by the 1990 Act can be complex, time-consuming and expensive. There has been little case law to clarify many of the difficult legal issues that can arise. Unlike a lot of environmental legislation, Part IIA of the 1990 Act does not implement EU law. There is therefore no obvious reason why it will change following Brexit.

The Transco case

The leading authority is the House of Lords’ decision in R (National Grid Gas Plc) v Environment Agency [2007] I WLR 1780 (“the Transco case”). In that case, coal tar had been deposited underground at a gas works by successive private undertakings between 1915 and 1948. The gas industry was nationalised by the Gas Act 1948, which passed to a state owned utility all property, rights, liabilities and obligations of the previous undertaking.

Section 17(1) of the Gas Act 1948 provided that:

“all property, rights, liabilities and obligations which, immediately before [the appointed vesting date] were property, rights, liabilities and obligations of an undertaker ... shall on the vesting date vest by virtue of this Act and without further assurance in such area board as may be determined by order of the Minister.”

The utility stopped production at the site and in 1965 sold the land for housing. On privatisation of the industry, section 49(1) of the Gas Act 1986 provided:

“all the property, rights and liabilities to which the [BGC] was entitled or subject immediately before that date shall ... become by virtue of this section property, rights and liabilities of ... [the successor company] ...”

In 2005, after the Part IIA regime entered into force, the Environment Agency notified Transco, as successor to the original polluter, that it was liable to remediate the land.

The House of Lords held that the definition of “an appropriate person” in section 78F(2) of the 1990 Act was not wide enough to cover a successor to the business of the original polluter and that the references to “liabilities” in section 17(1) of the Gas Act 1948 and in section 49(1) of the Gas Act 1986 did not apply to liabilities arising under the amendments effected by the introduction of Part IIA of the 1990 Act.

The Lords decided that Part IIA created liability now in respect of past conduct, but did not establish that such liability existed before Part IIA came into force. Lord Hoffmann said at [4]:

“It is true that the legislation was retrospective in the sense that it created a potential present liability for acts done in the past. But that is not the same as creating a deemed past liability for those acts. There is nothing in the Act to create retrospectivity in this sense.”

Lord Neuberger said at [35] that very clear words would be needed if it were intended to impose on a successor body liabilities which were non-existent at the date of succession and only created later. The judges noted one such instance of clear words: paragraph 3 of Schedule 2 to the Water Act 1989. Paragraph 3(2)(a) provides that for purposes connected with any transfers made in accordance with a scheme (including the transfer of rights and liabilities under an enactment) a body to which anything is transferred in accordance with the scheme is to be treated as “the same person in law” as the authority from which it is transferred. The Gas Acts did not contain such words, or words to similar effect.

Powys v Price

The issue arose again before the Court of Appeal in Powys County Council v Price and another [2017] EWCA Civ 1133. From the early 1960s until 1993 the predecessors of Powys County Council (“Powys”), first Builth Wells Urban District Council and, subsequently, the Borough of Brecknock (“Brecknock”) operated a landfill site on part of the farm.

A watercourse on the site runs into two rivers, the Irfon and the Wye, both of which are designated as Sites of Special Scientific Interest. Powys had concerns about leachate pollution of the rivers. From 2001 until 2015, Powys considered itself liable to monitor and mitigate the pollution. It installed and operated on site a treatment and filtration plant and a pumping station. In 2015, Powys decided that, applying the Transco case, it was not an “appropriate person” under Part IIA. The landowner disagreed and sought a declaration in court that Powys was liable.

At first instance, the landowner succeeded before HHJ Jarman QC: [2016] EWHC 2596 (QB). The judge considered that the Transco case was distinguishable. Whereas in the Gas Acts only liabilities existing “immediately before” the transfer would be taken over by the new entities, there was no equivalent provision in the legislation on local government reorganisation in Wales.

Powys was created by the Local Government (Wales) Act 1994 (“the 1994 Act”). Section 54(2)(c) gave the Secretary of State power to make an order “for the transfer of property, rights or liabilities, and of related functions, from an abolished body or the Residuary Body to a new principal council or other public body or to the Residuary Body”. The 1996 Order was made under that provision. Article 2(7) of the 1996 Order provides:

“Where property, rights, liabilities or duties of an old authority or other body are vested, by virtue of this Order, in a new authority or other body, anything done by or in relation to the old authority or body in connection with such property, rights, liabilities, or duties shall be treated as if it had been done by or in relation to the new authority or body as the case may be.”

The judge held that the tenor of the 1996 Order was that the public should be able to look to Powys in precisely the same way as it had previously looked to Brecknock and should be in no worse position as a result of local government reorganisation. He granted permission to appeal to the Court of Appeal.

The Court of Appeal (Lloyd Jones, Hamblen, Hickinbottom LJJ) reversed the decision. Lloyd Jones LJ, with whom the other judges agreed, said at [28]:

“The definition of “appropriate person” in section 78(2) i.e. “a person ... who caused or knowingly permitted the substances ... by reason of which the contaminated land in question is such land to be in, on or under that land” cannot be construed so as to include Powys as successor of Brecknock. This flows from the natural meaning of the words of the provision and is, in any event, compelled by the reasoning of the House of Lords in Transco in relation to the same provision. The emphasis in section 78F (2) and (3) is on the actual polluter, the person who caused or knowingly permitted the pollution. Powys clearly does not fall into this category.”

The Court of Appeal disagreed that the case was distinguishable from Transco. Comparing the Welsh local government provisions to the wide successor provision in the Water Act 1989 (referred to above), Lloyd Jones LJ said at [30]:

“… the succession provision in Article 4 of the Order with which we are concerned, which simply states that “all the property, rights and liabilities of the old authority shall ... vest in that successor authority”, is, in my view, nowhere near as extensive in its effect. On its face it is not effective to impose such a liability on the successor body.”

The Court of Appeal considered that the judge at first instance had placed too much reliance on the words “immediately before” in the Gas Acts in order to distinguish the case. While these words were noted by the House of Lords, there were merely supportive rather than essential to the reasoning: [30]. The key point was that “if it is intended to transfer subsequently arising liabilities, clear words would be required to achieve that result”: [31].

As to the judge’s conclusions regarding the “tenor” of the 1996 Order, Lloyd Jones LJ said at [33]:

“While I entirely understand why the judge in the present case was motivated to come to [this] result, I consider that it is prohibited by the wording of the statutory provisions which are unambiguous. In these circumstances the judge was not entitled to give effect to what he considered to be the purpose of the legislation.”

The Court of Appeal rejected the relevance of case law on “contingent” liabilities, i.e. potential causes of action in law which have not (yet) arisen on the facts. The Court of Appeal noted the conclusion of the House of Lords in Transco that contingent liabilities fell within the meaning of “liabilities” under the Gas Acts. The court agreed that the same would apply to the 1996 Order. Accordingly [42]:

“… had Part IIA been in force in 1996 when the transfer from Brecknock to Powys took place, I consider that Brecknock would have been subject to a contingent liability under Part IIA which would have passed to Powys under Article 4 of the 1996 Order with the result that Powys would be an appropriate person.”

Therefore, in order for a successor body to potentially be an “appropriate person”:

If the succession provisions pre-date the coming into force of the Part IIA regime, they need to use clear words to transfer subsequently arising liabilities, not just liabilities, including contingent ones, that existed at the time of the transfer; or
If the succession provisions post-date the coming into force of Part IIA, then potential liability for remediation under Part IIA is a contingent liability, which would transfer to the successor under provisions identical or similar to the Gas Acts and the Welsh local government reorganization legislation.