New ruling on liability for contaminated land caused by predecessor bodies

Anna Fellows, Browne Jacobson

The Court of Appeal judgment in the case of Powys County Council v Price and Hardwick (2017) overturns a High Court decision with wide ramifications for local authorities in relation to their liabilities under the contaminated land regime.

Context

Part II of the Environmental Protection Act 1990 (‘the EPA 1990’) came into force in England and Scotland in 2000, and Wales in 2001, introducing the contaminated land regime. The legislation defines the ‘appropriate person’, against whom liability for remediation may be enforced. Primary responsibility for the remediation of contaminated land is allocated to the person who caused or knowingly permitted the contamination. The original polluter remains liable for remediation even if they no longer have an interest in the land in question, and the liability has retrospective scope, arising even where the contamination occurred months, years or decades before the regime came into force.

Facts

The facts of the Powys case are relatively straightforward. From the 1960s until 1993, a landfill site was operated on part of a farm in Powys owned by the respondents, Mr Price and Mrs Hardwicke. The site was operated by the predecessors of Powys County Council, with the Borough of Brecknock becoming responsible for waste disposal in the area in 1974. In 1992 tipping ceased, and the Borough of Brecknock carried out works to bring the site back into agricultural use. It is now used for farming.

A local government reorganisation took place in 1996. The Borough of Brecknock was abolished and Powys County Council came into existence. The Local Government Re-Organisation (Wales) (Property etc) Order 1996 (‘the 1996 Order’) provided that:

“…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…”

“…all the property, rights and liabilities of the old authority shall…vest in [the] successor authority.”

After the contaminated land regime came into force in 2001, concerns were raised about leachate pollution originating from the former landfill site. In response, Powys County Council carried out monitoring and mitigation works, considering that it had inherited its predecessor’s liability for the site under the terms of the 1996 Order. However, in 2015, this view was reconsidered in light of the House of Lords decision in R (National Gas Grid (formerly Transco plc)) v Environment Agency (2007).

The Transco case considered contaminated land liabilities in the context of privatisation and corporate reorganisation. Coal tar had been deposited underground at a gas works by private undertakings between 1915 and 1948. The gas industry was nationalised by the Gas Act 1948, which passed all property, rights, liabilities and obligations to a state owned utility. The Gas Act 1986 re-privatised the industry, and the Environment Agency decided in 2005 that Transo plc was the appropriate person in relation to the gas works. However, the House of Lords held that the definition of ‘appropriate person’ was not wide enough to cover a successor to the business of the original polluter, and that references to ‘liabilities’ in the respective Gas Acts did not apply to liabilities arising under the EPA 1990.

Back in Powys, having been informed by Powys County Council that it no longer considered itself liable for the site, the respondent landowners applied to the court for a declaration that the contingent liability for contaminated land had passed from Brecknock to Powys. Distinguishing the case from the Transco ruling, the High Court held in 2016 that Powys was indeed liable.

Analysis

The High Court judge acknowledged that construing the meaning of ‘liabilities’ under the 1996 Order to include potential liabilities arising from a future change of law after the date of the transfer was a broad interpretation. He accepted that there was no case in the context of transfer orders which supported such a broad interpretation. However, he drew attention to the fact that the Gas Acts relevant to the Transco case referred to the transfer of liabilities existing ‘immediately before’ the transfer date, wording which was absent from the 1996 Order. The judge also considered his approach to be justified by the tenor of the 1996 Order: he favoured an approach which left the public in no worse a position as a result of the local government reorganisation.

Although it was clear that much would hang on the precise wording of the relevant transfer provisions, the potential impact of the High Court judgment for local authorities was significant. Until the 1990s, local authorities were generally responsible for running landfill sites, which were frequently operated under leases of private land. Older sites were operated with minimal controls, and this can result in a significant long-term environmental impact. Contaminated land liabilities may therefore not be easy to manage for local authorities with restricted finances.

The Court of Appeal has however taken a different approach, overturning the High Court’s decision. In his judgment dated 27 July 2017, Lord Justice Lloyd Jones carefully considered the meaning of ‘liabilities’ under the 1996 Order and more generally. He concluded that Brecknock had in fact not been under any liability, contingent or otherwise, at the time of the transfer, as Part IIA of the EPA 1990, which created the liability, had not yet come into force. There was therefore no liability capable of passing to Powys under the 1996 Order. Powys was off the hook.

It is worth noting that it was agreed by all parties involved in the case that had Part IIA of the EPA 1990 come into force prior to the 1996 reorganisation, Brecknock would have been subject to a contingent liability which would have passed to Powys under the 1996 Order. Public authorities formed since 2000 (2001 in Wales) therefore remain at risk of liability as a result of historic contaminated land liabilities incurred by predecessors. Nevertheless, the judgment in this case provides some helpful clarity for local authorities on the operation of transfer provisions and the transfer of liabilities.