09 October 2017

Contaminated Land – Buyer Beware!

The Court of Appeal has added to the very slim volume of cases interpreting Part 2A of the Environmental Protection Act 1990, which governs the historic contamination of land.

Under Part 2A, liability for historic contamination can extend not only to the original polluter, but also to a subsequent, ‘innocent’, landowner or occupier who did not cause the original contamination.

In Powys County Council v Price and Hardwick [2017] EWCA Civ 1133, the Court was asked to consider whether a successor local authority could be liable for the polluting activities of its predecessor.

Perhaps rather unusually, the case was brought under Part 8 of the Civil Procedure Rules, because the claimants were simply seeking a declaration of their rights. 

On the facts of this case, there were two predecessor authorities to Powys County Council (“Powys”) – Builth Wells UDC and the Borough of Brecknock.  For the period between the 1960s and 1993, the Borough of Brecknock operated a landfill site on part of a farm owned by Mr Price and Mrs Hardwick.  From 1974, the Borough of Brecknock was subject to the waste licencing regime, and as part of its licence, there was an agreement on the part of Brecknock that it would carry out works to bring the site back into agricultural use when tipping ceased.

The Borough of Brecknock ceased to exist and became Powys County Council on 1 April 1996.  Part 2A came into force in Wales on 15 September 2001, so the regime did not exist at the time of Brecknock’s rights and liabilities transferring to Powys.

Powys’ officers had always assumed that they had taken over responsibility for remediating the site and wrote to the owners indicating as much; and asking for permission to enter onto the site, sink a borehole and take leachate samples.  Leachate on the site was of particular concern because there was a watercourse intersecting it, which ran into two rivers, both of which were classified as SSSIs.  Over time, there was some concern that the leachate was causing pollution of the rivers.  Powys therefore asked the landowner for permission to enter onto the site to carry out further drainage works.

Over time, part of the site was formally leased to Powys for the construction and management of a leachate treatment plant.  Powys continued to monitor the leachate levels, and to carry out mitigating action until 2015.

In the meantime, in 2013, Powys’ contaminated land officer started to question the assumptions that the Council had made about the transfer of liabilities.  He was aware of a decision of the House of Lords in the case of Transco, in which it was held that Transco was not liable for some of the polluting activities that had previously been carried out by British Gas, its predecessor.  In the light of legal advice received by the contaminated land officer, Powys wrote to Mr Price and Mrs Hardwick on 27 March 2015, giving them 3 months’ notice to terminate the tenancy for the leachate treatment plant.

The case turned on the question of the liabilities that had been transferred to Powys.  The Local Government (Wales) Act 1994 and a 1996 Order made under it, sought to transfer the rights and liabilities of the Borough of Brecknock to Powys.  It was for this reason that everyone had assumed that Powys had become liable under Part 2A.

Before the Court of Appeal, Powys argued that as the contaminated land provisions did not come into force until around 5 years after the creation of the County Council, Brecknock had no liabilities that could have been transferred under the 1996 order.  If the regime did not exist when the transfer took place, then there was nothing that could have passed in turn to Powys. The Transco case had already established that Part 2A did not create retrospective liability in that sense.  It followed that if Powys was not responsible as the original polluter, then it would have no liability for cleaning up the site. 

The Court of Appeal agreed with  Powys.  However, Lord Justice Lloyd Jones, who gave the leading judgment, did suggest in passing that had the landowners brought a claim in nuisance, they may have been successful – but as the issues were not argued before him, he could not express a definitive view.

Whilst this case is clearly very fact-specific, it does contain some important points of principle that may be of more general application.  It is important, for example, to remember that the civil regime for nuisance, negligence and trespass runs in parallel with the contaminated land regime.  The latter may provide redress where the former does not.

The difficulty for the landowners in this case, was that the tipping operations had ceased before Powys came into existence; but conceivably, it may have been found to have been continuing a nuisance if it failed to remediate the site satisfactorily so as to prevent leachate contamination, even if it were not liable under Part 2A. 

As a wider issue, solicitors need to take great care with restructuring or transfer schemes when dealing with former local authorities or nationalised businesses, to ensure that their clients are not left with potentially hugely expensive remediation liabilities.  If there is any doubt, the question of liability needs to be carefully closed out in the contract, supported by indemnities where necessary.