Contaminated land - where are we now?
Two recent English cases highlight the significance of the contaminated land regime, and the need for the greatest care over the history of land in any transaction
In my brief article in last month’s Journal (p 54) I stressed that the issue of contaminated land has not gone away. It will not go away. Solicitors must act in accordance with the contaminated land information leaflet produced by the Society in 2003 (Journal, April 2003, 32 and on www.journalonline.co.uk).
The main provisions of the contaminated land regime contained in Part IIA of the Environmental Protection Act 1990, as amended, are summarised in the box opposite. It should always be remembered, however, that Part IIA is intended, and used, as a default scheme to deal with land which is not suitable for its existing use. In practice most remediation of land is done in connection with redevelopment, and planning authorities will insist on information regarding ground contamination and on appropriate cleanup before development is authorised. Part IIA is, however, highly relevant for existing contamination and can impose significant liabilities. Perhaps the best example is the recent case of Circular Facilities (London) Ltd v Sevenoaks District Council, 14 June 2004, unreported (magistrates’ court).
Circular Facilities: the background
This case related to the site of a former brickworks. It appears to have ceased operation in the early 1900s. Clay pits on the site filled with water and were then infilled. Part of the infill appears to have been deliberate dumping. Two people in particular had allowed tipping. One was a Mr Scott and one a person identified in the report only as a “previous landowner”.
In 1978 Mr Scott obtained planning permission to build eight houses on the site and bought the land. In 1979 he sold the site to Circular Facilities, but entered into an “informal partnership” in terms of he was responsible for developing the site. During the 1980s the eight houses were built and sold to private residents.
The physical difficulty on the site was that organic wastes dumped in the old claypits were generating methane and carbon dioxide which could migrate into the properties through service ducts and fissures in their concrete floors. As early as 1991 the council identified the site as one of concern with respect to landfill gas, and introduced gas protection measures in the eight homes at its own expense.
Once Part IIA was brought into force the council commissioned consultants who concluded that the gas posed a “significant possibility of significant harm” to the residents’ health. The council accordingly determined the land as contaminated and in November 2002 served a remediation notice on Circular Facilities, requiring it to take remedial measures.
Circular Facilities lodged an appeal against the notice, which suspended its requirements pending determination. Section 78N of the Act permits the council to carry out the remedial works themselves, which Sevenoaks did, and recover their costs (some £46,000) from the liable parties.
The liable parties
Circular Facilities’ first argument was that the whole case was now irrelevant and unnecessary because the works had been carried out and there was no longer a problem. That was thrown out on the basis that the council had done exactly what the legislation envisaged. The question was whether the work had in fact actually been “necessary” and whether Circular Facilities was the “appropriate person” who should pay for it.
It appears to have been accepted that the ground in question was “contaminated land”. The issue was the provisions for apportioning liability among the parties who had “caused or knowingly permitted” the substances in question to be within the land. Mr Scott and the previous (nameless) landowner clearly were causers or knowing permitters because they had allowed tipping on the site.
Circular Facilities tried to argue that they were not “causers or knowing permitters”. Their downfall, however, appeared to be evidence of a 1978 geotechnical report submitted by Mr Scott as part of a 1980 planning application on behalf of Circular Facilities. This said that black organic material had been found a little below ground level in a trial pit on the site and that water entering the pit had “gases bubbling through it”. The court therefore concluded that this report “must have been available to Circular Facilities”, that the company “must have considered” the risks of investing in the site before buying it from Mr Scott, and in that process the report “must have been considered”. It went on that it “must have been aware of the organic material and the gas and ought to have been aware of the risk posed by landfill sites such as this”.
The court therefore concluded that there were three class A “appropriate persons” who had “caused or knowingly permitted” the presence of the harmful substances. The court then required to apply exclusion tests.
Where the buck stopped
The vital exclusion test in this case was, ironically, the final test of the six. This states: “the purpose of this test is to exclude from liability those who would otherwise be liable solely because of the subsequent introduction by others of the relevant pathways or receptors (as defined in Chapter A) in the significant pollutant linkage”. The judge had no doubts about what this guidance implied. Mr Scott and the previous landowner had both allowed tipping on the site, but were excluded from liability by test 6. It was Circular Facilities which had introduced the pathways and receptors to create the pollutant linkage, and as such it was the appropriate person under s 78F. The appeal was dismissed with a costs order for £15,000.
Various lessons can be drawn from the case. These include:
1. Harmful contamination need not necessarily come from radioactivity, asbestos, heavy metals or chemicals. The difficulty was caused here by the rotting of simple organic matter.
2. If people without a knowledge of the law had been told the facts and been asked who should be held liable, they might well have reached a decision very different from that reached by the court on the basis of the legislation. They might well have said that the people who dumped the harmful substances should be held liable before the developer. They might even have sought some kind of equitable division of liability. The legislation is clear, however, that in these circumstances liability should rest with the person who built the development. The reasoning would appear to be that no harm would have been caused if the dumping had taken place but no development had then been built on top.
Appeal and settlement
The case was not finished yet. A further appeal was reported at  Env LR 35;  JPL 1624. This shed some light on the level of knowledge required for someone to be a “knowing permitter”. You will recall that the court at first instance concluded that the geotechnical report “must have been available to Circular Facilities”, and the company “must have considered” the risks of investing in the site. The appeal concluded that it was incumbent on the court to state whether or not it found as a fact that Mr Scott knew of the contents of the soil report and, if so, what legal conclusion that gave rise to. The legal basis for imputing Mr Scott’s knowledge to Circular Facilities should have been explored and disclosed. The result was that there should be a retrial.
The court had concluded that a person need only have knowledge of a substance (in this case organic material), and the statute then provides that having knowingly permitted that substance to be in, on or under the land, that person shall also be taken to have caused or knowingly permitted any substance which is there as a result of a chemical reaction or biological process affecting the first substance. There was no basis for limiting the ambit of the section to exclude responsibility of those who did not know of the potentiality for that reaction or process. Knowledge of the substance was taken to be knowledge of the substance generated by the process.
Unfortunately the retrial envisaged never took place. My understanding is that there was an out of court settlement. The fact remains, however, that the appeal that did take place cast substantial light upon the meaning of “knowing permitter”.
R (National Grid Gas) v Environment Agency
The most recent case under Part IIA is R (National Grid Gas plc) (formerly Transco plc) v Environment Agency  UKHL 30. It can also be looked on as a case which considers the liability of bodies which have succeeded to the assets (and possibly the liabilities) of earlier bodies.
The case is of interest and relevance. The difficulty is that it does not necessarily determine the liability of all statutory successor bodies, whether in the public or private sector. Each set of legislation is different. The words actually used in each transfer scheme are different. A great deal will depend on the wording actually used in each case.
The case related to a former gasworks in Doncaster. The site had been used for a coal gasworks by the Bawtry and District Gas Company and its successor bodies from about 1915. Operations ceased shortly after nationalisation in 1948 and the land was sold to a private developer for housing in 1965.
Sites which have been used as coal gasworks do tend to cause contamination problems. The Environment Agency declared the whole area, including 11 residential properties, a special site under the Part IIA regime. Remediation cost around £66,000 per property. The argument was about who was going to pay for this.
The Agency decided the developers and National Grid Gas were equally liable. The developers no longer existed. The Agency carried out the appropriate works, then sought a 50% contribution from National Grid Gas. The basic question was whether National Grid Gas were liable as statutory successors to the original gas companies.
Transfer of liabilities
The issue was clearly very important to National Grid Gas. If they were liable here, then (unless there was something different in their succession to another gas company) they might well be liable in a substantial number of other cases.
National Grid accepted that if it was the current owner of a contaminated site or had actually caused the contamination, it might be liable under the regime. It stressed however, that it did not even exist when the contamination was caused.
It was held that the transfer of assets and liabilities by the Gas Act 1948 could not extend to include liabilities that were created only when the contaminated land provisions were introduced in 1995. The 1948 transfer, the subsequent restructuring under the Gas Act 1972 and then privatisation under the Gas Act 1986 included the transfer of all liabilities existing “immediately before” the transfer date. The liability in question could not be said to exist at those dates even on a contingent basis.
In the words of Lord Hoffmann, “National Grid did not cause or knowingly permit any substances to be in, on or under the land. This was done by East Midlands Gas Board or its predecessor gas undertakers many years before National Grid came into existence. There is nothing in the Act to say that an appropriate person shall be deemed to be some other person or which defines who that person shall be”.
The Environment Agency had tried to argue on the basis of the “polluter pays” principle that innocent owners or occupiers of contaminated land should not have to pay. Lord Scott commented: “I have no doubt that was so and have no quarrel with that principle but Transco was not a polluter and is no less innocent of having ‘caused or knowingly permitted’ the pollution than the innocent owner or occupiers of the 11 residences”.
Scope of the decision
There are, however, qualifications regarding the effect of this case. National Grid’s success depended on the specific wording of the legislation which brought it into existence. Some legislation states that a successor body is to be treated as the same person in law as the body from which it transferred. The case is of great interest and is clearly vital to Transco. The position of other successor bodies will, however, depend on the detailed wording of the legislation which brought them into existence.
Whatever its shortcomings, the Part IIA regime is at least a coherent legal system. It is however potentially thrown into disarray by the decision of the European Court of Justice on 7 September 2004 in Van de Walle v Texaco Belgium SA. I refer you to the detailed article on this subject (Journal, May 2005, 54). There are proposals for further reforms relative to contaminated land at European level. In particular there are draft proposals regarding alterations to the definition of waste which might affect the problems caused by the Van de Walle case. Looking further ahead there is also a proposed European Framework Directive for soils, regarding the protection and sustainable use of soil. This may prove to be the EU way out of the Van de Walle problem. It may bring us ultimately to a new EU contaminated land regime.
The main message remains, however, that contaminated land is a live issue and will be ignored at your peril.
Professor Kenneth C Ross, Brodies LLP, Glasgow and University of Glasgow
WHAT THE LEGISTLATION ACTUALLY SAYS
The basic contaminated land regime is contained in Part IIA of the Environmental Protection Act 1990 as subsequently amended (particularly by the Environment Act 1995 and the Contaminated Land (Scotland) Regulations 2005). The legislation is lengthy in itself but is made more complex through being supported by even more lengthy statutory guidance. The most important provisions are as follows:
1. “Contaminated land” is now defined as “any land which appears to the local authority in whose area it is situated to be in such a condition by reason of substances in, on or under the land that (a) significant harm is being caused or there is a significant possibility of such harm being caused, or (b) significant pollution of the water environment is being caused or there is a significant possibility of such pollution being caused”. “Pollution” in relation to the water environment means the direct or indirect introduction, as a result of human activity, of substances into the water environment or any part of it which may give rise to any harm. The principal point to note about this definition is that it is relatively narrow. It focuses on harm. It would be perfectly possible to encounter an area of land which contained numerous potentially harmful substances but which was not “contaminated land” as defined.
2. The party who will be required to remediate “contaminated land” is the “appropriate person”. An “appropriate person” is defined as “any person or any of the persons who caused or knowingly permitted the substances, or any of the substances, by reason of which the contaminated land in question is such land to be in, on or under that land”. “If no person has, after reasonable enquiry, been found who is” by virtue of the foregoing definition “an appropriate person to bear responsibility for the things which are to be done by way of remediation the owner or occupier for the time being of the contaminated land in question is an appropriate person”.
The guidance mentioned above lays out a five stage procedure for determining liabilities. This involves (1) identifying potential “appropriate persons”; (2) determining the remediation actions; (3) attributing responsibility to “liability groups”, i.e. the appropriate persons for a particular significant pollutant linkage; (4) applying exclusion tests to the member of a liability group; and (5) apportioning liability between the members of the liability group who remain after the exclusion tests have been applied.
The emphasis of the Part IIA regime is to attach liability to the persons who caused or knowingly permitted the presence of the pollutant. These are called “Class A” appropriate persons. The exclusion process for Class A persons is complex and consists of six tests which must be applied in the sequence set out in the statutory guidance. The tests can never be operated in such a way as to exclude all of the Class A appropriate persons in the liability group. Listing these in the order in which they must be applied, these tests are, in summary, as follows:
1. “Excluded activities” – this excludes those who are appropriate persons solely by reason of having carried out certain listed activities, such as making loans or grants to another.
2. “Payments made for remediation” – this excludes those who have in effect met their responsibilities by making certain kinds of payment to some other member of the liability group which would have been sufficient to pay for adequate remediation.
3. “Sold with information” – this excludes those who have disposed of land to a buyer who was properly informed beforehand of the presence of the pollutant.
4. “Changes to substances” – this excludes those who caused or knowingly permitted the presence of a substance which only led to the creation of a significant pollutant linkage because it interacted with another substance which was introduced by another person at a later stage.
5. “Escaped substances” – this excludes from liability those who would otherwise be liable for the remediation of land which has become contaminated as a result of the escape of substances from other land where it can be shown that another member of the liability group was actually responsible for that escape.
6. “Introduction of pathways or receptors” – this excludes those who would otherwise be liable solely because of the subsequent introduction by others of the relevant pathways or receptors in the significant pollutant linkage.