Contaminated Land – House of Lords decision

Introduction

The House of Lords has unanimously rejected the Environment Agency’s contentions that National Grid Gas plc (“NGG”) (formerly Transco) should be liable under Part 2A of the Environmental Protection Act 1990 (“EPA 1990”) for the remediation of a former public gasworks site. The firm conclusion of the judgment is that NGG could not be considered an appropriate person for the purposes of funding remediation.

Judgment was handed down on 27 June 2007 in the case of R (on the application of National Grid Gas plc (formerly Transco plc)) (Appellants) v Environment Agency (Respondents). The High Court judgment had held in favour of the Environment Agency and the appeal went directly to the House of Lords by way of the leapfrog procedure.

Implications

The case affects the application of Part 2A of the EPA 1990 in relation to sites contaminated by a wide range of privatised businesses, in particular utilities, that may have caused land to be contaminated and have subsequently become subject to statutory reorganisation, nationalisation or privatisation. The policy implications of the decision are far-reaching. It is not difficult to imagine that further consideration by the government and the regulators will be given to this by Part 2A Parliament imposed liability retrospectively. The House of Lords effectively ruled that when passing Part 2A in 1995, the then Parliament did not intend that this retrospective liability would overreach the intent of the Parliament at the time of the British Gas and other privatisations. This will no doubt give rise to considerable academic and constitutional debate.

Where the transfer scheme or other reorganisation took place prior to the implementation of Part 2A and did not clearly contemplate transferring liabilities that arise after the vesting date, the House of Lords decision confirms that developers or purchasers of such land, who may be liable as “knowing permitters”, will not be able to rely on the successors of the original polluters to cover or contribute to remediation costs. There is also the issue of whether that type of successor company is a “person” for the purposes of Part 2A. Where the successor company actually owned the land in question after vesting, there may be scope to argue that they have become a “knowing permitter” but this will very much depend on the facts of the specific case.

Key Issues

The key issue was whether NGG could be held liable for the acts of its statutory predecessors. An accepted fact of the case is that the actual polluters of the site were the Bawtry and District Gas Company and the South Yorkshire and Derbyshire Gas Company, both of which were predecessors of NGG and neither of which remain in existence.

In order to establish whether NGG was an “appropriate person” under Part 2A and therefore liable to fund the remediation costs, the House of Lords considered the following questions:

• Is the concept of “appropriate person” wide enough to cover statutory successors to the original polluter?
• Had liability any Part 2A liability of the original polluters passed down to NGG as a result of statutory transfers of liability?

Decision

Lord Scott of Foscote gave short shrift to the Environment Agency’s contention that “appropriate person” under the EPA 1990 would extend to cover statutory successors:

“The argument for the Agency, advanced by Mr Pleming with success before Forbes J, was that “person” in section 78F [of the EPA 1990], as in the phrase “person … who caused or knowingly permitted …” should be construed so as to include every person who became by statute the successor to the liabilities of the actual polluters…This is, in my opinion, a quite impossible construction to place on the uncomplicated and easily understandable statutory language.”

The Environment Agency invited the House of Lords to review the Parliamentary record to establish whether Parliament intended Part 2A to extend to successor companies. The Lords resisted this suggestion on the basis that it was only necessary where ambiguity existed in the legislation, and it was not accepted that there was any ambiguity in the language of Part 2A.

Lord Neuberger of Abbotsbury was open to the possibility that in some circumstances it may be right to extend the concept of “polluter pays” beyond the original polluter. However he noted that this was a matter of policy for the legislature and not for the courts.

The Lords also rejected the Environment Agency’s arguments on the second issue of whether liability for remediation had been transferred to NGG. Lord Scott writes:

“Both in section 17(1) of the 1948 Act and in section 49(1) of the 1986 Act the assets and liabilities transferred were expressly limited to those existing “immediately before” the transfer date. The notion that that language can encompass a liability created by Parliament in 1995 by the amendment of the 1990 Act seems to me, with the greatest respect, unarguable.”

Also mentioned in the Lords’ decision on this issue was that the liabilities were being transferred to a public company in which the investing public, noted to have included Sid, were invited to buy shares The Lords considered that the investing public were entitled to believe that the liabilities of the new company were as identified in the prospectus and thereby limited to those existing immediately before the date of transfer. Lord Scott of Foscote said:

“I find it extraordinary and unacceptable that a public authority, a part of government, should seek to impose a liability on a private company, and thereby to reduce the value of the investment held by its shareholders, that falsifies the basis on which the original investors, the subscribers, were invited by government to subscribe for shares.”

To read the Law Now article on the High Court judgment of this case, click here.