The recent decision of the High Court in Price and Hardwicke v Powys County Council determined that a local authority may acquire potential liability under the contaminated land regime (“CLR”) from its statutory predecessor, notwithstanding that the CLR did not enter into force until over 5 years after the transfer of liabilities took place.

Key Facts

The applicants owned a farm on which the respondent’s predecessors as local authority operated a landfill from the 1960s until 1992. Following closure of the landfill, the predecessor local authority carried out works to bring the site back into agricultural use. On 31 March 1996, pursuant to the Local Government (Wales) Act 1994, the respondent’s predecessor was abolished, and the respondent replaced it as the relevant local authority for the site . Under the Local Government Re-organisation (Wales) (Property, etc.) Order 1996 (“1996 Order”), all liabilities of the predecessor vested in the respondent. Initially, the respondent assumed that it had inherited liability for the site, and it obtained permission from the applicants to carry out further environmental monitoring and work at the site.

In September 2001, Part 2A of the Environmental Protection Act 1990 came into force in Wales introducing the CLR. Under section 78F of the 1990 Act, the person or persons responsible for remediation of contaminated land are known as “appropriate persons”. In the first instance, the appropriate person or appropriate persons will be the person or persons who have caused or knowingly permitted the contaminative substances to be present in, on or under the land (Class A persons). However, if no Class A person(s) can be found, the appropriate person will be the owner or occupier for the time being of the affected land (Class B persons). No remediation notice had yet been served under the CLR in relation to the site; in fact, the land had not even been determined as contaminated under the CLR. Nevertheless, the applicants were concerned that there was a real risk that the land would be determined and sought a declaration that the respondent was an appropriate person under the regime.

In R (on the application of National Gas Grid (formerly Transco Plc)) v Environment Agency (“the Bawtry Case”), it was held that the Gas Act 1986 did not pass liability under the CLR from a state-owned gas utility company on to the public limited company which had been formed pursuant to the 1986 Act as its successor. The respondent relied upon that decision as justification that it was not liable under the CLR for landfill operations carried out by its statutory predecessor which had ceased before 1996. It was common ground that the word “liabilities” under the 1996 Order included potential liability. The crux of this dispute, however, was whether “liabilities” could include a liability that arises (as in the case of liability under the CLR) for the first time by subsequent legislation.

Decision

Counsel for the respondent contended that there was nothing within Section 78F to suggest that a polluter’s successors (whether they are a private company or a public body) are deemed responsible for the acts of the original polluter. Furthermore, it was submitted that the use in the 1996 Order of the language of “vesting” indicates that such liabilities would have had to have been vested in the predecessor authority. However, the fact that the land was not determined as contaminated in 1996 meant that there could not have been any liability on the predecessor at the time when it ceased to exist. Furthermore, counsel for the respondent suggested that if Parliament had intended all liabilities (including those created by legislation) coming into force in the future to be transferred, then, given the potential width of liabilities that could be included, it would have used very clear express terms in the 1996 Order to do so.

Counsel for the applicants pointed out that, in the Bawtry case, the relevant legislation referred to the transfer of liabilities of the predecessor company “immediately before” the transfer date. However, in the 1996 Order, there was no reference the liabilities transferring being only those that existed “immediately before” the transfer date. Also, in the present case, unlike the Bawtry case, there was no suggestion that subscribers for shares in a public company would have been effectively misled if the company took on more liabilities than those that stood “immediately before” the date of transfer. Moreover, counsel for the applicants asserted that the whole tenor of the Order was to ensure that the reorganisation of the local authorities left members of the public in the same position in relation to the new authority as they had been in with the old authority. After all, this was not a transfer of liabilities to a private company, but from one emanation of the state to another.

The judge was persuaded by the applicants’ case and gave the declaration sought, that the respondent was an appropriate person under the regime.

Implications

It is clear as a result of the High Court’s decision that statutory successors may inherit liability under the CLR; notwithstanding that the CLR came into force after the transfer took place. This has potentially significant consequences for public bodies who may have undergone statutory reorganisation before the introduction of the regime in 2001. Until the 1990 Act required them to be operated by arm’s-length companies, landfill sites were operated by local authorities. Therefore, practically every local authority could find itself in the same position as the respondent in this case.