Court of Appeal confirms that historical polluters of land can be held liable to compensate current occupiers for the cost of clean up works required by the EPA

On 26 July 2017, the Court of Appeal of Victoria handed down its decision in Yarra City Council v Metropolitan Fire and Emergency Services Board & Ors.[1]

The decision confirmed the trial judge’s determination that former occupiers of land who caused pollution to occur or abandoned industrial waste on land can be made liable to pay the costs incurred by the current occupier of the land in complying with a Clean Up Notice issued under s 62A(1)(a) of the Environmental Protection Act 1970 (Vic) (Act), notwithstanding that the original act or acts of pollution occurred before the commencement of s 62A of the Act, or the Act itself.

This is an important decision for later owners or occupiers of land previously polluted by another party; and for organisations that have caused pollution or abandoned industrial waste on land in the past, and on sold the affected land.

Between 1914 and the 1960s, the City of Richmond (Richmond) ran a tar distilling plant at a site in Burnley Street, Richmond (Burnley site). Connected to this plant was a bluestone pit that was used to store coal tar. The tar distilling operations ceased in the 1960s and many of the buildings on the Burnley site were cleared and the bluestone pit used to store coal tar was filled-in.

In 1994, by an Order in Council, the Yarra City Council (Yarra) became the successor in law to Richmond. The Order in Council provided that, among other things, all liabilities of Richmond became the liabilities of Yarra.

At this point in time, Richmond/Yarra employees knew there was some contamination on the Burnley site however, any prior knowledge that there was coal tar in the filled-in bluestone pit had been lost. In 1996, Yarra relinquished possession of the Burnley site to the State of Victoria.

In 2004, the Metropolitan Fire and Emergency Services Board (MFESB) bought the Burnley site from the State of Victoria, intending to construct a community safety and training facility. Construction work was halted in July 2005, when a test hole identified coal tar in the bluestone pit.

In December 2006, the Environmental Protection Authority (EPA) served a Clean Up Notice on MFESB as the occupier of the Burnley site, which MFESB complied with.

MFESB commenced proceedings against Yarra seeking to recover its costs in complying with the Notice, in accordance with s 62A(2) of the Act.[2] This provides that a court may order the occupier of land subject to a Notice be compensated for any reasonable costs incurred in good faith in complying with a Clean Up Notice by:

  • the person who has caused or permitted the pollution to occur (s 62A(1)(b))
  • any person who appears to have abandoned or dumped industrial waste or potentially hazardous substance (s 62A(1)(c)).

The Supreme Court proceeding

MFESB argued that Yarra’s liability under s 62A(2) stemmed from Yarra being a person who caused pollution to occur (s 62A(1)(b) of the Act) and/or a person who appears to have abandoned industrial waste (s 62A(1)(c) of the Act).

In a decision dated 24 December 2015, the Supreme Court of Victoria (Riordan J) decided that:

  • Richmond had caused the coal tar pollution to occur
  • Yarra was liable for the acts of Richmond in causing pollution, by virtue of the 1994 Order in Council
  • the liability of Yarra was unaffected by the fact that the underlying pollution occurred before the commencement of the Act
  • Yarra appeared to have abandoned the coal tar when it relinquished possession of the Burnley site in 1996.

On 5 February 2016, as part of the preliminary proceeding on the question of whether MFESB was entitled to compensation and damages, Riordan J made a declaration that Yarra was liable under s 62A(2) to compensate MFESB for any reasonable costs it incurred in good faith in complying with the December 2006 Notice.

A copy of the Supreme Court’s decision can be found here.

Yarra appealed the Supreme Court’s decision, submitting that the primary judge made errors in finding: that Yarra was a person who caused pollution to occur, and that it had appeared to abandon the coal tar for the purposes of ss 62A(1)(b) and (c) of the Act, and not exercised its discretion to consider whether grant relief under s 62A(2) of the Act, before making a declaration that Yarra was liable under s 62A(2).

In its decision, the Court of Appeal (Warren CJ, Tate and Osborn JJA):

  • confirmed the Supreme Court’s decision that Yarra was liable for the pollution caused by Richmond. This was because Richmond’s liabilities, which included its contingent liability for clean up costs associated with the pollution it caused on the Burnley site, were transferred to Yarra by virtue of the Order in Council that made Yarra the successor in law to Richmond. The effect of this transfer of liabilities was that Yarra assumed the character of the person who caused pollution to occur for the purposes of s 62A(1)(b) of the Act
  • ruled that s 62A(2) of the Act applies to pollution that occurred before the commencement of that section and that s 62A(2) does not operate impermissibly retrospectively. This is because the event which gives rise to the liability to compensate is the event of compliance with a Clean Up Notice, not the occurrence of the pollution. Accordingly, the fact Richmond caused pollution to occur before the commencement of the Act did not affect Yarra’s liability under s 62A(2) of the Act
  • overturned the Supreme Court’s decision that Yarra appeared to abandon the coal tar. Instead, the Court of Appeal decided that Yarra’s complete lack of knowledge of the coal tar in the bluestone pit meant it could not be said to have appeared to abandon the coal tar for the purposes of s 62A(1)(c) of the Act
  • held that the Court’s power to grant relief under s 62A(2) is discretionary both as to liability and quantum and that the Supreme Court’s declaration that Yarra was liable to compensate MFESB under s 62A(2) of the Act was premature and inappropriate. In determining whether to exercise its discretion to make such a declaration, the primary judge needed to have first considered evidence and submissions relating to a range of circumstantial factors, including the contract of sale between the State of Victoria and MFESB and the absence of knowledge of Richmond/Yarra of the presence of coal tar on the Burnley site. Accordingly, the Court of Appeal set aside the declaration made by the Supreme Court and remitted the matter to the primary judge to consider these factors and determine whether the discretion to grant relief under s 62A(2) of the Act should be exercised.

Importantly, the effect of the Supreme Court and Court of Appeal’s decisions is that organisations that caused pollution to occur on land before the Act commenced can still be held liable to compensate an occupier who has incurred costs in complying with a Notice.

A copy of the Court of Appeal’s decision can be found here.