In a previous edition we examined a case which considered the standard of care for developers developing brownfield sites (Potential for increased Liability for brownfield developers). Another ruling which potentially increases liability for brownfield developers has been given in Crest Nicholson Residential Limited, R (on application of) v Secretary of State for Environment, Food and Rural Affairs and Others [2010] EWCH 561 (Admin). The case illustrates what amounts to causing pollutants to be present in land, and how the application of the "sold with information" exclusion test operates in relation to apportioning liability. The decision is a stark warning to developers both north and south of the border.

Housing built on former chemical works

The Crest case involves St Leonard's Court, an estate comprising 66 residential units in Sandridge, near St Albans in Hertfordshire. From the 1950s to the 1980s the land housed a chemical works. Redland Minerals Ltd bought the chemical works as a going concern in 1980 and continued to operate at the site until Crest Nicholson Residential Limited purchased the site from Redland.

In the context of the acquisition, Crest carried out testing on the land and obtained information from Redland that there were chemicals present although, importantly, Redland did not fully disclose the extent of the contamination. Relying on these investigations, Crest went on to demolish the chemical plant buildings on site in 1983 and carry out the residential redevelopment, which was completed, after some delay, in 1987.

Thirteen years later, in late 2000, a source of water contamination was found on site. The St Albans District Council identified that the source of this contamination was bromate and bromide leaching into the soil, and contaminating the water source for the new residential development. They referred the case to the Environment Agency.

"Caused or knowingly permitted"

The test used for establishing liability in contaminated land cases is based on whether the parties ''caused or knowingly permitted" the presence of a pollutant in, on or under the land. Under Part IIA of the Environment Protection Act 1990 (which came into force on 1 April 2000) the Environment Agency served a remediation notice against both Redlands and Crest on the basis of their being persons that had "caused or knowingly permitted" the bromate and bromide contamination on the site, and were therefore liable to remediate the site. Both parties lodged an appeal against the notice claiming the other was responsible.

The High Court refused their appeal and ruled that both Crest and Redland were liable and apportioned liability between them.

Sold with information

Redland argued they were not liable on the basis that they had sold the site to Crest "with information" (see Defra Guidance 01/2006). However although they had sold the site "with information", Crest could not reasonably have been aware of the extent of the bromide contamination likely to be present based on the information Redland had provided. Neither had Redland provided information to Crest on the bromate contamination. Accordingly the "sold with information" test only limited their liability to a certain extent.

Crest were found responsible for the remaining proportions of liability, however they argued that they could not be held to have "caused" the contamination as they did not cause the chemicals to enter on to the site. However the Court determined that a party does not have to introduce a contaminant to a site to have caused it to be in, on or under the land. A party can be found liable for contamination to land through both action and inaction.

The Court held that Crest's liability consisted in both action and inaction in this case, as a result of how it dealt with the redevelopment works. Crest had demolished the former factory hard standings in 1983, leaving the contaminated soil exposed to further rainfall leaching for over two years pending the building of new houses, despite having been aware of the past use of the site and the risks this entailed. The result of this leaching was that contamination that would otherwise have been removed had remained and, indeed been flushed deeper into the ground.

Impact on developers

This case serves as a warning to land owners and developers alike. Whilst, in principle, the contaminated land regime works on the basis of the ''polluter pays'' model, it could be seen in practice to apply instead on the basis of strict liability, as the responsibility to remediate contaminated land can arise without any active fault, breach of law or intention.

Although not dealt with explicitly in this case, Mr Justice Sales' opinion underlined that if it is not possible to find who caused or permitted the contamination, liability will pass to the current owner and occupier. Coupled with the retrospective application of the regime, developers are not immune from liability for historical events, even though the circumstances surrounding such events may have been common practice at the time. Similarly, disposing of contaminated land is not necessarily a bar to future liability even where disclosures are made.

It is possible to build in some contractual protection against environmental liabilities when selling or purchasing land but, as the full extent of land contamination may be difficult to determine, even after detailed site inspections and due diligence, problems may still arise.

The ruling in Crest Nicholson Residential Limited, R (on application of) v Secretary of State for Environment, Food and Rural Affairs and Ors can be viewed on the BAILII website.