UK: High Court orders re-trial of the first appeal against a remediation notice

In the first case of its kind, the High Court has overturned an appeal heard in the Magistrates' Court against the service of a remediation notice under the contaminated land regime of Part IIA Environmental Protection Act 1990. The original appeal was itself the first to be made under Part IIA.

The original case, heard in June 2004 involved an appeal against the service of a Part IIA remediation notice by Sevenoaks District Council upon developers, Circular Facilities (London) Limited. The notice concerned a former landfill upon which Circular Facilities had built a number of houses. The appeal turned primarily upon whether Circular Facilities had the requisite knowledge of contamination at the site to be classed as an "appropriate person" to meet the costs of remediation.

The appeal to the High Court questioned the validity of the Magistrates' Court's original decision that Circular Facilities had sufficient knowledge of the contamination. In ordering a retrial, Mr Justice Newman held that the basis upon which knowledge was imputed upon Circular Facilities was not fully considered in the Magistrates' Court.

The issue of knowledge can be crucial in determining liability for contaminated land. The current judgment and the ensuing retrial will be of significance in relation to Part IIA and also potentially other legislation dealing with environment liability where knowledge is a critical factor.

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First court decision on contaminated land legislation

On the 14 and 15 of June 2004 Sevenoaks Magistrates Court heard the first appeal against a remediation notice under Part IIA Environmental Protection Act 1990 on contaminated land.

In the short term it is unlikely that this will signify the start of a flood of cases. This is due to the relatively low number of sites identified as contaminated land and the fact that many will be dealt with through voluntary remediation. Nevertheless pressure for greater enforcement action is building. The Environment Agency has announced that it has set itself a target of securing remediation of 80 Special Sites (generally the higher risk sites) by 2006/7 and DEFRA is examining ways to give the contaminated land regime greater impetus.

For a number of reasons it is not surprising that this first court case on the contaminated land regime involved a relatively low key site and parties. Nevertheless, the court's decision is helpful. It addresses a couple of the many difficult issues in the contaminated land regime and endorses the approach to interpretation of the legislation and guidance being taken by many lawyers.

The outcome of this case and the pressure for increased enforcement activity under the contaminated land regime underlines the need to analyse and apply the legislation and guidance systematically and in detail. This is the case whether allocating risk for contamination in a transaction or responding to regulatory action.

Part IIA Environmental Protection Act 1990 was inserted into the Environmental Protection Act 1990 by the Environment Act 1995. It introduced retrospective liability for contaminated land and has become an important risk allocation issue in a great many transactions involving property. However, due to the time it took to develop the detailed supporting statutory guidance the legislation only came into force in the year 2000 in England and Scotland and in 2001 in Wales.

For a number of reasons relatively few sites have been identified as contaminated land under (75 by June 2004) and proportionately few remediation notices have been served (3 by June 2004).

A lack of local authority resources and motivation and the fact that the legislation was designed to apply mainly to sites that are giving rise to significant risks are contributing factors in the number of sites identified. The requirement for the enforcing authorities to pursue voluntary remediation where possible, problems in finding existing "appropriate persons" to carry out remediation and the generally cautious approach of the enforcing authorities have contributed to the low number of remediation notices.

The case before Sevenoaks Magistrates' court concerned a former brickworks which closed early in the 20th century. During the 1960s and 1970s while Mr Kinchen-Goldsmith and then Mr and Mrs Scott owned the land the clay pits were landfilled with a variety of wastes including putrescible matter.

Working with the architect employed by Circular Facilities (London) Limited and under an informal arrangement with Circular Facilities, Mr Scott obtained planning permission on behalf of Circular Facilities to build eight houses. Mr and Mrs Scott sold the land to Circular Facilities which developed and sold the houses in the 1980s.

A geotechnical report dated 12 July 1978 on the condition of the site was provided to Sevenoaks District Council in March 1980 in support of the planning application. It was put on the planning register and was therefore available to Circular Facilities and its advisers.

Sevenoaks District Council became so concerned that the former clay pits were emitting significant quantities of carbon dioxide and methane that it installed gas protection measures in the houses during the 1990s. Nevertheless its concern over the risk continued and it appointed an environmental consultancy to advise on the issue once Part IIA Environmental Protection Act 1990 came into force in England. The environmental consultancy advised that the carbon dioxide and methane from the former clay pits was still giving rise to a "significant possibility of significant harm" to the health of residents. The court noted that the gas was causing a real risk of combustion and asphyxiation.

Sevenoaks District Council formally identified the site as contaminated land on this basis and served a remediation notice on Circular Facilities in November 2002. Circular Facilities appealed against the remediation notice. While the remediation notice was suspended pending the appeal, Sevenoaks used its powers to take emergency remediation action where there is an imminent danger of serious harm. It intended to then use its power to recover its costs from the appropriate person.

The first argument raised by Circular Facilities was that the court could not affirm the remediation notice because it had been made redundant by virtue of the fact that Sevenoaks District Council had already carried out the work under its emergency powers. The court dismissed this argument pointing out that the legislation and guidance contemplate this situation and that determining the appeal on the remediation notice would establish liability for costs incurred by SDC.

Circular Facilities' second ground of appeal was that it had been unreasonably determined as an "appropriate person". The question was whether Circular Facilities knowingly permitted the contaminants to be in, on or under the land.

Although "knowingly permitted" is a common phrase in environment law very little case law is available on its meaning. The court therefore applied the government's guidance in Circular 02/2000 which broadly states that to knowingly permit substances to be in, on or under land a person must have knowledge of their presence, power to prevent them from being there and the ability and reasonable opportunity to prevent their presence or remove them. Circular Facilities argued that it did not have the requisite knowledge but the court did not accept the argument because the geotechnical report submitted on behalf of Circular Facilities had identified organic matter in the ground and gas bubbles rising through water in the trial pits. The court took the view that the Circular Facilities must have considered the report and therefore must have had knowledge of its contents. The court went on to state that Circular Facilities could have investigated the risk and could have taken measures to remove the risk. It considered that Circular Facilities' failure to deal with the gas meant that it had permitted its presence.

Under Part IIA the enforcing authorities must identify anyone who has caused or knowingly permitted the contamination in question to be in, on or under the land. Those persons are known as "Class A" appropriate persons. If no such persons can be found then the enforcing authority must look to the current owner and occupier of the contaminated land. Those persons are known as "Class B" appropriate persons. In this case Sevenoaks District Council did identify Class A appropriate persons, namely Mr Kirchen-Goldsmith, Mr Scott and Circular Facilities.

Where more than one Class A appropriate person is identified the enforcing authority must apply a series of exclusion 6 tests in strict order to see if any of the Class A appropriate persons must be excluded from liability.

The Severnoaks case turned on the 6th and final exclusion test. That test excludes from liability any Class A appropriate persons who have caused or knowingly permitted the presence of the contaminants (this might include the original polluter) where another Class A appropriate person has subsequently introduced a pathway or receptor which created the risk in question. The court accepted that the intention behind the contaminated land regime is to make a developer of land that creates the risk of harm from contaminants on a site responsible for removing or preventing that risk.

Applying the 6th exclusion test the court held that Circular Facilities had introduced the pathways (the housing development) and the receptors (the householders) thereby creating the risk from the carbon dioxide and methane. It therefore decided that both Mr Scott and Mr Kinchen-Goldsmith should be excluded from liability. It dismissed Circular Facilities' appeal and held that Sevenoaks District Council had been correct in serving the remediation notice on Circular Facilities alone.

Apart from representing a milestone in the development of the contaminated land regime this case does provide some useful indications on the approach of the courts. It confirms (i) that the courts are likely to follow the guidance in Circular 02/2000 and give the term "knowingly permitted" a relatively broad meaning and (ii) that the courts are likely to apply the exclusion tests in the statutory guidance strictly. It also serves as a useful reminder of the need to apply Part IIA Environmental Protection Act 1990 and the supporting statutory guidance systematically and to consider the outcome of all the exclusions tests when analysing contaminated land risks.

At a broader level the contaminated land regime was always intended to address the more serious cases of contamination that are giving rise to real risks. It was also intended to fit into a wider regulatory system including the planning controls. Nevertheless the DEFRA and the Environment Agency clearly see the need to increase action under the contaminated land regime. In particular, sites that have been investigated but have not yet been subjected to active enforcement are likely to be targeted in the near future.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq

The original publication date for this article was 23/05/2005.