In deciding that a waste management licence is "property" and can be disclaimed as onerous by a liquidator under Section 178 of the Insolvency Act 1986, the Court of Appeal has overturned a Divisional Court ruling.
Last year, the Divisional Court was asked to consider the plight of Mr Stout who had been appointed to act as the liquidator of a company which had the benefit of a waste management licence for a landfill site.
The site in question consisted of some 30 acres of which the company for which Mr Stout had been appointed liquidator had infilled and reinstated some 20 acres. Mr Stout sought to lease the site but found negotiations somewhat frustrated by the onerous terms and conditions of the waste management licence. As it appeared that a new licence might be issued on more favourable terms, Mr Stout sought to disclaim the existing licence on the basis that it was unsaleable.
In the Court's opinion, disclaiming the licence would cause it to be terminated and this was inconsistent with the terms of the Environmental Protection Act 1990 which only permitted the Environment Agency to revoke a licence or to determine whether surrender should be accepted. As such, it was the opinion of the Court that the 1990 Act should prevail and the licence would remain in force.
A similar matter came before the Court of Appeal in July this year and, on this occasion, involved two companies which had gone into liquidation. The Official Receiver had been appointed as liquidator and the Environment Agency had sought to require him to remedy breaches of the licences. As the Official Receiver could not afford to carry out the requisite works, he again sought to disclaim the licences.
In considering the provisions of the 1990 Act, the Court decided that the circumstances in which a licence could be terminated were not exhaustive since the Agency had accepted that a licence would expire on the death or dissolution of the holder. There were, therefore, external forces which could bring about the termination of the licence.
In essence, the Agency submitted that unsecured creditors should be responsible for discharging the costs of compliance where the polluter could not pay. The Court formed the view that this was not what was envisaged by the "polluter pays" principle.
In the opinion of the Court, clear words would be required in order to exclude the power of the liquidator under Section 178 to disclaim onerous properties. No such words existed within the 1990 Act.
This decision is likely to bring considerable relief to liquidators but with a possible further appeal by the Environment Agency pending this is very much a case of "watch this space".
For further information please contact Mike Shepherd, Trinity Court, 16 John Dalton Street, Manchester, M60 8HS, Tel: +44 161 830 5000
This article was first published in the Autumn 1999 issue of Hammond Suddards' Safety, Health and Environment Newsletter.
The information and opinions contained in this article are provided by Hammond Suddards. They should not be applied to any particular set of facts without appropriate legal or other professional advice.