Lords look at prickly polluter pays case

The House of Lords has ruled on a case considering whether private utility companies can be held responsible for the pollution caused by their publicly-own predecessors.

Contaminated Land

R (on the application of National Grid Gas plc (formerly Transco plc)) (Appellants) v. Environmental Agency (Respondents, Civil Appeal from Her Majesty's High Court of Justice, 27 June 2007

The House of Lords has issued a judgement overturning the decision of the Court of Appeal on the liability of National Grid Gas plc in respect of contaminated land at the Bawtry site.

The issue in the case was whether the appellants were 'appropriate persons' within the meaning of s78F(1) of the Environmental Protection Act 1990, and as such liable to bear the costs incurred by the Agency in respect of remediation works.

The site in question was contaminated by coal tar - a residue from the process of manufacturing coal gas from coal - which was buried underground in containers at a time when it was not known that this would be harmful.

The site now consists of 11 residential properties, and the Environment Agency designated the land and carried out the necessary remediation itself at a cost of £66,000 per residence.

The Lords had to consider two arguments. Firstly, could the appellants be classified as an "appropriate person" liable to bear the remediation costs in terms of section 78F(2) of the Environmental Protection Act 1990?

Secondly, over the years there had been statutory transfers of the assets and liabilities from the predecessor companies to their statutory successors. These statutory transfers provided that the successor company would be liable for all the assets and liabilities that existed "immediately before" the transfer date.

The issue was whether or not the liabilities in respect of the contaminated land regime could be passed down successively to the current owners, National Grid Gas plc, despite the fact that at the time of the transfers, the contaminated land regime did not exist.

The Agency argued that National Grid plc should still be liable to bear the remediation costs because they were the statutory successor of the assets and liabilities of the East Midland Gas Board, the original polluter. Effectively, the Agency argued that the appellants should "stand in the shoes of the polluter".

Their Lordships unanimously rejected this submission, since in terms of section 49(1) of the Gas Act 1986, the transfer of statutory "liabilities" to successor companies was limited to those liabilities arising "immediately before" the transfer date.

At the time when East Midlands Gas Board, the successor to the originally polluting companies, inherited the site in question, the potential for liability over the contaminated site under Part IIA of the 1990 Act had not yet come into existence and consequently, this body could not be held responsible for a liability that did not arise immediately before the transfer date.

This in turn meant that British Gas Corporation did not inherit the contaminated land liability in relation to the site. British Gas Corporation did not, in fact, even inherit the site, which was sold by East Midlands Gas Board to a property developer shortly after the gas industry was nationalised.

This in turn meant that when the industry was privatised, and British Gas Plc took on the liabilities of the British Gas Corporation, the site was not part of the assets transferred to British Gas.

Since this transfer was effected in 1986, nine years before Part IIA was added to the 1990 Act by the Environment Act 1995, such liability under it could not be inherited by British Gas Plc under statute.

The judgement can be accessed via the following link:-

http://www.publications.parliament.uk/pa/Id200607/idjudgmt/jd070627/grid-1.htm.

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