Avoiding enforcement notices
Maria Cull, from law firm Herbert Smith, analyses recent environmental court rulings concerning businessIn a case of fraud, in which the defendant was described by the judge as "perhaps the most blatant liar I have ever heard in the witness box", the High Court deemed that the defendants had committed fraud on the Land Registry contrary to Section 82(1) of the Land Registration Act 1925.
The purpose of the deception was to try to transfer and thus avoid an obligation, imposed by an enforcement notice for waste tipping, to a company with no assets. The judge ordered the register to be rectified to show the defendants as the registered proprietors, thus rendering them subject to the notice.
This case, Buckinghamshire County Council v Briar, shows that it is difficult to avoid liability as the owner of land that requires waste removal and site restoration, and also develops the interpretation of "owner" under Section 336(1) of the Town and Country Planning Act 1990 - this defines "owner" as the party entitled to the rack rental income from property (full market rent rather than ground rent).
The case involves Mr Sarbjit Singh Briar and Mrs Lorraine Janesse Briar, whom Buckingham County Council sought to make responsible for the clean-up costs of land that they bought in 1988 for about £80,000.
The Briars had sought to obtain planning permission for tipping on the land. The permission was refused as the land had already been used for tipping and was within a flood plain in the Colne Valley Park.
Nevertheless, further tipping occurred on the land and there followed a series of enforcement notices.
The first, in 1990, was ignored and the Briars were prosecuted for failing to comply, after which they agreed to remove some of the waste and re-grade the land. However, a complete clean-up scheme was never fully agreed, and in 1995 and 1996 two further enforcement notices followed.
The Briars failed to attend a public inquiry in August 1997, having appealed the 1996 enforcement notice, claiming that they were no longer the owners of the land. Further tipping on the site occurred in 1997 and 1998.
Breaking the law
It transpired that the Briars, as the registered owners of the land, had transferred the land in June 1997 to Mr Briar's company, LJB Electronics for £86,000, and then again, in July 1997, to an apparently unrelated company called Deli Bar for £1.
In March 1998, Deli Bar was struck off the register, but was restored on an application by the council. On further investigation by the council, no trace of the directors of Deli Bar was found and their registered address was found to be false.
The council presented three grounds on which the Briars could be liable for clean up under the 1990 Planning Act, despite the fact that technically the owner was Deli Bar.
The first was by correcting the ownership register to re-instate the Briars as proprietors.
The second was by holding that the Briars remained owners in equity by virtue of the fact that Deli Bar held the land on constructive trust, and was a façade linked to the Briars.
The third method involved setting aside the transfers under the Insolvency Act as an undervalue transaction and returning the land to the Briars.
The judge accepted the council's first argument under Section 82(1)(d) of the 1925 Land Registration Act, after agreeing that the entry in the register of Deli Bar as the owner was obtained by fraud.
He accepted that Mr Briar had presented a forged letter to the Land Registry in order to facilitate the registration of the transfer to Deli Bar, and to conceal the fact that the transferee had no genuine officers and was a sham.
However, the judge did not accept the second argument. He held to a strict interpretation of "owner" under Section 336(1) of the Town and Country Planning Act 1990, and judged that Deli Bar had held the land on constructive trust. In this case, where a statutory definition identifies the person to be held liable, Deli Bar was judged to be a nominee for the Briars.
The third argument did not hold water with the judge either. This was because the transfer of the land, valued at around £50,000, would cost around £1.3m to clean up and would therefore have a negative value.
The Insolvency Act requires that the transaction be looked at from the point of view of the transferor, LJB, and not the transferee, Deli Bar.
This decision has shown that the definition of "owner" is very strict under the 1990 Act and does not allow for other interpretations of legal ownership such as constructive trusts.
It has also shown that even a fraudulent sham as convoluted as this can be unravelled and that it is hard to escape the consequences of
non-compliance with an enforcement notice.