It will be clear from what is said above that more than one party may be responsible to pay for remediation as an ‘appropriate person’. In deciding how to allocate responsibility or costs as between a number of parties, local authorities will be required to follow the guidance. This may result in certain parties being excluded from liability and, if so, it is irrelevant that a party would have been well placed to fund the clean-up. (for example because of insurance coverage). Equally, depending on the pollution linkages, a number of parties may have caused or knowingly permitted the contamination of the land. These parties will constitute a ‘liability group’. Even where no such person can be found, there may exist a liability group made up of owners/occupiers where significant harm is present or there is a significant possibility of significant harm.
These two groups may be separated out. Owners and occupiers are labelled ‘Class B appropriate persons’. This reflects the philosophy of the Act that liability ought to fall primarily on those who caused or knowingly permitted the substances to be present. The guidance considers whether an owner could be said to knowingly permit the presence of contaminants by failing to remove them when faced with knowledge of them as a result of notification by the authority. In short could knowledge trigger the ‘knowingly permit’ test? The guidance answers this by saying the distinction made between mere owners and knowing permitters ‘implies that a person who merely owns or occupies the land in question cannot be held to have “knowingly permitted” as a consequence of that consultation alone’. “in the Government’s view it would not”. However no legal authority for this proposition is cited, and the guidance states that: “it is ultimately for the courts to decide the meaning of the test…” The guidance is right to point out that the if any owner subject to notification could henceforth be said to knowingly permit, the distinction between class A and B liability groups would be rendered nonsensical. On the other hand it must be clear on the authority of Alphacell v Woodward that those in a position to prevent pollution once in a state of knowledge must be taken to knowingly permit.
Other than this possibility, an owner or occupier will only become an appropriate person where no class A appropriate person can be found. In the guidance the Oxford English Dictionary definition of “found” is given, namely “discovered, met with, and ascertained”. The guidance also remarks that a person who has ceased to exist cannot logically be found. This strongly implies liability on owners and occupiers where a previous owner is now dead or where a company has been wound up. insolvent.In a number of the contaminated land cases to have reached the courts or the Secretary of State, the absence of such parties has been a factor in determining liabilities.
In situations where a number of parties may be liable, creating a liability group, it is open for the parties to agree the basis upon which costs may be borne between them. Assuming that there is an ‘arms-length’ relationship between the parties, this such agreements will be honoured by the local authority. An exception might be where the effect of the agreement would be to increase the costs borne by a party who might take advantage of the ‘hardship’ provisions of the Act. Presumably, although this is less than clear, if a party agrees to bear some remediation cost, the local authority could accept this even though that party may be excluded from the liability group.
The guidance suggests six tests that if applied to person who would otherwise be Class A appropriate person, could have the effect of excluding that persons from a liability group established in relation to a particular pollution linkage.
The tests are detailed and complex and presently include:
1. Exempting a person who caused or knowingly permitted pollution as part of a liability group where another member (other members) of that group was effectively in control solely by virtue of:
• providing or withholding financial assistance in the form of a grant loan, credit or guarantee;
• underwriting an insurance policy;
• carrying out due diligence in order to decide whether to lend or insure;
• consigning waste to a person responsible for its disposal;
• creating a tenancy in favour of or licensing the occupation of someone who causes or knowingly permits the presence of a pollution linkage;
• issuing a statutory permission, licence or consent for activity or taking or not taking enforcement action;
• providing legal, financial, engineering, scientific or technical advice;
• contracting to provide goods or services other than one aimed at the problem of on-site pollution, where the contractor has no independent responsibility for pollution management, and where the contracting party is not a director, shadow director or manager, or a related company.
2. Exempting a member of a liability group who has made a payment (either ex gratia, in the settlement of a civil action or as part of a transfer of ownership) to another member of the liability group for the purpose of remediation. This will apply where the remediation would have been effective (i.e. the land would not have been classed as contaminated) if properly carried out and where the person making the payment retains no control over the land or the remediation
3. The exclusion of a vendor who sold a site at arms length at an open market value, and with sufficient information to enable the purchaser to be aware of the presence of pollution. The guidance contains the surprising (some would say outrageous) suggestion that in transactions between large commercial organisations after 1990, (ten years prior to the operation of the legislation) permission to carry out a survey may be taken to constitute a sale with information. This test applies to freehold sales and long (over 21 year) leases.
4. Exclusions are available in instances where a chemical reaction or a biological process affecting more than one substance creates a pollution linkage – broadly to exempt the person responsible for a first substance where the interaction of a second and later substance was not reasonably foreseeable.
5. The possibility of excluding a party who caused or knowingly permitted a pollutant to be present upon neighbouring land where it appears that another member of the liability group caused or knowingly permitted the escape from that neighbouring land on to the site which is now contaminated.
6. Exclusion from a liability group where a significant pollution linkage is caused by building or engineering work changes in the use of the land or the failure to maintain systems for reducing or managing pollution risks. In such cases the exclusion is available to those persons who have not been involved in the relevant act or omission (i.e. the building, engineering works etc.) that created the pathway, brought the receptor to the land or otherwise established the pollution linkage.
It is vital to note that the tests apply sequentially and they cannot lead to the exclusion of all members of a liability group, so that some liable party must remain after their application. Once all of the above tests have been applied, if there remain members of a Class A liability group for a particular significant pollution linkage, then they will bear the burden of remediation to the exclusion of anyone who would be liable as a Class B appropriate person. Note therefore that the exclusions apply only as between Class A parties and cannot operate to shift liability from class a parties to those in class B. .
In relation to class B appropriate persons, there is only one simple exclusion in comparison to the many tests above. This is to ensure that those liable to pay a rent equal to rack rent in relation to contaminated land, but who hold no beneficial interest in the ownership of that land, are not caught within the liability group.
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