The contaminated land regime: time for a regime that is fit for purpose (Part 2)

• Author: Valerie Fogleman
• Position: School of Law, Cardiff University, Cardiff, UK and Stevens & Bolton LLP, Guildford, UK

I Introduction

This article is the second part of a paper that is intended to show that flaws inherent in Part 2A of the Environmental Liability Act 1990 (EPA 1990) have made the regime to remediate contaminated land in the UK unworkable. Part 2 examines the complex liability system created by Part 2A. It then discusses whether the regime has, nevertheless, been successful in remediating contamination from historic pollution. Finally, the article suggests issues that should be considered in deciding the future of Part 2A.

II Liability

A person who caused or knowingly permitted substances to be on land such that the land is contaminated land (called a Class A person) is primarily liable under Part 2A¹. A knowing permitter is a person who knows that contamination is present at a site, has the power to remediate it, but fails to do so after a reasonable opportunity. If a Class A person cannot be found after a reasonable inquiry, the owner or occupier (called a Class B person) is liable².

A Distinction between Classes A and B persons

There is an overlap between a knowing permitter and an owner or occupier because knowing permitters tend to be owners or occupiers of land. The question thus arose as to the point at which an owner or occupier becomes a knowing permitter. DETR Circular 02/2000 explained the distinction as follows. If a local authority notifies an owner or occupier that their land is contaminated land, the notification does not trigger Part 2A because the consultation triggered by the notification is to determine “‘what shall be done by way of remediation’ and not for the purpose of determining liability”³. This answer evades the question. It would be nonsensical for an owner or occupier to become a knowing permitter at the time it is notified that land is contaminated. Class B persons would simply cease to exist. The more pertinent question is the stage at which an owner or occupier may become a knowing permitter prior to that time; this question was not addressed and remains unanswered.

B Scope of liability

The scope of liability under Part 2A is a mixture of joint and several liability and proportionate liability. Joint and several liability applies to the selection of appropriate persons; proportionate liability then applies to the appropriate persons who have been selected. The selection process operates in reverse by excluding certain appropriate persons from liability⁴. There are two reverse selection processes; one for Class A persons, one for Class B persons.

1. Joint and several liability

In order to transfer liability from an “actual polluter” to the most recent person who knowingly permitted contamination to remain on land, the statutory guidance sets out six exclusion tests⁵. The tests are applied in the order in which they appear in the statutory guidance; their application ceases when their continued application would eliminate all Class A persons from a liability group for a significant contaminant linkage. At least one person must remain in each liability group⁶. It is irrelevant whether the person(s) who remains in the liability group has sufficient funds to pay part or all of the costs of remediating the contamination⁷. Part 2A thus differs from other contaminated land regimes in which persons with secondary liability such as owners and occupiers may be liable if the polluter cannot pay, as well as not being found⁸.

The first exclusion test is a mixture of activities, most of which, as the test specifies, may not – or could not – amount to causing or knowingly permitting contamination⁹. For example, lenders are excluded from liability if, among other things, they made a grant or a loan to a Class A person¹⁰, neither of which subjects a person to liability for causing or knowingly permitting land to be contaminated land unless, perhaps, the contractual documentation authorised the lender to enforce covenants concerning the use of the land and the lender actually enforced them ( Lawrence and Lee, 2003 ). The real reason for the test is a request by lenders to the government for its inclusion¹¹. Another exclusion in the first test excludes a person who provides legal, financial, engineering, scientific or technical advice to a client who is a Class A person¹². Lawyers, engineers and other persons do not typically have any interest in their client's land and, thus, have no power to remediate – or not to remediate – contamination at it. Again, the government added complexity to the statutory guidance for no apparent legal reason.

The purpose of the second exclusion test is to exclude from liability a person who has accepted a reduced payment, or other consideration, for the sale of a contaminated site. The test applies when the buyer has agreed, as documented in the contract for sale, to carry out specified remedial measures that would adequately remediate the contamination¹³. If the buyer cannot be found when a local authority requires the contamination to be remediated, either because the measures were not carried out or were carried out inadequately, the test does not apply and liability reverts to the seller¹⁴.

The purpose of the third exclusion test, which is the most widely used in contracts for land acquisitions, is to exclude a person who sells the freehold, or a leasehold of over 21 years, in an arm's length sale, with information that the land is contaminated. The buyer must have “had information that would reasonably allow that particular person to be aware of the presence on the land of the [contaminant] identified in the significant [contaminant] linkage in question, and the broad measures of that presence” prior to the sale¹⁵. That is, the buyer must actually be aware of specific pollutants¹⁶. There is an exception to this requirement for:

[…] transactions since the beginning of 1990 where the buyer is a large commercial organisation or public body, permission from the seller for the buyer to carry out his own investigations of the condition of the land should normally be taken as sufficient indication that the buyer had the [requisite] information [about the presence of the contaminant identified in the significant contaminant linkage]¹⁷.

The term “large commercial organisation” is not defined. As with the second test, liability reverts to the seller if the buyer cannot subsequently be found¹⁸.

The purpose of the fourth test is to exclude a person who caused or knowingly permitted a substance to be in, on or under land but the presence of that substance would not have resulted in the land being contaminated land. Such a person is excluded if another person subsequently introduced another substance to the land that interacted with the initial substance to become a significant contaminant¹⁹.

The purpose of the fifth test is to exclude a person from liability for remediating a site adjacent to a contaminated site when another person caused a substance at the original site to escape from it to the adjacent site²⁰.

The purpose of the sixth and final test is to exclude a person from liability who caused or knowingly permitted a substance to be in, on or under a site when another person subsequently introduced the pathway or receptor that caused the significant contaminant linkage²¹. Application of this test can, for example, exclude a person who caused contamination in lieu of a developer if the developer does not remediate contamination during re-development so that it is not contaminated land in respect of its developed use. The test is particularly enforcement unfriendly for local authorities. If a local authority serves a remediation notice on a developer, it knows that the person hearing an appeal is unlikely to be sympathetic because the local authority will, in effect, be requiring the developer to remedy contamination that the authority could have required the developer to remediate during the planning process but failed to do.

The exclusion tests show the fallacy of the government's contention that Part 2A does not impose joint and several liability. The government was simply wrong when it stated that it was rejecting “an approach […] in which all of the liability could pass on to the shoulders of a smaller group of those responsible, or even on to one person”²². Liability is not shared among all members of a liability group in proportion to their share of overall responsibility for the contamination. The entire purpose of the tests is statutorily to exclude the “actual polluter” and to transfer liability to the most recent knowing permitter.

The failure to recognise or acknowledge that it had created a joint and several liability system led the government to reject the creation of contribution actions by which a Class A person who had remediated contaminated land could recover some of those costs from another Class A person if, for example, the other Class A person was identified after the remediation had been completed²².

2. Proportionate liability

Proportionate liability applies after completion of the reverse selection process for Class A persons. A local authority may not designate an area on which more than one significant contaminant linkage exists as a single contaminated land site. This is because different persons may be responsible for each significant contaminant linkage²³. The local authority must, therefore, make a determination of each area of contaminated land pursuant to each such linkage²⁴. If the land is owned...