Increased environmental risks in property transactions following Court of Appeal decision

The Court of Appeal in Powys County Council v Price and Hardwick [2017] EWCA Civ determined that Powys County Council was not liable as an “appropriate person” for the remediation of contamination created entirely by the activities of its predecessor local authorities in operating a landfill site. The decision has wide ranging and potentially onerous implications for private landowners, developers, landlords and buyers, as Chelsie Thompson and Rebecca Roffe explain.

Part IIA of the Environmental Protection Act 1990 (or the Contaminated Land Regime (the “CLR”)) came into force in England and Scotland in 2000, and in Wales in 2001. Under the CLR, if land is identified as contaminated, liability for remediation is imposed on the relevant “appropriate persons”:

• Class A persons. In the first instance, liability is imposed on those who caused or knowingly permitted the contaminating substances to be present in, on or under the land; or
• Class B persons. If no Class A person can be found, liability passes to the current owner or occupier of the site (regardless of whether it was aware of the contamination).

These remediation liabilities apply even if the original polluter has since disposed of its interest in land and even if the contamination occurred before the CLR came into force.

The Court of Appeal distinguished the facts of the Powys case from the earlier case of R (Transco plc) v Environment Agency [2007] 1 WLR 318, where the House of Lords held that nothing in the CLR rendered Transco (a commercial company) responsible as an “appropriate person” in respect of the activities of its predecessors.

Powys County Council was created by the Local Government (Wales) Act 1994 and this was an important factor in the case because the Court of Appeal cited that the CLR does not create a liability before it came into force. The liabilities created by the CLR could not be said to have existed when the old Council was dissolved therefore it was held that Powys could not have inherited CLR liabilities.

The Court of Appeal differed from the first instance judge (Judge Jarman QC) ruling that Powys did not take over as the Class A person since the liabilities arose prior to Powys’ existence. Instead, the decision of the Court of Appeal placed responsibility for remediation under the CLR onto the innocent current landowner as a “Class B” person, in the absence of any directly responsible “Class A” person (i.e. Powys).

Although this is reassuring for local authorities in similar situations to Powys, especially where historic landfill sites have been operated by predecessor local authorities, the decision has significant implications for innocent owners and occupiers who may become liable for remediation where no other appropriate person can be found. Although the CLR is a clean-up measure of last resort, as the main focus of clean-up is through the planning regime, where vacant land is held for a long period of time, this may expose developers to greater liability of enforcement under the CLR.

Private landowners, landlords and buyers will need to place more emphasis on re-evaluating and weighing up the risks associated with the purchase of historic and current landfill sites as clean-up costs can be very expensive. Undertaking desktop searches will now become even more prominent in property transactions as developers will have to be extremely vigilant throughout the due diligence process.