Renewed focus on asbestos

United Kingdom

Asbestos has for many years been a matter of significant concern to the property industry. However, recent developments have given rise to renewed interest and press attention. The Health & Safety Commission ("HSC") has for some time been working on legislation to impose express duties to actively manage asbestos in buildings. It is pushing ahead with this legislation despite recent articles and letters in the national press arguing that chrysotile (white asbestos) is a harmless substance and is incorrectly listed as a Category 1 carcinogen.

A related issue was the "tax windfall" for owners of buildings recently heralded by parts of the property press suggesting that asbestos removal works qualify for Contaminated Land Remediation Expenditure Tax Relief.

Most recent of all was the House of Lord unanimous judgment of Thursday 16th May 2002 in Fairchild v Glenhaven that sufferers of Mesothelioma, an asbestos related disease, should be awarded compensation in cases where workers had been exposed to asbestos dust during employment by more than one employer, even where it could not be established which was to blame.

This article provides a brief explanation of these three developments.

Proposals for new asbestos duties

Consultation on the latest draft control of Asbestos at Work Regulations [2002] and a new supporting Approved Code of Practice closed on 19th February 2002. The draft Regulations contain express obligations on employers to identify and manage asbestos in buildings and on all other parties who have any contractual obligation in relation to the maintenance or repair of premises to take necessary measures to enable the employer to discharge his duty. The proposed changes are of potential importance to owners, landlords and tenants of property and anyone involved in construction, refurbishment and facilities management both from a regulatory and a contractual perspective.

Although new use of asbestos in buildings is illegal, the HSC estimates that 4.4 million older buildings still contain asbestos containing materials ("ACMs"). When in good condition ACMs do no harm but when disturbed or damaged they can become a danger to human health if fibres are released into the air which people can breath. The Control of Asbestos at Work Regulations 1987 focused on the protection of workers engaged in the manufacture of ACMs. Research now shows that the largest group of workers at risk from asbestos related diseases are now those in building related trades such as carpenters, electricians and cablers. Although these workers are to some extent protected by the existing provisions (including amendments to the CAWR in 1998) the HSC has identified a need to afford them greater protection.

Many of the proposed changes in the draft CAWR 2002 simply reinforce or make explicit the duties which arguably are implicit under existing general health and safety legislation, but are rarely complied with. The most important proposed change is the proposed duty to manage asbestos. The duty only applies to non-domestic premises. The HSC proposes that the main duty is placed on employers in respect of premises occupied by them in which persons work. It also proposes a secondary duty on every person who has, by virtue of any contract or tenancy, an obligation to maintain or repair premises to take necessary measures so far as is reasonable to enable the employer to fulfil his duty.

The proposed duty to manage contains four elements as follows:

  • Investigation - an explicit duty to ensure that a suitable and sufficient assessment is carried out as to whether ACMs are or are liable to be in the premises.
  • Asbestos Register - an explicit duty to keep an up-to-date written record of the location of all asbestos which is or is assumed to be present.
  • Asbestos Management Plan - an explicit duty to assess risk and prepare, implement and maintain a written management plan to control risks posed by asbestos through monitoring, maintenance/safe removal and provision of information.

The HSC's target date for making the Regulations appears to be slipping, but it still seems likely that they will be made later this year. Although the Regulations would not enter into force until 18 months after they are made the HSC and HSE are anxious to encourage obligated persons to start taking steps to comply as soon as possible.

Contaminated land remediation expenditure tax relief

Some recent articles in the property press have given the impression that Contaminated Land Remediation Expenditure Tax Relief provides a "tax windfall" for owners of buildings known to contain asbestos. Having checked the matter with the Inland Revenue the scope for claiming this tax relief is much narrower than those reports would suggest but should nevertheless not be overlooked. It appears that it can apply to asbestos remedial works in particular circumstances.

The tax relief is set out in the Finance Act 2001. It is available to companies that incur capital expenditure on cleaning up land they acquire in a "contaminated state". Essentially it allows companies to treat 150% of qualifying capital expenditure as revenue expenditure in calculating profits before tax. The three main criteria in order to claim the tax relief are as follows.

  • Land in the UK must be acquired by a company for the purposes of the trade carried on by the company.
  • At the time of the acquisition all or part of the land must be in a "contaminated state". company must incur capital expenditure, which amounts to "qualifying land remediation expenditure".

Land is in a "contaminated state" if it is in such a condition, by reason of the substances in, on or under the land, that "harm is being caused or there is a possibility of harm being caused" or "pollution of controlled waters is being caused or is likely to be caused". This definition is actually wider than the definition of contaminated land used in the well known statutory contaminated land regime in Part IIA Environmental Protection Act 1990.

The important informal clarification the Inland Revenue has made is that "land" may in this context also include buildings. Therefore, land may potentially be in a "contaminated state" by virtue of substances in the fabric of the buildings. This interpretation, if correct, does have potentially far reaching implications. However, the implications may have been exaggerated in recent property press reports as they appear to overlook the requirement that the land be in a "contaminated state". The Inland Revenue has indicated that it does not consider that the mere presence of asbestos in buildings results in the possibility of harm being caused. The possibility of harm only arises if the asbestos is disturbed and becomes friable. On this basis the relief should, therefore, be available where asbestos is in a dangerous condition at the time the land is acquired. The Inland Revenue has stated that it will treat each application on a case by case basis.

To claim this tax relief, an election must be notified to the Inland Revenue in writing. In view of the Inland Revenue’s case-by-case approach, it would be prudent to seek a preliminary view before making any assumptions as to the applicability of the relief, particularly in relation to asbestos. A request for advice may be submitted in writing to the relevant local tax office. This may provide a practical mechanism for companies to obtain a view on the likely application of the relief before expenditure is incurred.

Fairchild v Glenhaven

The full speeches of the five Law Lords; Lord Bingham, Lord Nicholls, Lord Hoffmann, Lord Hutton and Lord Rodger were handed down on 20 June 2002. The significance of the change in the law of tort in England and Wales is now apparent from a reading of the five speeches.

For cases where an injured claimant has evidential difficulties in proving the necessary causal link between the injury suffered and a breach of duty by more than one former employer, Fairchild sets a new precedent by making each of the former employers jointly liable for the entirety of the loss.

The key aspect of the Lords' speeches was that the creator of the risk must bear the consequences of that risk coming to fruition even in cases where medical and scientific knowledge is unable to prove the causative link to a particular exposure to asbestos which caused the onset of the disease. Where there is doubt this doubt should be exercised in favour of the claimant. The Law Lords stated that unlike Lord Wilberforce's dissenting judgement in McGhee v National Coal Board [1973] 1WLR 1 this was not a reversal of the burden of proof but a common sense outcome that created a fair conclusion although "rough justice" for innocent defendants was acknowledged. The 'unbridgeable evidential gap' caused by the application of the traditional legal test of causation was surmounted by questioning the purpose of the test itself and actively construing the lack of evidence against the defendants who are perceived to be morally 'in the wrong'.

The judgment is remarkable for its candour and its refusal to be bound by long-established legal precedent. The suspension of the standard test for causation (the so-called 'but for' test) is justified on the basis that its rigid application to the facts of these cases would have resulted in unfairness and injustice. The House of Lords' approach is that the purpose of legal rules, principles and precedent is ultimately to produce a just outcome. If the rules prevent a just outcome they will be dis-applied, although a cautious, restrictive approach is recommended for extending the law in this way.

The inevitable consequence of this powerful precedent is uncertainty. While the House of Lords stressed that this decision must be viewed in the context of its particular facts, formulating a 6-stage test for similar cases, it openly anticipated further developments and extensions to the law of negligence in the future. This will be of particular relevance to those concerned with industrial and occupational disease cases but is also of general application in matters where the factual matrix is complex and the evidential basis imperfect. Claimants and their advisers will seek to use Fairchild as a device to overcome difficulties with causation; the extent to which they are successful and the pace of further change to the law is a matter for speculation. The fact that the claimants' only exposure to asbestos in these cases came through their employment is a factor which limits this judgement to its' particular facts. However, with the impending introduction (August 2002) of the Control of Asbestos at Work Regulations, which will impose onerous new duties on property owners and managers, the decision is a timely reminder that, where asbestos is concerned, the Courts will have little or no sympathy for those who expose others through lack of care or appreciation of their duties.

This is an updated version of an article that was published in 'Property Law' (Number 93), 24 June 2002 For futher information please conact Daniel Chappell on +44 (0)20 7367 2810 or at daniel.chappell@cms-cmck.com