9 - Determining Liability
9.1 If the ENFORCING AUTHORITY is not satisfied, at this stage, that appropriate REMEDIATION is being, or will be, carried out without a REMEDIATION NOTICE being served, it needs to consider who might be served with such a notice. This section of this Annex deals with the questions of who appears to be an APPROPRIATE PERSON and, if there is more than one such person, whether any of these should be EXCLUDED from liability and, where necessary, of how the liability for carrying out any REMEDIATION ACTION should be APPORTIONED between the APPROPRIATE PERSONS who remain. Further questions, covered in section 10 of this Annex, need to be considered before the ENFORCING AUTHORITY can decide whether a REMEDIATION NOTICE should be served on anyone.
9.2 Where the ENFORCING AUTHORITY is precluded from serving a REMEDIATION NOTICE by virtue of section 78H(5)(d), because it has the power to carry out the REMEDIATION itself, the authority needs to follow the same processes for determining liabilities, including any EXCLUSIONS and APPORTIONMENTS, in order to determine from whom it can recover its reasonable costs incurred in doing the work (see also paragraphs 16.1 to 16.6).
The Definition of the "Appropriate Person"
9.3 Part IIA defines two different categories of APPROPRIATE PERSON, and sets out the circumstances in which persons in these categories might be liable for REMEDIATION
9.4 The first category is created by section 78F(2), which states that
"…any person, or any of the persons, who caused or knowingly permitted the substances, or any of the substances, by reason of which the CONTAMINATED LAND in question is such land to be in, on or under that land is an APPROPRIATE PERSON."
9.5 Such a person (referred to in the statutory guidance as a CLASS A PERSON) will be the APPROPRIATE PERSON only in respect of any REMEDIATION which is referable to the particular substances which he caused or knowingly permitted to be in, on or under the land ( section 78F(3)). This means that the question of liability has to be considered separately for each SIGNIFICANT POLLUTANT LINKAGE identified on the land.
9.6 The second category arises in cases where it is not possible to find a CLASS A PERSON, either for all of the SIGNIFICANT POLLUTANT LINKAGES identified on the land, or for a particular SIGNIFICANT POLLUTANT LINKAGE. These circumstances are addressed in section 78F(4) and (5), which provide that:
"(4) If no person has, after reasonable inquiry, been found who is by virtue of subsection (2) above an appropriate person to bear responsibility for the things which are to be done by way of REMEDIATION, the OWNER or occupier for the time being of the land in question is an APPROPRIATE PERSON.
"(5) If, in consequence of subsection (3) above, there are things which are to be done by way of REMEDIATION in relation to which no person has, after reasonable inquiry, been found who is an APPROPRIATE PERSON by virtue of subsection (2) above, the OWNER or occupier for the time being of the CONTAMINATED LAND in question is an APPROPRIATE PERSON in relation to those things."
9.7 A person who is an APPROPRIATE PERSON under sections 78F(4) or (5) is referred to in the statutory guidance as a CLASS B PERSON.
THE MEANING OF "CAUSED OR KNOWINGLY PERMITTED"
9.8 The test of "causing or knowingly permitting" has been used as a basis for establishing liability in environmental legislation for more than 100 years. In the context of Part IIA, what is "caused or knowingly permitted" is the presence of a POLLUTANT in, on or under the land.
9.9 In the Scottish Executive's view, the test of "causing" will require that the person concerned was involved in some active operation, or series of operations, to which the presence of the pollutant is attributable. Such involvement may also take the form of a failure to act in certain circumstances.
9.10 The meaning of the term "knowingly permit" was considered during the debate on Lords' Consideration of Commons' Amendments to the then Environment Bill on 11 July 1995. The then Minister for the Environment, Earl Ferrers, stated on behalf of the Government that: "The test of "knowingly permitting" would require both knowledge that the substances in question were in, on or under the land and the possession of the power to prevent such a substance being there." ( House of Lords Hansard, 11 July 1995, col. 1497)
9.11 Some commentators have questioned the extent to which this test might apply with respect to banks or other lenders, where their clients have themselves caused or knowingly permitted the presence of pollutants. With respect to that question, Earl Ferrers said: "I am advised that there is no judicial decision which supports the contention that a lender, by virtue of the act of lending the money only, could be said to have "knowingly permitted" the substances to be in, on or under the land such that it is contaminated land. This would be the case if for no other reason than the lender irrespective of any covenants it may have required from the polluter as to its environmental behaviour, would have no permissive rights over the land in question to prevent contamination occurring or continuing ." ( House of Lords Hansard, 11 July 1995, col. 1497)
9.12 Some commentators have, in particular, questioned the position of a person who, in his capacity as OWNER or occupier of land, is notified by the LOCAL AUTHORITY about the identification of that land as being CONTAMINATED LAND under section 78B(3). They have asked whether the resulting "knowledge" would meet the "knowingly permit" test as set out in paragraph 9.10 above. In the Scottish Executive's view, it would not. The legislation clearly distinguishes between those who cause or knowingly permit the presence of pollutants and those who are simply owners or occupiers of the land. In particular, this is evident in sections 78F, 78J and 78K which all relate to the different potential liabilities of OWNERS or occupiers as opposed to persons who have "caused or knowingly permitted" the presence of the POLLUTANTS.
9.13 Similarly, section 78H(1) requires consultation with OWNERS and occupiers for the specific purpose of determining "what shall be done by way of REMEDIATION" and not for the purpose of determining liability. In the Scottish Executive's view, this 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.
9.14 It is ultimately for the courts to decide the meaning of "caused" and "knowingly permitted" as these terms apply to the Part IIA regime, and whether these tests are met in any particular case. However, indications of how the test should be construed can be obtained from case law under other legislation where the same or similar terms are used.
THE POTENTIAL LIABILITIES OF OWNERS AND OCCUPIERS OF LAND
9.15 Only where no CLASS A PERSON can be found who is responsible for any particular REMEDIATION ACTION will the OWNER or occupier be liable for REMEDIATION by virtue solely of that ownership or occupation. OWNERS and occupiers may, of course, be CLASS A PERSONS because of their own past actions or omissions.
9.16 It is ultimately for the courts to decide whether, in any case, it can be said that no CLASS A PERSON has been found. In the Scottish Executive's view, the context in which the word is used in Part IIA implies that a person must be in existence in order to be found. Section 78F(4) provides that the OWNER or occupier shall bear responsibility only "if no person has, after reasonable inquiry, been found who is an APPROPRIATE PERSON to bear responsibility for the things which are to be done by way of REMEDIATION." A person who is no longer in existence cannot meet that description. Under section 78E(1), the responsibility of an APPROPRIATE PERSON for REMEDIATION is established by the service of a REMEDIATION NOTICE. Service implies the existence of the person on whom the notice is served. In general, therefore, this means that a natural person would have to be alive and a legal person such as a company must not have been dissolved. However, it may be possible in some circumstances for the authority to act against the estate of a deceased person or to apply to a court for an order to annul the dissolution of a company.
9.17 Similarly, it is ultimately for the courts to determine what would constitute "reasonable enquiry" for the purposes of trying to find a CLASS A PERSON.
9.18 Section 78A(7) defines the term OWNER as follows:
"in relation to any land in Scotland, means a person (other than a creditor in a heritable security not in possession of the security subjects) for the time being entitled to receive or who would, if the land were let, be entitled to receive, the rents of the land in connection with which the word is used and includes a trustee, factor, guardian or curator and in the case of public or municipal land includes the persons to whom the management of the land is entrusted."
9.19 The term "occupier" is not defined in Part IIA and it will therefore carry its ordinary meaning. In the Scottish Executive's view, it would normally mean the person in occupation and in many cases that will be the tenant or licensee of the premises."
The Procedure for Determining Liabilities
9.20 Part 3 of the statutory guidance set out at Chapter D of Annex 3 provides a procedure for the ENFORCING AUTHORITY to follow to determine which of the APPROPRIATE PERSONS in any case should bear what liability for REMEDIATION. That procedure consists of the five distinct stages set out below.
9.21 Not all of these stages will be relevant to all cases. Most sites are likely to involve only one SIGNIFICANT POLLUTANT LINKAGE and thus have only one LIABILITY GROUP. In many cases, such a LIABILITY GROUP will consist of only one APPROPRIATE PERSON. However, more complicated situations will arise, requiring the application of all five stages. These steps may appear complex, but they are needed to fulfil the aims of the legislation in implementing the "polluter pays" principle while trying to avoid making APPROPRIATE PERSONS bear more than their fair share of the cost.
FIRST STAGE - IDENTIFYING POTENTIAL APPROPRIATE PERSONS AND LIABILITY GROUPS
9.22 The ENFORCING AUTHORITY will have already identified, on a preliminary basis those persons who appear to it to be APPROPRIATE PERSONS in order to notify them of the identification of the CONTAMINATED LAND (see paragraph 4.1 above).
9.23 At this stage, the authority needs to reconsider this question, and identify all of the persons who appear to be APPROPRIATE PERSONS to bear responsibility for REMEDIATION. Depending on the information it has obtained, it may consider that:
(a) some or all of those who previously appeared to be APPROPRIATE PERSONS still appear to be such persons;
(b) some or all of those persons no longer appear to be APPROPRIATE PERSONS;or
(c) some other persons appear to be APPROPRIATE PERSONS, either in addition to those previously identified, or instead of them.
9.24 An example of circumstances in which the identity of those who appear to be APPROPRIATE PERSONS might change is if the authority had not previously found a person who had caused or knowingly permitted the POLLUTANT to be present (a CLASS A PERSON), but could now do so. At the time it identified the CONTAMINATED LAND, the authority would have identified the OWNER and the occupier of the land as being APPROPRIATE PERSONS. However, these persons would no longer appear to be APPROPRIATE PERSONS, unless they were also CLASS A PERSONS.
9.25 If, as a result of this process of reconsideration, the ENFORCING AUTHORITY identifies new persons who appear to be APPROPRIATE PERSONS, it needs to notify them of the fact that they have been identified as such ( section 78B(4), see paragraphs 4.3 to 4.6 above).
9.26 The ENFORCING AUTHORITY will have identified one or more SIGNIFICANT POLLUTANTS on the land and the SIGNIFICANT POLLUTANT LINKAGES of which they form part.
A Single Significant Pollutant
9.27 Where there is a single SIGNIFICANT POLLUTANT, and a single SIGNIFICANT POLLUTANT LINKAGE, the ENFORCING AUTHORITY needs to make reasonable enquiries to find all those who have caused or knowingly permitted the SIGNIFICANT POLLUTANT in question to be in, on or under the land ( section 78F(2)). Any such persons are then "CLASS A PERSONS" and together constitute a "CLASS A LIABILITY GROUP" for the SIGNIFICANT POLLUTANT LINKAGE
9.28 If no such CLASS A PERSONS can be found, the ENFORCING AUTHORITY needs to consider whether the SIGNIFICANT POLLUTANT LINKAGE of which it forms part relates solely to the SIGNIFICANT POLLUTION OF THE WATER ENVIRONMENT, rather than to any SIGNIFICANT HARM. If this is the case, there will be no LIABILITY GROUP for that SIGNIFICANT POLLUTANT LINKAGE ( section 78J(2)), and it should be treated as an ORPHAN LINKAGE (see paragraph 11.3 below).
9.29 In any other case where no CLASS A PERSONS can be found for a SIGNIFICANT POLLUTANT, the ENFORCING AUTHORITY needs to identify all of the OWNERS or occupiers of the CONTAMINATED LAND in question. These persons are then "CLASS B PERSONS" and together constitute a "CLASS B LIABILITY GROUP" for the SIGNIFICANT POLLUTANT LINKAGE.
9.30 If the ENFORCING AUTHORITY cannot find any CLASS A PERSONS or any CLASS B PERSONS in respect of a SIGNIFICANT POLLUTANT LINKAGE, there will be no LIABILITY GROUP for that linkage and it should be treated as an ORPHAN LINKAGE (see paragraph 11.3 below).
Two or More Significant Pollutants
9.31 Where there are several SIGNIFICANT POLLUTANTS, and therefore two or more SIGNIFICANT POLLUTANT LINKAGES, the ENFORCING AUTHORITY should consider each linkage in turn, carrying out the steps set out in paragraphs 9.28 to 9.31 above, in order to identify the LIABILITY GROUP (if one exists) for each of the linkages.
In All Cases
9.32 Having identified one or more LIABILITY GROUPS, the ENFORCING AUTHORITY should consider whether any of the members of those groups are exempted from liability under the provisions in Part IIA. This could apply where:
(a) a person who would otherwise be a CLASS A PERSON is exempted from liability arising with respect to water pollution from an abandoned mine ( section 78J(3))
(b) a CLASS B PERSON is exempted from liability arising from the escape of a pollutant from one piece of land to other land ( section 78K); or
(c) a person is exempted from liability by virtue of his being a person "ACTING IN A RELEVANT CAPACITY" (such as acting as an insolvency practitioner) ( section 78X(4)).
9.33 If all of the members of a LIABILITY GROUP benefit from one or more of thes exemptions, the ENFORCING AUTHORITY should treat the SIGNIFICANT POLLUTANT LINKAGE in question as an ORPHAN LINKAGE (see paragraph 11.3 below).
9.34 Individual persons may be members of more than one LIABILITY GROUP. This might apply, for example, if they had caused or knowingly permitted the presence of more than one SIGNIFICANT POLLUTANT.
9.35 Where the membership of all of the LIABILITY GROUPS is the same, there may be opportunities for the ENFORCING AUTHORITY to abbreviate the remaining stages of the procedure for determining liabilities. However, the tests for EXCLUSION and APPORTIONMENT may produce different results for different SIGNIFICANT POLLUTANT LINKAGES, and so the ENFORCING AUTHORITY will need to exercise caution before trying to simplify the procedure in any case.
SECOND STAGE - CHARACTERISING REMEDIATION ACTIONS
9.36 Each REMEDIATION ACTION will be carried out to achieve a particular purpose with respect to one or more identified SIGNIFICANT POLLUTANT LINKAGES. Where there is only a single SIGNIFICANT POLLUTANT LINKAGE on the CONTAMINATED LAND in question, all the REMEDIATION ACTIONS will be referable to that linkage, and the ENFORCING AUTHORITY will not need to consider how the different REMEDIATION ACTIONS relate to different linkages. Therefore the authority will not need to carry out this stage and the third stage of the procedure where there is only a single SIGNIFICANT POLLUTANT LINKAGE.
9.37 However, where there are two or more SIGNIFICANT POLLUTANT LINKAGES on the CONTAMINATED LAND, the ENFORCING AUTHORITY needs to establish, for each REMEDIATION ACTION, whether it is:
(a) referable solely to the SIGNIFICANT POLLUTANT in a single SIGNIFICANT POLLUTANT LINKAGE (a SINGLE-LINKAGE ACTION); or
(b) referable to the SIGNIFICANT POLLUTANTS in more than one SIGNIFICANT POLLUTANT LINKAGE (a SHARED ACTION).
9.38 Where a REMEDIATION ACTION is a SHARED ACTION, there are two possible relationships between it and the SIGNIFICANT POLLUTANT LINKAGES to which it is referable. The ENFORCING AUTHORITY needs to establish whether the SHARED ACTION is:
(a) a COMMON ACTION - that is, an action which addresses together all of the SIGNIFICANT POLLUTANT LINKAGES to which it is referable, and which would have been part of the REMEDIATION PACKAGE for each of those linkages if each of them had been addressed separately;
(b) a COLLECTIVE ACTION - that is, an action which addresses together all of the SIGNIFICANT POLLUTANT LINKAGES to which it is referable, but which would not have been part of the REMEDIATION PACKAGE for every one of those linkages if ach of them had been addressed separately, because
(i) the action would not have been appropriate in that form for one or more of the linkages (since some different solution would have been more appropriate);
(ii) the action would not have been needed to the same extent for one or more of the linkages (since a less far-reaching version of that type of action would have sufficed); or
(iii) the action represents a more economic way of addressing the linkages together which would not be possible if they were addressed separately. A COLLECTIVE ACTION replaces actions that would have been appropriate for the individual SIGNIFICANT POLLUTANT LINKAGES if they had been addressed separately, as it achieves the purposes which those other actions would have achieved.
THIRD STAGE - ATTRIBUTING RESPONSIBILITY TO LIABILITY GROUPS
9.39 This stage of the procedure does not apply in the simpler cases. Where there is only a single SIGNIFICANT POLLUTANT LINKAGE, the LIABILITY GROUP for that linkage bears the full cost of carrying out any REMEDIATION ACTION. Where the linkage is an ORPHAN LINKAGE, the ENFORCING AUTHORITY has the power to carry out the REMEDIATION itself, at its own cost (see paragraph 11.3 below).
9.40 Similarly, for any SINGLE-LINKAGE ACTION, the LIABILITY GROUP for the SIGNIFICANT POLLUTANT LINKAGE in question bears the full cost of carrying out that action.
9.41 However, for each SHARED ACTION the ENFORCING AUTHORITY needs to apply the statutory guidance set out in Part 9 of Chapter D, in order to attribute to each of the different LIABILITY GROUPS their share of responsibility for that action.
9.42 After that statutory guidance has been applied to all SHARED ACTIONS, it may be the case that a CLASS B LIABILITY GROUP which has been identified does not have to bear the costs for any REMEDIATION ACTIONS, since the full cost of the REMEDIATION ACTIONS required will have been borne by others. Where this is the case, the ENFORCING AUTHORITY does not need to carry out any of the rest of this procedure with respect to that LIABILITY GROUP.
FOURTH STAGE - EXCLUDING MEMBERS OF A LIABILITY GROUP
9.43 The ENFORCING AUTHORITY then needs to consider, for each LIABILITY GROUP which has two or more members, whether any of those members should be EXCLUDED from liability: for each CLASS A LIABILITY GROUP with two or more members, the authority applies the statutory guidance on EXCLUSION set out in Part 5 of Chapter D; and for each CLASS B LIABILITY GROUP with two or more members, the authority applies the statutory guidance on EXCLUSION set out in Part 7 of Chapter D.
FIFTH STAGE - APPORTIONING LIABILITY BETWEEN MEMBERS OF A LIABILITY GROUP
9.44 The ENFORCING AUTHORITY next needs to determine how any costs attributed to each LIABILITY GROUP should be apportioned between the members of that group who remain after any EXCLUSIONS have been made.
9.45 For any LIABILITY GROUP which has only a single remaining member, that person bears all of the costs falling to that LIABILITY GROUP. This means that he bears the cost of any SINGLE-LINKAGE ACTION referable to the SIGNIFICANT POLLUTANT LINKAGE, and the share of the cost of any SHARED ACTION attributed to the group as a result of the ATTRIBUTION process set out in Part 9 of Chapter D.
9.46 For any LIABILITY GROUP which has two or more remaining members, the ENFORCING AUTHORITY applies the relevant statutory guidance on APPORTIONMENT between those members. Each of the remaining members of the group will then bear the proportion determined under that guidance of the total costs falling to the group. The relevant APPORTIONMENT guidance is:
(a) for any CLASS A LIABILITY GROUP, the statutory guidance set out in Part 6 of Chapter D; and
(b) for any CLASS B LIABILITY GROUP, the statutory guidance set out in Part 8 of Chapter D.
AGREEMENTS ON LIABILITIES
9.47 The statutory guidance set out in Part 3 of Chapter D provides the procedure which the ENFORCING AUTHORITY should normally follow. However, two or more APPROPRIATE PERSONS may agree between themselves the basis on which they think costs should be borne, or apportioned between themselves, for any REMEDIATION for which they are responsible. If the ENFORCING AUTHORITY is provided a copy of such an agreement and none of the parties to the agreement has informed the authority that it challenges the application of the agreement, the authority needs to allocate liabilities between the parties to the agreement so as to reflect the terms of the agreement, rather than necessarily reflecting the outcome which would otherwise result from the normal processes of EXCLUSION and APPORTIONMENT ( paragraph D.38).
9.48 However, the ENFORCING AUTHORITY should not do this if the effect of following the agreement would be to increase the costs to be borne by the public purse. In these circumstances, it should disregard the agreement and follow the five stage process outlined above ( paragraph D.39).
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