Blair C Nimmo+gerard A Friar Joint Liquidators Of The Scottish Coal Company Limited For Directions
| Jurisdiction | Scotland |
| Judge | Lord Hodge |
| Neutral Citation | [2013] CSOH 124 |
| Year | 2013 |
| Published date | 17 July 2013 |
| Date | 11 July 2013 |
| Court | Court of Session |
| Docket Number | P416/13 |
| OUTER HOUSE, COURT OF SESSION | |
| [2013] CSOH 124 | |
| P416/13 | OPINION OF LORD HODGE in the Petition BLAIR C NIMMO and GERARD A FRIAR, Joint Liquidators of The Scottish Coal Company Limited Petitioners; For Directions ________________ |
Petitioners: Sellar, QC; Govier; HBJ Gateley LLP
SEPA: Lake, QC; Brodies LLP
Local authorities: Howie QC, McColl; Ledingham Chalmers LLP
Lord Advocate: Sheldon; Scottish Government Legal Directorate
SNH: McIlvride; Harper Macleod LLP
11 July 2013
[1] On 29 April 2013 the court ordered the winding up of The Scottish Coal Company Ltd ("SCC") and appointed the noters as interim liquidators. They had been appointed on 19 April 2013 as provisional liquidators of SCC. At a meeting of creditors on 3 June 2013 they were appointed liquidators. In this application they seek directions from the court in relation to the performance of their duties.
[2] SCC carried on several businesses including the operation of open-cast mining on seven sites in Scotland. Those sites were (i) House of Water, East Ayrshire, (ii) Broken Cross, South Lanarkshire, (iii) Dalfad, East Ayrshire, (iv) Dunstonhill, East Ayrshire, (v) Mainshill, South Lanarkshire, (vi) St Ninians, Fife, and (vii) Blair House, Fife. The site at Blair House had been mothballed when the noters were appointed provisional liquidators. Since their appointment the petitioners have ceased the mining operations but continue pumping and securing the safety of the sites.
[3] The noters have sold several sites and parts of other sites to Hargreaves Surface Mining Ltd ("Hargreaves"). SCC has retained several disused open cast sites or parts of sites at Headlecross, Glentaggart, Spireslack, Powharnal/Dalfad, Dunstonhill, Blair House and Shiel. This application is concerned with those sites or parts of sites.
[4] Mining operations are subject to various statutory obligations to control land use, to protect the environment, habitats and birds and to ensure the safety of the public by fencing disused mines and quarries. Several of the statutory obligations have been enacted to implement directives of the European Union. The costs of complying with the statutory obligations are significant. The obligations include the protection of the environment from the discharge of polluted water from the sites and the obligations under planning legislation to restore the sites.
[5] The principal environmental dangers relate to the pollution of water courses and ground water by (i) rain water run off carrying chemicals and fuels used in the mining process, and minerals exposed by the removal of surface cover on excavation of the voids and (ii) discharges, including silt, from settlement ponds or lagoons. In this case the principal regulatory provisions were and are the Water Environment (Controlled Activities) (Scotland) Regulations 2005 (which is revoked subject to transitional provisions) and 2011 ("CAR") which protect the water environment and the Pollution Prevention and Control (Scotland) Regulations 2000 (now revoked) and 2012 ("PPC") for which the Scottish Environment Protection Agency ("SEPA") is responsible. Scottish Natural Heritage ("SNH") also was represented as it is concerned with a special protection area at Muirkirk and North Lowther uplands special protection area ("SPA") under Conservation (Natural Habitats etc.) Regulations 1994 in which SCC's former site at Powharnal is located.
[6] SCC granted the Bank of Scotland plc a first ranking floating charge over all of the assets comprised in its property and undertaking. SCC's directors applied for the company to be wound up rather than appoint an administrator because it was insolvent and did not wish the cost of performing its environmental obligations to use up the funds realised from the sale of its assets. Before the sale to Hargreaves the noters had been spending about £1.4 million per month on maintaining the retained sites in conformity with the environmental authorisations that govern their use. The noters estimate that the sale to Hargreaves and future realisations will give them funds of between £9.7 million and £10.5 million. They calculate that they will spend about £478,000 per month on maintaining the sites that remain in their control. Thus if no other charges were incurred, the noters would have funds to maintain the sites for between 20 and 22 months.
[7] The noters wish to protect SCC's unsecured creditors and the bank, as holder of the floating charge, from the dissipation of the proceeds of disposal of SCC's assets which continued performance of the statutory obligations will entail. Mr Sellar estimated that the costs of restoring the sites and former sites in accordance with the planning conditions governing the sites and the planning agreements into which SCC had entered would be about £73 million. There is no question of SCC having the means to meet those planning obligations. The focus of the discussion therefore was on CAR and whether SCC's insolvent estate was liable to meet the costs of measures which SEPA would require to accept the surrender of its licences.
[8] The noters aver that the winding up of SCC creates a statutory trust over the company's assets in favour of its ordinary creditors and that they must apply the proceeds of the realisation of those assets ranking the unsecured creditors of the company pari passu. The noters assert that the continued expenditure on meeting SCC's environmental obligations would give a preference to the costs of performing those obligations which was contrary to the statutory pari passu ranking.
[9] The noters therefore seek directions from the court on:
(i) whether they can abandon or disclaim the sites and former sites, thereby transferring ownership to the Crown;
(ii) whether they can abandon or disclaim the statutory licences or permits which authorised SCC to carry out its industrial activities and which imposed the onerous statutory obligations on it;
(iii) the appropriate procedure to effect the abandonment of property under (i) and (ii) above; and
(iv) the ranking of the costs of complying with planning obligations or whether they are treated as liquidation expenses under Rule 4.67 of the Insolvency (Scotland) Rules 1986, and whether the noters are personally liable for any failure to comply with enforcement procedure under the Planning Acts.
[10] Because of the potential for serious environmental damage if the sites and former sites were not properly maintained and also significant financial costs which might fall on the taxpayer if the relevant local authorities or other statutory bodies had to carry out remediation works, the following public bodies or persons lodged answers to the note and were represented by counsel at the hearing:
The Scottish Environment Protection Agency ("SEPA"),
Scottish Natural Heritage ("SNH"),
East Ayrshire Council and South Lanarkshire Council ("the local authorities"), and
The Lord Advocate on behalf of the Scottish Ministers ("the Lord Advocate").
The application was intimated to, among others, Fife Council, Midlothian Council and North Lanarkshire Council and to the Crown Agent on behalf of the Office of Queen's and Lord Treasurer's Remembrancer. But those parties did not lodge answers or make representations at the hearing.
[11] As the noters and some of the respondents sought the directions as a matter of urgency, all of the represented parties prepared detailed written submissions and agreed a timetable for the hearing which restricted the time that each could make oral submissions. I am grateful to counsel for their industry and the skill with which they presented their written and oral submissions. Without that I would not have been able to give the directions within the desired time.
[12] Mr Howie for the local authorities raised an issue of the competency of the proceedings as he submitted that not all interested parties were represented at the hearing. He argued that the template for the application for directions was a petition by trustees for directions, which was competent only if all contradictors were before the court and the facts were not disputed (Peel's Trustees v Drummond 1936 SC 786).
I do not see the matter as one of competency. A liquidator as an officer of court has the right to apply to the court for directions which relate to his duties and are needed to allow him to perform those duties (Liquidator of Upper Clyde Shipbuilders Ltd 1975 SLT 39). The court will need to be satisfied that an interested party is aware of both the application and the hearing before it would give directions which could directly affect that party. But I do not think that it is necessary to go further and require that all interested parties attend or are represented at that hearing. To require that would involve a person in unnecessary expense and would give a veto to a party with an interest contrary to that of the general body of creditors.
[13] The immediate issue which causes the noters and SEPA to ask for an urgent determination is whether the noters can by disclaimer relieve themselves (and thus the creditors of SCC) of the cost of complying with their obligations under CAR. Mr Sellar accepted that there was no immediacy in relation to the fourth direction and agreed to hold that over for later discussion in order to allow the hearing on the other directions to be completed in the time available.
The first direction: the abandonment of land in Scotland
[14] There is no express statutory provision which allows the liquidator of a Scottish registered company to disclaim onerous property. This is in contrast with section 178 of the Insolvency Act 1986 ("the 1986 Act") which gives such a power to the liquidator of a company incorporated in England and Wales. Section 178 allows a liquidator by disclaimer to bring to an end the company's ownership of property, including land, which as a result vests in the Crown. Counsel were not able to find any case...
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