R (Oss Group Ltd) v Environment Agency; Solvent Resource Management Ltd v Environment Agency

JurisdictionEngland & Wales
JudgeLord Justice Carnwath,Lord Justice Maurice Kay,The Master of the Rolls
Judgment Date28 June 2007
Neutral Citation[2007] EWCA Civ 611
Docket NumberCase No: C1/2006/2545
CourtCourt of Appeal (Civil Division)
Date28 June 2007

[2007] EWCA Civ 611

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM QBD, ADMINISTRATIVE COURT

MR JUSTICE BURTON

CO/2157/2006

Royal Courts of Justice

Strand, London, WC2A 2LL

Before

The Master of the Rolls

Lord Justice Carnwath and

Lord Justice Maurice Kay

Case No: C1/2006/2545

Between
R(Oss Group Limited)
Appellant
and
Environment Agency & Ors
Respondents
and
Defra
Intervener

Robert McCracken QC & Stephen Tromans (instructed by Messrs Sharpe Pritchard and Semple Fraser LLP) for the Appellant

John Howell QC & Dinah Rose QC (instructed by Environment Agency Legal Services) for the Respondents

Derrick Wyatt QC and Kassie Smith (instructed by DEFRA) for the Intervener

Hearing dates: Monday 14 th & Tuesday 15 th May, 2007

Lord Justice Carnwath

Introduction

1

The business of OSS is the collection of waste lubricating and fuel oil from places such as garages and workshops, and its conversion into marketable fuel oil. The issue in short is when the material ceases to be “waste” for the purposes of the Waste Framework Directive (“WFD”). Is it at the completion of the process of preparing it for use as fuel (as argued by OSS), or when it is actually burnt (as argued by the Environment Agency)? The judge agreed with the Environment Agency.

2

The answer is of considerable economic significance, because of the costs of complying with the higher standards required for waste processes. This has become particularly relevant to OSS' business since 2005, when the Waste Incineration Directive (“WID”) was applied to existing waste operations. If the judgment is upheld, a power station using OSS fuel is subject to the more costly controls applying to a waste incinerator, which would not apply if it were burning virgin fuel oil.

3

OSS had in fact attempted to anticipate the impact of the Directive. For many years the largest and most profitable part of its business had consisted of reprocessing waste oils to produce “recycled fuel oil” (“RFO”). In preparation for the WID, it invested in new processes, enabling it to produce a higher quality product called “clean fuel oil” (“CFO”), which it was hoped would not be regarded as waste. The “cleanness” of the product is a matter of dispute. As Burton J put it:

“… there is considerable and presently irresoluble factual dispute as to whether, even on their own case, the processes which OSS carry out are indeed sufficient to render the CFO sufficiently safe to burn, or sufficiently comparable to, or materially indistinguishable from, a natural fuel (if such be required), or compliant with the BS2869, even if, which the Agency does not accept, such British Standard is relevant at all.” (para 14)

4

That factual dispute, if it arises, is for another day. If the judgment is upheld, it will be academic. We are directly concerned with the limited legal issue on which the judge granted permission to appeal:

“… whether a lubricating oil, thus not originally used as fuel, which becomes waste can thereafter be burnt other than as waste.”

5

The same legal issue arose in another case before the judge, relating to the business of Solvent Resource Management Ltd (“SRM”). Because the factual issues were largely agreed in that case, the judge directed that it be treated as the lead case for resolving the legal issues, on the basis of submissions from both companies. His decision in favour of the Agency rendered academic the factual issues in the OSS case. Although permission to appeal was granted to both companies, only OSS is before us.

6

Although not before us, the SRM case is a good illustration of the practical significance of the Agency's claimed distinction between use as fuel and other end-uses. In simple terms, SRM recovers waste solvent materials, from which it produces so-called “PGDs” (Product Grade Distillates) for sale on the market. It is common ground that, following those processes, the PGDs may be handled and sold on the basis that they have ceased to be waste. However, according to the Agency, and as confirmed by the judge, that approach does not apply to the same products when used as fuel in SRM's own plants. Thus it is a notable (and unashamed) feature of the Agency's position that identical substances, following completion of the same recovery processes, may lose or retain the character of “waste” depending on the purposes for which they are then used.

The legal framework

7

It is unnecessary to repeat Burton J's helpfully comprehensive exposition of the European and domestic sources of the law. Much of the same ground was covered by Stanley Burnton J in Castle Cement v Environment Agency [2001] Env LR 46. I would also pay special tribute to the exhaustive review and analysis of the relevant source material, European and domestic, in the judgment of Lord Reed in the Court of Session in Scottish Power Generation Ltd v Scottish Environment Protection Agency [2005] SLT 98 (“ Scottish Power”).

8

The arguments before us have turned principally on the interpretation of passages in the judgments of the Court of Justice in ARCO Chemie Nederland v Minister Van Volkshuisvesting [2002] QB 646 (“ ARCO”), and in three subsequent cases: Palin Granit Oy [2002] 1 WLR 2644; R (Mayer Parry Recycling Ltd) v Environment Agency [2004] 1 WLR 538; and Niselli (2004) Case C-457/02. A short outline of the relevant European law will be sufficient as background to the discussion of the issues between the parties.

9

The governing legislation is the Waste Framework Directive (“WFD”), which dates from 1975 (now consolidated with subsequent amendments in Directive 2006/12/EC). The main definitions are in Article 1:

i) “Waste” means “any substance in the categories set out in Annex I which the holder discards or intends… to discard” (1(a)).

ii) “Holder” means “the producer of the waste or the natural or legal person who is in possession of it” (1(c)).

iii) “Producer” means “anyone whose activities produce waste ('original producer') and/or anyone who carries out pre-processing, mixing or other operations resulting in a change in the nature or composition of this waste” (1(b))

10

Categories of Waste are listed in Annex I, but that list is of limited help because it ends with a catch-all group: “any materials, substances or products which are not contained in the above-mentioned categories”.

11

Annexes IIA and IIB list operations constituting respectively “disposal” and “recovery” of waste. “Disposal operations” include D10 (“Incineration on land”) and D11 (“Incineration at sea”); “recovery operations” include R1 (“Use principally as a fuel or other means to generate energy”), R2 (“Solvent reclamation/regeneration”), R3 (“Recycling/reclamation of organic substances which are not used as solvents …”), R9 (“Oil re-fining or other reuses of oil”), and R10 (“Land treatment resulting in benefit to agriculture or ecological improvement”).

12

It will be seen that burning or “incineration” of waste may qualify as either a disposal operation (D10 or 11) or a recovery operation (R1), depending on whether its “principal” purpose is to generate energy. The distinction was explained by the ECJ in Case C-228/00 Commission v Germany [2003] ECR I -1439:

“… the essential characteristic of a waste recovery operation is that its principal objective is that the waste serves a useful purpose in replacing other materials which would have had to be used for that purpose, thereby conserving natural resources…

The combustion of waste therefore constitutes a recovery operation where its principal objective is that the waste can fulfil a useful function as a means of generating energy, replacing the use of a source of primary energy which would have had to have been used to fulfil that function.” (para 45–6)

13

The ordinary English meaning of the word “discard” is an imperfect guide to its significance in the definition of waste. Other language versions have equal status in European law, and may have a slightly different emphasis. For example, the French “se défaire de”, or the German “entledigen”, might perhaps be better translated as “get rid of”: see my discussion in Mayer Parry Recycling v Environment Agency [1999] 1 CMLR 963 para 24–30. I there concluded on the then state of the authorities (including Vessoso & Zanetti [1990] ECR I–1461; Tombesi [1997] ECR I–3561; Inter-Environnement Wallonnie ABSL v Région Wallonne [1997] ECR I-7411)

“The general concept is now reasonably clear. The term 'discard' is used in a broad sense equivalent to 'get rid of'; but it is coloured by the examples of waste given in Annex I and the Waste Catalogue, which indicate that it is concerned generally with materials which have ceased to be required for their original purpose, normally because they are unsuitable, unwanted or surplus to requirements…”

Although much of the rest of the judgment has been overtaken by subsequent authority, that still seems to me a fair general summary of the intended meaning of the word “discard”, taken on its own.

14

It is clear, however, that it is only part of the story. The following points, some of which will need further discussion, can be found in the cases:

i) The concept of waste “cannot be interpreted restrictively” ( ARCO para 40).

ii) Waste, according to its ordinary meaning, is “what falls away when one processes a material or an object, and is not the end product which the manufacturing process directly seeks to produce” ( Palin Granit Oy para 32).

iii) The term “discard”“covers” or “includes” disposal or recovery within the terms of Annex IIA and B ( Wallonie para 27; ARCO para 47); but the fact that a substance is treated by one of the methods described...

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