R (National Grid Gas Plc) v Environment Agency

CourtHouse of Lords
JudgeLORD HOFFMANN, LORD WALKER OF GESTINGTHORPE, LORD MANCE, LORD NEUBERGER OF ABBOTSBURY, LORD SCOTT OF FOSCOTE
Judgment Date27 Jun 2007
JurisdictionEngland & Wales
Neutral Citation[2007] UKHL 30

[2007] UKHL 30

HOUSE OF LORDS

Appellate Committee

Lord Hoffmann

Lord Scott of Foscote

Lord Walker of Gestingthorpe

Lord Mance

Lord Neuberger of Abbotsbury

R (on the application of National Grid Gas plc (formerly Transco plc))
(Appellants)
and
Environment Agency
(Respondents)(Civil Appeal from Her Majesty's High Court of Justice)

Appellants:

Richard Gordon QC

Richard Macrory

Martin Chamberlain

(Instructed by Pinsent Masons)

Respondents:

Nigel Pleming QC

Stephen Tromans

Rory Dunlop

(Instructed by Environment Agency)

LORD HOFFMANN

My Lords,

1

I have had the advantage of reading in draft the speech to be delivered by my noble and learned friend Lord Scott of Foscote and gratefully adopt his statement of the facts and issues.

2

The Environment Agency puts its case in two ways. First, it says that National Grid Gas plc ("National Grid") is an appropriate person against whom a remediation notice may be served under section 78E of the Environmental Protection Act 1990. Section 78F(2) defines an appropriate person as one who "caused or knowingly permitted the substances�by reason of which the contaminated land in question is such land to be in, on or under that land." But National Grid did not cause or knowingly permit any substances to be in, on or under the land. That was done by the East Midlands Gas Board or its predecessor gas undertakers many years before National Grid came into existence. There is nothing in the Act to say that an appropriate person shall be deemed to include some other person or which defines who that other person should be. National Grid is plainly not an appropriate person within the meaning of the Act.

3

The other argument is that in 1948 there was a statutory transfer of the assets and liabilities of the privately owned predecessor undertakings to the East Midlands Gas Board (see section 17(1) of the Gas Act 1948), in 1972 there was a statutory transfer of the assets and liabilities of the East Midlands Gas Board to the British Gas Corporation (see section 1(1) of the Gas Act 1972) and in 1986 there was a statutory transfer of the assets and liabilities of the British Gas Corporation to British Gas plc (see section 49(1) of the Gas Act 1986). National Grid has since acquired the gas transportation and storage undertaking of British Gas plc and the relevant liabilities. In each case the statutory provisions for succession said that the successor company would take over the liabilities of the predecessor company "immediately before" the transfer date.

4

The Environment Agency submits that the liability of the East Midlands Gas Board and its predecessors to have a remediation order made against them under section 78E was a liability passed down the chain to National Grid. But I find it quite impossible to say that this was a liability which existed, even as a contingency, "immediately before" the transfers of 1948, 1972 or 1986. No such liability existed until Part IIA was inserted into the 1990 Act by the Environment Act 1995. It is true that the legislation was retrospective in the sense that it created a potential present liability for acts done in the past. But that is not the same as creating a deemed past liability for those acts. There is nothing in the Act to create retrospectivity in this sense.

5

For these reasons and those given by my noble and learned friend Lord Scott of Foscote, with which I agree, I would allow the appeal.

Introduction

LORD SCOTT OF FOSCOTE

My Lords,

6

Coal was one of the engines of the industrial revolution and for over 150 years, until the advent of natural gas from the North Sea in the early 1970s, one of its important uses was in the production of coal gas. But the production of coal gas left residues that had to be disposed of. One of these residues was coal tar and the main means of disposal was to bury the coal tar in containers beneath the earth. One of the places where coal tar was thus disposed of was a site at Bawtry in Doncaster, a site that now consists of 11 residential properties with gardens.

7

The presence of the coal tar beneath these gardens constitutes contamination that is potentially harmful to health and the Environment Agency (the respondent to this appeal), formed the opinion, an opinion with which no one has disagreed, that remediation works to remove the contaminating material needed to be carried out. The Agency, pursuant to its duties and responsibilities under the Environmental Protection Act 1990 (as amended in 1995) has carried out the necessary works at a cost in the region of �66,000 per residence. The question is who should bear that cost.

8

There are, judged by the language of the relevant provisions of the 1990 Act, three obvious possibilities. One possibility is that the costs should be borne by the polluters, that is to say, by the companies that, in the process of turning coal into coal gas, produced the coal tar and buried it in the ground at the Bawtry site. Another possibility is that the cost should be borne by the present owners of the residences beneath whose gardens the coal tar was buried. The third obvious possibility is that the cost should be met out of public funds. Notwithstanding that these are the three possibilities apparently contemplated by the statutory language, the Agency has contended for, and Forbes J in the court below accepted, a fourth possibility, namely, that the appellant, National Grid Gas plc (previously Transco plc, by which name it is convenient to refer to the appellant) should bear the cost. This is a surprising contention, for Transco was not the polluter, and indeed has never been in the business of producing coal gas - its business is, and has always been, the transportation of natural gas. Nor has Transco ever been the owner of any part of the Bawtry site. The Agency's contention is based on the circumstance that Transco is the statutory successor to the assets, rights and liabilities of the East Midlands Gas Board ("EMGB"), a state owned area gas undertaker to which, as with the other area gas boards, the assets and liabilities of the privately owned gas undertakings had been transferred by the Gas Act 1948. The contention, in short, is that the polluter should pay and that Transco should be regarded as standing in the shoes of the polluter. To test this contention it is necessary to refer to the history of the Bawtry site, to the statutory scheme whereby the privatisation of the gas industry was brought about, and, finally to the relevant provisions of the 1990 Act.

The history of the Bawtry site

9

The actual polluters of the Bawtry site had been, first, two private companies, namely, the Bawtry and District Gas Company ("B&DGC") and the South Yorkshire and Derbyshire Gas Company ("SY&DGC"). The B&DGC had purchased the Bawtry site in about 1912 and constructed on the site a gas works which became operational in about 1915. In 1931 the B&DGC was amalgamated with the SY&DGC and the amalgamated company continued gas production at the Bawtry site. The gas industry was nationalised by the Gas Act 1948 after which the site was owned and controlled by the EMGB. However gas production at the site was discontinued shortly after nationalisation and in 1965 the site was sold to Kenton Homes Ltd. In 1966 the site, still undeveloped for housing purposes, came into the ownership of Kenneth Jackson Ltd, which company applied for and obtained planning permission to build houses on the site. The 11 residences already referred to were then built. Seven of them were, for a time, owned by the Secretary of State for Defence but subsequently all 11 passed into private ownership.

10

As is explained in para 30 of Forbes J's judgment, it is not known exactly when the coal tar residues were buried at the site. It is probable that most of this happened when the site was in private ownership before nationalisation, but some part may have happened while the site was owned by the EMGB.

11

Section 17(1) of the Gas Act 1948 provided that:

"� all property, rights, liabilities and obligations which, immediately before [the appointed vesting date] were property, rights, liabilities and obligations of an undertaker [eg B&DGC and SY&DGC] � shall on the vesting date vest by virtue of this Act and without further assurance in such Area Board as may be determined by order of the Minister".

Thus the Bawtry site passed into the ownership of the EMGB subject to the liabilities of the B&DGC and the SY&DGC "immediately before" the vesting date.

12

According to evidence given to Forbes J, it was not, in the mid 1960s when the EMGB sold the site or previously, considered dangerous to leave coal tar residues under the land, provided they were properly contained. The conveyance of the site by the EMGB to Kenton Homes Ltd in 1965 described the site as including "the underground tanks installed on part thereof" (see para 31 of Forbes J's judgment).

13

By the Gas Act 1972 the Area Gas Boards were abolished and their property, rights, liabilities and obligations were transferred to the British Gas Corporation (the "BGC") which remained in state ownership. So the BGC became subject to any liabilities of the EMGB arising out of its previous ownership of the Bawtry site or inherited under section 17(1) of the 1948 Act from B&DGC and SY&DGC.

Privatisation

14

Privatisation of the gas industry was effected by the Gas Act 1986. A "successor company", in the event British Gas plc, was formed, public subscription in this new company was invited by the Government (the advertised enthusiasm of "Sid" played a prominent part as did, of course, a formal prospectus) and the transfer to the successor company, British Gas plc, of the BGC's assets and liabilities was effected by section 49 of the 1986 Act. Section 49(1) said that on a...

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