1 J. Jarvis Q.C. and M. Fordham, Lender Liability: Environmental Risk and Debt (1993), p. 2.

2 Ibid., p. 2. M. Fordham, “A rude awakening” [1993] N.L.J. 750.

3 See R.M. Auerback, “Environmental Law, Practice and Liability: Background”, Ch. 1 in J.J. Norton, R.M. Auerback and J.M. Gaba (eds.), Environmental Liability for Banks (1995).

4 The Act is supplemented by the Contaminated Land (England) Regulations 2000, SI 2000/227, and Guidance Notes issued in the form of a Department of the Environment, Transport and the Regions Circular 02/2000 on Contaminated Land (hereafter “Guidance Notes”). For Scotland, see the Contaminated Land (Scotland) Regulations 2000, SI 2000/178, in force as from 14 July 2000. The Welsh and Northern Ireland Assemblies have yet to introduce similar legislation.

5 Legislation giving rise to criminal liability includes the following. The integrated pollution control (I.P.C.) regime (Environmental Protection Act 1990, Pt. 1) and its replacement, the pollution prevention and control (P.P.C.) regime (Pollution Prevention and Control Act 1999; Pollution Prevention and Control (England) Regulations 1999), make it an offence to carry out heavily polluting industrial processes (e.g., chemical and metal manufacture) without or in breach of a licence to do so. Under s. 33 of the E.P.A. 1990, it is a criminal offence to dispose of controlled waste on a site without or in breach of a licence. In relation to contaminated land, failure to remediate when instructed to do so is a criminal offence under the E.P.A. 1990, Pt. IIA. Section 79 of the E.P.A. 1990 lists certain statutory nuisances, failure to abate which when required to do so is a criminal offence under s. 80. Sections 85 and 161A of the Water Resources Act 1991 provide for the offences of polluting controlled water without or in breach of a licence, and failing to clean up water when instructed to do so (discharge of trade effluent into sewers is covered by s. 118 of the Water Industry Act 1991).

6 Clean-up liabilities include those for I.P.C. (E.P.A. 1990, s. 27) or P.P.C. (Pollution Prevention and Control Act 1999; Pollution Prevention and Control (England) Regulations 2000); controlled waste (E.P.A. 1990, s. 59); contaminated land (E.P.A., Pt. IIA); statutory nuisance (E.P.A. 1990, s. 81); and water pollution (Water Resources Act 1991, s. 161A).

7 (1868) L.R. 3 H.L. 330.The availability of this cause of action has been severely restricted since the House of Lords held in Cambridge Water Co. v. Eastern Counties Leather pic. [1994] 2 A.C. 264 that foreseeability of harm by the defendant was a pre-requisite to recovery of damages.

8 S. Cromie, “Contaminated Land. The Risks for Lenders” (1997) 8 (1) P.L.C. 33, 37.

9 P. Thieffry and D. McKenney, “Lender's Liability in the European Union”, Ch. 4 in J.J. Norton, R.M. Auerback and J.M. Gaba (eds.), Environmental Liability for Banks (1995), pp. 83-88; N.S.J. Koeman (ed.), Environmental Law in Europe (1999). See also the 1993 European Commission Green Paper on Remedying Environmental Damage, COM (93) 47 final, and the 2000 European Commission White Paper on Environmental Liability, COM (2000) 66 final. There is a voluminous literature on EC environmental law and its impact on the national laws of Member States. J. Scott, EC Environmental Law (1998) provides an entertaining and thought-provoking overview. See also K. Kramer, EC Environmental Law (4th ed., 2000).

10 E.P.A. 1990, s. 78F provides that the “appropriate person” is, in the first instance, the person who caused or knowingly permitted the contamination (known as a Class A person) or, if such a person cannot be found after reasonable enquiry, the current owner or occupier of the land (known as a Class B person).

11 E.P.A. 1990, s. 78R.

12 Although the D.E.T.R. Guidance Notes indicate how the enforcing authority may “sign off” a site on an informal basis (Guidance Notes, Annex 2, para. 15.6).

13 E.P.A. 1990, s. 78P.

14 Westminster City Council v. Haymarket Publishing Ltd. [1981] 1 W.L.R. 677, C.A. (unpaid rating surcharge that constituted a charge on the land under the General Rate Act 1967 held to take priority over all other interests in the land).

15 (1991) 81 D.L.R. (4th) 280, reversing (1989) 75 Alta. L.R. (2d) 185, MacPherson J.

16 Ibid., p. 291.

17 (1996) 129 D.L.R. 105, Ontario Court, General Division.

18 The E.P.A. 1990, Pt. IIA contains provisions dealing with overlap.

19 Examples include the following. Water Resources Act 1991, s. 85: offence of causing or knowingly permitting any polluting matter to enter “controlled waters” (virtually any watercourse other than a sewer). E.P.A. 1990, s. 33: offence to knowingly cause or knowingly permit controlled waste to be deposited without a licence or in a manner likely to cause pollution of the environment or harm to human health. E.P.A. 1990, s. 78F(2): clean up of contaminated land by person who caused or knowingly permitted the contaminating substances to be present in, on or under the land (a Class A “appropriate person”).

20 Examples include the following. E.P.A. 1990, s. 59: owner or occupier of land upon which controlled waste has been deposited without a licence is liable for the cost of removing it unless he can show that he did not knowingly cause or knowingly permit the deposit of the offending waste. E.P.A. 1990, s. 78F (4): where, after reasonable enquiry, the original polluter (a Class A “appropriate person”) cannot be “found” the owner or occupier for the time being becomes the appropriate person (a Class B “appropriate person”). E.P.A. 1990, ss. 80 & 81: the owner or occupier of land can be ordered to abate a statutory nuisance if the person responsible for it cannot be found, or to pay the local authority's costs in abating it.

Common law: the owner or occupier can be held liable for nuisance or under Rylands v. Fletcher (1868) L.R. 3 H.L. 330, even if he did not create the nuisance or bring the damaging substance onto his land.

21 Alphacell Ltd. v. Woodward [1972] A.C. 824, H.L.

22 Impress (Worcester) Ltd. v. Rees [1971] 2 All E.R. 357; National Rivers Association v. Wright Engineering Co. Ltd. [1994] 4 All E.R. 281. Although note Lord Wilberforce's warning in Alphacell Ltd. v. Woodward [1972] A.C. 824, at 835, that it is not in every case that the act of a third party necessarily interrupts the chain of causation: “the answer to such questions is one of degree and depends on a proper attribution of responsibility”.

23 Attorney-General's Reference (No. 1 of 1994) [1995] 1 W.L.R. 599, C.A.

24 [1922] 1 K.B. 742, 759, per Atkin L.J. See also Test Valley Investments v. Tanner [1964] Crim. L.R. 62, D.C. The D.E.T.R. Circular on Contaminated Land defines “permit” to include both the ability to take steps to prevent the substance being present or remove it and having a reasonable opportunity to do so (Annex 2, paras. 9.8-9.14).

25 Current Law Annotated Statutes 1995, Vol. 3, p. 154.

26 Schulmans Incorporated Ltd. v. National Rivers Authority [1993] Env. L.R. D.1, Q.B.D. Div. Ct.

27 Westminster City Council v. Croyalgrange Ltd. [1986] 1 W.L.R. 674, H.L.

28 Guidance Notes, Annex 3, Chapter D, para. 48(a).

29 As defined in the Companies Act 1985, s. 736.

30 Guidance Notes, Annex 3, Chapter D, para. 47.

31 Guidance Notes, Annex 3, Chapter D, para. 41(c).

32 42 U.S.C. s. 9601(20)(A).

33 901 F. 2d. 1550 (11th Cir. 1990); cert, denied, 111 S. Ct. 752 (1991).

34 Ibid., 1557-1558. In Re Bergsoe Metal Corporation, 910 F. 2d. 668 (9th Cir. 1990), the Ninth Circuit Court of Appeals, held that the lender does not lose exemption merely by having the power to become involved in the borrower's management; the lender must exercise actual management authority before liability attaches.

35 Ibid., 1558.

36 Fleet Factors was remitted back to the District Court which held that, even under the standards laid down by the Environmental Protection Agency, the lender was liable as the sale of the borrower's assets by the lender's agent, following foreclosure by the lender on its security interest on some of the borrower's inventory and equipment, had led to the release of toxic chemicals and asbestos and had been conducted “with all the finesse of a Viking raiding party”: 819 F. Supp. 1079 (S.D. 1993) and 821 F. Supp. 707 (S.D. Ga. 1993).

37 1994 WL 27881 (D.C. Cir. 1994).

38 The standard definition of the term “shadow director” is prescribed by section 741(2) of the Companies Act 1985 and this is mirrored in other statutes, including section 22(5) of the Company Directors Disqualification Act 1986 and section 251 of the Insolvency Act 1986. Section 251 of the Insolvency Act 1986 provides that: “‘shadow director’, in relation to a company, means a person in accordance with whose directions or instructions the directors of the company are accustomed to act (but so that a person is not deemed a shadow director by reason only that the directors act on advice given by him in a professional capacity).”

39 Secretary of State for Trade and Industry v. Deverell [2000] 2 W.L.R. 907, C.A. However, a lender is not likely to be held a “shadow director” when it makes its proposals for rehabilitation of the company a condition for continuation of support. See Re PFTZM Ltd. [1995] 2 B.C.L.C. 530. See also E. Ferran, Company Law and Corporate Finance (1999), p. 484.

40 Although the lender would have to control a governing majority of the board before being classed as a shadow director ﹛Kuwait Asia Bank EC v. National Mutual Life Nominees Ltd [1991] 1 A.C. 187, P.C.).

41 Cromie, fn. 8 above, p. 36.

42 (1906) 95 L.T. 319.

43 [1981] 1 W.L.R. 677.

44 Ibid., 680, per Lord Denning.

45 [1965] 1 W.L.R. 1165.

46 The Public Health Act 1936, s. 343 defined an owner of property as “the person for the time being receiving the rackrent of premises … whether on his own account or as agent or trustee for any other person”.

47 All three members of the court emphasised that the case only concerned the normal relationship of banker and customer and that if there were “special circumstances” the bank might be liable (at 1170B, per Lord Parker C.J., at 1172E, per Sachs J., and at 1173D, per Browne J.).

48 Jarvis & Fordham, fn. 1 above, pp. 131-134; G. Beringer & E. Thomas, “Lenders and Environmental Liability” (1991) 2 (11) P.L.C. 3, p. 8.

49 Wheat v. E Lacon & Co [1966] A.C. 552. See R. Lee, “Lending and the Environment in the UK: Environmental Risks for Bankers”, Ch. 3 in J.J. Norton, R. Auerback & J. Gaba (eds.), Environmental Liability for Banks (1995), pp. 60-61.

50 [1942] 2 K.B. 160.

51 Ibid., 164-165, per Lord Caldecote.

52 J. Jarvis Q.C., M. Fordham and D. Wolfson, “Domestic Environmental Liability”, Ch. 5 in R. Cranston (ed.), Banks, Liability and Risk (2nd ed., 1995), p. 162.

53 Lee, fn. 49 above, p. 60.

54 Southern Water Authority v. Nature Conservancy Council [1992] 1 W.L.R. 775, 781, per Lord Mustill, quoting Madrassa Anjuman Islamia v. Municipal Council of Johannesburg [1922] 1 A.C. 500, 504, per Viscount Cave.

55 E.P.A. 1990, s. 78F(4), (5). The Guidance Notes state that a company which has been dissolved cannot be found.

56 Hansard, H.L. Vol. 560, col. 1445, H.L. Vol. 562, cols. 165, 1040, 1042-1043.

57 See the dissenting judgment of Rigby L.J. in Gaskell v. Gosling [1896] 1 Q.B. 669, which was approved by the House of Lords [1897] A.C. 575. The Insolvency Act 1986, s. 44(1)(a), provides that an administrative receiver is deemed to be the agent of the company unless and until the company goes into liquidation.

58 Standard Chartered Bank v. Walker [1982] 1 W.L.R. 1410, 1416, per Lord Denning M.R.

59 American Express International Banicing Corp. v. Hurley [1985] 3 All E.R. 564.

60 E.P.A. 1990, s. 78X(3), (4).

61 T. Hellawell, Contaminated Land (2000), p. 24.

62 British Bankers’ Association, “Position Paper on Banks and the Environment” (July 1993); E. Welch and T. Parker, “A Bank's View of Lender Liability in Environmental Legislation” [1993] J.I.B.L. 217.

63 P. Blackman, “Lender Liability and Deep Pockets; Managing Environmental Risks in Financing Businesses in Europe”, Ch. 13 in H. Enmarch-Williams (ed.), Environmental Risks and Rewards for Business (1996).

64 This reflects the stance taken by the European Commission in its recent White Paper on Environmental Liability, COM (2000) 66 final.

65 Jarvis & Fordham, fn. 1 above, pp. 168-174; Jarvis, Fordham & Wolfson, fn. 52 above, pp. 168-170; Cromie, fn. 8 above, pp. 38-40; Beringer & Thomas, fn. 48 above, p. 8.

66 Insurance cover for gradually occurring pollution damage, as opposed to that caused by a catastrophe, is increasingly difficult to find. See Blackman, fn. 63 above, p. 99; Cromie, fn. 8 above, p. 38.