England and Wales Court of Appeal (Civil Division) Decisions

IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
CARDIFF DISTRICT REGISTRY
HHJ JARMAN QC
[2016] EWHC 2596 (QB)

		Royal Courts of Justice Strand, London, WC2A 2LL
		27/07/2017

LORD JUSTICE LLOYD JONES :

1. This is an appeal from a decision of HHJ Jarman QC delivered on 2 November 2016 in proceedings under Part 8 CPR issued by Mrs E J Hardwicke and Mr E J Price ("the respondents") the owners of Rhosforlo, a farm at Garth, Builth Wells, Powys. The judge granted a declaration that the liabilities transferred to the appellant Powys County Council ("Powys") pursuant to Article 4 of the Local Government Re-organisation (Wales) (Property etc) Order 1996 ("the 1996 Order") include liability as an "appropriate person" under Part IIA of the Environmental Protection Act 1990 ("the 1990 Act") in respect of the actions of its predecessor, the Borough of Brecknock, in relation to a landfill site at the farm ("the site").

Factual and Procedural Background

2. From the early 1960s until 1993 the predecessors of Powys, first Builth Wells Urban District Council and, subsequently, the Borough of Brecknock ("Brecknock") operated a landfill site on part of the farm. The prior owners of the farm allowed Builth Wells Urban District Council to create the landfill site in the early 1960s by culverting a watercourse and to tip domestic and commercial waste into the valley through which the watercourse runs.
3. Upon local government reorganisation in 1974 Brecknock became responsible for waste disposal in the area and entered into a series of licences with the respondents and their then co-owner to tip "refuse" on the site. The terms of the licences included an agreement on the part of Brecknock to carry out certain works to bring the site back into agricultural use, which it did when tipping ceased in 1992. The site is now used for farming.
4. The Borough of Brecknock was abolished on 31 March 1996 and Powys came into existence on 1 April 1996 by merger of the districts of Brecknock, Radnorshire and Montgomeryshire. After this local government reorganisation, it was assumed by Powys that it had taken over its predecessor's liability for the site. Powys wrote to the respondents stating that it had responsibility for all local authority environmental functions in the county and asking for permission to enter onto the site, to sink a borehole and to take sample of leachate levels. The watercourse on the site runs into two rivers, the Irfon and the Wye, both of which are designated as Sites of Special Scientific Interest.
5. The monitoring undertaken by Powys led to concerns about leachate pollution of the rivers. Accordingly, in 1999 Powys asked the respondents for permission to install gravel drains around the edge of the site and land drains across the top. Permission was given and the works were carried out.
6. By a tenancy agreement dated 1 August 2001 the respondents let to Powys a small piece of land adjacent to the site for the purpose of monitoring the site, and for the installation and operation of a treatment and filtration plant and a pumping station. Powys sought to enter into the tenancy on the assumption that it was bound by the remediation regime under Part IIA of the 1990 Act, which came into force in Wales on 15 September 2001. Thereafter, until 2015 Powys carried out a number of monitoring and mitigation activities on the site.
7. In 2013 the contaminated land officer of Powys, Mr David Jones, reconsidered the assumption that the liabilities for the former shire landfills following unification of the shires into Powys County Council were transferred to Powys. In particular, he considered the decision of the House of Lords in R (National Gas Grid (formerly Transco plc)) v Environment Agency [2007] 1 WLR 318 ("Transco"). After taking further legal advice, Mr Jones expressed the opinion that waste operations on the site had been completed before 1994 and that, accordingly Powys could not have been the original polluter.
8. On 27 March 2015 Mr Jones wrote to the respondents giving three months' notice to terminate the tenancy, noting that the precedent established in Transco meant that Powys was not liable for any contamination of the site.
9. The respondents instructed solicitors who challenged this interpretation of the law and indicated that in the absence of a satisfactory solution, they would commence proceedings under Part 8 CPR for a declaration that the transfer of liabilities from Brecknock to Powys included a contingent liability for contaminated land under Part IIA of the 1990 Act.
10. In June 2015 National Resources Wales took leachate samples at the site, and in an email to Mr Jones on 9 July recommended twelve months of monitoring the site. Powys did not take up the proposal, but surrendered its discharge permit and terminated the tenancy. No further monitoring of the site has been carried out and National Resources Wales has not taken any further steps in relation to the levels of iron detected in June 2015.
11. The respondents issued proceedings on 31 March 2016. A hearing took place before HHJ Milwyn Jarman QC at Cardiff Civil Justice Centre on 30 September 2016.

Relevant legislation

12. Powys was created by the Local Government (Wales) Act 1994 ("the 1994 Act"). Section 53 deals with the continuity of the exercise of functions, and provides in relevant part:

"(1) The abolition of the old authorities shall not affect the validity of anything done by any of those authorities before their abolition.

(2) Anything which at 1 April 1996 is in the process of being done by or in relation to an old authority in the exercise of, or in connection with, any relevant functions may be continued by or in relation to the authority ("the successor authority") by which those functions become exercisable or, as the case may be, became exercisable in respect of the area in question.

…

(4) Anything done by or in relation to an old authority before 1 April in the exercise of or in connection with any relevant functions shall, so far as is required for continuing its effect on and after that date, have effect as if one by or in relation to the successor authority.

(5) Subsection (4) applies in particular to—

(a) any decision, determination, declaration, designation, agreement or instrument made by an old authority;

(b) any regulations or byelaws made by an old authority;

(c) any licence, permission, consent, approval, authorisation, exemption, dispensation or relaxation granted by or to an old authority;

(d) any notice, direction or certificate given by or to an old authority;

(e) any application, request, proposal or objection made by or to an old authority;

(f) any condition or requirement imposed by or on an old authority;

(g) any fee paid by or to an old authority;

(h) any appeal allowed by or in favour of or against an old authority;

(i) any proceedings instituted by or against an old authority.

(6) Any reference in this section to anything done by or in relation to an old authority includes a reference to anything which by virtue of any enactment is treated as having been done by or in relation to that authority.

(7) Any reference (however framed) to an old authority in any document constituting, or relating to, anything to which the provisions of this section apply shall, so far as is required for giving effect to those provisions, be construed as a reference to the successor authority."

13. Section 54(2)(c) gave the Secretary of State power to make an order "for the transfer of property, rights or liabilities, and of related functions, from an abolished body or the Residuary Body to a new principal council or other public body or to the Residuary Body". The 1996 Order was made under that provision.
14. Article 2(7) of the 1996 Order provides:

"Where property, rights, liabilities or duties of an old authority or other body are vested, by virtue of this Order, in a new authority or other body, anything done by or in relation to the old authority or body in connection with such property, rights, liabilities, or duties shall be treated as if it had been done by or in relation to the new authority or body as the case may be."

15. Article 4 of the 1996 Order provides in material part:

"Where in relation to an old authority, there is only one successor authority, all the property, rights and liabilities of the old authority shall…vest in that successor authority."

16. Part IIA of the 1990 Act was enacted by way of amendment on 19 July 1995. Following a period of consultation and the drafting of statutory guidance, it came into force in Wales on 15 September 2001.
17. Part IIA contains the framework for identifying contaminated land and allocating responsibility for remediation. Section 78F defines who may be an "appropriate person" on whom a remediation notice can be served in respect of contaminated land:

"(2) Subject to the following provisions of this section, 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.

(3) A person shall only be an appropriate person by virtue of subsection (2) above in relation to things which are to be done by way of remediation which are to any extent referable to substances which he caused or knowingly permitted to be present in, on or under the contaminated land in question.

(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 contaminated land in question is an appropriate person."

The decision appealed

18. The issue before the judge was whether Powys was an "appropriate person" under section 78F(2) of the 1990 Act bearing responsibility for carrying out remediation works in respect of contaminated land. It was accepted both that Brecknock would have been such an appropriate person, if it had still been in existence, and that, if Powys was not such an "appropriate person", the respondents would be appropriate persons as owners and occupiers of the contaminated land under section 78F(4).
19. The judge held that Powys was an appropriate person under section 78F(2), on the basis that it had taken over the liabilities of Brecknock by virtue of the legislation providing for local government reorganisation in Wales, including the 1994 Act and the 1996 Order. He came to this conclusion notwithstanding the Transco case in which the House of Lords had held that the transfer of property rights and liabilities of a private gas company to a state owned gas utility and later to a public limited company as provided for by the Gas Acts 1948 and 1986 was not sufficient to encompass liabilities which only arose in 1995 by the amendment of the 1990 Act. The judge considered that National Gas Grid was distinguishable. In particular the judge relied on a provision in the Gas Acts that only liabilities existing "immediately before" the transfer would be taken over by the new entities, which had no equivalent in the legislation on local government reorganisation in Wales. The judge also noted that a further reason for the outcome in Transco, namely that imposing liability upon a successor would falsify the basis on which the investing public were invited to subscribe for shares in British Gas plc, was absent from the case before him.
20. The judge accepted that a very wide reading of the word "liabilities" in the 1996 Order would be required in order to include liability under Part IIA of the 1990 Act which was brought into existence some five years after the creation of Powys. He also considered that the authorities cited on contingent liabilities had no application to the present case where the law in force at the time of transfer gave no basis for liability. Nevertheless, in his view the tenor of the 1996 Order was that the public should be able to look to Powys in this regard in precisely the same way as it had previously looked to Brecknock and should be in no worse position as a result of local government reorganisation.
21. Having concluded that Powys was an appropriate person under section 78F(2) of the 1990 Act, the judge did not accept the invitation of counsel for Powys to decline to exercise his discretion to grant the declaration sought. He found that there was a real and present dispute between the parties as to the extent to which the respondents were entitled to look to Powys as an "appropriate person" to carry out remediation works under the 1990 Act. There was a real and substantial risk that the site would be found to be contaminated land in the foreseeable future. There was no alternative remedy available to the applicants as no remediation notice had yet been served against which they could appeal under section 78L of the 1990 Act. Furthermore, the potential availability of the appeal procedure would not assist the respondents in deciding how to proceed in the interim in relation to potential liability.
22. On 25 November 2016 the judge granted permission to appeal to the Court of Appeal on the basis that the point of law he had determined was a novel one with substantial implications for local authorities in respect of responsibility for works to remedy contamination of land caused by predecessor authorities.

Grounds of appeal

23. Powys raises a single ground of appeal, namely that the conclusions reached by the judge on the law were wrong. In particular, it is said that the judge erred in holding that the word "liabilities" under article 4 of the 1996 Order encompassed liabilities arising under legislation which had not yet come into force.
24. Powys does not seek to appeal the judge's exercise of discretion in granting the declaration requested. However, it notes that it does not agree with the judge's conclusion that there is a "real and substantial risk" that the site will be found to be contaminated land in the foreseeable future.

The "Transco" case

25. The only authority on Part IIA of the Environmental Protection Act 1990 to which we were referred was Transco. There coal tar had been deposited underground at a gas works by successive private undertakings between 1915 and 1948. The gas industry was nationalised by the Gas Act 1948, which passed to a state owned utility all property, rights, liabilities and obligations of the previous undertaking. 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 … 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."

The utility stopped production at the site and in 1965 sold the land for housing. On privatisation of the industry, section 49(1) of the Gas Act 1986 provided:

"all the property, rights and liabilities to which the [BGC] was entitled or subject immediately before that date shall … become by virtue of this section property, rights and liabilities of … [the successor company] …"

After a series of corporate reorganisations in the 1990s, that part of British Gas plc's undertaking concerned with the transportation and storage of gas devolved on Transco plc ("Transco") (later renamed National Grid Gas plc), the appellant. Following the coming into force of Part IIA of the EPA 1990, in 2005 the Environment Agency notified Transco of its decision that Transco was the appropriate person in respect of the site. The House of Lords, reversing Forbes J., held that the definition of "an appropriate person" in section 78F(2) of the EPA 1990 was not wide enough to cover a successor to the business of the original polluter and that the references to "liabilities" in section 17(1) of the Gas Act 1948 and in section 49(1) of the Gas Act 1986 did not apply to liabilities arising under the amendments effected by the introduction of Part IIA of the EPA 1990.

Discussion

26. Part IIA was enacted on 19 July 1995. However, there followed a lengthy period of consultation and preparation of the necessary statutory guidance before it came into force in Wales on 15 September 2001. Once it was brought into force Part IIA introduced a new regime of strict liability for historic contamination under which liability can extend not only to the original polluter but also to a landowner or occupier other than the polluter. This regime is retrospective in the sense that it imposes liabilities in respect of acts done in the past which did not give rise to such a liability as the law stood at the time the acts were performed. Thus in Transco Lord Scott observed (at [19]) that the original undertakings would, if they had still been in existence, have been appropriate persons for section 78F purposes because they were polluters as a result of what they did between 1912 and 1948. It appears therefore that Brecknock would, in 2001 when Part IIA came into force in Wales, have been an appropriate person, if it had still been in existence at that date. However, while Part IIA creates liability now in respect of past conduct, it does not establish that such liability existed before Part IIA came into force. The point was made by Lord Hoffmann in Transco as follows (at [4]):

"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."

(See also Lord Neuberger at [33].)

27. Two principal questions arise for decision on this appeal. The first is whether the definition of "an appropriate person" within section 78F of the 1990 Act is wide enough to cover a successor of the original polluter. The second is whether the succession provisions contained in the Local Government (Wales) Act 1994 and 1996 Order made under it have the effect of imposing liability on Powys arising under amendments to the 1990 Act which came into force in 2001.

28. The definition of "appropriate person" in section 78(2) i.e. "a person … 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" cannot be construed so as to include Powys as successor of Brecknock. This flows from the natural meaning of the words of the provision and is, in any event, compelled by the reasoning of the House of Lords in Transco in relation to the same provision. The emphasis in section 78F (2) and (3) is on the actual polluter, the person who caused or knowingly permitted the pollution. Powys clearly does not fall into this category. (See Transco per Lord Scott at [20], Lord Neuberger at [34].)

29. The second issue for decision is whether in the circumstances of this case, Powys can be "an appropriate person" under Part IIA by virtue of the operation of the succession provisions in the 1994 Act and the 1996 Order. On behalf of Powys, Mr. Tromans QC accepts that had Brecknock still been in existence in 2001 when Part IIA came into force in Wales Brecknock would have been an appropriate person because of its previous conduct in relation to the site. However, he submits that Part IIA does not operate retrospectively in the sense that Brecknock must be deemed to have been under a liability before it ceased to exist. Accordingly, he submits that the case is on all fours with Transco where the House of Lords rejected the submission that the provisions of the Gas Acts could transfer to the successor body liabilities under Part IIA which did not exist at the dates of the successions brought about by those Acts.

30. For reasons stated earlier in this judgment, Mr. Tromans is, in my view, clearly correct in his submission that Part IIA does not operate retroactively so as to deem a predecessor body to have been under a liability which only arose under legislation which came into force after the predecessor body ceased to exist. In such circumstances, as Lord Neuberger pointed out in Transco (at [35]), very clear words would be needed if it were intended to impose on a successor body liabilities which were non-existent at the date of succession and only created later. We were referred to the provision in paragraph 3, Schedule 2 to the Water Act 1989, which was also referred to in Transco, as an example of a provision which would have such effect. Paragraph 3(2)(a) provides that for purposes connected with any transfers made in accordance with a scheme (including the transfer of rights and liabilities under an enactment) a body to which anything is transferred in accordance with the scheme is to be treated as the same person in law as the authority from which it is transferred. If Powys were required to be treated as the same person in law as Brecknock, it would be subject to the obligation first imposed after the succession and the demise of Brecknock. However, the succession provision in Article 4 of the Order with which we are concerned, which simply states that "all the property, rights and liabilities of the old authority shall … vest in that successor authority", is, in my view, nowhere near as extensive in its effect. On its face it is not effective to impose such a liability on the successor body.

31. The judge accepted that there had been no decided case where the word "liabilities" in the context of transfer orders had been held to include a potential liability arising from a change of law after the date of the transfer. Nevertheless, he gave three reasons for distinguishing Transco. First, he referred to the fact that the succession provisions in the Gas Act 1948 and the Gas Act 1986 both provided for the transfer of all the property, rights and liabilities to which the predecessor body was entitled or subject "immediately before" the vesting date. By contrast there are no equivalent words in the 1996 Order. Before us Mr. McCracken submits that this is an important distinction from the present case which justified the judge in departing from the approach in Transco. It is the case that all three members of the House of Lords who delivered speeches in Transco referred to the words "immediately before" in the 1948 Act and the 1986 Act. (See Lord Hoffmann at [4], Lord Scott at [20], Lord Neuberger at [35].) However, while this was supportive of their conclusions, I do not consider that it was essential to their reasoning. Lord Hoffmann (at [4]) considered that Part IIA did not create a deemed past liability for the acts of the predecessor. Lord Scott observed (at [20]) that very careful statutory language would be needed to impose on a company innocent of any polluting activity a liability to pay for works to remedy pollution caused by others to land it had never owned or had any interest in. Lord Neuberger considered (at [35]) that, given that the private undertakings had long ceased to exist by 1995, it could not sensibly be said that they had ever had even a potential liability to decontaminate the relevant land by virtue of Part IIA. He referred to the words "immediately before" qualifying "liabilities" as a consideration "over and above that". Moreover, it seems to me that the words "immediately before" merely serve to emphasise what must, in any event, be the usual position i.e. that the rights, property and liabilities which vest in the successor are those which are those vested in the predecessor prior to the transfer. As I have indicated above, if it is intended to transfer subsequently arising liabilities, clear words would be required to achieve that result.

32. Secondly, the judge placed considerable emphasis on the fact that in Transco the successor body was a company and not a public authority. It is correct that Lord Scott dealt with this (at [22]) pointing out that the attempt by the Environment Agency to cast the burden of paying for remediation works on Transco falsified the basis on which the investing public were invited to subscribe for shares in British Gas plc. Once again, I consider that while this is supportive of the reasoning of Lord Scott it is not essential to his conclusion. Lord Scott was here responding to a submission by Mr. Pleming on behalf of the respondent that since British Gas plc had had the benefit of the assets of the predecessor private undertakings, including presumably the proceeds of sale of the contaminated site, it was right and fair that its successor, Transco, should bear any liabilities relating to that site. Moreover, Lord Scott made clear that this was "an additional answer", his "immediate answer" being that the liabilities imposed on British Gas plc by the 1986 Act were the liabilities existing immediately before the date of transfer and those liabilities could not include subsequently arising liabilities. Accordingly, I do not consider this a satisfactory basis on which to distinguish Transco.

33. Thirdly, the judge considered that the whole tenor of the 1996 Order was that the public should be in no worse position as a result of the local government reorganisation. This approach was inspired by the observations of Woolf J. in Walters v. Babergh District Council (1983) 82 LGR 235. As will appear later in this judgment, however, that decision concerned a contingent liability and is therefore, in my view, distinguishable from the present case. While I entirely understand why the judge in the present case was motivated to come to a similar result, I consider that it is prohibited by the wording of the statutory provisions which are unambiguous. In these circumstances the judge was not entitled to give effect to what he considered to be the purpose of the legislation.

26. In the course of his submissions before us Mr. McCracken drew particular attention to the following passage in the speech of Lord Neuberger in Transco (at [35]):

"As to the second contention, the "liabilities" referred to in the 1948 and 1986 Acts, while plainly extending to contingent liabilities which existed at the time, cannot sensibly be interpreted as applying to liabilities which did not then exist, not merely in fact, but even in principle. Given that [the private undertakings] had long ceased to exist by 1995, it cannot sensibly be said that they have ever had even a potential liability to decontaminate the relevant land by virtue of the amendments to the 1990 Act effected in 1995."

Mr. McCracken then built a submission on the basis of this acceptance that "liabilities" includes contingent liabilities at the date of succession.

27. Mr. McCracken drew attention to a series of decided cases in which a successor body was held to have succeeded to a contingent liability. In Walters v. Babergh District Council (1983) 82 LGR 235, Melford District Council had in 1962 approved plans for the construction of a building. In 1974 all "liabilities" attaching to Melford were transferred by Article 16(3)(a) of the Local Authorities (England) (Property etc.) Order 1973 to the defendant council and Melford ceased to exist. The plaintiff purchased the building in 1976 and shortly thereafter it showed signs of subsidence and remedial work became necessary. The plaintiff sued the defendant council claiming damages for negligence or breach of statutory duty under the Public Health Act 1936 in approving plans which allegedly provided inadequate foundations. Woolf J. held that, although no cause of action accrued until damage had been suffered, the defendant council had succeeded to the contingent liability of Melford. He considered that the ordinary meaning of the word "liabilities" in article 16(3)(a) was capable of applying to contingent or potential causes of action and that such a reading undoubtedly accorded with the intent of the draftsman of the order to give the order a meaning which would be sufficiently wide to extend to such potential liabilities. In this regard he relied on the following passage from the judgment of Megarry J. in Bromilow & Edwards Ltd. v. Inland Revenue Commissioners [1969] 1 WLR 1180, a decision on revenue legislation.

"There is a further consideration, namely, the ambit of the word "liability". I refrain from any detailed attempt to explore the various possible meanings of this word. All that I need say is that I have looked at the entry under that word and under "liable" in Words and Phrases (1944) and in Stroud's Judicial Dictionary (1952), 3^rd Ed., and that it seems plain that "liability" is a word capable of some amplitude of meaning. I say this without discussing the meaning that that word bears in the celebrated classification in Hohfeld's Fundamental Legal Conceptions (1932), where it is the correlative of "power" and the opposite of "immunity". I do not think that the meaning of the word can be limited, as Mr. Heyworth Talbot would have me limit it, to a present, enforceable liability, excluding any contingent or potential liability. Used simpliciter, the word seems to me to be fully capable of embracing the latter form of liability, as in a surety's liability for his principal before there has been any default. … Given a choice, and, as it seems to me, a fair choice, I have no hesitation in choosing the interpretation which makes sense and makes this part of the subsection work, as against one that reduces it to dust. In any case, I consider that the meaning which I prefer is the primary and natural meaning of the words in the context in which they appear."

28. Walters v. Babergh District Council has been followed in the Court of Appeal of Northern Ireland and by both the Outer and Inner Houses of the Court of Session.
29. In Devine (a minor) v. Northern Ireland Housing Executive [1992] NI 72 a child was injured when he fell off the flat roof of a block of garages on the housing estate where he lived. In proceedings in negligence against the Housing Executive, the plaintiff alleged that the garages had been negligently designed by the Antrim and Ballymena Development Commission, the predecessor of the Housing Executive. The Court of Appeal of Northern Ireland held that the word "liabilities" in the legislation effecting the transfer of functions included inchoate and potential liabilities and therefore included the potential liability of the Commission in respect of the negligent design of the garage notwithstanding the fact that no actionable cause of action accrued until injury was suffered after the succession had occurred. Walters v. Babergh District Council was applied.
30. In Anton v. South Ayrshire Council [2012] CSOH 80 the pursuers averred that during the deceased's employment with Ayr County Council between 1948 and 1971 he had been exposed to asbestos dust. Ayr County Council ceased to exist as a result of local government reorganisation in 1975. The deceased developed mesothelioma but did not develop any symptoms until about October 2007. Lady Clark accepted that if the word "liabilities" in the statutory instrument effecting the transfer of functions was to be interpreted as referring to an existing cause of action in delict against Ayr County Council the successor would not be liable because there was no existing cause of action in delict at the transfer date as there was no coincidence of injuria and damnum. However, Lady Clark rejected the submission that the word "liabilities" in the order had the restricted meaning of liabilities which could be sued upon. In doing so she expressly agreed with the observations of Woolf J. in Walters v. Babergh District Council.
31. The facts of Bavaird v. Sir Robert McAlpine Limited and others [2013] CSIH 98 were very similar. It was alleged that the deceased, Mr. Bavaird, had been exposed to asbestos while employed by the East Kilbride Development Corporation between 1971 and 1974. The Corporation had been wound up and in 1995 and 1996 its assets and liabilities were transferred to South Lanarkshire Council. In 2007 Mr. Bavaird began to suffer symptoms of mesothelioma. The Inner House held that the contingent liability had been transferred by the 1996 transfer order which referred to "liabilities" without further defining that word. Lady Paton observed:

"[31] As for article 2 of the transfer order, the word "liabilities" is not defined, and is not used as a term of art or a technical term. I consider that the word "liabilities", properly construed, includes "potential liabilities" for the following reasons.

[32] The Oxford English Dictionary defines "liability" as "the condition of being liable or answerable by law or equity" and "liable" as, inter alia, "3a … likely to suffer from (something prejudicial)". The Chambers Dictionary defines "liability" as "the state of being liable" and "liable" as inter alia "exposed to a possibility or risk". In my opinion, these definitions, applied in the context of this case, mean that the "liabilities" being transferred include the possibility or risk of the transferee becoming responsible for the delayed development of industrial disease in employees who worked during an earlier period for the transferor. In other word, "liabilities" includes the possibility or risk that EKDC employees such as Mr. Bavaird might, post-transfer to the fourth defenders, develop mesothelioma due to pre-transfer exposure to asbestos."

In coming to this conclusion she expressly approved the reasoning of Woolf J. in Walters v. Babergh District Council in its entirety (at [34]). Lord Drummond Young and Lord Marnoch delivered concurring opinions.

32. The above line of authority may be difficult to reconcile with the decision of this court in Nash v. Rochford Rural District Council [1917] 1 KB 384, which does not appear to have been cited in Walters v. Babergh District Council. In Nash the plaintiff was injured on a highway for which the defendant was the highway authority. The plaintiff alleged that the accident was caused by the negligent construction of a drain and at the trial he succeeded on the basis of a contention that the drain had been constructed by the defendant's predecessors as the highway authority. The Court of Appeal, allowing the appeal, held that as there was no right of action for damages against a highway authority until actual damage had accrued, the preceding highway authorities were not under any liability which could be passed on to their successors. Moreover, on the true construction of the Acts of Parliament creating the successive highway authorities, there was nothing to make any such authority liable for acts of misfeasance committed by its predecessors. Scrutton LJ observed (at pp. 400-401):

"I cannot think that negligence not causing damage involves a "liability" in the ordinary legal sense, or in the sense of the interpretation clause, either a "liability to any proceeding for enforcing a duty" or "a liability to which any authority would but for this Act be liable or subject to whether accrued due at the date of the transfer or subsequently accruing." The latter words point to bills of exchange and similar obligations where a liability arises from acceptance accruing due at a future date. Indeed, as the definition of "liability" includes liability to punishment, it should obviously be construed strictly."

33. In the course of argument before us it was suggested that Nash may be distinguishable. In particular, we note that Nash was cited in Devine where the Court of Appeal of Northern Ireland distinguished it on the ground that the Court of Appeal in Nash regarded the word "liability" in the relevant legislation as meaning "legal liability" which could not arise until damage accrued. Hutton LCJ, by contrast, made clear (at p. 91G) his view that a liability can exist in the eyes of the law which is a contingent liability and not a legal liability. Moreover, he observed (at p. 92D-F) that in Nash the Court of Appeal was strongly influenced by the consideration that, at that time, a highway authority was not responsible for nonfeasance and that the court had considered that it was not the intention of Parliament to make a highway authority liable for an accident where that highway authority itself was not guilty of misfeasance but only on nonfeasance. Accordingly, the court had interpreted "liabilities" in such a way as not to make the successor council responsible in damages for a danger which it did not itself create.
34. I do not consider that it is necessary to come to a concluded view as to whether Nash is distinguishable in this way. Nash, Walters and Devine were all cited in Transco. In his speech in Transco, with which Lord Walker and Lord Mance agreed, Lord Neuberger made clear (at [35]) that contingent liabilities which existed at the time would be liabilities within the 1948 and 1986 Acts. Accordingly, had Part IIA been in force in 1996 when the transfer from Brecknock to Powys took place, I consider that Brecknock would have been subject to a contingent liability under Part IIA which would have passed to Powys under Article 4 of the 1996 Order with the result that Powys would be an appropriate person. In the course of his submissions, Mr. Tromans, very fairly, accepted as much.
35. The contingent liabilities which were the subject of Walters, Devine, Anton and Bavaird were all cases where the predecessor body had acted in breach of an existing duty but where no cause of action in tort accrued until damage was suffered. Such contingent liabilities must be distinguished from a situation where the predecessor body was under no relevant obligation at the time of the conduct of which complaint is made and where the legal obligations are imposed for the first time under a statutory scheme implemented only after the succession has taken place. This was the point made by Lady Paton in Bavaird (at [34]) where she observed of her conclusion that the successor body was bound by a contingent liability:

"Such a construction would not treat as negligent actings which were not so categorised in 1971-4 (contrast with the circumstances in R (National Grid Gas plc) v. Environment Agency [2007] 1 WLR 1780)."

36. Mr. McCracken submits, nevertheless, that in the present case Brecknock should be considered as having been under a contingent or potential liability in respect of Part IIA prior to the succession to Powys in 1996 because Part IIA was enacted in 1995, although it did not come into force in Wales until 2001. I am unable to accept this submission. Transco establishes that Part IIA does not operate retrospectively to create a deemed liability prior to its commencement. Part IIA came into force not when it was enacted but in accordance with its provisions for coming into force. (See Interpretation Act 1978, section 4.) Furthermore, an enacted statutory provision has only limited effect until it is brought into force. Section 13 of the Interpretation Act 1978 provides:

13 Anticipatory exercise of powers.

Where an Act which (or any provision of which) does not come into force immediately on its passing confers power to make subordinate legislation, or to make appointments, give notices, prescribe forms or do any other thing for the purposes of the Act, then, unless the contrary intention appears, the power may be exercised, and any instrument made thereunder may be made so as to come into force, at any time after the passing of the Act so far as may be necessary or expedient for the purpose—

(a) of bringing the Act or any provision of the Act into force; or

(b) of giving full effect to the Act or any such provision at or after the time when it comes into force.

Contrary to the submission of Mr. McCracken, I do not consider that prior to the coming into force of Part IIA Brecknock was under any contingent or potential liability comparable with those in the Walters line of authority. In particular, there was no power to create a liability by serving a notice under section 78E until Part IIA of the statute was brought into force. More generally, subjects of the law are entitled to regulate their affairs in accordance with those statutory provisions which have been brought into force.

37. Mr. McCracken drew attention to the fact that the "polluter pays principle" is the basis of many international instruments. He referred, in particular, to the Recommendation of the Council of the OECD on the Implementation of the Polluter-Pays Principle, 14 November 1974, C(74)223. In this regard he also relied on the statement by Lord Neuberger in Transco (at [28]) that the "uncontroversial underlying submission" on behalf of the Environment Agency in that case was that it is a cardinal general principle underlying the amendments made in 1995 to the Environmental Protection Act 1990 that "the polluter pays". However, to my mind this principle does not assist in determining the outcome of the present appeal. The principle is dependent on determining who is the polluter. If the transfer of liabilities under the 1994 Act and the 1996 Order is used to support a submission that Powys was the polluter, the argument based on the "polluter pays principle" becomes circular. Furthermore, as Transco itself shows, the means selected by Parliament to give effect to this new regulatory regime when combined with provisions governing succession may give rise to gaps in the scheme of responsibility. However, as Lord Neuberger pointed out (at [33]) whether, and if so, in what circumstances and on what basis, it would be right to extend the concept of a polluter paying is a matter of policy for the legislature, not for the courts.
38. Accordingly, I consider that at the date of succession Brecknock was not under any liability, whether accrued, contingent or potential in respect of Part IIA, which was capable of passing to Powys by virtue of Article 4 of the 1996 Order.

Further grounds

39. In the court below, the respondents advanced two further grounds on the basis of which they submitted that Powys was to be considered an appropriate person for the purposes of Part IIA. In the light of the conclusion to which he came on their principal submission, the judge did not address these further grounds in his judgment. The respondents rely on these further points as additional reasons to support the judgment.
40. First, the respondents rely on section 53(4), Local Government (Wales) Act 1972 to argue that acts done in pursuance of the statutory function to tip waste or the licence to tip waste held by Brecknock should be attributed to Powys. They submit that the tipping of waste on land was carried out by Brecknock in exercise of its statutory duty to arrange for the disposal of the controlled waste collected in its area as the relevant waste disposal authority. That duty passed to the appellant which became the relevant waste disposal authority on 1 April 2006. They submit that the tipping carried out by Brecknock therefore has effect as if done by Powys so far as required for continuing its effect. They submit that it is required to continue in order to give effect to the remediation responsibilities in Part IIA of the 1990 Act, which subsequently came into force and that the court should interpret it as so continuing its effect.
41. I am unable to accept this submission. As Mr. Tromans put it in his submissions, the purpose of section 53(4) is to ensure the continued validity of a local authority's decisions. It applies "so far as is required for continuing its effect". The subsection only applies where there is a need to ensure that the exercise of a function continues to have effect. The examples provided in section 53(5) make this clear. Thus section 53(4) applies, for example, to continuing the effect of decisions made, licences granted or notices given. By contrast, the tipping of waste is not required to continue its effect. This ancillary provision is clearly not intended to secure that everything done by a predecessor authority is deemed to have been done by the successor authority.
42. Secondly, Mr. McCracken advances an argument founded on the transfer from Brecknock to Powys of the licence to tip refuse. His submission runs as follows. Brecknock's licence to tip refuse on the land, which was in existence from 27 November 1987 until 27 November 1997, vested in Powys on 1 April 1996 as part of the vesting of property and rights in the successor authority. By virtue of section 53(7) of the 1994 Act, the references to Brecknock in the document would be deemed thereafter to be references to Powys. In this way Powys acquired the right to tip waste on the land. It is immaterial that it chose not to do so. Because the right to do so had vested in Powys the effect of Article 2(7) of the 1996 Order is that anything done by or in relation to Brecknock in connection with Brecknock's acts of tipping waste is required to be treated as if it had been done by or in relation to Powys. Accordingly, Powys is deemed to have caused the land to become contaminated under section 78F(2) of Part IIA of the 1990 Act since Brecknock's acts are to be treated as if they had been carried out by Powys.
43. I consider that this submission gives an impermissibly wide effect to Article 2(7) of the 1996 Order. The principal provision of the Order governing the transfer of liabilities is Article 4. Article 2(7) is merely an ancillary provision intended to secure that, where liabilities are transferred, anything done by the predecessor authority in relation to that liability shall continue to have effect as if it had been done by the successor authority. Thus, for example, a waiver or amendment by Brecknock of its rights under the licence would be treated as the act of Powys so that the rights and liabilities transferred would continue to be qualified in the same way. However, if Article 4 does not have the effect of transferring liabilities, Article 2(7) cannot be invoked as an independent means of securing such a transfer.

The terms of the tipping licences.

44. Finally, I draw attention to one matter which came to light in the course of argument of this appeal. Under the licence between the licensors and Brecknock dated 20 May 1974, Brecknock agreed, inter alia:

(vi) Not to do or suffer to be done in or upon the land any act or thing which shall or may be or become a nuisance, damage, annoyance or inconvenience to the Owners or their tenants or the occupiers of any of the adjoining property of the neighbourhood …"

The same clause appeared in the licence dated 12 December 1975 and, in almost identical terms, in the licence dated 27 November 1987. It may well be arguable that, in certain circumstances, this provision could have created a contingent liability on Brecknock to which Powys succeeded by virtue of the 1996 Order. However, as this falls outside the scope of the present appeal and as the matter was not fully argued before us, I say nothing further about it.

Conclusion

45. For these reasons I would allow the appeal.

LORD JUSTICE HAMBLEN :

46. I agree.

LORD JUSTICE HICKINBOTTOM :

47. I also agree.