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You are here: BAILII >> Databases >> High Court of Ireland Decisions >> Minister for the Environment and Local Government & Ors v. Irish Ispat Ltd. (In Voluntary Liquidation) & Anor [2004] IEHC 278 (29 July 2004)
URL: http://www.bailii.org/ie/cases/IEHC/2004/278.html
Cite as: [2005] 2 IR 338, [2004] IEHC 278
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- The vast bulk of environmental problems have been caused by
- If the order was made and complied with by the company the cost would be borne by the unsecured creditors. The effect of not allowing disclaimer is to hold the Company and the creditors responsible for conditions which have never been breached as there has been no production under the licence. If the order is not made, the necessary works will have to be carried out by the State which is the current and former owner of the site and the party primarily responsible for the pollution. The choice is not between forcing the polluter to pay or letting the polluter off.
- If an order is made the Company either will have to choose not to comply and be subject to sanctions or will have to take assets and apply a large proportion (or all) towards remedial work favouring the applicants at the expense of the creditors of the company and in breach of the statutory order of priorities under the Companies Act, 1963. It is inventing or creating the applicants as creditors and giving them a super-preferential status in circumstances where there is no debt owing by the company to the applicants and where they are not creditors of the company. In any event s. 58(4) deals with the consequence of non-compliance with an order. If an order is made and is not complied with then either the local authority or the EPA can carry out the works and recover the costs as a simple contract debt in any court of competent jurisdiction. However, it is probable such a debt would not be admissible to proof in a winding up since it was not a debt which existed at the commencement of the winding up. The net result would be of no effect. The order would be in vain and the court in its discretion should not make such an order.
[2004] IEHC 278
[2002 No. 270 COS]
IN THE MATTER OF IRISH ISPAT LIMITED (IN VOLUNTARY LIQUIDATION)
AND IN THE MATTER OF THE COMPANIES ACTS, 1963 TO 2001
AND IN THE MATTER OF AN APPLICATION BY RAY JACKSON, LIQUIDATOR, PURSUANT TO SECTION 290 OF THE COMPANIES ACT, 1963.
RECORD NO. 2003/94 SP
IN THE MATTER OF SECTION 58 OF THE WASTE MANAGEMENT ACT, 1996
AND IN THE MATTER OF AN APPLICATION BY THE MINISTER FOR THE ENVIRONMENT AND LOCAL GOVERNMENT AND THE MINISTER FOR DEFENCE AND THE MINISTER FOR COMMUNICATIONS, MARINE AND NATURAL RESOURCES
BETWEEN/
APPLICANTS
RESPONDENTS
Judgment of Carroll J. delivered the 29th day of July, 2004.
This case concerns two interrelated cases which were heard consecutively. The first concerns an application dated 27th June, 2002 by Ray Jackson, the liquidator of Irish ISPAT Ltd. (in voluntary liquidation) (the Company) for an order pursuant to s. 290 of the Companies Act, 1963 for leave to disclaim:
1. An indenture of lease dated 22nd May, 1996 between the Minister for Finance of the first part, the Minister for the Marine, of the second part and the Company of the third part, of part of Haulbowline Island, Cobh, Co. Cork and part of the foreshore and bed of the sea adjacent to Haulbowline Island as described in the Schedule and delineated on the map annexed to the lease.
2. An integrated pollution control licence, register 498, granted to the company on 2nd June, 2001 by the Environmental Protection Agency (EPA). The notice parties are the Minister for Finance, the Minister for Defence, the Minister for Communications, Marine and Natural Resources and the EPA.
The three Ministers were jointly represented and the EPA was separately represented.
When the application came on for hearing the Liquidator had operated a break clause in the lease and given three months' notice to the lessor to terminate under clause 36, effective 22nd May, 2003. The surrender of the lease was completed and the State had resumed possession of the premises leaving only the application to disclaim the pollution control licence to be dealt with.
The second application concerns a special summons issued on 27th February, 2003, by the Minister for the Environment and Local Government and the Minister for Defence and the Minister for Communications, Marine and Natural Resources against Irish ISPAT Limited (in voluntary liquidation) ("the Company") and Ray Jackson, ("the Liquidator") as respondents seeking orders pursuant to s. 58 of the Waste Management Act, 1996; firstly to discontinue the holding, recovery or disposal of waste on the lands comprised in the said lease within a specified time and to carry out certain works specified in the summons together with an order specifying the manner and time within which the works are to be carried out.
Secondly, to mitigate or remedy any effects of the said holding recovery or disposal of waste in manner and timeframes fixed by the court.
Thirdly, to put in place an effective ongoing monitoring examination and inspection system following mitigation or remediation to prevent future occurrence of environmental pollution.
Section 209 Companies Act, 1963 Application
The Company was formerly known as Irish Steel Limited. It owned and operated a steel manufacturing plant at Haulbowline, Cobh, Co. Cork, having acquired the business which was carried on at the plant since 1937 by another company, also called Irish Steel Limited. On 30th May, 1996 following a sale of the shares in the Company by the Minister for Enterprise and Employment to ISPAT Mexicana SA de CV, the name of the Company was changed to Irish ISPAT Limited. The Company occupied the property demised in part I of the Schedule to the lease under a demise dated 22nd May, 1996 from the Minister for Finance and the premises described in part II of the schedule under a demise from the Minister for Marine. Under this lease the Company surrendered to both lessors certain prior leases and foreshore lease in consideration of which (inter alia) the property described in the schedule was demised to the company.
Each demise was for a term of thirty five years from 22nd May, 1996. Under the lease the rent was reviewed every five years. The rent in respect of the property demised by the Minister for Finance was increased from £16,842.00 to £25,263.00 per annum on 22nd May, 2001. The rent for the property demised by the Minister for the Marine increased from £3,158 to £4,737 p.a. from 22nd May, 1996.
Clause 36 of the lease provided:
"At the expiration of seven years from the date hereof and every seventh year thereafter the lessee shall be entitled to terminate this lease on giving to the first Minister and the second Minister not more than six months' and not less than three months' written notice such notice to expire at the end of the said initial seven year or subsequent seven year periods provided always that such termination shall be without prejudice to the liabilities of either party which have accrued before date of termination."
This break clause was operated by the liquidator on 21st May, 2003 after the s. 290 application was brought. It was the first opportunity the Company had to terminate in accordance with condition 36. The termination was accepted and the State is now in occupation of the demised property.
The financial position of the Company was estimated by the Directors in their statement of affairs to show a deficiency as regards creditors of €36,869,131. While the Liquidator has realised the majority of the assets leaving some more assets to be realised, he expects the overall deficiency to be higher than that estimated by the directors.
On 22nd June, 2001 the EPA issued an integrated Pollution Control Licence (IPC licence) to the Company to carry on the "initial melting or production of iron or steel" subject to fifteen conditions with the reasons as set out in the schedule attached thereto. The Liquidator in his grounding affidavit sets out what he considers is a summary of the relevant conditions, as follows:
"Condition 2
Management of the activity
The Company is obliged to establish and maintain an Environmental Management System ("EMS") fulfilling the requirements of the Licence. The EMS should assess all operations and review all practicable options for the use of cleaner technology, cleaner production and the reduction and minimisation of waste. The minimum elements required to be included in the EMS are set out in this Condition and include such matters as a Schedule of Environmental Objectives and Targets, Environmental Management Programme, a Pollution Emission Register, the establishment of a Documentation System, Corrective Action, Awareness and Training, appointment of a person in charge and the establishment of a program to ensure that members of the public can obtain information concerning the environmental performance of the Company at all reasonable times.
Condition 3
This stipulates the parameters for defining such matters as Emission Limit Values for emissions to the atmosphere and to waters and the manner by which monitoring will be evaluated.
Condition 4
Notification
This condition stipulates the categories of events which must be notified to the EPA, including such matters as release of environmental significance to atmosphere from any potential emission point, emissions not complying with the requirements of the Licence, malfunctions or breakdown of control equipment or monitoring equipment, incidents with the potential for environmental contamination of surface water or ground water, the maintenance of a record of incidents etc.
Condition 5
Emissions to Atmosphere
This condition contains detailed restrictions on the levels of emission to the atmosphere and prohibit any other emission to the atmosphere of environmental significance. It also requires the establishment and maintenance of a test program for such emissions.
Condition 6
Emissions to Water
This condition stipulates limits on specified emissions to water and requires the maintenance of a program for the control and maintenance of abatement equipment.
Condition 7
Waste Management
The Licence requires that disposal or recovery of waste should take place only as specified in the detailed schedules to the Licence. It requires that the disposal of hazardous waste by onsite land filling shall discontinue from the date of grant of the Licence. This condition also requires the Company to carry out a topographical survey of the landfill site to be submitted to the EPA, such survey to be repeated annually. The Company is required within six months of the date of the grant of the Licence to prepare a Landfill Operational Plan to be submitted to the EPA for agreement. Within twelve months the Company is required to submit to the EP A for agreement a Landfill Decommissioning Plan. The Company is required to carryout a biological assessment of the harbour sediments adjacent to the landfill. This condition requires construction of a rock armour faced sea wall as detailed in Planning Permission S/97/4031 issued by Cork County Council to be started within twelve months of the date of grant for the Licence and completed within five years.
Condition 8
Noise
This condition governs noise emissions and requires certain noise abatement
measures to be implemented as set out in "the Foster Wheeler report dated 9 June 1997 in the IPC application".
Condition 9
Non process water
This condition requires a visual examination of the surface water discharge to be carried out weekly and a log of such inspections to be maintained. The Company is required to prepare a program to reduce contamination of surface water from this site. This program is to be submitted to the EPA within twelve months of the date of grant of the Licence.
Condition 10
Energy Use
The Company is required to carry out an audit of the energy efficiency of the
site within one year of the date of grant of the Licence.
Condition 11
Monitoring
The Company is required to carry out sampling, analysis, measurements, examinations maintenance as set out in the Schedules to the Licence and this condition deals extensively with the types of monitor points and sampling requirements required.
Condition 12
Recording and Reporting to the Agency
The Company is required to record all sampling analysis, measurements, examinations, calibrations and maintenance carried out in accordance with the requirements of the Licence. The Company is required to record all incidents which effect the normal operation of the activity and which may create an environmental risk. All complaints must be recorded and a monthly report must be made to the EP A of complaints. Records required to be maintained under the Licence must be kept for a period of not less than 7 years.
Condition 13
Accident Prevention and Emergency Response
The Company is required within six months of the date of grant of the Licence to put in place an Accident Prevention Policy, and an Emergency Response Procedure. Each of these is required to be reviewed annually and updated as necessary and to be available for inspection by the EPA.
Condition 14
Residuals Management
The Licence provides that following termination or planned cessation for a period greater than six months of the licensed activity the Company should to the satisfaction of the EP A decommission render safe or remove for disposal/recovery any soils, sub-soils, buildings, plant or equipment or any waste materials or substances that may result in environmental pollution. The company is required to prepare to the satisfaction of the EPA a fully detailed and costed plan for the decommissioning of closure of the site or part thereof. This plan must be submitted to the EPA for agreement within three months of the date of grant of the Licence.
Condition 15
Financial Provision
The Company is required to pay to the EPA an annual contribution of £29,692 or such sum as the EP A from time to time determines toward the cost of monitoring the activity. The Licence contains provision for this amount to be indexed in accordance with the public sector average earning indices. This provision also requires the Company to arrange for the completion by an independent and appropriately qualified consultant of a comprehensive and fully costed Environmental Liabilities Risk Assessment for the whole site which will address liabilities from past and present activities. The report on this assessment must be submitted to the EPA within six months of the grant of the Licence and within eighteen months of the grant of the Licence the Company is required to make financial provision in a form acceptable to the EPA to cover any liabilities incurred by the Licensee as a consequence of environmental pollution arising at the site. The amount of this indemnity must be capable of covering all of the liabilities identified in the Environmental Liabilities Risk Assessment."
The Liquidator does not say the conditions are inappropriate to the nature of the activity carried on by the Company prior to his appointment or that they are unfair but he points out that licence was granted after the Company had ceased production and after it had on 15th June, 2001, issued notices to all creditors convening the statutory meeting held on 22nd June, 2001 to commence the winding up of the Company. He says the cost of compliance with these conditions cannot be met by the Company. He believes the Company's interest in the licence constitutes property which is either unsaleable or not readily saleable by reason of binding the Company to the performance of the onerous conditions. Accordingly, the application under s. 290 is to disclaim the licence.
In a replying affidavit Mr. Kieran O'Brien of the EPA states that application for the licence was made on 9th June, 1999 in respect of the activity of "the initial melting or production of iron or steel". This had been carried on by the company since around 1935. As such it was an "established activity" at the time of the coming into force of the Environmental Protection Agency Act, 1992 (EPA Act, 1992). Under s. 82 a person carrying out that activity was permitted to carry out the activity pending the grant of an IPC licence. He also says that the Company had not ceased production on 22nd June, 2001. Two inspectors visited the plant on 22nd August, 2001. The steel mill was in operation processing unfinished material. He was informed the processing would continue until 24th August, 2001.
He claims the court should not permit the disclaimer of the licence by the Liquidator on behalf of the Company except in circumstances where clear provision is made for the enforcement of the condition attached to the licence so as to ensure the environmental pollution which has been caused by the activity the subject of the licence will be contained and remediated. He says he is advised that there is no statutory provision under which an IPC licence may be disclaimed. He also refers to s. 32 of the Waste Management Act, 1996 prohibiting the transfer of control of waste to any person other than an "appropriate person", i.e. a local authority or a person licensed.
In a replying affidavit on behalf of the Minister for Communications, Marine and Natural Resources, Mr. Adam Cronin, a Chartered Engineer in the Department, refers to the serious environmental issues arising from the activities of the Company. The State retained Enviros Aspinwell, Environmental Consultants, of Shrewsbury, England to undertake an investigation and assessment of the premises at Haulbowline to ascertain the types and levels of contamination present on the site and to make recommendations as to the possible site remediation options available. The report was completed and the cost estimates for environmental management are estimated at 30 million euro with 15.95 million euro attributable to the actions of the Company. He said that it is intended that proceedings will be issued under ss. 57 and 58 of the Waste Management Act, 1996 (as amended) for relief in respect of environmental pollution and/or risk of environmental pollution caused or likely to be caused at Haulbowline.
He refers to and exhibits four different agreements concluded at the time of transfer of shares:-
1. Agreement for sale of the share capital, 6th September 1995.
2. Lease 22nd May, 1996.
3. Supplemental Agreement for sale of the Share Capital, 13th May, 1996.
4. Deed of Rectification, 27th November, 1997.
Under the agreement of 6th September, 1995 the Minister for Finance agreed to make a capital contribution of £2,360,000 towards environmental works to be undertaken by the Company. The purchaser agreed to procure the Company would spend £2,360,000 on environmental work as soon as practical after completion. The supplemental agreement amended this to spending £2.4 million on "environmental management" over a six-year period.
He states the disclaimer sought for the IPC licence is a matter for the EPA. The Company has other obligations under environmental legislation, in particular Waste Management Act, 1996. Even if the disclaimer were permitted the Company would still have continuing obligations under the 1992 Act and the Waste Management Act, 1996.
With regard to the statement of affairs he says that although there are significant debts including £30,146,664.00 payable in shareholders' loans and advances, there are also assets of £21,851,665.00. He said the total deficiency is £36,869,131.00.
The Minister for the Environment and Local Government, the Minister for Finance, the Minister for Enterprise, Trade and Employment, the Minister for Communications, Marine and Natural Resources and the Minister for Defence have issued a plenary summons against Irish ISPAT Limited (in liquidation), Ray Jackson, Liquidator, ISPAT Mexicana SA de CV and ISPAT International NV on the 21st May, 2003 claiming (inter alia) damages for nuisance, negligence, breach of statutory duty and for the escape of deleterious matter and breach of contract.
Peter Young of Enviros Aspinwell is one of the authors of the report of October 2002. He says in his affidavit that unless the steps recommended in the report are undertaken, he considers there is a serious risk that environmental pollution will continue to occur and/or is likely occur in the future.
In a supplementary affidavit the Liquidator refers to the Enviros Aspinwell report. He says that as Liquidator it is not his lawful function nor does he have lawful authority to apply the realised assets of the Company to the cost of undertaking a rehabilitation of the site or remedying breaches of covenants and conditions. However, he had undertaken certain essential works to avoid injury or damage and to ensure the safety of the site. He points out that steel making had been carried on at the premises for a period exceeding sixty years and the current condition derives from that extended period of production. He claims that it would be unfair to the creditors as of 28th June, 2002 if they were to suffer the burden of the cost of undertaking works necessary to rehabilitate the site. The purpose of s. 290 is to enable the Liquidator to disclaim onerous property in the best interests of the creditors of the Company. He deals with matters relevant to the lease, the disclaimer of which is no longer in issue except to say that the precise extent of the onerous nature of the lease may be relevant to damages provable in the winding up under s. 290 (9) of the 1963 Act.
He also refers to the agreements with Irish ISPAT Mexicana SA for the purchase of shares exhibited by Mr. Cronin whereby the purchaser committed to procure the Company would conduct certain environmental work. He says that he is not aware of any basis why a failure of a shareholder to comply with his commitments could deprive a liquidator of the right to avail of s. 290.
He disputes Mr. Cronin's estimate that the assets available are £21,851,665.00 (€27,745,891.13). He says net receipts to date amount to €25,540,000.00 of which €10,184,000.00 was in respect of trade debtors, the subject of a debenture containing a fixed charge on such debts and was paid directly to the company entitled. He says it is the creditors not the Company which will benefit by the making of an order under s. 290.
He refers to a pending application under s.280 of the Companies Act, 1963 for a determination whether claims by former employees for damages enjoyed preferential status. If they did not he estimated there would be a small dividend paid to unsecured creditors of the Company. (It was subsequently determined in the High Court in the Liquidator's favour, that such claims did not enjoy preferential status.)
With regard to the granting of the licence, he says he does not understand why the EPA issued the licence when a liquidation of the Company was imminent and had been announced and it was clear that the conditions in the licence could not be complied with by the Company. The Company has ceased production prior to the grant of the licence. Arrangements were put in place on 15th June, 2001 for the closure of the plant. He undertook some production operations for two weeks in August, 2001 in order to complete certain works in progress.
With reference to the provisions of the Waste Management Act, 1996, he is advised that if the court grants the disclaimer order the effect of that order and of the disclaimer will be to determine all rights, interests and liabilities of the Company in the property the subject of the lease and thus the respondent Ministers will come into possession of the relevant material.
In a second supplemental affidavit the Liquidator refers to the notice served by letter of 21st February, 2001, exercising the right under clause 36 of the lease to terminate the lease at the expiration of seven years from the date thereof. As a consequence of an application for an interlocutory injunction made by the lessors, the liquidator did not vacate the site until 18th June, 2003.
He also refers to a letter to the EPA dated 6th June, 2003 giving notice that the legal interest of the Company in Haulbowline Island had reverted to the lessors and that the notice was given without prejudice to his rights to disclaim the IPC licence pursuant to s. 290 of the Companies Act.
Lastly, Mr. Dara Brathnach of the Department of Environment, Heritage and Local Government on behalf of the respondent Ministers exhibited audited accounts to the 31st December, 1999 showing advances from parent/associated companies of the Company of £11.653 million and an advance against equity from the parent undertaking of £10 million. In addition, monitoring reports submitted show shareholders' loan of £17.45 million and a shareholder advance against equity of £12.7 million totalling £30.1 million.
Details of loans and other information made by the parent company to the Company were sought by letter of 21st October, 2003 and a reply received from the liquidator's solicitors on 11th November, 2003. The request was not made in the context of discovery and was not further pursued.
Section 58 of the Waste Management Act, 1996 Application
The grounding affidavit of Geraldine Tallon, made on behalf of the applicants, refers to the application by the Liquidator under s. 290 of the Companies Act, 1963 and exhibits documents in those proceedings. She also refers to the report from the environmental consultants Enviros Aspinwell of Shrewsbury, England (This report is exhibited in the affidavit of Peter Young). Ms. Tallon avers that it appears from the report that there is serious environmental pollution at the site in Haulbowline as a result of holding, recovering or disposing of waste by the respondents and that there are a number of steps that must be taken in order to ensure discontinuance of, and remediation and mitigation of, environmental pollution at Haulbowline in respect of that part of the site formerly occupied by the Company and prays for the relief sought in a special summons.
The relief sought in the summons is as follows:
A) An order pursuant to s. 58 of the Waste Management Act, 1996 that the Defendants discontinue the said holding, recovery or disposal of waste on lands being leased by the first named defendant and in the control of the second named defendant, situated at Haulbowline Island, Cork Harbour, in the County of Cork, within a specified period that may be fixed by this Honourable Court and in particular that the defendants carry out the following works:
(a) disposal of radioactive scrap and sources;
(b) disposal of radioactive sources;
(c) demolition of contaminated buildings;
(d) rectification of the drainage system and removal of hazardous or contaminated materials from the drainage system;
(e) electrical HVL demolition and disconnection and dielectric fluid removal (PCBs);
(f) remediation of main steelworks at site to manage contaminated land and water liability;
(g) remediation of East Tip site where steelworks waste has been tipped and which may contain, inter alia, hot spots such as PCBs and possibly low levels of radioactivity;
(h) remediation of other areas of the steelworks site such as East Camber and South Tip.
B) An order pursuant to s. 58 of the Waste Management Act, 1996 that the defendants mitigate or remedy any effects of the said holding, recovery or disposal of waste on lands being leased by the first named defendant and in the control of the second named defendant situated at Haulbowline Island, Cork Harbour in the County of Cork in such manner and within such a timeframe as may be fixed by this Honourable Court, including those works set out above at paragraph A.
C) An order directing the defendants and each one of them by themselves or through their servants or agents to take such steps as are necessary and/or as this honourable Court shall direct, to put in place an effective, on-going monitoring examination and inspection system following mitigation or remediation of the effects caused by the holding, recovery and disposal of waste on the said lands situated at Haulbowline Island, Cork Harbour in the County of Cork so as to prevent any further occurrence of environmental pollution.
D) Interim interlocutory relief. (No longer relevant.)
In his replying affidavit the Liquidator repeats the history of the steel manufacturing plant at Haulbowline and says that following the sale on 30th May, 1996 to ISPAT Mexicana SA, the Company carried on business for approximately five years. He refers to his appointment as Liquidator on 28th June, 2001.
He denies that he is the "holder" of any "waste" within the meaning of the Act and claims that the proceedings against him are fundamentally misconceived. Insofar as relief is sought against the Company he claims it would be wholly inappropriate as being seriously prejudicial to the creditors of the Company and their prospect of recovery in the winding up.
He refers to the notice of termination of the lease under Clause 36 on 21st February, 2002.
In relation to the report from Enviros Aspinwell says that while there are some aspects of the report which he believes are not accurate, he accepts that the report broadly reflects the current condition of the site. The report also identifies the works advised to be undertaken if the site were to be environmentally rehabilitated to the fullest extent. The time limit is identified as extending to year 2006 at the earliest and further works to be conducted thereafter. The cost of such works is estimated at £30 million. It is being contended that the Company is responsible for £15.95 million. He says it is not clear the basis on which the consultants allocated costs as between the State and the Company.
He sets out what he has done in the progress of liquidation. He says he does not believe it is his duty or obligation as liquidator under the Act or otherwise and is not in a position to conduct the works referred to by Ms. Tallon and that is why he brought the application to disclaim the lease and the IPC licence. To take this step would seriously prejudice the interests of the creditors of the Company and could not be considered to be within the duties and obligations of liquidator.
He sets out the financial position of the Company at that time. The net receipts amount to €26,000,294.00, of which €10,000.284.00 in respect of trade debts, the subject of a debenture containing a fixed charge in favour of ITSPC plc which was paid directly to the bank.
The estimated net liability is €20,000.000.00.
He refers to the claim for determination of the status of claims by former employees in respect of hearing loss which since the hearing of this case, has been determined in the High Court in favour of the Liquidator.
If he is not permitted to disclaim the lease and the IPC licence and if he is obliged to carry out the works referred to in Ms. Tallon's affidavit, there will be insufficient funds to do so and any potential dividend which might be available for the creditors of the Company will be lost.
In a supplementary affidavit sworn on 30th November, 2003, the Liquidator updates the position. He says he applied to the Radiological Protection Institute of Ireland (RPII) for a licence to transport eleven radioactive sources of caesum from the property held under the lease since it was terminated to Rocky Island, the freehold property of the Company. The licence was granted on 26th May, 2003 and the sources were transported to Rocky Island on 5th June, 2003 as confirmed by letter dated 9th June, 2003 by RPII. Further applications were made to RPII to vary or amend the terms of licence. He confirms that all of the radioactive material previously in Haulbowline was removed to Rocky Island. Some has been exported in accordance with export licences issued by RPII. There are only nine Radium 226 radioactive sources and one other source still present on Rocky Island which are held in secure storage on terms licensed by RPII. He says he believes there is no activity conducted on Rocky Island which otherwise requires to be licensed either by the EPA or by the RPII.
Statutory Provisions
The statutory provisions relevant to the issues in this case are:
(A) Section 290(1) of the Companies Act, 1963 – "Subject to sub-sections (2) and (5), where any part of the property of a company which is being wound up consists of land of any tenure burdened with onerous covenants, or shares or stock in companies, of unprofitable contracts, or of any other property which is unsaleable or not ready saleable by reason of its binding the possessor thereof to the performance of any onerous act or to the payment of any sum of money, the liquidator of the company, notwithstanding that he has endeavoured to sell or has taken possession of the property or exercised any act of ownership in relation thereto, may, with the leave of the court and subject to the provisions of this section, by writing signed by him, at any time within twelve months after the commencement of the winding up or such extended period as may be allowed by the court, disclaim the property."
(B) Section 290(9) of the Companies Act, 1963 – "Any person damaged by the operation of a disclaimer under this section shall be deemed to be a creditor of the company to the amount of the damages, and may accordingly prove the amount as a debt in the winding up."
(C) Section 284 of the companies Act, 1963 – "In the winding up of an insolvent company the same rules shall prevail and be observed relating to the respective rights of secured and unsecured creditors and to debts provable and to the valuation of annuities and future and contingent liabilities as are in force for the time being under the law of bankruptcy relating to the estates of persons who are judged bankrupt, and all persons who in any such case would be entitled to prove for and receive dividends out of the assets of the company may come in under the winding up and make such claims against the company as they respectively are entitled to by virtue of this section.
(D) Section 3 of the Bankruptcy Act, 1988 "'Property' includes money, goods, things in action, land and every description of property, whether real or personal and whether situated in the State or elsewhere; also obligations, easements, and every description of estate, interests and profit, present or future, vested or contingent, arising out of or incident to property as above defined."
(E) Section 58(1)(a) of the Waste Management Act, 1996 "Where, on application by any person to the appropriate court, that court is satisfied that another person is holding, recovering or disposing of, or has held, recovered or disposed of, waste, in a manner that is causing, or has caused, environmental pollution, that court may make an order requiring that other person to do one or more of the following, that is to say:
(i) to discontinue the said holding, recovery or disposal of waste within a specified period, or
(ii) to mitigate or remedy any effects of the said holding, recovery or disposal of waste in a specified manner and within a specified period.
Submissions by the Liquidator in the s. 290 application
The liquidator's arguments are:-
The IPC licence granted on 22nd June, 2001 was granted at a time that the licensed activity had ceased apart from very limited works carried out to finish work in progress from 13th August, 2001 to August 24th, 2001 to enable it to be sold as part of the winding up. The conditions which were attached to the IPC licence were onerous, in particular a requirement to start construction of a sea wall within twelve months to be completed in five years from the date of the licence at an estimated cost of £25million.
The liquidator claims the licence is property which is onerous property and if he is permitted to disclaim it would facilitate him in bringing the liquidation to a speedy conclusion (Tempany v. Royal Liver Trustees [1984] I.L.R.M. 273). The liquidator was appointed in a creditors' voluntary winding up for the purposes of winding up the affairs of the company and distributing the assets of the company (s. 267(1)). He was not empowered to carry out the licensed activity.
The liquidator claims that as there is no definition of "property" in the Companies Act, 1963 it is governed by s. 290 of the Bankruptcy Act, 1988 by virtue of s. 284 of the Companies Act, 1963. This provides the same rules shall prevail relating to the respective rights of secured and unsecured creditors and to debts provable as are in force for the time being under the law of bankruptcy.
Under the definition section of the Bankruptcy Act, 1988 "property" includes "every description of property" and also "obligations".
"Obligations" must include the clear up obligations under this licence.
The liquidator submits the property is property which is unsaleable or not readily saleable.
In the English case of In Re Celtic Extraction Limited (2001) C.H. 475 the Court of Appeal reversed the decree of the Company Court judge (Neuberger J.) who permitted a liquidator to disclaim a waste management licence under the Environmental Protection Act, 1990. The English Insolvency Act, 1986, s. 178 differs from s. 290 of the Companies Act, 1963. There sub-s. 6 defines onerous property as including "any other property of the company which is unsaleable or not readily saleable or is such that it may give rise to a liability to pay money or to perform any other onerous act".
The liquidator disputes that the licence must be transferable as held by the Court of Appeal. There is a transfer mechanism contained in s. 40(1) of the U.K. Environmental Protection Act, 1990 whereby the statutory authority effects a transfer to the proposed licencee under s. 90(2). Under s.91(2) of the 1992 Act, a person carrying on a licensed activity who transfers his interest in the activity to another person merely notifies the EPA of that fact and the benefit automatically transfers as the grant of a licence (s. 91(1)) enures for the benefit of the activity and of all persons for the time being interested therein.
It is common case that the licence is site specific and cannot be sold independently from sale/transfer of some interest in the activity itself. But that does not mean that the licence is incapable of sale. The issue of whether an IPC licence is saleable property within the meaning of s. 290 is not dependant on whether the activity has ceased or not. The purchaser who acquired an interest in the activity in question will automatically get the benefit of the licence.
The liquidator submits the reason the licence is not readily saleable is because anyone who seeks to acquire an interest in the business of manufacturing steel and thus acquiring the benefit of the licence will incur a liability to the State of £30million.
The liquidator submits that the case of The State (Pheasantry) v. Donnelly [1982] I.L.R.M. 512 at 515 is not authority for the proposition that a licence is not property but rather that it is authority for the proposition that a licence cannot be regarded as property capable of separation from the premises themselves. That is not to say a liquor licence is not property.
As to whether the court's discretion should be exercised in allowing the liquidator to disclaim, the arguments against permitting disclaimer are set out in the s. 58 proceedings. If not allowed, the liquidator will be forced to apply the assets of the company in a manner not provided for in the Companies Acts for the distribution of assets on a winding up.
While Neuburger J. in The Mineral Resources case referred to the polluter must pay, that would not be the case here. The assets of the company belong to the creditors to be paid to them pari passu.
The argument is advanced by the EPA that the court should not exercise its discretion to allow the disclaimer because the 1996 Act is an Act brought in to fulfil the State's requirement under the European Communities Integrated Pollution and Control Directive, 96/61/E (the Directive) and therefore should be given preference over the Companies Acts provisions in a winding up.
The EPA submitted that s. 90 of the 1992 Act, contemplated that a licence would cease only if the activity to which it relates has ceased for a period of three years. Therefore any disclaimer which terminates the licence would be contrary to
s. 90 which provides that a licence will terminate if the activity has not commenced within three years of the grant or has ceased for three years. The liquidator argues that s. 90 does not provide that these are the only circumstances. He suggests that the 1992 Act can be reconciled with the companies legislation by permitting s. 260 of the Companies Act to operate as a separate ground for termination.
The liquidator rejects the suggestion that the expense which would be incurred in compliance with the IPC licence could be regarded as "costs, charges and expenses properly incurred in the winding up" as referred to in s. 281. He says the charges are not something incurred in the winding up itself or by any act of the liquidator. He submits it is impossible to view the costs of complying with the licence as costs or expenses properly incurred in a winding up within the meaning of s. 290.
The liquidator has not taken over or adopted the licence for the benefit of the liquidation so it is impossible to view the costs of complying with the licence as costs, charges or expenses properly incurred in a winding up within the meaning of s. 281 of the Companies Act, 1963.
He refers to the submission of Mr. O'Brien on behalf of the EPA in his affidavit of 18th September, 2002 that disclaimer should not be permitted unless clear provision is made for the enforcement of the conditions attached to the licence so as to ensure environmental pollution caused by the activity the subject of the licence will be contained and remediated.
The liquidator points out that the EPA can under s. 90(2) extend the period of three years after the cessation of the activity. Also the liquidator might be exposed personally to a criminal prosecution under s. 5(8). The EPA suggests that to permit s. 290 to operate would be contrary to Article 3 of the Directive to take necessary measures upon definitive cessation of activities to avoid any pollution risk. This is associated with "the polluter pays" principle. The Liquidator claims this is not a choice between the polluter pays or the State pays – it is whether the unsecured creditors pay.
Morritt L.J. in the Celtic Extractions case says there is nothing in the Directive to suggest that the "polluter pays" principle is to be applied to the case where the polluter can not pay so as to require the unsecured creditors of the polluter should pay to the extent of the assets available for distribution among them.
A further factor is that the licence was granted only after notices were issued to put the Company into liquidation. Also the question arises as to the extent to which the Company can be liable for pollution which was not in breach of any condition of the licence. Except for a tiny amount of work done to finish a small amount of product after the commencement of the liquidation, virtually no activity was carried on by the Company.
Submissions by the EPA on the s. 260 application
Having set out the statutory scheme under the 1992 Act, it is submitted on behalf of the EPA that the licence does not fall within any categories of property listed in s. 290. In particular it is not property which is unsaleable or not readily saleable by reason of its binding the possessor thereof to the performance of any onerous act or the payment of any sum of money.
It is submitted that an IPC licence is a creature of regulatory law and does not amount to property. It neither confirms a right nor takes it away but merely regulates the exercise of the right. The EPA quotes The State (Pheasantry) v. Donnelly, [1982] I.L.R.M. 512 as authority for a proposition that a licence cannot be regarded as property. The EPA distinguishes the English cases, Re Celtic Extraction Ltd. 2001, CH 475 and Re Mineral Resources, 1 A.E.R. 746 and also the difference between the English and Irish statute law.
Even if the IPC licence constitutes property within the meaning of s. 290 it does not constitute onerous property as defined by that section.
An IPC licence must have two characteristics: it must be prima facie saleable and it must be unsaleable by reason of binding the possessor to the performance of any onerous act or to the payment of any sum of money.
It was submitted that it is not prima facie saleable. The licence has no existence independent of the activity to which it relates. The only way it can be transferred is if the activity is transferred.
There are two types of conditions: one relates to activities while ongoing and, when the activity has ceased, the "mop-up" conditions will be operable.
Under s. 90, if the activity has ceased within three years the licence ceases to have effect. Under s. 91(1) the licence enures for the benefit of the activity and all persons for the time being interested. Therefore it might be said the licence is transferable and presumably capable of attracting a value.
But it is not possible to transfer independently of the activity: therefore the licence is not prima facie saleable within the meaning of s. 290. The licence is site specific. The liquidator cannot sell a licence independently of the activity. If sold as a going concern the sale price would reflect the value of the licence. It is not independently saleable. It is not unsaleable by reason of onerous acts or payment of money. The licence is inextricably linked to the activity. It is unsaleable by reason of the fact that the activity has ceased. Therefore it cannot be transferred.
The EPA submits the court should refuse to exercise its discretion to allow disclaimer of the licence. The 1992 Act and the Companies Acts are self contained codes. The right of disclaimer can exist only if specifically included in the 1992 Act or specifically referred to in the Companies Acts. There are no such provisions.
Section 90 of the 1992 Act contemplates that the licence will cease only if the activity to which it relates has ceased for a period of three years, therefore any disclaimer which terminates the licence will be contrary to the statutory scheme set out in the 1992 Act. Insofar as there is any conflict between the provisions of s. 290 of the Companies Act, 1963 and the 1992 Act, the court ought to give precedence to the latter.
Further the court ought to have regard to the principles set out in the Directive and ought to adopt the interpretation of Irish law which would give the greatest effect to the polluter pays principle and to the protection of the environment provided for by licences granted under the 1992 Act.
If the liquidator has to expend money it is as costs in the liquidation. He is not paying to a creditor. Section 84(3) of the 1992 Act provides the Agency may recover any payment due to it from a condition attached to a licence as a simple contract debt.
The liquidator must have regard to the Directive. Domestic law predates the Directive. If there is a conflict the second in time prevails.
Article 3 provides Member States shall take the necessary measures to provide that the competent authorities ensure that installations are operated in such a way that:
(f) the necessary measures are taken upon definitive cessation of activities to avoid any pollution risk and return the site of operation to a satisfactory state.
Submissions of the State (being the Notice Parties in the s. 290 proceedings and the applicants in the s. 58 proceedings.)
The State in relation to the s. 290 proceedings submits that:-
1. Where the onerous nature of the obligation arises due to the default on the part of the company, s. 290 should not apply.
2. The licence is not property within the meaning of s. 290 or at all.
3. The obligations which liquidator seeks to disclaim are imposed on him by the Waste Management Act, 1996 in any event and therefore s. 290 relief should not be granted.
(The submissions in relation to disclaimer of the lease following operation of the break clause are moot.)
In considering the exercise of discretion, the interests of all persons interested in the liquidation (see Tempany v. Royal Liver Trustees [1984] I.L.R.M. 273) should be taken into account including the cross proceedings under s. 58 of the 1996 Act. (See also In Re Ranks (Ireland) Ltd. [1988] I.L.R.M.)
The licence is not property within the meaning of s. 290, therefore there can be no disclaimer. The liquidator is obliged to comply with the licence obligations which must be funded out of the assets of the Company.
The proper interpretation of the 1992 Act is to regard an IPC licence as imposing obligations in relation to activities and not the land affected by them. An IPC licence is granted for the purpose of controlling pollution. There is no contract between the parties. There is a statutory obligation enforceable by criminal penalty. The licence is granted to a person in respect of a particular activity and is site specific. It is an enhancement of existing property comparable to planning permission. The licence is not property. It is a right affecting an activity carried on at a particular site.
Even if the licence were property, it is unsaleable because the activity which it affects has ceased. The land on which the activity was carried on has been disposed of by the break clause in the lease. It became unsaleable because of the decision of the liquidator to break the lease and not because of any onerous condition.
Submissions in relation to s. 58
In considering whether to permit disclaimer of the IPC licence the court must consider the company's obligations under ss. 57 and 58 of 1996 Act. The obligations under ss. 57 and 58 may be wider than the obligations under the licence and it is necessary to consider the application of those obligations. In the interpretation section (s. 5) of the 1996 Act in relation to waste, "holder" includes any other person having for the time being possession or control of the waste.
Section 57 proceedings can only be brought against the holder of waste. As the liquidator left the premises he is no longer holding waste. The State claims that Rocky Island is still in occupation of the liquidator and obligations still arise re Rocky Island. It should be noted that the 1996 Act is subsequent in time to the Companies Act, 1963. Also the 1996 Act implements various community directives relating to environmental matters and in particular to waste. The State referred to Wicklow County Council v. Fenton [2003] I.L.R.M. 279 (O'Sullivan J.) The State submits that the company has caused environmental pollution and it is necessary that the company should mitigate or remedy the effects of holding recovery or disposal of waste. If an order is made under s. 58 which is not complied with, a local authority may take the steps and recover the amount of expenditure as a simple contract debt.
The State submits that any remediation work ordered by a court pursuant to s. 58 should be considered a cost, charge or expense properly incurred in the winding up under s. 281 of the Companies Act, 1963. (See In Re Noyek [1989] I.L.R.M. 155) To construe s. 281 as including the costs of remediation would be conformity with interpretive obligation. A national court must in applying national law whether adopted before or after a Community Directive, must as far as possible in the light of the wording and the purpose of the Directive do so to achieve the result pursued by the Directive. To hold the liquidator responsible for the costs of remediation rather than forcing the costs of remediation to be borne by the community at large would be in compliance with the "polluter pays" principle which is a cardinal principle of European environmental law. It is submitted that it would contrary to the "polluter pays" principle to allow the liquidator to disperse the assets of the company without first ensuring that the company bears some or all of the costs of remediation as a cost charge or expense of the liquidation.
With reference to In Re Celtic Extraction Limited [2001] C.H. 475, an insolvent company was permitted to disclaim a waste management licence but the State makes a distinction. First, there is no equivalent s. 58 proceedings under U.K. law. In this case the State says the disclaimer does not operate because there is no property within the meaning of the Act, but in any event s. 58 proceedings operate independently. It is submitted that if the company should be allowed to disclaim the lease and the licence it nonetheless has obligations under the Waste Management Act, 1996. There is nothing in the 1996 Act which indicates that the application should be disallowed by virtue of the disclaimer provisions.
If s. 290 operated to undermine s. 58 it would be in breach of the European Community Law.
A factor to be taken into account is that the sum of over €30million is payable in shareholders loans to the company's parent company. The most significant creditor is the parent company of the company that caused the significant environmental damage. In those circumstances equity indicates that the discretion should be exercised in favour of monies being allocated to an environmental clean-up rather than being returned to the parent company.
Submissions of the liquidator in response to the s. 290 application.
The liquidator made an alternative submission that it was sufficient to show that the licence was unsaleable simpliciter.
The liquidator agreed the licence was site specific. He commenced disclaimer of the lease and the licence together. After operating the break clause it created a split between the lease and the licence.
It is appropriate to refer the definition of property in the Bankruptcy Act, 1988 to the 1963 Act.
The licence is saleable and has a value albeit it is sold with something else. The licence has a quality of transferability. It is inherently capable of sale. The Waste Management Act, 1966 is not exhaustive as to how the licence may be determined. A harmonious interpretation is needed.
The "polluter pays" principle has two rationales; economic efficiency and the person who causes the pollution must bear the costs. But whatever rationale is applied, it means the person to blame pays.
Regarding the submission about debts owed to a shareholder, i.e. the parent company, the liquidator submits it is misconceived that out of assets realised, money owed to a particular shareholder should be spent on environmental matters. It is open to the State to bring an action against the shareholder, as has been done.
The licence is designed for a business up and running. The clean-up costs are not attributable to a breach of conditions in the lease.
If the disclaimer is not granted the liquidator may be at some risk of criminal prosecution.
The liquidator says he has a licence from the Radioactive Institute and that radioactive material is stored at Rocky Island in accordance with that licence.
Submissions of the Company and the Liquidator in respect to s. 58 application.
The company and the liquidator as respondents in the s. 58 application submitted that s. 58 (1)(a) of the 1996 Act only operates where the respondent is either holding, recovering or disposing of or has held, recovered or disposed of waste in a manner that is causing or has caused environmental pollution. The company is no longer in possession of the premises and is not a person holding, recovering or disposing of waste on the site. The State's case must be confined to whatever flows from the circumstance where the company has held, recovered or disposed of waste.
The first type of order that can be made is to discontinue the holding, recovery or disposal of waste. It is no longer appropriate because the company no longer holds the waste. An alternative order which could be made is that the company should mitigate or remedy any effects of having held, recovered or disposed of waste in a specified manner and within a specified period. This is the relief sought at para. 5(b) of the special summons. (This is not strictly speaking so as the relief sought does not refer to having held, recovered or disposed of waste). The relief sought at para. 5(c) does not come within s. 58 at all because it expressly seeks to direct the company to do something following mitigation or remediation of effects, namely to put in place an effective ongoing monitoring examination and inspection system. Section 58 (1)(a)(ii) is confined to an order requiring the company to mitigate or remedy the effects and does not encompass some further action.
Therefore the only relief which could be granted is that at para. 5(b) of the Indorsement of Claim.
The court is being asked to exercise what is only a discretionary power under s. 58 of the Waste Management Act, 1996 in such a way as to set at naught the mandatory and binding provisions of the Companies Act, namely the manner and order in which the estimated assets of twenty-one million euro should be applied in discharge of the creditors in accordance with the priorities laid down in the Companies Act.
Where a company is insolvent the directors hold the assets in trust for the creditors rather than for the Company. When the Company goes into liquidation there is a specific order of priorities in which the assets must be distributed to creditors.
The court should not make an order under s. 58 in exercise of its discretion. The factors which should influence the court in particular are
the company's activities for the best part of fifty years when the company was in fact in the ownership and under the control of the State.
As to the status of the liquidator, a special summons was issued not only against the company but also against the liquidator personally. There is no basis on which an order could be made against the liquidator personally since the party which held the waste is the company in liquidation and not the liquidator.
Further submissions by EPA in reply to s. 290 proceedings.
The EPA then replied to the submission made by the liquidator in his reply (but not in his opening) that the licence was unsaleable property but not by reason of onerous conditions.
The EPA submitted the licence was inextricably bound to the activity and had no existence independently of the activity.
The site has been surrendered and the liquidator has no activity to sell.
The liquidator had made the new point that the Minister to whom the land reverted might want to commence making steel or seek someone else to do so and that person would have the benefit of the licence. But the EPA submits this is speculation without any evidence. There is no evidence the liquidator tried to sell as a going concern. The inference has to be that because the business ceased before it obtained the licence, the business in unprofitable.
Further reply by the liquidator to the s. 290 proceeding
In reply, the liquidator says the point he made was that the mere fact that the activity closed down does not spell the end of the licence. If the activity resumes it is saleable. The liquidator submits that if the EPA is right, if the licence has no existence because the activity has ceased, there is nothing to disclaim.
The application for disclaimer was made 27th June, 2002 but the State did not bring the summons under s. 58 until 27th February, 2003, long after the application to disclaim. The Company has held and disposed of the radiological waste.
If the court makes an order under s. 58 the liquidator would have to apply funds in doing works. The court is being asked to create a conflict between the 1996 Act and the Companies Act, 1963 and put aside the priorities of the Companies Act to comply with an order under the 1996 Act.
Discretion must be exercised. The court would be repealing provisions of the Companies Act, 1963. The State is not a creditor. It would be creating the State as a new super preferential creditor and there is no jurisdiction to create a new winding up code.
A summary remedy is provided under s. 58(4). The County Council or the EPA can do the work but the debt may not be provable at all as it did not exist at the date of the winding up.
Further submissions by the State on the s. 58 application
The liquidator is a "holder" and is therefore a proper party. Section 58(4)(a) and (b) are silent about the effects of the obligation. It does not have to be interpreted as if the debt is unprovable. Under s. 58(7) it is an offence not to comply with an order under s. 58(1).
The State has invoked the code to protect the community at large. The State is not a creditor. The obligation stems from holding – not accidental ownership such as inheritance. The Company sought the licence and it has obligations.
In the Fenton v. Wicklow County Council case it was still the same company. The State does not ask to lift the corporate veil in this case. The date of the licence does not help. It operates prospectively.
The State is not asking the court to decide policy. It is asking to apply the statute law. Economic justice has been left to the legislators. It is not for the courts to apply economic justice. The European Directive must take priority over national law.
The Liquidator in reply
The Company spent £2.4million on environmental matters. The State gave slightly less. The Company spent this money in accordance with its agreement up to year 6. No case was ever made that it did not comply with the lease or the share purchase agreement. It was not a matter of controversy. The court should not refuse to exercise its discretion under the mistaken belief that the Company did not spend money as per the revised agreement.
Issues under s. 290 Application
The issues arising from the s. 290 application appear to be as follows:-
(1) Does the definition of "property" in s. 3 of the Bankruptcy Act, 1988 apply to companies in liquidation?
(2) Can s. 290(1) be construed so the property described as unsaleable does not have any further qualification?
(3) Is the IPC licence and/or the obligations created by it "property" within the meaning of s. 290(1) which is unsaleable or not readily saleable by reason of its binding the possessor thereof to the performance of any onerous act or to the payment of any sum of money.
(4) Should the court allow disclaimer
(a) in general
(b) in particular because of the s. 58 application.
Issues under the s. 58 Application
The issues arising from the s. 52 application appear to be:
(1) Are the orders sought in the special summons within the ambit of s. 58.
(2) Can the liquidator be obliged to spend assets available to the creditors to carry out remedial works as specified in the relief claimed as costs properly incurred in the winding up under s. 281 in priority to other debts.
(3) Is the existence of large shareholder loans a factor to be taken into account by the court in the exercise of its discretion.
(4) Should the court exercise its discretion to direct payment by the liquidator of remedial costs, in particular by reference to the Directive and European Community law.
Section 58 application
In dealing with these two applications I have decided to deal first with the
s. 58 application. The 1996 Act is independent of the IPC licence. The application under s. 58 does not depend on the existence or not of the IPC licence or whether the licensee is bound by the conditions and terms of the licence. The 1996 Act was brought in to implement various Community Directives relating to environmental matters and in particular waste.
Issue 1
The first matter to consider is what relief claimed in the special summons is relevant. Section 58(1)(a) provides:
"Where, on application by any person to the appropriate court, that court is satisfied that another person is holding, recovering or disposing of, or has held, recovered or disposed of, waste, in a manner that is causing, or has caused, environmental pollution, that court may make an order requiring that other person to do one or more of the following, that is to say:
(i) to discontinue the said holding, recovery or disposal of waste within a specified period or
(ii) to mitigate or remedy any effects of the said holding, recovery or disposal of waste in a specified manner and within a specified period."
The relief claimed at para. (a) is for an order that the defendants discontinue the holding, recovery or disposal of waste on lands being leased by the first defendant (the Company) and in the control of the second defendant (the Liquidator) within a specified period and to carry out certain listed works.
This relief cannot be granted because neither the Company nor the Liquidator holds, recovers or disposes of waste. The Company no longer leases the lands and the Liquidator is not in control of the lands.
The order sought at para. (c) to put in place an effective, on-going monitoring examination and inspection following mitigation or remediation so as to prevent a further occurrence, is not an order contemplated by s. 58. It refers to mitigation or remediation but there is no mention of anything following on from that.
The relief sought at para. (b) referring to mitigation or remediation does not refer to the past holding of waste. However, no point was taken by the Liquidator and it could if necessary be remedied by an amendment. So I am proceeding on the basis that the relief sought at para. (b), if amended, could refer to waste formerly held by the respondents.
Issue 2.
Section 281 of the 1963 Act provides that all costs, charges and expenses properly incurred in a winding up, including the remuneration of the liquidator shall be payable out of the assets of the company in priority to all other claims.
The purpose of a winding up is to get in the assets and distribute the money realised in accordance with Company law.
Section 254 provides:
"In the case of a voluntary winding up the company shall, from the commencement of the winding up cease to carry on its business, except so far as may be required for the beneficial winding up thereof, so, however, that the corporate state and corporate powers of the company shall, notwithstanding anything to the contrary in its articles, continue until it is dissolved."
While a liquidator is not a trustee in a voluntary winding up, he has a statutory duty towards the creditors and contributories including the administration of a fund (the assets of the company) impressed with the trust for them and if he neglects those duties he may be held personally liable by the party prejudiced. (see Palmer: Company Law para. 151.2.3, p. 15029.
An interpretation of s. 281 arose in Burns v. Hearne [1989] I.L.R.M. 155 concerning liability to tax on money placed by the liquidator on deposit at interest. It was held by the Supreme Court (Griffin J.) at p. 158 the word "charge" is sufficiently wide to encompass any imposition such as tax or whatever constitutes a burden of duty on the land or property and income tax and corporation tax are clearly "charges".
The "charges" contemplated in this case are not charges properly incurred in the winding up. They are neither charges as defined by the Supreme Court or incurred in the winding up such as costs of recovery, preservation and realisation of assets. In my view the court could not make an order directing the costs of mitigation or remediation to be made under s. 281.
Issue 3
Among the debts of the Company are large shareholder loans owing to its parent company. It was suggested that these should be considered differently from other debts and presumably in some way be made amenable to mitigating or remedying pollution.
Under s. 283 all debts which are admissible to proof against the Company are set out. Under s. 275 (subject to preferential claims) the property of a company on its winding up should be applied in satisfaction of its liabilities pari passu.
I know of no principle of law which would permit some debts which have been proved in the winding up excluded from benefiting from the pari passu rule and being diverted to another purpose. Nor has any basis been suggested.
Issue 4 – the exercise of discretion in the s. 52 proceedings.
The question arises whether the provisions of the 1996 Act should be applied in priority to the provisions of the 1963 Act. In the Directive, Recital 1 refers to the objectives and principles of the Community Environment Policies consisting of preventing, reducing and, as far as possible, eliminating pollution by giving priority to intervention at source and ensuring prudent management of national resources in compliance with the "polluter pays" principle and the principle of pollution prevention.
Article 3 of the Directive sets general principles governing the basic obligations of the operator. Member States have to take necessary measures to provide that competent authorities ensure that installations are operated in such a way that
(a) all the appropriate preventive measures are taken against pollution . . .
(b) no significant pollution is caused;
(c) waste production is avoided . . .; and where waste is produced it is recovered or where that is technically and economically impossible, it is disposed of while avoiding or reducing any impact on the environment.
. . .
(f) the necessary measures are taken upon definitive cessation of activities to avoid any pollution risk and return the site of operation to a satisfactory state.
For the purposes of compliance with the Directive it is sufficient if Member States ensure that the competent authority take account of the general principles set out in this article when they determine the conditions of the permit.
In this case the permit/licence was granted after the Company had ceased production of steel. The production prior to the granting of the licence was permitted by virtue of the 1992 Act and was not subject to any conditions. The conditions in the licence cannot be applied retrospectively. The Liquidator did finish off work in progress but this was an associated part of the melting and production of steel which took place prior to the grant of the licence which was not subject to conditions. It is also a factor that the amount of waste attributable to this work must be infinitesimal in relation to the general pollution caused over the 50/60 year period when the Company was owned by the State up to 1996 after which it was taken over by a foreign shareholder.
The obligations under the Directive refer to ensuring the installations "are operated" in a particular way. It does not refer to past operations.
The licence was granted after the Company had ceased to carry on business. So the Company never did what was authorised by the licence (i.e. "the initial melting and production of steel").
In this case the polluter (i.e. the Company) has no assets. The State is not seeking to lift the corporate veil which was the approach adopted by O'Sullivan J. in Wicklow County Council v. Denton [2003] 1 I.L.R.M. 279.
But most importantly of all, the assets in the hands of the Liquidator available for distribution are impressed with a trust for the creditors. There is nothing over for the contributories. The principle of the "polluter pays" as far as the Company is concerned cannot be achieved.
This is a view supported by Morritt L.J. in Celtic Extraction Ltd. 2001 Ch 475 at p. 48 where he said:
"There is nothing in the Directive to suggest that the 'polluter pays' principle is to be applied to cases where the polluter cannot pay so as to require that the unsecured creditors of the polluter should pay to the extent of the assets available for distribution among them."
A further Directive 75/442 on waste cited by the State is also based on the "polluter pays" principle which cannot apply here.
For these reasons I will not exercise the discretion under s. 58 to order the Liquidator to expend money which is available for distribution among the creditors in mitigating or remedying pollution in Haulbowline Island.
Issues arising under the s. 290 application
Issue No. 1:
Section 284 of the 1963 Act requires that the Bankruptcy Rules shall prevail and be observed relating to:
(1) the respective rights of secured and unsecured creditors;
(2) the debts provable;
(3) the valuation of annuities and future and contingent liabilities.
In Re Irish Attested Sales Ltd. [1962] I.R. 70 it was held by Kenny J. in relation to s. 207 of the Companies Consolidation Act, 1908 (which is effectively identical to s. 284 of the 1963 Act) that the provisions of the 1908 Act do not import all the rules of bankruptcy in the law in relation to the winding up of companies. There he was dealing with the rights of secured and unsecured creditors inter se and between each other.
In s. 284 there is a finite list with limited application. I am of opinion (by analogy with the decision in Irish Attested Sales Ltd.) that the rules of bankruptcy imported into the winding up of companies are confined to the matters specified in
s. 284.
Issue 2
In my opinion s. 290(1) cannot be construed so that property described as unsaleable does not have any further qualification. In my view the section must be read so that property is either unsaleable by reason of having to perform onerous acts or the payment of money, or not readily saleable for the same reasons. The purpose of the section is to allow disclaimer of onerous property. If the property is not subject to the performance of onerous acts or the payment of money there is no valid reason why a liquidator should seek or be allowed to disclaim.
Issue 3
Is the license property within the meaning of s. 290(1).
The nature of rights created by a licence has arisen in other cases. In Hempenstall v. Minister for Environment [1994] 2 I.R. 20 (dealing with taxi licences) Costello J. said at p. 28:
"Property rights arising in licences created by law (enacted or delegated) are subject to the conditions created by law and to an implied condition that the law may change those conditions. Changes brought about by law may enhance the value of those property rights (as the Regulations of 1978 enhanced the valuation of taxi plates by limiting the number to be issued and permitting their transfer) or they may diminish them (as the applicants say was the effect of the Regulations of 1992). But an amendment of the law which by changing conditions under which a licence is held reduces the commercial value of the licence cannot be regarded as an attack on the property right in the licence – it is a consequence of the implied condition which is an inherent part of the property right in the licence."
In Maher v. Minister for Agriculture [2001] 2 IR 139, Keane C.J. left open the question of property rights in licences. He said at p. 186:
"It seems to me unnecessary in this context to consider whether rights in the nature of licences conferred by law in relation to particular property such as planning permission or licences for the sale of alcohol constitute property rights."
In The State (Pheasantry) v. Donnelly [1982] I.L.R.M. 512 it was held that the holder of an intoxicating liquor licence does not have a property in the licence separate from the premises:
"The premises have an enhanced value as a result of the licence being attached thereto but the licence cannot be regarded as property capable of separation from the premises themselves." (at p. 515)
This is not saying that the licence cannot be regarded as property.
I do not find the English cases Mineral Resources Ltd. [1999] 1 A.E.R. 746 or Celtic Extractions Ltd. [2001] Ch. 475 to be very helpful. The statutory scheme in the U.K. under the Environmental Protection Act, 1990 is materially different from the 1992 Act. The definition of property in s. 178 of the U.K. Insolvency Act, 1986 is materially different from s. 290 of the 1963 Act.
Also I am not convinced that in order to qualify as unsaleable/not readily saleable under s. 290, the property must be transferable by act of parties. Under the statutory regime instituted by the 1992 Act, s. 91(1), it is provided that the grant of the licence enures for the benefit of the activity and of all persons for the time being interested therein. Under sub-s. (2): where a licensee ceases to hold or transfers to another person his interest in the activity to which the licence relates he shall forthwith give his notice to that effect to the agency specifying in the case of a transfer of his interest the name of the person to whom his interest in the activity has been transferred. It follows that the transfer of rights under the licence is by operation of law.
If the licenced activity was potentially profitable, there was nothing to stop the Liquidator selling the business as a going concern, the value of which would be enhanced by the existence of the licence in the same way as a licensed premise derives a large part of its value from the existence of a liquor licence attached thereto. The sale of the business would also have to include the sale of the site to which the licence related. This would mean that the premises, the activity and the interest under the licence together were capable of constituting "saleable property". In my opinion it is sufficient if it were capable of being saleable property even though the reality was that it was unsaleable because of onerous covenants and the payment of money. Therefore I am satisfied that taken together, the premises, the rights under the licence and the activity authorised by the licence constituted property within the meaning of s. 290.
The Liquidator did not transfer his interest in the activity or indeed in the premises. By operating the break clause in the lease the link between the premises where the activity had to be carried on and the licence was broken.
The EPA's submission was that the licence was not unsaleable because of onerous covenants or the payment of money but rather that it was unsaleable because the licence had no existence independently of the activity.
That does not take account of the decision in Tempany v. Royal Liver [1984] I.L.R.M. 291 (Keane J.) which was cited in relation to the considerations to be taken into account by the court in an application for leave to disclaim. At p. 290 Keane J. considered the question of the date at which disclaimer should become operative in the case of a lease. He said the lessors were entitled to apportioned rent in full from the date of the appointment of the liquidator to the date on which they were given notice of the liquidator's intention to disclaim. The order accordingly was that the disclaimer took effect from that date.
In this case, while the Liquidator was in correspondence about disclaiming the lease, the s. 290 application dated 27th June, 2002 claimed disclaimer of both the lease and the licence. So if the same principle applied, the latest date for the disclaimer to take effect would be that date or the date of service, if later. At this time the lease and the licence were together vested in the Company so that the licence did not suffer the infirmity of being separated from the premises. By analogy with the disclaimer of a lease, I am of opinion that the disclaimer of a licence, where allowed, would take place on the date notice was given. This predated the exercise of the break clause and accordingly the licence can be treated as property within the meaning of s. 290.
Issue 4
In considering whether the Liquidator should be permitted to disclaim the licence the court must take account of the interests of all parties interested in the liquidation. (Tempany v. Royal Liver [1984] I.L.R.M. 273) First of all, there are the creditors whose money this is and who would be most affected if there is no disclaimer of the licence.
Next there is the EPA, the grantor of the licence. I take into account (as has already been mentioned in connection with the s. 58 application) that the Company operated legally without conditions under the 1992 Act until the EPA granted an IPC licence after the Company had given up production and given notice to creditors. It is not clear to me why the EPA issued the licence in circumstances where it was clear it would never be operated. I consider that the completion of work in progress by the Liquidator was done in his capacity as Liquidator rather than taking over or adopting the licence for the benefit of the liquidation.
The State having failed in its application under s. 58, does not have an interest in the winding up.
In my opinion this is an appropriate case in which to allow disclaimer of the licence.