United Kingdom VAT & Duties Tribunals (Landfill Tax) Decisions

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Cite as: [2008] UKVAT(Landfill) L27, [2008] UKVAT(Landfill) L00027

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Augean Plc v Revenue & Customs [2008] UKSPC (27 February 2008)

L00027

LANDFILL TAX — contaminated land — application for exemption certificate — whether site closed — no — what is 'relevant activity' — held to be disposal of waste as landfill — whether disposal sought to be remedied by reclamation proposed and which had caused pollution continuing to cause contamination — yes — appeal dismissed

MANCHESTER TRIBUNAL CENTRE REF: MAN/07/9501

AUGEAN PLC Appellant

- and -

THE COMMISSIONERS FOR

HER MAJESTY'S REVENUE AND CUSTOMS Respondents

Tribunal: David Demack (Chairman)

Sitting in public in Manchester on 6 and 7 November 2007

Maurice Sheridan, of counsel, instructed by Messrs Walker Morris, solicitors, Leeds, for the Appellant

James Puzey, of counsel, instructed by the Solicitor and General Counsel for HM Revenue and Customs for the Respondents

© CROWN COPYRIGHT 2007

DECISION

Introduction and relevant landfill tax legislation

The appellant company, Augean plc ("Augean"), appeals against a decision on review of Her Majesty's Commissioners for Revenue and Customs ("the Commissioners") of 15 February 2007 upholding an earlier decision to refuse a certificate of exemption from landfill tax in respect of part of Thornhaugh Quarry, Wansford, near Peterborough ("the Quarry"). The part of the Quarry in question comprised Phases 1 and 2 of the excavation and landfill works thereat. For convenience, I propose to refer to Phases 1 and 2 of the works together as "the Site".

The Commissioners' decision was made in response to an exemption certificate application made by Augean on 30 May 2005 in respect of waste to be removed from the Site and disposed of. Augean gave its reason for the removal and disposal as being "to facilitate the reclamation of Thornhaugh Quarry to agriculture in accordance with the extant planning permission and remove pollutants that are currently causing harm by contamination of the groundwater".

With its application, Augean lodged a statement explaining that ironstone had been and limestone was being extracted from the Quarry in a series of seven phases which were being progressively backfilled by landfill with a view to the Quarry being restored to its previous levels and returned to agricultural use. Augean added that the deposit of landfill at the Site commenced in 1984, and on purchasing the Quarry in 2004 it identified problems resulting from the earlier deposit of commercial, domestic and industrial waste at the Site without suitable containment. Water coming into contact with the waste was draining from the Site as leachate causing persistent contamination of the groundwater and consequent contamination of the limestone aquifer. Augean explained that it wished to carry out reclamation works at the Site in order to:

(i) remove the contamination and prevent pollution of the groundwater and aquifer; and

(ii) restore the Site to agricultural use in accordance with conditions contained in the planning permission.

Augean further said that the restoration profile of the Site required under the planning permission could not be achieved without further infill at the Site; but that in the absence of containment, the weight of any further infill would result in pressure on the underlying waste, squeezing leachate into the aquifer and exacerbating the level of contamination. Despite evaluating alternative engineering solutions, Augean maintained that it was necessary to remove some 920,000 tonnes of waste from the Site for disposal at a then unidentified appropriately engineered landfill facility. It further explained that it then intended to engineer the residual void thus created to contain such further infill as was required to achieve the requisite restoration level.

By letter of 19 July 2006, the Commissioners gave two reasons for refusing to issue an exemption certificate, namely:

(i) that the disposal of waste by way of landfill at the Site had not ceased, the planning permission requiring further infilling with non-inert waste in order to restore it to agricultural use; and

(ii) that the disposal which Augean sought to remedy by the reclamation proposed and which had caused pollution was continuing to cause contamination.

In doing so, the Commissioners accepted that Augean's objective was to reduce or remove the potential of pollutants to cause harm, but said that they were not satisfied that the "relevant activity" at the Site had ceased as required by section 43B(8)(c) of the Finance Act 1996 ("the 1996 Act").

The 1996 Act contains the statutory provisions relating to landfill tax relevant in the instant case. Section 39 provides for landfill tax to be charged in accordance with Part III of the Act. Section 40 provides for tax to be charged on a taxable disposal, defined as "a disposal of material as waste made by landfill at a landfill site on or after 1 October 1996". Section 41 provides that the landfill site operator, defined as "the person who is at the time of the disposal the operator of the landfill site which constitutes or contains the land or under which the disposal is made", is the person liable to pay tax charged on a taxable disposal. Section 42 provides for different rates of tax on the disposal of qualifying material. Section 43A deals with contaminated land exempting from the tax material the subject of a certificate issued under section 43B, and satisfying certain other requirements.

Section 43B is headed "Contaminated land: certificates". The relevant parts thereof provide as follows:

"(1) Subject to subsection (2) below, the Commissioners shall issue a certificate in relation to any land where —

(a) an application in writing is made by a person carrying out, or intending to carry out, a reclamation of that land (the applicant);

(b) the applicant provides to them such information as they may direct, whether generally or as regards that particular case;

(c) the application is made not less than 30 days before the date from which the certificate is to take effect; and

(d) the reclamation qualifies under subsection (7) below.

(2) The Commissioners shall not refuse an application for a certificate in a case where the conditions specified in subsection (1)(a) to (d) above are satisfied unless it appears to them —

(a) necessary to do so for the protection of the revenue; or

(b) except where the applicant is one of the bodies mentioned in subsection (5) of section 43A above, that all or part of the reclamation of land to which the application relates is required in order to comply with a notice or order mentioned in subsection (4) of that section.

(7) A reclamation qualifies under this subsection if —

(a) …

(b) … it is, or is to be, carried out with the object of reducing or removing the potential of pollutants to cause harm,

and … the conditions specified in subsection (8) below are satisfied.

(8) The conditions mentioned in subsection (7) above are —

(a) that the reclamation constitutes or includes cleaning the land of pollutants which are causing harm or have the potential for causing harm;

(b) … ; and

(c) that all relevant activities have ceased or have ceased to give any rise to any pollutants in relation to that land.

(10) For the purposes of subsection (8)(c) above an activity is relevant if—

(a) it has at any time resulted in the presence of pollutants in, or under the land in question otherwise than —

(i) without the consent of the person who was the occupier of the land at the time, or

(ii) by allowing pollutants to be carried onto the land by air or water, and

(b) at that time it was carried out —

(i) by the applicant or person connected with him, or

(ii) by any person on the land in question."

In its notice of appeal Augean gave the following reasons for appealing:

"(i) that the Commissioners have erred in law as to the proper objective, construction and application of the relevant provisions of the Finance Act 1996, set out and / or referred to in the Review Application;

(ii) have failed to take into account the relevant legislation affecting and / or applicable in respect of the land the subject of the Application ("the Application land") as well as that affecting and / or applicable to other land in the vicinity of the Application land;

(iii) have taken into account irrelevant facts so as to reach and / or in coming to their Review Decision (and / or to their Refusal); and

(iv) having failed to take into account relevant facts so as to reach and / or in coming to their Review Decision (and / or to their Refusal).

Augean was represented by Mr Maurice Sheridan, and the Commissioners by Mr James Puzey, both of counsel. They produced an agreed bundle of copy documents, and I took oral evidence from Mr Gene Barry Wilson, Augean's group technical director, Dr Margaret Bates, a chartered waste manager and chartered environmentalist of the University of Northampton, and Mr Gordon Walker, one of the Commissioners' officers. From the evidence so presented, I make the following findings of fact. They build on the contents of the statement submitted by Augean with its exemption certificate application.

The facts (including other relevant legislation)

Augean is a specialist waste contractor, and bought the Quarry in December 2004. In addition, to the Quarry, it owns two other operational landfill sites, and three treatment facilities.

The Quarry, which is some 2.5 kilometres west north-west of the village of Wansbrough, near Peterborough, was opened in or about 1957, presumably with the benefit of planning permission for quarrying.

As Augean indicated in the statement accompanying its application, ironstone and limestone were to be extracted from the Quarry in a series of seven phases. Extraction commenced with Phases 1 and 2, i.e. from the Site. The first quarrying operations took place between 1957 and 1963 when ironstone was removed, and the resulting void was partially backfilled with limestone overburden. Phase 1 was infilled between 1984 and 1986, and Phase 2 through to an unknown date, claimed by Augean to be 1993. Observations carried out in recent years show that the Site was infilled with a wide range of commercial and industrial wastes, and some domestic wastes. The Site is separated from the remainder of the Quarry by quarry backfill, that constituting physical separation for the purposes of the Landfill (England and Wales) Regulations 2002 ("the Landfill Regulations").

The infilling so carried out followed what was then waste industry standard practice for the design and operation of landfill sites, and was based on the now out-dated principle of 'dilute and disperse', otherwise known as 'disperse and attenuate'. Sites were not engineered for containment of wastes, but rather allowed contaminants from landfill contained in leachate to seep into the underlying and surrounding geology, and from there to groundwater. To control pollution, the process relied on the natural attenuation capacity of the surrounding geology and the dispersion by groundwater.

From the mid 1980s, landfill practice developed on the principle of containment, a key element whereof entails the lining and capping of the landfill void with a low permeability material such as clay. The cap minimises the ingress of incident rainfall, thus reducing the production of leachate, and the basal and side linings provide the barrier to migration of leachate to the surrounding ground and groundwater.

Prior to 1990, the operation of landfill sites was controlled by waste disposal licences issued under the Control of Pollution Act 1974. Such licences continuing in operation on 31 May 1994 were converted into waste management licences ("WMLs") by section 77 of the Environmental Protection Act 1990 ("the EPA"). Section 35(1) of the EPA defines a WML as "a licence granted by a waste regulation authority authorising the treatment, keeping or disposal of any specified description of controlled waste in or on specified land …". By section 35(9) of the EPA, "A licence may not be surrendered by the holder except in accordance with section 39 below". It is common ground that the waste regulation authority is now the Environment Agency.

Section 39, so far as relevant for present purposes provides as follows:

(1) A licence may be surrendered by its holder to the authority which granted it but, in the case of a site licence, only if the authority accepts the surrender

(2) The following provisions apply to the surrender and acceptance of the surrender of a site licence

(3) The holder of a site licence who desires to surrender it shall make an application for that purpose to the authority …

(4) An authority which receives an application for the surrender of a site licence —

(a) shall inspect the land to which the licence relates, and

(b) may require the holder of the licence to furnish to it further information or further evidence

(5) The authority shall determine whether it is likely or unlikely that the condition of the land, so far as that condition is the result of the use of the land for the treatment, keeping or disposal of waste (whether or not in pursuance of the licence), will cause pollution of the environment or harm to human health

(6) If the authority is satisfied that the condition of the land is unlikely to cause the pollution or harm mentioned in subsection (5) above, the authority shall, subject to subsection (7) below, accept the surrender of the licence; but otherwise the authority shall refuse to accept it

(7) Where the authority proposes to accept the surrender of a site licence, the authority must, before it does so, —

(a) refer the proposal to the appropriate planning authority; and

(b) consider any representations about the proposal which the [planning?] authority makes to it during the allowed period".

The waste disposal licence for the Site was converted into a WML by the EPA. The licence for the Site was modified on six occasions between 1985 and November 2003, and finally on 18 March 2004. The last mentioned modification contains the following conditions:

"5.8 EVACUATION OF WASTE

Waste once deposited and covered in accordance with condition 6.6 (waste covering) shall not be excavated, disturbed or picked over except with the written permission of the Environment Agency.

GROUNDWATER AND SURFACE WATER PROTECTION

1 SCHEMES

Within four months of the date of issue of this licence modification new approved schemes shall be submitted to the Environment Agency.

D LEACHATE CONTROL SCHEME

This shall specify leachate control, removal, treatment and disposal measures sufficient to ensure that groundwater and surface water are not contaminated, and to ensure that the depth of leachate above the base of the site does not exeed one metre at any collection point. This level shall be determined to Ordnance datum, and made available to the Environment Agency within one month of the construction of the cell. Details of emergency provisions in the event of the non-operation of any leachate control system shall be included.

9 LEACHATE MIGRATION

Should surface water or groundwater monitoring results indicate that leachate may be leaving the site then, in consultation with the Environment Agency, the licensee shall immediately carry out the following:

(a) an investigation to establish the cause and extent of any pollution and forward the results forthwith to the Environment Agency; and

(b) take remedial action as far as practical to:

(i) prevent further escape of leachate from the site; and

(ii) reduce the consequences of leachate migration until prevention can be achieved."

It would appear, and I find, that in or about 1993 the then owner of the Quarry simply stopped the landfilling of waste at the Site. Its restoration profile had not achieved the contours for return to agriculture required by the then applicable planning permission being between two metres and eight metres below the consented restoration profile, and it had not been capped. No explanation was given to me for the failure of the then owner, and the successive series of later owners, to comply with their planning obligation to restore the Site to agricultural use, or to meet the requirements of the WML, which remains in force.

In accordance with the review of the old mineral permissions procedure set out in section 96 of and Schedules 13 and 14 to the Environment Act 1995, on 25 April 1997 a number of old mineral and landfill planning permissions for the Quarry were consolidated into a single planning permission "for extraction of minerals and restoration to agriculture and nature conservation use by infilling at [the Quarry] in accordance with your application received on 27 January 1997 …". The result was that the whole of the Quarry, i.e. including the Site, was covered by the new planning permission, which provided for the continuing extraction of minerals and its restoration to the permitted contours via the importation of putrescible wastes for agricultural use.

The 1997 planning permission will expire on 31 December 2013, "at which time the operation authorised by this permission shall cease and the land reinstated to a condition suitable for the resumption of agricultural use to the satisfaction of the Mineral Planning Authority" (condition 2). Conditions 20 to 27 set out what is required of the site operator to lead to the restoration of the Site to agricultural use. They include the capping of the Site, the spreading of subsoil and topsoil, and the submission of an aftercare scheme "requiring that such steps [be taken] as may be necessary to bring the land to the required standard for the use of agriculture". They may also require the operator to infill any depressions to the final settlement contours where differential settlement occurs during the restoration and aftercare period.

A subsequent planning permission varied certain conditions contained in the 1997 permission, but the variations are irrelevant in the present context.

WMLs have now been replaced by PPC (Pollution Prevention Control) permits, but only where the landfill meets the strict criteria of the Landfill Regulations, and is compliant with the Groundwater Regulations 1998 ("the Groundwater Regulations").

Transitional arrangements provided for applications for PPC permits for landfill sites controlled by WMLs to be made by July 2002. No such application was made in respect of the Site. Augean accepts that the Site does not meet the criteria for a PPC permit; leachate from it continues to be discharged to groundwater.

Under regulation 16 of and paragraph 1(9A)(b) of Schedule 4 to the Landfill Regulations, the Environment Agency is required to serve a closure notice where no application for a PPC permit is made by a date specified by the Environment Agency.

Not only is regulation 16 of the Landfill Regulations relevant, in the present context so too is regulation 15. The relevant parts of the two regulations provide:

15. Closure and after-care procedures for landfills

(1) The following closure and after-care procedures shall apply to all landfill sites

(2) The procedures may relate to the closure of the whole of the landfill or part of it

(3) The closure procedure shall begin —

… (c) by a reasoned decision of the Environment Agency which shall be set out in a closure notice served on the operator in accordance with regulation 16

(4) A landfill shall not be definitively closed until —

(a) such reports as may be required by the Environment Agency have been submitted to it by the operator; and

(b) the Environment Agency —

(i) has assessed all the reports submitted by the operator;

(ii) has carried out a final on-site inspection; and

(iii) has notified the operator by notice in writing served on the operator that it approves the closure

(5) Following definitive closure of a landfill, after-care procedures shall ensure that —

(a) the operator remains responsible for the maintenance, monitoring and control for such period as the Environment Agency determines is reasonable, taking into account the time during which the landfill could present hazards;

(b) the operator notifies the Environment Agency of any significant adverse environmental effects revealed by the control procedures and takes the remedial steps required or approved by the Agency; and

(c) the operator is responsible for monitoring and analysing landfill gas and leachate from the landfill and the groundwater regime in its vicinity in accordance with Schedule 3 for as long as the Environment Agency considers that the landfill is likely to cause a hazard to the environment.

(6) Notwithstanding sections 38 and 39 of the 1990 Act (requirements on revocation or surrender of waste management licences) or regulations 19 and 21 of the 2000 Regulations (requirements on surrender or revocation of permits), the Environment Agency shall not accept any complete or partial surrender of the landfill permit, or revoke it in whole or in part, for as long as the Environment Agency considers that the landfill (or the relevant part of it) is likely to cause a hazard to the environment.

(7) The operator shall not be relieved from liability under the conditions of the landfill permit by reason of the Environment Agency's approval of closure under paragraph (4)(b)(iii)."

16. Closure Notices

(1) Where the Environment Agency has taken a reasoned decision under regulation 15(3)(c), it shall serve a closure notice under this regulation ("a closure notice") on the operator of the landfill.

(2) A closure notice shall —

(a) state the Environment Agency's reasons for requiring initiation of the closure procedure;

(b) specify the steps the operator is required to take to initiate the procedure; and

(c) the period within which they must be taken.

(3) The Environment Agency may withdraw a closure notice at any time."

By letter of 25 May 2006, Mr John Sweeney, the environment manager of the Environment Agency for Kettering and Northampton districts, informed Augean that the 2005 annual monitoring report for the Site revealed that it "continues to cause pollution of the Lincolnshire Limestone aquifer". He continued, saying that:

"to achieve [the landfill contour agreed with Peterborough City Council] it will be necessary to raise levels above phases 1 and 2. Raising levels above phases 1 and 2, in their current condition, would cause more pollution to escape the site into the aquifer. The Environment Agency would not support a remediation proposal that increased pollution of the aquifer. Consequently, it does not seem possible to prevent further pollution of the Lincolnshire Limestone aquifer, or achieve the planning permission contour, without extensive remediation of phases 1 and 2 at Thornhaugh landfill.

Under these circumstances, I ask that your company consider how best to remediate phases 1 and 2. I would be pleased to consider remediation options at our future liaison meetings. My initial view is that only excavation of the waste combined with re-engineering of the void this would create could provide a remediation strategy that eliminates pollution of the aquifer and enables achievement of the planning permission contour".

No evidence was adduced to indicate whether Augean put forward a remediation strategy to the Environment Agency. If it did, it would appear to have proved unacceptable to the Agency for on 28 February 2007 it served a closure notice on Augean requiring it to carry out certain specified steps by 28 May 2007.

The closure notice is in the following terms:

"Thornhaugh Landfill Site

The Environment Agency ("the Agency") served on you pursuant to the Landfill (England and Wales) Regulations 2002 (the 2002 Regulations), Schedule 4, paragraph 1(9) a notice requiring you to apply for a PPC permit within a specified period.

As no application for a landfill permit was duly made within the specified period the Agency requires you to initiate the closure of the landfill site or part of it (as defined by plan reference EA/WML/70119/2) at Thornhaugh Landfill Site, Thornhaugh, Wansford, Peterborough PE8 6NL pursuant to Schedule 4 paragraph 1(9A)(b) to the Regulations.

In exercise of its powers under the above Regulations, the Agency requires you to take the steps specified in Schedule 1 to this notice with immediate effect.

The reasons for the Agency's decision are set out in Schedule 2 to this notice".

Schedules 1 and 2 to the closure notice are in the following terms:

"Schedule 1

Specified Steps

As of the date of issue of this notice cease accepting and do not recommence the acceptance of waste for disposal at the landfill.

Maintain, monitor and control the landfill as required by the conditions of the Waste Management Licence EA/WML/70119, which authorised the disposal of waste in the landfill.

By 28^th May 2007 provide the Agency with reports to demonstrate:

A plan identifying the area(s) of the site which is/are to be considered definitively closed.

Evidence that the waste mass is stable.

Procedures for the management and control of landfill gas, leachate, groundwater and surface water.

Procedures for monitoring landfill gas, leachate, groundwater and stability / settlement during the aftercare phase for that / those area(s).

A procedure for reporting any significant environmental affects during the aftercare phase.

See Agency Landfill Directive Regulatory Guidance Note No. 7 (v.2.0)

Schedule 2

Reasons for Decision

A duly made application was not provided by the end of the specified period for an application made pursuant to the 2002 Regulations, Schedule 4 paragraph 1(9A)(b)".

The closure notice has not been withdrawn by the Environment Agency.

In 2003, landfill recommenced at the Quarry, but only in areas outside the Site. From Phase 3 onwards, the landfill was operated on the principle of containment, and those areas were physically separated from the Site by quarry backfill material and by engineered liners. Phases 3 to 7 (except Phase 4C) are the subject of a PPC permit issued on 9 November 2005, and as I mentioned earlier, constitute what the Commissioners now accept is an entirely physically and legally separate landfill site.

Augean's current mineral workings are in Phase 4, otherwise known as the Bradshaw land. On completion of the workings in Phase 4, Augean will progress to working in Phase 7. Phases 3 and 6 are filled and restored. It is currently carrying out landfill operations in Phase 5 where non-hazardous wastes are disposed of in four separate mono-cells, i.e. cells for the receipt of waste that are self-contained within the landfill, as required by the Landfill Regulations. Phase 5 has a total void of approximately 300,000 metres³ of which 180,000 metres³ are unfilled. The non-hazardous cell in Phase 5 is full.

Following the sequence of mineral extraction the Quarry, the next area of landfilling will be Phase 4, which is split into phases. Tipping of waste will be prohibited in Phase 4A which is to be protected for great crested newts. Phase 4B is covered by the PPC permit, but it is difficult to engineer and develop without the development of Phase 4C. Phase 4C has a void of some 450,000 metres³that does not presently have planning permission for landfill or the benefit of a PPC permit. Phase 7, which has a void of 330,000 metres³, has over 200,000 metres³ principally of limestone backcast stored in it which will require removal before Phase 7 can be engineered for landfill. At present, there are no engineered areas available for the acceptance of non-hazardous wastes at the Quarry.

Use of the Quarry for waste disposal is the subject of the Cambridgeshire and Peterborough Minerals and Waste Plan, the executive summary of which "suggests" an "extension of the existing hazardous waste landfill site taking stable and non-reactive waste as part of quarry restoration near Thornhaugh". The Quarry is included in the Cambridgeshire and Peterborough Minerals and Waste Site Specific Proposals document as a preferred option for the disposal of stable and non-reactive hazardous waste under policies SSP13 and 14. Policy SSP13 specifies "Thornhaugh" as having been allocated "for stable non-reactive hazardous waste disposal". And preferred option Policy SSP 14 is a safeguarding policy that designates as Waste Safeguarding areas:

"(a) existing waste management facilities that make a significant contribution in managing Cambridgeshire and Peterborough's waste;

(b) waste management allocations made in … SSP13 …"

At page 38, the document states:

"Within Safeguarding Areas there will be a presumption against any development that could prejudice the existing or proposed waste management use. The Waste Planning Authority must be consulted on any planning proposal that may potentially prejudice the waste use".

In the Core Strategy document, the authority states its Preferred Option MW19 as:

"The Waste Planning Authorities have sufficient non-hazardous landfill provision to meet forecast requirements over the plan period. No additional allocations will be made through the Site Specific Proposals Plan, and proposals for additional provision will be resisted".

Augean's proposals for the Quarry

In evidence, Mr Wilson indicated that Augean intended to make application in 2008 for planning permission for landfilling a void space of approximately 450,000 metres³ in Phase 4 of the Quarry. In accordance with the allocation in the Mineral and Waste Development Plan, I accept that any such application will be for the disposal of stable non-hazardous waste.

Subject to the success of the present appeal, Augean intends to include in its planning application a proposal to remove the contaminating materials in the Site. It has not yet identified a site to receive the materials intended to be so removed. Subject to the grant of planning permission and a PPC permit, Augean intends to remove the contaminating material in the Site while contemporaneously filling Phase 4 and excavating Phase 7. After the material is removed and Phase 4 filled, Augean further intends fully to engineer the Site to develop a modern containment landfill for the disposal of wastes from the construction industry that are difficult to manage. Such wastes comprise asbestos, gypsum and contaminated soils together with a complementary limited quantity of non-hazardous waste.

Submissions for Augean

(a) The factual and legal case generally

In summary, Mr Sheridan observed that there were in fact and in law two landfill sites at the Quarry: the Site, and Phases 3 to 7 of the workings at the Quarry. He submitted that the Site was a closed inactive landfill site subject to the WML, most of the waste deposited there having probably been domestic waste. He claimed that no further waste was permitted to be deposited on the Site, and said that, by virtue of its having been operated on the dilute and disperse principle, leachate was designed to leak into the surrounding environment and be diluted by groundwater to a "supposedly non-adverse level".

Augean wished to reclaim the Site by removing the waste deposited there to another non-hazardous landfill site. Thus, in Mr Sheridan's submission, for the purposes of section 43B the "relevant activity" was the former and concluded landfilling of waste at the Site; "the land" was the Site; and "the reclamation" in issue was that proposed by Augean, in respect of which it had made its application for an exemption certificate. It was common ground that there were adverse effects from contaminate from the Site to groundwater so that the proposed reclamation satisfied section 43B(8)(a), and that "the land" in section 43B(8)(c) was the land relevant to satisfaction of section 43B(1) and (8)(a).

Mr Sheridan submitted that subsequent development of the Site was not a material consideration in the proper construction and application of section 43B(8)(c); exemption certificates could be (and were) issued where no specific development was planned for the land reclaimed.

He claimed that the proposed reclamation would not be economically viable were Augean to have to pay landfill tax on the deposit of the non-hazardous waste it intended to remove from the Site to a third party landfill site. If landfill tax were to be chargeable on that deposit, the Site could not be reclaimed and the adverse effects on groundwater would continue: if landfill tax were not payable, the subsequent development of the Site could proceed. Augean envisaged that the Site could be developed for the purpose of receiving hazardous waste in what would be a new landfill site. On deposit of any waste in that new site, landfill tax would be payable: the difference in income for receipt of hazardous waste in that site could fund its reclamation. Reclamation of the Site as Augean envisaged would have the added benefit of allowing for completion to the intended final contours of the planning permission for the whole of the Quarry.

Mr Sheridan maintained that the proposed mode of reclamation of the Site was supported by the Environment Agency.

(b) The proper construction of "relevant activities" in section 43B(8)(c)

Mr Sheridan maintained that, in relation to Augean's application, the Act was introduced to address two main objectives:

(1) to tax the disposal of waste to landfill so as to discourage landfilling of waste by way of increased cost; and

(2) to encourage the reclamation of land by the removal of or the potential of pollutants to cause harm whether for its own sake or linked to facilitating development, even though the latter would mean that materials the subject of the reclamation would be disposed of as landfill.

He maintained that the second objective was met, in the context of the first, by disapplying landfill tax to the disposal of reclaimed materials to landfill.

In reliance on the decision in Taylor Woodrow Contruction Limited v Commissioners of Customs and Excise (1998) Decision No. L003, Mr Sheridan submitted that it was not open to the Commissioners to seek to tax in cases where that served to frustrate the achievement of the reclamation of land by removal of the pollutants in question. Given the stated objectives, section 43B was to be construed purposively, rather than literally, cf MacNiven (Inspector of Taxes) v Westmoreland Investments Ltd [2001] STC 237.

Thus he maintained that section 43B was to be construed and applied in a manner that promoted achievement of the objective of reclamation of contaminated land, and did not frustrate it, Commissioners of Customs and Excise v Parkwood Landfill Ltd [2002] STC 1536, where at paragraph 22 Aldous LJ said that "The Act must … be construed against the background of its purpose".

It appeared to Augean that the Commissioners had concluded that activity at Phases 3 to 7 of the Quarry was the same as that at the Site, and that therefore what happened at the former affected the latter. Alternatively, they said that any deposit of hazardous waste in a new landfill site on the Site would be the resumption of suspended non-hazardous landfilling activities. Mr Sheridan submitted that that was incorrect: Phases 3 to 7 were physically separate from the Site.

The Commissioners had also in erred in law in misunderstanding the role and obligations of the Environment Agency with regard to Phases 3 to 7 and / or any further new landfill site, and the issue of PPC permits. The Environment Agency was, in Mr Sheridan's submission, legally able to issue the PPC permit for Phases 3 to 7 because they were physically separate in construction, operation and effect from the Site: it would likewise be able to issue a PPC permit in relation to any subsequent development of the Site. He also maintained that the Commissioners' position would posit the following far reaching consequences for the operation and application of section 43B:

(1) they would contradict the past practice and operation of that section by making subsequent development material to its proper construction and operation;

(2) choice of development would interfere with consideration of whether land was to be reclaimed or not (contrary to previous rulings); and

(3) they would require, for no legitimate environmental protection purpose, subsequent development conducted in accordance with modern, stringent environmental protection requirements to differ from the old activity that had led to the contamination in question, in particular the pollution of groundwater.

Mr Sheridan submitted that those consequences were not prescribed by section 43B:

(1) there was no basis for contradicting current practice and the operation of section 43B;

(2) subsequent development of the land in question was, as a matter of law, immaterial: and (if points (1) and (2) were not accepted);

(3) requiring any subsequent development to be different in type from that previously allowed to cause contamination of the environment was nonsensical. It would mean that on land the subject of an exemption certificate which had been used, say, for an old gasworks, subsequent development for section 43B could be a chemicals plant but not a gasworks but, if on that land the polluting activity had been a chemicals plant, subsequent development could be a gasworks but not a chemical plant. Such arbitrary proscription to subsequent development on any land the intended subject of reclamation, as the Commissioners seemingly proposed, was illogical and untenable.

(c) The "relevant activity" has ceased

Section 43B(10) of the 1996 Act states:

"For the purposes of subsection (8)(c) above an activity is relevant if—

(a) it has at any time resulted in the presence of pollutants in, or under the land in question otherwise than—

(i) without the consent of the person who was the occupier of the land at the time, or

(ii) by allowing pollutants to be carried onto the land by air or water, and

(b) at that time it was carried out —

(i) by the applicant or a person connected with him, or

(ii) by any person on the land in question."

Mr Sheridan submitted that the highlighted words showed "relevant activity" to relate to an activity that had in the past resulted in the presence of pollutants on the land in question. A purposive construction of the section, coupled with an acknowledgement that it was intended to be functional, required a "relevant activity" to have a causal connection to the pollutants in relation to the land in question, and hence to the land the subject of the reclamation. There was no landfilling activity being conducted on or in the Site: Phases 3 to 7 were not the subject of the reclamation, and activities there were irrelevant to a proper consideration of section 43B(8) and (10).

Furthermore, Mr Sheridan maintained that the Commissioners had made an error of law in considering as relevant what activity might take place once the source of the contamination was removed – in the instant case, the suggested disposal of waste. As a matter of law, the activity if any that might take place afterwards could not affect the proper construction and application of section 43B. That section did not provide for any such subsequent activity to be a material consideration, certainly where, as here, the section 43B(7)(b) requirements were met with regard to the reduction or removal of the potential of pollutants to cause harm. Mr Sheridan observed that the Commissioners had accepted that to be a relevant test, and had been satisfied.

He submitted that the suggestion by the Commissioners that landfilling had simply been suspended at the Site was highly artificial and, as a matter of law, wrong.

Section 43B(8) was linked to section 43B(7), the latter referring to reducing or removing the potential of pollutants in the land the subject of reclamation. Mr Sheridan therefore contended that section 43B(8) referred to activities relevant to achieving the result intended by section 43B(7).

He maintained that nothing that happened at the Site after the removal of the in situ waste would affect the subject of the reclamation, or the reclamation itself. After removal of the source of pollution from the Site, it would need to be "re-engineered" to secure a PPC permit.

(a) The "relevant activity" has ceased to give rise to any pollutants in relation to that land

Mr Sheridan contended that the Commissioners' further argument that, even if the relevant activity had ceased, it had "not ceased to give rise to pollutants in relation to that land" appeared to have been made because they asserted that the past deposit of non-hazardous (domestic) waste at the Site would continue to give rise to leachate on that land. He submitted that that reasoning applied an erroneous literal approach, failing to place the words in their immediate and overarching context. The real issue in the instant case was, he maintained, whether there were activities continuing which would cause pollutants to continue to migrate into the land the subject of the intended reclamation so as to frustrate the very purpose of the reclamation intended. He claimed that there were no such activities in the vicinity of the Site.

Mr Sheridan also maintained that the Commissioners seemed to be arguing that if subsequent development of the Site involved any landfilling activity that must mean that the "relevant activity" was giving rise to pollutants in relation to that land. He submitted that to be legally in error because subsequent development per se was legally irrelevant to the operation of section 43B. Moreover, the 1996 Act was not intended to prescribe what developments were to be allowed / accepted by the Commissioners under or in relation to the section 43B regime. It was Augean's case that other statutory planning and regulatory schemes were designed to prevent pollution of the environment, and should be trusted to do so.

He submitted that, on the Commissioners' interpretation, Augean's application should succeed even if it proposed to leave the resultant void untouched, or had not even proposed any subsequent development. However, that would not assist in meeting the requirements of the 1997 planning permission. Augean could, theoretically, have suggested filling the void with e.g. concrete to levels to which it could then add soils to comply with the planning permission as to restoration and return to agricultural use. However, that was unsustainable development, and otherwise not a sensible use of land resources. But correspondence from the Commissioners did indicate that that would have been a subsequent use of land that would have allowed the issue of an exemption certificate – an illustration, in Mr Sheridan's submission, of the artificiality of the Commissioners' position.

Mr Sheridan also submitted that it was nonsensical from a legal and practical viewpoint to consider that meeting the Environment Agency's suggestion for complying with the planning permission equated to not having ceased the activities at the Site that led to the pollution from the Site. Any waste disposal at the Site after removal of the polluting material could not result in pollution of the groundwater in the Lincolnshire limestone aquifer, and hence any such activity would not be relevant for section 43B(7). Moreover, as a matter of simple logic, if the Site was not made the subject of the reclamation proposal, no activity at all would be permitted on it. There was therefore a logical continuum lacking in the Commissioners' conclusion that landfilling at the Site would continue in any event. In short, Mr Sheridan submitted, the activity the source of the pollution had ceased: further, in so far as it was relevant, no further pollution would occur on completion of the reclamation.

He further submitted that the commonality of the planning permission dealing with the restoration obligations for the Site and Phases 3 to 7 of the Quarry was legally irrelevant and otherwise immaterial. The Site and the remainder of the Quarry could be subject to two or more planning permissions; alternatively, the planning permission relevant to both sites could include permission for yet further unconnected development. As the Taylor Woodrow decision indicated, the mere fact that a planning permission applied to land outside the scope of a section 43B application did not render the part within it which was the subject of proposed reclamation ineligible for an exemption certificate.

The Commissioners' reasoning and conclusions were, in Mr Sheridan's submission, flawed in fact and in law: the appeal should be allowed and the exemption certificate granted. Absence of the certificate meant that the Commissioners were endorsing the countenance of pollution of groundwater, and frustrating achievement of the second objective of the Finance Act 1996, namely the encouragement of reclamation by removal of or the potential of pollutants to cause harm whether for its own sake or linked to facilitating development.

Submissions for the Commissioners

Mr Puzey rejected Mr Sheridan's claim that the Site was closed, observing that it was a landfill site, and a permitted activity to restore the Quarry to agricultural use was the landfilling of waste. Landfill occurred on the Site until an unknown date in the early 1990s but, Mr Puzey submitted, it did not cease as the Site had not been restored in accordance with the planning permission. Augean's proposal was to remove contaminated waste in the Site, and to use the resulting void, as re-engineered, to receive hazardous waste, the current charge for depositing which was about £40 per tonne: thus contaminating waste was removed, and Augean created an asset for its business.

Mr Puzey also rejected Augean's claim that no further waste was permitted to be deposited on the Site saying that it had never been closed and that when the Environment Agency had served a closure notice in 2007, Augean had applied to defer the process.

He accepted that Augean's objective was to reduce or remove the potential of pollutants to cause harm (see section 43B(7)(b) of the 1996 Act), and that that need not be the only reason for clearing the Site of existing waste. But, he maintained, that objective was not sufficient: what must also be demonstrated was that the "relevant activity", in the instant case polluting landfill, had ceased, or ceased to give rise to pollutants, in, or under the land (section 43B(8)(c)).

Part of Augean's case was that the new material would not pollute as it would be deposited in engineered cells. Mr Puzey submitted that the 1996 Act was not drafted in terms that required examination of the methods of containment and their future viability. The hope that the original deposits of waste on the Site would not be polluting had been misplaced. Similarly it was said that the engineered containment method proposed would be effective. He maintained that that might or might not be so, but it was irrelevant to the simple question posed by the 1996 Act: whether the "relevant activity" of placing pollutants in, on or under the Site had ceased. He submitted that it had not for under Augean's proposals hazardous waste would be deposited in, on or under the land comprised in the Site. The use of barrier methods, containment and management systems did not remove pollutants from the Site: they simply reduced the risk of them being released into the environment, or further into the environment.

Section 43B(7)(b) was drafted in terms of "removing the potential of pollutants to cause harm". Mr Puzey observed that that potential would remain whilst pollutants continued to be deposited in, on or under the Site. He contended that the purpose of the reclamation provisions was not to permit one type of pollutant to be replaced by another.

Of Augean's other argument on that issue, that the future use of the Site was a matter which was of no relevance to the criteria in section 43B, he observed that subsection (10) was drafted in terms of whether the "relevant activity" "has" resulted in the presence of pollutants and used the words "at the time" it was carried out. In Mr Puzey's submission, use of the past tense was simply a reference back to the requirement in subsection (8) that the relevant activities "have ceased". He added that if the activities had not ceased and / or would be resumed, a certificate could not be granted.

Mr Puzey also observed that, if the point needed further emphasis, it was provided by a consideration of subsections (5) and (6) of section 43B: a certificate might be withdrawn or varied thereunder if a reclamation under subsection (7) did not in fact qualify, or no longer qualified.

The question of whether a "relevant activity" had ceased was a matter of fact. Whilst it was clear that some 14 years had passed since the Site was last used for landfill, it was also clear that it remained an incomplete landfill site and that Augean proposed to resume landfill. In Mr Puzey's submission, "ceased" should be given its normal everyday meaning. It could not be correct for a site operator to claim that landfill had ceased at the Site, and then in the next sentence state that it was to start anew at the same incomplete and unrestored location, that being irrelevant or immaterial to the question of cessation.

In Mr Puzey's further submission, the Commissioners were not endorsing the contamination of pollution of groundwater by refusing Augean an exemption certificate. A certificate might be granted provided the future landfill was not of pollutants, e.g. by the deposit of inert waste. He maintained that Augean had made, and continued to make, commercial decisions within the framework of planning requirements, environmental legislation and the landfill tax law. The Commissioners were not seeking to prevent the reclamation of land, but what they sought was the correct application of the provisions of the 1996 Act.

Conclusion

Operation of the Site is currently governed by:

(1) the planning permission of 25 April 1997;

(2) the WML as notified on 18 March 2004; and

(3) the closure notice of 28 February 2007.

In summary, the planning permission permits the deposit of waste by landfill and requires restoration of the Site to permitted contours via the importation of putrescible waste for agricultural use. The WML provides that waste once deposited and covered shall not be excavated, disturbed or picked over, except with the written permission of the Environment Agency and, in the event of leachate appearing to be leaving the Site, requires Augean to take remedial action, as far as practical to prevent the further escape of leachate and, pending the achievement of prevention, reduce the consequences of leachate migration. Augean has neither sought, nor has the Environment Agency granted, permission for waste on the Site to be excavated, disturbed or picked over. Nor has the Agency indicated support for Augean's proposed mode of reclamation of the Site. Mr Sweeney's letter of 25 May 2006 (see paragraph 26 above) referred only to his "initial view" of Augean's proposed remediation strategy, and no evidence was adduced of matters having progressed beyond that stage. The closure notice sets out the steps to be taken leading to the closure of the Site, or part of it, and requires Augean to maintain, monitor and control the landfill as required by the WML. Further, regulation 15(5) of the Landfill Regulations provides:

"Following definitive closure of a landfill, after-care procedures shall ensure that —

(a) the operator remains responsible for the maintenance, monitoring and control for such period as the Environment Agency determines is reasonable …".

The closure of all landfill sites is governed by regulation 15 of the Landfill Regulations (see regulation 15(1)). The procedure to be followed for the purpose is clearly set out in sub-regulations (3) and (4), beginning with a reasoned decision of the Environment Agency as set out in a closure notice. The notice is to be followed by reports to be made by the site operator. Thereafter the Agency is to assess all such reports and carry out a final on-site inspection before notifying the site operator in writing that it approves the site closure. Until then "a landfill site shall not be definitively closed". I consider the word "definitively" in this context to be synonymous with "finally", thus indicating that closure itself does not occur until all the steps detailed have been completed. And since I find the various required steps not to have been completed in relation to the Site, and in particular no notice of approval of closure has been served by the Environment Agency, I hold that the Site is not closed.

It appears to me naturally to follow that the "relevant activity" for the purposes of section 43B(8)(c) is not "the former and concluded landfilling of waste at the Site" as submitted by Mr. Sheridan, but rather the continuing one of the disposal of waste by landfill.

I do, however, accept his claim that no further waste is permitted to be deposited at the Site since one of the specified steps in the closure notice is that from the date thereof, 28 February 2007, Augean "cease accepting and do not recommence the acceptance of waste for disposal at the landfill". That does not affect my definition of "relevant activity" for ceasing to accept waste may be a temporary phenomenon since by regulation 16(3) of the Landfill Regulations the Environment Agency may withdraw the closure notice at any time.

I am also unable to accept Mr Sheridan's submission that the "relevant activity" has ceased. If I were to do so, it would mean that any landfill site operator could simply close down its operation and thereafter, at a time of its own choosing, claim that there was no landfilling being conducted on its site. As I have already explained, under the planning permission, Augean is required to carry out certain work on the Site with a view its being restored to defined contours and to agricultural use, and under the WML is required to prevent leachate migration and also to take remedial steps to prevent further leachate escapes until prevention can be achieved. In other words, there is a present and continuing liability on Augean to deal with the leachate problems under the WML.

Section 43B(8)(c) of the 1996 Act requires all "relevant activities" to "have ceased or have ceased to give rise to any pollutants in relation to that land". It is now, although it was not earlier, common ground that "that land" is the Site. As I have decided, "relevant activities" in the present case means the landfilling of wastes at the Site. In doing so, I have taken careful account of section 43B(8)(10) and am quite satisfied that the deposit of waste at the Site has resulted in the presence of pollutants in or under the Site. I earlier found that deposits of waste at the Site ceased on service of the closure notice so that the only remaining question is whether the deposits of waste at the Site have ceased to give rise to any pollutants in relation to it. It is patently obvious from the evidence, and I find, that the deposits made continue to give rise to pollutants in relation to the Site.

No evidence was adduced of the intention of the dilute and disperse principle of disposal of waste and, in its absence, I am not prepared to find that it was designed to allow leachate to leak into the surrounding environment. Rather, I would think, as Mr Puzey put it, it was hoped that when the original deposits of waste were made they would not be polluting.

As I mentioned earlier, it is common ground that the Site and Phases 3 to 7 of the workings at the Quarry are two entirely separate landfill sites, so that the Environment Agency could, and did, grant a PPC permit for Phases 3 to 7. But clearly the Agency cannot issue a PPC permit for the Site without first accepting surrender of the WML, and there is no sign of its being prepared to accept surrender at present. I am able to deal with the appeal only on the basis of the existing permission, licence and notice affecting the Site, so that I am unwilling to proceed on the assumption that the Environment Agency will withdraw the WML and replace it with a PPC permit.

In reaching the above conclusions I have taken full account of all the submissions of Mr. Sheridan. I have ignored the activities on Phases 3 to 7 of the Quarry as being irrelevant, those phases as I have said, forming a completely separate landfill site. In every respect other than those with which I have dealt, I adopt the case advanced by Mr. Puzey being satisfied of its correctness.

In my judgment Augean is not entitled to an exemption certificate in respect of the Site. It follows that I dismiss the appeal. I direct Augean to pay the Commissioners' costs of and incidental to the appeal, such costs to be determined by a costs judge of the High Court in the event of their not being agreed.

DAVID DEMACK

CHAIRMAN
Release Date: 27 February 2008

MAN/07/9501