Environmental law and practice moves on apace, and consultants and advisers face numerous pitfalls. Edward Cooke shows how to avoid them
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Key point |
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Recent cases underline the need for professionals dealing with contaminated land issues to keep up to date with environmental practice and procedure and to establish higher standards of professional practice |
Many column inches have been written about the new contaminated land regime (Part IIA of the Environmental Protection Act 1990) that came into force in April 2000. The contaminated land “warning card” issued by the Law Society in June 2001 has also been extensively covered.
This will involve a huge knock-on effect for surveyors and specialist consultants, who must grapple with the rapidly moving pace of environmental practice and procedure. How are a client’s objectives to be achieved in a timely and expedient fashion while avoiding a claim for professional negligence?
This article examines some of the professional pitfalls that arise when dealing with contaminated land, and suggests solutions to minimise risk.
Lessons
A number of problems have been highlighted by two recent cases (see box opposite), from which many lessons can be learnt.
” The adviser/consultant will need written terms of engagement and a clearly defined retainer. A set of standard terms of business is no substitute for a clear understanding of the client’s objectives. A client’s perceptions and issues of reputation may increase the standard of professional expertise required.
” Give clear advice to enable the client to appreciate the factors that will influence a commercial decision.
” Confirm instructions in writing, make notes and issue minutes. Jot down the date of when a note is made, even if this is days or weeks later. Be aware of the risks of giving informal advice, and be no less vigilant in recording what has been said.
” The timing of advice can be crucial. In Mott Macdonald, the Urban Regeneration Agency (URA) lost the opportunity to abandon the project at an early stage. Thus, the consultant paid for the remediation costs that could not be recovered from the subsequent redevelopment.
” Clarify underlying assumptions in professional opinions. Central to Mott Macdonald was a misunderstanding over the nature of public perceptions and scientific advice. The court agreed with the URA’s view on the risk of adverse public perceptions.
” Higher principles may apply when advice, rather than information, is given.
” The level of the client’s expertise is relevant to the level of care required by the professional adviser. The URA did not have experience of working with contaminated land, and was heavily reliant upon the advice given by Mott Macdonald. A client may be a sophisticated purchaser of commercial property, but not of contaminated land.
Negotiating deals
The two cases highlight the complexity of environmental issues and the difficulty of interpreting site-investigation results. These concerns affect all consultants involved with contaminated land. However, when negotiating deals, some specific points should be borne in mind:
” Good information and teamwork are the foundation for a successful deal. Ensure that the lawyers and consultants employed have the relevant expertise. Lawyers advise upon environmental liabilities. Consultants advise whether a site is contaminated. Use a lawyer to appoint the consultant and to consider the views of any lender. Involve all those concerned before issuing heads of terms.
” Environmental reports and information should not be suppressed. Before commissioning a report, a client needs to know that information obtained may have to be disclosed. Queries may arise over remediation works, which could be answered only by a post-remediation audit. Such reports need to be commissioned at the outset. Legal privilege may not apply to reports, unless they are commissioned by a lawyer for the purposes of advising upon potential claims and liabilities. Reports may have to be disclosed in any subsequent proceedings instituted by a regulator. Beware of outdated and gratuitous reports given by contractors touting for work.
” A purchaser will be unable to rely upon a vendor’s consultant’s report without a collateral warranty. Also, relying upon a report raises questions of insurance cover and the impact of exclusion clauses.
” Unless you can understand them, it is unwise to review environmental reports and information. How will you know if the information is complete?
Avoiding liability
The task is to identify potential environmental liabilities. It may be necessary to reassess the commercial imperatives of the deal in the light of those liabilities. The solutions will depend upon the circumstances, but might include:
” withdrawal from the transaction;
” revisiting the financial terms of the deal;
” restructuring the deal;
” obtaining indemnities and warranties, or at least written representations;
” modifying or changing the purchaser’s development plans;
” considering the application of the exclusion tests set out in the statutory guidance;
” the purchaser considering what the purchasing entity should be, for example, using an SPV to help ring-fence liability;
” drawing the regulators into discussions;
” insuring against the risks envisaged.
Conclusion
The contaminated land regime demands new skills and expertise from all those involved. Problems cannot be addressed with pre-packaged solutions. Success depends upon finding improved ways of working to manage risks and to achieve the client’s objectives. Moreover, if the cases mentioned here are not to be oft-repeated, higher standards of professional practice need to be established. Like environmental legislation, “best practice” is ignored at your peril.
Edward Cooke is head of planning and development at TLT solicitors, Bristol
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Case law Two recent cases involving claims against environmental consultants illustrate the problem areas |
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Urban Regeneration Agency/English Partnerships v Mott Macdonald QBD 27 October 1998. In this case, Mott Macdonald (MM) was employed by the Urban Regeneration Agency (URA) to investigate contamination on a site at the Royal Dockyard, Chatham, and to advise upon remediation. The work was carried out by a contractor, with MM acting as engineer to the URA. The site was to be used for housebuilding. The project would be economic only if the decontamination costs did not exceed the value of the restored site. Unfortunately, MM failed to recognise the true extent of contamination caused by heavy metals and asbestos, and failed to identify that part of the site had been used as a graveyard. Different perceptions emerged of what was meant by “contamination” as the costs of the project rose beyond the value of the site. The URA was primarily concerned with public perception of the site. However, MM argued that it was necessary to remove contaminated soil only if it were a danger to public health or the environment. The URA had no previous experience of working with contaminated land. Had it known of the true extent of contamination it would not have proceeded, or would have aborted the project. MM’s advice had been given by different divisions within the firm, with little communication and poor management, resulting in conflicting advice. In making an award of £18.5m against MM, the court referred to the firm as “a group of disparate individuals who had been set a task beyond their collective or individual expertise”. This comment caused as much consternation among environmental consultants as the size of the award, which was confirmed by the Court of Appeal. In Lidl Properties v Clarke Bond Partnership [8] Env LR 662, the central issue was a misunderstanding about the client’s instructions. Clarke Bond Partnership (CBP) offered advice to Lidl upon a remediation scheme that it had devised for a previous owner of a contaminated site that had been used for the production and storage of industrial cleansing agents and detergents. The day before Lidl acquired the site, CBP had given Lidl gratuitous oral advice as to the levels of contamination and the works required to remediate the site. CBP’s advice was that a cost-effective system of drains could be installed to enable contaminated water to be tankered away for discharge to the sewer. Previous proposals had involved more comprehensive and expensive schemes. Following acquisition of the site, inexperienced contractors were employed. The remedial work that was carried out failed to deal with contamination, and the regulators stopped the work. A sophisticated remediation scheme was subsequently employed at considerably greater cost, which Lidl claimed from CBP. The basis of the claim was that Lidl had purchased the property in reliance upon advice given by CBP on the extent of remediation that would be required. The court decided that even though advice had been given gratuitously, there was a duty of care arising out of the assumption of responsibility. In such circumstances, there was no reason why liability for economic loss should not flow from negligent performance of the duty. Fortunately for CBP, the court held that subsequent events did not show that the CBP scheme was unworkable, but rather that it was never properly implemented. There was, therefore, no loss attributable to CBP’s advice. The meeting that led to the claim for over £3.7m had no agenda, no minutes, no notes and no confirmatory letters. The claim was based upon an implied assumption of responsibility, for which no contract or payment was required. |
