Disclaimer — Consequences to liquidator of disclaiming a waste management licence — Whether liquidator has power to disclaim a waste management licence — Whether purported disclaimer of waste manage-ment licence was ineffective
In
July 1992 a waste disposal licence was granted to MR Ltd. By reason of section
77(2) of the Environmental Protection Act 1990, this took effect from May 1994
as a waste management licence within the meaning of section 35 of the 1990 Act.
In September 1997 MR Ltd was experiencing difficulties: it ceased trading and
appointed the respondent liquidator. The liquidator’s efforts to transfer the
licence were unsuccessful. In November 1997 he gave notice purporting to
disclaim it. The Environment Agency issued proceedings challenging the
purported disclaimer of the licence and contending that it was ineffective; it
sought a declaration that the liquidator had no power to disclaim the licence.
The liquidator sought relief by way of an ordinary application with regard to
his costs and directions.
A
waste management licence is ‘property’ within the meaning of section 436 of the
Insolvency Act 1986. It is not property that is capable of disclaimer within
section 178 of the 1986 Act, having regard to section 35 of the Environmental
Protection Act 1990. There was no order as to costs. Costs incurred by and on
behalf of the liquidator in connection with both applications were expenses
properly incurred in the winding up of a company; they were payable out of the
company’s assets pursuant to section 115 of the 1986 Act: see p76F.
referred to in the judgment
Attorney-General of Hong Kong v Chan
Nai-Keung [1987] 1 WLR 1339
Ayerst v C&K (Construction) Ltd
[1976] AC 167; [1975] 3 WLR 16; [1975] 2 All ER 537, HL
Berkely
Applegate (Investment Consultants) Ltd (No 3), Re (1989) 5 BCC 803
Campbell (A Bankrupt), In re [1997] Ch
14; [1996] 3 WLR 626; [1996] 2 All ER 537
Commonwealth of Australia v WMC
Resources Ltd (1998) 152 ALR 1
Gooch v London Banking Association
(1886) 32 ChD 41
Hans Place Ltd, Re [1992] 2 EGLR 179;
[1992] 44 EG 143
Heath v Tang [1993] 1 WLR 1421,
CA
Hindcastle Ltd v Barbara Attenborough
Associates Ltd [1997] AC 70; [1996] 2 WLR 262; [1996] 1 All ER 737; [1996]
1 EGLR 94; [1996] 15 EG 103, HL
House Property & Investment Co Ltd, In re [1954] Ch 576; [1953] 3 WLR 1037; [1953] 2 All ER 1525
Lamford Forest Products Ltd, Re (1991)
86 DLR (4th) 534
Maughan, Re (1885) 14 QBD 956
Midlantic National Bank v New Jersey
Department of Environmental Protection (1986) 474 US 494; 106 S Ct 755
National Provincial Bank Ltd v Ainsworth
[1965] AC 1175; [1965] 3 WLR 1; [1965] 2 All ER 472, HL; reversing sub nom
National Provincial Bank Ltd v Hastings Car Mart Ltd [1964] Ch 665;
[1964] 3 WLR 463; [1964] 3 All ER 93, CA
Nottingham General Cemetery Co, Re The
[1955] Ch 683; [1955] 3 WLR 61; [1955] 2 All ER 504; 53 LGR 519
Panamericana de Bienes y Servicios SA v Northern
Badger Oil & Gas Ltd (1991) 81 DLR (4th) 280
Paramount Airways Ltd, Re [1990] BCC 130
Park Air Services plc, In re [1997] 1
WLR 1376; [1997] 3 All ER 193, CA
R v Secretary of State for the Home
Department, ex parte Hickey (No 1) [1995] QB 43; [1994] 3 WLR 1110; [1995]
1 All ER 479, CA
R v Tower Hamlets London Borough
Council, ex parte Chetnik Developments Ltd [1988] AC 858; [1988] 2 WLR 654;
[1988] 1 All ER 961; [1988] 2 EGLR 195; [1988] 26 EG 69, HL
Rae, Re [1995] BCC 102
Sargent v Customs & Excise
Commissioners [1995] 1 WLR 821; [1995] 2 BCLC 34, CA
Stanhope Pension Trust v Registrar of
Companies [1994] BCC 84
Suwalsky, In re: The Bankrupt v The
Trustee and the Official Receiver [1928] B&CR 142
Western Mining Corporation Ltd v Commonwealth
of Australia (1996) 136 ALR 353
Western Mining Corporation Ltd v Commonwealth
of Australia (1994) 121 ALR 661
Application
to challenge disclaimer of waste management licence
These
were two applications; the first was an originating summons by the Environment
Agency seeking declarations; and the second was an ordinary application by the
liquidator seeking relief with regard to his costs of opposing the Environment
Agency’s application and seeking directions in the event of the agency
obtaining the relief it sought.
Tedd QC and Andrew Macnab (instructed by the solicitor to the Environment
Agency) appeared for the applicant agency.
& Associates) represented the respondent liquidator.
NEUBERGER
J: The applications before me raise two issues of
some significance and difficulty, namely:
1.
Whether a waste management licence granted pursuant to the provisions of Part
II of the Environmental Protection Act 1990 (the 1990 Act), and held by a
company, can be disclaimed by a liquidator of that company pursuant to section
178 of the Insolvency Act 1986 (the 1986 Act);
2.
The consequences of such a licence being capable or incapable, as the case may
be, of disclaimer.
The facts
On
July 21 1992 Cambridgeshire County Council (the council) granted to Mineral
Resources Ltd (the company) a waste disposal licence (the
(the site) pursuant to the provisions of Part 1 of the Control of Pollution Act
1974 (the 1974 Act). By virtue of section 77(2) of the 1990 Act, the licence
was treated with effect from May 1 1994 as a waste management licence within
the meaning of section 35 of the 1990 Act.
The
licence contained a number of conditions. There were conditions relating to the
nature of the waste that could be tipped on the site and the manner of its
disposal; there were conditions for supervision, manning, hours of work, the
keeping of records and the maintenance of monitoring equipment; there were
conditions dealing with the control of leaching and emanation of gas; there
were conditions requiring landscaping once the site was fully tipped and
monitoring thereafter.
The
company had been granted a succession of fairly short leases of the site, the
last of which expired on August 30 1997. The site extends to some 30 acres, of
which the company has infilled and reinstated 20 acres.
However,
by that time, the company had got into difficulties and the directors had
decided that it could not continue to trade. It ceased trading on September 5
1997, and Mr Keith Stout, a licensed insolvency practitioner and chartered
accountant, was appointed liquidator at a meeting of creditors which took place
on September 18 1997.
Mr
Stout initially took the view that he might be able to effect a transfer of the
licence to someone who would take a fresh lease of the site, with a view to
filling the remaining 10 acres. At least two companies entered into
negotiations with Mr Stout with a view to paying for a transfer of the licence,
but, in the event, the negotiations came to nothing. In one case, the
interested party was not able to negotiate a lease of the site and, in another
case, the interested party was informed that a new licence might be issued on
somewhat more favourable terms.
Once
it became clear that a new licence might be available on more attractive terms,
Mr Stout decided that the licence was effectively unsaleable and he gave notice
purporting to disclaim it on November 3 1997.
On
November 25 1997 the Environment Agency (the agency), which, under the
provisions of sections 30(1) and 77 of the 1990 Act, as amended by the
Environment Act 1995, had replaced the council as the waste regulation
authority, issued an originating application seeking a declaration that the
liquidator had no power to disclaim the licence and that the purported notice
of disclaimer was of no effect. On January 9 1998 the liquidator issued an
ordinary application, seeking relief with regard to his costs of opposing the
agency’s application, and also seeking directions in the event of the agency
obtaining the relief it sought.
Centrally relevant statutory provisions
Insolvency Act 1986
Section
178 of the 1986 Act provides, so far as relevant:
(2)
Subject as follows, the liquidator may, by the giving of the prescribed notice,
disclaim any onerous property and may do so notwithstanding that
rights of ownership in relation to it.
(3)
The following is onerous property for the purposes of this section —
(a) any unprofitable contract, and
(b)
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 perform any
other onerous act.
(4)
A disclaimer under this section —
(a) operates so as to determine, as from the
date of the disclaimer, the rights, interests and liabilities of the company in
or in respect of the property disclaimed; but
(b) does not, except so far as is necessary
for the purpose of releasing the company from any liability, affect the rights
or liabilities of any other person . . .
(6)
Any person sustaining loss or damage in consequence of the operation of a
disclaimer . . . is deemed a creditor of the company to the extent of the loss
or damage and accordingly may prove for the loss or damage in the winding up.
Section
436 of the 1986 Act contains the following definition:
‘Property’
includes money, goods, things in action, land and every description of property
wherever situated and also obligations and every description of interest,
whether present or future or vested or contingent, arising out of, or
incidental to, property;
Environmental Protection Act 1990
Section
33(1) provides that, subject to certain material exceptions:
[A]
person shall not —
(a)
deposit controlled waste . . . in or on any land unless a waste management
licence authorising the deposit is in force and the deposit is in accordance
with the licence;
(b) treat, keep or dispose of controlled waste
. . .
(i)
in or on any land . . .
except
under and in accordance with a waste management licence;
Section
33(1)(c) renders it illegal to keep or dispose of controlled waste:
in
a manner likely to cause pollution of the environment or harm to public health.
Section
33(6) provides that:
A
person who contravenes subsection (1) above or any condition of a waste
management licence commits an offence.
Section
35(1) defines a waste management licence 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 . . .
Under
subsection (12) ‘licence’ in Part II of the 1990 Act is defined as meaning a
waste management licence.
Subsections
(2) and (3) respectively identify the types of person who can be granted a
licence and, albeit very generally, the terms and conditions of a licence.
Section 35 also contains the following provisions:
(9)
A licence may not be surrendered by the holder except in accordance with
section 39 below.
(10)
A licence is not transferable by the holder but the waste regulation authority
may transfer it to another person under section 40 below.
(11)
A licence shall continue in force until it is revoked entirely by the waste
regulation authority under section 38 below or it is surrendered or its
surrender is accepted under section 39 below.
Section
38 empowers a waste regulation authority to revoke or suspend licences. Section
39 deals with ‘Surrender of Licences’ and subsection (1) thereof provides:
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.
The
remainder of section 39 is concerned with the machinery for effecting a
surrender.
Section
40 is headed ‘Transfer of Licences’ and provides:
(1)
A licence may be transferred to another person in accordance with subsections
(2) to (6) below and may be so transferred whether or not the licence is partly
revoked or suspended under any provision of this Part.
(2)
Where the holder of a licence desires that the licence be transferred to
another person (‘the proposed transferee’) the licence holder and the proposed
transferee shall jointly make an application to the waste regulation authority
which granted the licence for a transfer of it . . .
(4)
If, on such an application, the authority is satisfied that the proposed
transferee is a fit and proper person the authority shall effect a transfer of
the licence to the proposed transferee.
Section
42 provides as follows:
(1)
While a licence is in force it shall be the duty of the waste regulation
authority which granted the licence to take the steps needed —
(a)
for the purpose of ensuring that the activities authorised by the licence do
not cause pollution of the environment or harm to human health or become
seriously detrimental to the amenities of the locality affected by the
activities; and
(b)
for the purpose of ensuring that the conditions of the licence are complied
with . . .
(3)
For the purpose of performing the duty imposed on it by subsection (1) above,
any officer of the authority . . . may, if it appears to him that by reason of
an emergency it is necessary to do so, carry out work on the land . . . to
which the licence relates . . .
(4)
Where a waste regulation authority incurs any expenditure by virtue of
subsection (3) above, the authority may recover the amount of the
expenditure from the holder, or (as the case may be) the former holder, of the
licence . . .
Section
42(5) entitles the waste regulation authority to serve notice on a licensee
specifying any breach of condition of the licence, and requiring it to be
remedied; section 42(6) empowers the waste regulation authority to revoke or
suspend the licence, in whole or in part, in the event of the remedial steps
not being taken. Section 42(6A) provides:
If
a waste regulation authority is of the opinion that revocation or suspension of
the licence . . . would afford an ineffectual remedy against a person who has
failed to comply with any requirement imposed under subsection (5) . . . above,
the authority may take proceedings in the High Court . . . for the purpose of
securing compliance with the requirement.
Section
43 of the 1990 Act contains provision which entitles an applicant for, or
holder of, a licence, who is dissatisfied with any decision of a waste
management authority, to appeal to the Secretary of State.
The issues
As
I have mentioned, there are two main issues. The first is whether a liquidator
of a company is entitled to disclaim a waste management licence pursuant to the
provisions of section 178(2) of the 1986 Act. That is the issue raised by the
agency’s originating application. The second issue, which is raised in Mr
Stout’s ordinary application, concerns the consequences in this case if he is
unable to disclaim the licence. These two issues substantially inter-relate,
because the consequences of whether a liquidator is able or unable to disclaim
a waste management licence, appear to me to be of considerable relevance in
resolving the first issue.
The
agency raises two arguments as to why the liquidator’s purported disclaimer of
the licence was ineffective in the present case. The first is that the licence
is not ‘property’ within the definition of section 436, and therefore incapable
of disclaimer under section 178, of the 1986 Act. The second ground is that,
even if the licence is ‘property’, the provisions of the 1990 Act, on their
true construction, exclude the application of the power to disclaim contained
in section 178 of the 1986 Act, so far as a licence under section 35 of the
1990 Act is concerned. I shall consider these two arguments in turn, and will
then deal with the liquidator’s summons.
Is a licence ‘property’ under the 1986 Act?
Sir
Nicolas Browne-Wilkinson V-C said of section 436 of the 1986 Act in Re
Paramount Airways Ltd [1990] BCC 130 at p148, ‘it is hard to think of a
wider definition of property’. In the context of section 178, it is scarcely surprising
that ‘property’ should be given a wide meaning. In Hindcastle Ltd v Barbara
Attenborough Ltd [1997] AC 70, Lord Nicholls of Birkenhead explained at
pp86H–87B that the legislative purpose of the section was to facilitate the
winding up of a company’s affairs by freeing the company from liabilities that
would otherwise impede the winding up. Such a purpose can only be
satisfactorily achieved if it is possible to disclaim things that cannot, in
practice, be realised. In that context, I would refer to
Cemetery Co [1955] Ch 683 at p695, where Wynn-Parry J held that a
liquidator had power to disclaim a cemetery, even though under the relevant Act
of Parliament, the company was prohibited from alienating the cemetery.
If
a thing such as a waste management licence were incapable of disclaimer because
it was not ‘property’, this could frustrate the orderly and expeditious winding
up of a company’s affairs, as the inability to disclaim it might cause the
liquidation to be indefinitely extended. In this connection, Roxburgh J said,
in Re House Property & Investment Co Ltd [1954] Ch 576 at p612 that,
while he accepted that ‘what is reasonable must vary according to the
circumstances of the company’, the policy of the winding-up provisions (then
found in the Companies Act 1948) ‘would abhor an arrangement under which a
liquidator had to continue his liquidation for 70 years’.
Furthermore,
as Mr Anthony de Garr Robinson, who appears on behalf of Mr Stout, pointed out,
the primary obligation of a liquidator is to distribute the ‘property’ of the
company (under section 107, in the case of a voluntary liquidator, and section
143(1) in the case of a compulsory liquidator). If ‘property’ in the 1986 Act
excluded a waste management licence, it would mean that the liquidator would
owe no obligation to seek to realise the value of a licence for the benefit of
creditors, even though there is both in law (in light of section 40 of the 1990
Act) and in practice (in light of Mr Stout’s evidence) a market in which people
are prepared to pay for a transfer of the licences. Thus, if a waste management
licence fell out with ‘property’ this would seem to run contrary to the policy
inherent in sections 107 and 143 of the 1986 Act.
It
is contended on behalf of the agency that a waste management licence is not
‘property’ because it is expressly described as a licence. It appears to me
that merely because something is or can be categorised as a ‘licence’ does not
mean that it is incapable of constituting ‘property’. It would be a triumph not
merely of form but of bare linguistics if the legal characterisation of a right
under one statute were to be determined by the nomenclature that the
legislature chose to use in another statute concerned with a wholly different
area of law.
In
the context of a case involving the acquisition of interests in land
enforceable against third parties, Lord Wilberforce said:
Before
a right or an interest can be admitted into the category of property, or of a
right affecting property, it must be definable, identifiable by third parties,
capable in its nature of assumption by third parties, and have some degree of
permanence or stability . . .: see National Provincial Bank Ltd v Ainsworth
[1965] AC 1175 at pp1247G–1248A.
It
seems to me that a waste management licence even satisfies that rather strict
test.
Furthermore,
the facts that the legislation creating waste management licences provides for
their transfer (in section 40) and that there is in fact a
management licence is ‘property’ within the wide definition of section 436 of
the 1986 Act. It is true that, on the face of it somewhat peculiarly, section
40(5) provides that it is ‘the Authority’, and not the holder of the licence,
which is to ‘effect a transfer of a licence’, but that does not appear to me to
alter the fact that, reading section 40 as a whole, it does provide that a
licence is transferable. In this connection, it is the licensee who identifies
the desired transferee, who can charge for the transfer and whose choice of
assignee, if a ‘fit and proper person’, the agency is bound to accept. Further,
the agency does not issue a fresh licence, but endorses the original licence
with the name of the transferee. I consider that the mere existence of the
regulatory machinery contained in section 40 is not antithetical to the concept
of ‘property’. One only has to consider that almost every lease is unassignable
without landlord’s consent to see that that must be right.
I
draw some comfort from the decision of the Privy Council in Attorney-General
of Hong Kong v Chan Nai-Keung [1987] 1 WLR 1339 where, albeit in a
rather different context, the Privy Council held that export quotas were ‘other
intangible property’ within the definition of ‘property’ of the Hong Kong Theft
Ordnance, and, consequently, were capable of being stolen. Although such quotas
gave no more than the expectation of being granted a government export licence,
the Privy Council appears to have been impressed by the facts that they were
legally capable of transfer (albeit subject to the consent of government) and
that there was a ‘flourishing market’ (see pp1341F–1342C). Echoing the
observation of Sir Nicolas Browne-Wilkinson, Lord Bridge observed at p1342B
that, as in the Theft Act 1968, the word ‘property’ ‘was intended to have the
widest possible ambit’.
I
was pressed with the argument that a bankrupt’s passport was held not to be
property in Suwalsky, In re; The Bankrupt v The Trustee and the
Official Receiver [1928] B&CR 142. That does not seem to me to assist.
As Charles J said in that case, at p143, a passport is not the property of the
holder, but of the Crown. In any event, in the context of bankruptcy, it may
well be necessary for a narrower construction of the word ‘property’ to be
adopted since some rights or articles are too personal to an individual to vest
in his trustee in bankruptcy: see, for instance, Heath v Tang
[1993] 1 WLR 1421 and In re Campbell (A Bankrupt) [1997] Ch 14 at p21H.
Even in the context of bankruptcy, I note that in Re Rae [1995] BCC 102,
where the bankrupt had the benefit of certain fishing licences from the
Ministry of Agriculture, Fisheries and Food, Warner J held that an extra-legal
‘entitlement’, recognised by the ministry in the holder of any such licence (or
his nominee) to be considered for the grant of a new fishing licence, passed to
the trustee in bankruptcy pursuant to sections 283(1) and 306 of the 1986 Act.
I
have been referred to a case in Australia where the nature of a statutory
permit to explore for petroleum was raised: see Commonwealth of Australia
v WMC Resources Ltd (1998) 152 ALR 1. Although the High Court of
Australia (by a majority) took a different view from the inferior courts
as to whether the statutory modification or extinguishment of such a permit
constituted ‘acquisition of property’, the question of whether such a permit
constituted property was the subject of dispute in the lower courts, where all
the judges who considered the matter held that it did constitute ‘property’. In
the Supreme Court, that point was conceded by the appellant. This can perhaps
be most easily appreciated by considering the observations of Kirby J at
pp68–69.
It
is true that Kirby J was in the minority, but there is no reason to think that
his views on this point did not reflect those of the other members of the
Australian High Court, and they certainly reflected the views of the inferior
courts. Expressly echoing the observations of Lord Wilberforce to which I have
already referred, and quoting from an earlier case, he described the permit at
p68, line 30 as:
definable,
identifiable by third parties, capable in its nature of assumption by third
parties, and [had] some degree of permanence or stability.
It
was essentially on that basis that Ryan J at first instance [Western Mining
Corporation Ltd v Commonwealth of Australia (1994) 121 ALR 661 at
pp681–8], and the Federal Court on appeal [(1996) 136 ALR 353 at pp355–9, 378–9
and 395–7] held the permit to be property.
In
all these circumstances, I am of the view that a waste management licence
granted pursuant to section 35 of the 1990 Act constitutes ‘property’ within
the definition of that word in section 436 of the 1986 Act, and, hence, subject
to the argument to which I now turn, such a licence may be disclaimed by the
liquidator of the company that holds it pursuant to section 178 of the 1986
Act.
Does the 1990 Act prevent disclaimer?
The
agency contends that sections 35 to 44 of the 1990 Act constitute a
self-contained and exclusive code relating to the grant, terms, revocation,
surrender and transfer of waste management licences and that therefore the holder
of a licence may only divest himself of the licence, and therefore of the
obligations imposed on him under it, in accordance with that code. In
particular, the agency relies on section 35(11) of the 1990 Act, which, it will
be recalled, provides that a waste management licence ‘shall continue in force’
unless and until revoked under section 38 or surrendered in accordance with
section 39. This leaves no room, runs the argument, for termination by any
other means, and in particular no room for determination by disclaimer.
Are the statutory codes inconsistent?
The
first question to consider is whether, if a liquidator were to disclaim a waste
management licence, it could none the less be said to ‘continue in force’. In
this connection, Mr de Garr Robinson, in the course of his clear submissions,
contends that, although disclaimer of a waste management licence results in its
determination so far as the licensee is concerned, and determines all the
agency’s rights and obligations that are co-relative to those of the licensee
under the licence, the obligations and
than the licensee, do survive, by virtue of section 178(4)(b) of the
1986 Act.
The
effect of a disclaimer of a lease under section 178 of the 1986 Act was
authoritatively considered by the House of Lords in Hindcastle. In that
case, the House of Lords overruled a line of authority going back nearly a
century, which was to the effect that the disclaimer of a lease by the liquidator
of a tenant company discharged the liability to the landlord of a surety of the
tenant’s liabilities under the lease. In reaching the conclusion that the
earlier line of authority was wrong, the House of Lords effectively relied on
section 178(4)(b) of the 1986 Act.
In
the course of his leading speech, Lord Nicholls considered, first, the case of
a landlord and an insolvent tenant, with no third-party involvement. In such a
case, having said that disclaimer operated to put an end to the obligations both
of the landlord and the tenant, he went on to say this at p87F:
Disclaimer
also operates to determine the tenant’s interest in the property, namely the
lease. Determination of a leasehold interest has the effect of accelerating the
reversion expected upon the determination of that estate. The leasehold estate
ceases to exist.
Lord
Nicholls then considered a second case, namely where the landlord has the
benefit of a guarantor. Having held that in such a case the liability of the
guarantor continues notwithstanding the disclaimer, Lord Nicholls went on to
discuss the status of the lease in such a case after disclaimer. At p88G–H he
said:
The
statute provides that a disclaimer operates to determine the interest of the
tenant in the disclaimed property but not so as to affect the rights or
liabilities of any other person. Thus when the lease is disclaimed it is
determined and the reversion accelerated but the rights and liabilities of
others, such as guarantors and original tenants are to remain as though
the lease had continued and not been determined. In this way the determination
of the lease is not permitted to affect the rights or liabilities of other
persons. Statute has so provided.
If
one applies those observations to the present case, it appears to me that Mr de
Garr Robinson is right in his contention, that if a waste management licence
can be disclaimed, its disclaimer would not affect the rights and obligations
of the agency with regard to third parties. However, I do not consider it
follows that he is right in his contention that, as a result, the licence
continues in force notwithstanding the disclaimer. In my judgment, it is
apparent from the two passages I have cited from the speech of Lord Nicholls
that a disclaimer determines the lease, whether third-party interests are
involved or not: however, where third-party rights or obligations are involved,
they would continue, notwithstanding the disclaimer, because of the artificial
hypothesis required by the statute. The words emphasised by Lord Nicholls, ‘as
though’, appear to me to make it clear that he was not saying that where
third-party rights or
lease had in reality ceased to exist.
Of
course, one must be careful of applying the reasoning, even of the House of
Lords, where the disclaimed property is a lease to a case where the disclaimed
property is a waste management licence. None the less, given that I accept the
argument that such a licence is ‘property’, it would seem somewhat surprising
if very different considerations applied to the effect of the disclaimer on
such a licence as they do from a lease. Further, as Mr Rex Tedd QC, on behalf
the agency, pointed out, the idea that a waste management licence could be said
to ‘continue in force’ in circumstances where it is vested in nobody is little
short of absurd, particularly when one bears in mind that such a licence can
only be granted to ‘a fit and proper person’ under section 36(3) of the 1990 Act,
and, even more significantly, can be revoked under section 38(2), if ‘it
appears . . . that the holder of the licence has ceased to be a fit and proper
person by reason of the management of the activity that is authorised by the
licence having ceased to be in the hands of a technically competent person’. If
a licence could be disclaimed, and thereafter the management of the site
deteriorated, it would be somewhat difficult, as a matter of language, for a
revocation to be justified on the basis that ‘the holder of the licence has
ceased to be a fit and proper person’, given that there would be no such holder
in existence.
Accordingly,
in my judgment, the submission on behalf of the agency that there is a conflict
between a licence being disclaimable property under section 178 of the 1986 Act
and the clear provisions of section 35(11) of the 1990 Act is made out. I do
not accept an alternative argument advanced by Mr de Garr Robinson to the
effect that the power to disclaim should be treated as something sui generis
falling outside the scheme of the 1990 Act. It seems to me that either
disclaimer would put an end to the licence or it would not: if it puts an end
to the licence, then it would seem to be counter to section 35(11) of the 1990
Act; on the other hand, if it does not put an end to the licence, then section
35(11) presents no difficulties.
Mr
de Garr Robinson suggested that section 35(11) was introduced into the 1990 Act
to emphasise a change of approach to that contained in the 1974 Act, section 8(4)
of which entitled a licensee unilaterally to determine the licence. If
anything, that point appears to me to assist the agency’s case here, because it
demonstrates, when enacting the 1990 Act, the legislature decided that a waste
management licence could only come to an end if the waste management authority
so agreed or determined.
Having
reached the conclusion that there is a conflict between section 35(11) of the
1990 Act and section 178 of 1986 Act so as far as the possible disclaimer of
waste management licences is concerned, the question that has to be considered
is which of the two provisions prevails.
Why the 1990 Act should prevail over the 1986 Act
First,
it appears to me that there is considerable public interest in the maintenance
of a healthy environment, and in the principle pithily expressed as ‘the
polluter must pay’. It is the view that prevails both in
indeed, in most of the developed world. It is not merely apparent from the
provisions of the 1990 Act itself, but also from the terms of the EC council
directive of July 15 1975 on waste (75/442/EEC) as amended by council directive
91/156/EEC. On the other hand, while I accept that provisions of the 1986 Act
relating to winding up and disclaimer are not merely for the benefit of
individual shareholders, creditors, debtors and liquidators of companies but
also for the good administration of business and commerce, it appears to me
that those interests are of a less wide-ranging and important nature, both in
the domestic sense and in the international sense, that the concerns embodied
in the 1990 Act.
Accordingly,
there is nothing surprising in the notion that the legislature should have
intended that continued compliance with a waste management licence should
override the interests of the creditors or contributories of a company and
administrative concerns, namely the speedy winding up of companies. While other
considerations must be considered, it therefore appears to me, at least in the
absence of strong factors the other way, that the interest in the protection of
the environment should prevail over the interest in fair and orderly winding up
of companies.
Second,
while neither factor should be given too much weight, it does seem to me
legitimate, when faced with conflicting provisions in two statutes, to give
weight to two rules of construction that both, to my mind, support the agency’s
contention. First, there is the principle, cited by the agency in Latin, leges
posteriores priores contrarias abrogant.
There
is no doubt of the existence of such a rule. It is helpfully expressed in vol
8(2) of Halsbury’s Laws of England (4th ed reissue, 1996) at para 234 as
follows:
If
there is repugnancy or incompatibility between one statute and another, the one
that is later in date prevails [footnote: ie the earlier statute is held to be
repealed pro tanto by implication . . .].
Second,
there is the principle that was considered and, indeed, applied by the Court of
Appeal in R v Secretary of State for the Home Department, ex parte
Hickey (No 1) [1995] 1 All ER 479. The principle, taken from Bennion on
Statutory Interpretation (2nd ed 1992) at p205, is set out at p487F:
Where
the literal meaning of a general enactment covers a situation for which
specific provision is made by another enactment contained in an earlier Act, it
is presumed that the situation was intended to continue to be dealt with by the
specific provision rather than the later general one. Accordingly the earlier
specific provision is not treated as impliedly repealed.
It
could be said that, just as the liquidator could contend that section 178 is
the ‘specific provision’ dealing with disclaimer, so could the agency argue
that section 35(11) of the 1990 Act is the ‘specific provision’ dealing with
waste management licences. However, while the point is not easy, I
have reached the conclusion that the disclaimer provisions of section 178 of
the 1986 Act should be treated as the ‘general enactment’, and section 35(11)
of the 1990 Act should be treated as the ‘specific provision’. One is here
concerned with the power of a liquidator to disclaim, and that power is
bestowed upon him in respect of a very wide category of ‘property’. The
question is whether a specific category of property created by a later statute,
namely a waste management licence, is capable of disclaimer if the legislature
has, in that later legislation, apparently provided that it should not be
disclaimable. This view is consistent with that of the Alberta Court of Appeal
in a case I discuss below, Panamericana de Bienes y Servicios SA v Northern
Badger Oil & Gas Ltd (1991) 81 DLR (4th) 280 at p299.
Of
course, such so-called principles or rules of construction are aids to
interpretation: while they are of assistance when construing statutes and may
point to the right answer, it is always important to remember that they are
servants, not masters.
Third,
I believe that it is relevant to consider the consequences of a waste
management licence being capable of disclaimer. If it is capable of disclaimer,
then, once it is disclaimed, the obligations of the licensee under the licence
cease. However, it is argued that, in those circumstances, the agency would be
able to prove in the liquidation for any ‘loss or damage’ it suffers as a
result of the disclaimer by virtue of the provisions of section 178(6) of the
1986 Act. I have reached the conclusion that it would not be open to the agency
so to prove, and even if it were, it would not be a satisfactory exercise.
The
basis on which it is said that the agency would be able to prove for loss and
damage is its rights under section 42, and, in particular, subsections (3) and
(4), of the 1990 Act. It will be recalled that, under those provisions, if the
licence conditions are not complied with or there is a danger of pollution on
the site, the agency could go in and rectify the problem if, by reason of an
emergency, ‘it is necessary to do so’ and recover the cost from the licensee.
It is said by Mr de Garr Robinson that the loss of this right is something for
which the agency would be entitled to prove by virtue of section 178(6) of the
1986 Act.
It
appears to me that that argument is fraught with problems. First, as a matter
of principle, I have some difficulty in seeing how the agency could prove for
the future possible costs of carrying out such work. It is not as if the agency
is under a statutory or contractual duty to carry out such work: it merely has
the powers so long as the licence exists to require such work to be done, and
to carry out that work in an emergency and recover the costs. I suppose that
circumstances might arise in which the court would construe the discretion
given to the agency, a public body concerned with the maintenance of the
environment, as a duty (as was done in relation to a discretion in very
different circumstances in R v Tower Hamlets London Borough Council,
ex parte Chetnik Developments Ltd [1988] AC 858 at pp871G–H and 877C–D).
But that seems a very insecure peg on which to hang the argument that the
agency should have a right to prove.
If
there is no clear duty on the agency to carry out the necessary work in the
future, then it seems to me a little difficult to see how the agency can
claim to have suffered loss and damage as a result of the disclaimer of the
licence. The agency’s argument amounts to saying that it had lost the right to
recover the cost of such work that it might in the future have chosen to carry
out at its own expense. Its position is very different from that of, say, a landlord,
who would be able to show loss and damage in the event of the disclaimer of a
lease that entitled him to carry out work of repair to the demised premises and
to recover the cost from the tenant: so long as the lease subsisted, the
landlord would have the benefit of a right to carry out, at the ultimate
expense of the tenant, work that improved the value of the landlord’s own
property; the agency could not make any similar claim here.
The
truth is that, if the licence is disclaimed at a time when there is a
substantial amount of work to carry out to the site, by virtue of conditions
imposed in the licence for the benefit of the environment, the loser as a
result of the disclaimer of the licence would not so much be the agency as the
general public.
I
have not been referred to any English case that assists on this point, but
there is a decision of the Alberta Court of Appeal that tends to support my
view that the authority may not have a right to prove. It is Panamericana,
to which I have referred. In that case, the defendant company, a licensed
operator of oil and gas wells, was bankrupt, and one of the questions
considered was whether the Energy Resources Conservation Board had a provable
claim under the relevant Bankruptcy Act, RSC 1985, in the event of the company
failing to comply with a requirement of the board. Reversing the judge at first
instance, the Alberta Court of Appeal held that the board would not have such a
claim, because it was not a ‘creditor’ within the meaning of the 1985 Act. At
p291b–g, the Alberta Court of Appeal said:
It
is true that . . . [the Board] has the power by statute to create in its own
favour a statutory debt if it chooses to do so. It may, under s 92(1) and (2)
of the Oil and Gas Conservation Act . . . do the work . . . itself and
become a creditor for the sums expended. But the board has not done so in this
case. Rather, it is simply in the course of enforcing observance of a part of a
general law of Alberta . . .
In
my view, the board is not, at this point, a ‘creditor’ of Northern Badger with
a claim provable in its bankruptcy.
It
would be wrong to place too much weight on that decision. It appears to me to
be distinguishable on a number of grounds. In the present instance, I am not
dealing with the definition of ‘creditor’, but with the meaning of ‘loss and
damage’. The present case is concerned with the consequences of a disclaimer,
not with the right to prove in the absence of a disclaimer. In any event, the
reasoning of the Canadian court is somewhat different to mine.
Even
if it were possible for the agency to prove pursuant to section 178(6) of the
1986 Act, that would be an exercise that was both unsatisfactory and difficult.
It would be unsatisfactory because, as Mr de Garr Robinson accepts, the loss
and damage would be assessed by
only be made in relation to the loss of the right to recover the costs of
carrying out work that was necessary in an emergency. On the face of it,
therefore, unless one gives a very extended and unnatural meaning to the words
‘by reason of an emergency’, it appears that the loss and damage would have to
be calculated on the assumption that the agency could not prove for the cost of
installing sensible monitoring machinery, because that would be for the purpose
of preventing an emergency: rather, it would have to prove on the basis that,
because no such machinery was installed, an emergency, possibly with very
serious consequences, could arise in the future, which the agency would have
been able to remedy at the ultimate cost of the licensee. It seems to me that
that would be a difficult and artificial basis for assessing ‘loss and damage’
under section 178(6). The true loss and damage would be the inability to
enforce the installation of sensible monitoring machinery while the site was
being reinstated, and carrying out monitoring and appropriate maintenance works
from time to time, once the site was reinstated, until such time as it was
stable. Anyway, it seems to me that it would be a very difficult exercise
indeed to assess the quantum of the loss and damage on this very artificial
basis, namely the assumption that nothing is done until an emergency arises,
and thereafter the cost of remedying the emergency is recoverable.
On
the face of it, however, there is force in the point that the words ‘by reason
of an emergency’ should be very widely construed, so as to mean, for instance,
‘to avoid an emergency occurring some time in the future’; although that is not
the natural meaning of the words, there is, at least at first sight, a pretty
strong argument for giving the words such a wide meaning bearing in mind their
context. However, as I see it, the problem with that argument is that it
ignores section 42(6A) of the 1990 Act, which enables the agency to obtain
specific performance from a licensee of the conditions of his licence.
Accordingly, in a case where there is no present emergency, it seems to me that
the appropriate course for the agency to take, if it does not wish to revoke or
suspend the licence, is to enforce the obligation of the licensee through the
courts; it is only if the delay involved in that course could lead to
prejudice, that the agency’s power under section 42(3), limited as it is by the
words ‘by reason of an emergency’, could be implemented. In my judgment, that
point is rather underlined by the fact that, under section 42(4), the licensee
can avoid payment if he can show ‘that there was no emergency requiring any
work’.
If
the agency is unable to prove under section 178(6) of the 1986 Act for the
whole of the likely future cost of the licensee in complying with the
outstanding liabilities under the licence at the time it was disclaimed, it
appears to me that the consequences of a licence being capable of disclaimer
would be, from the point of view of the effectiveness of the 1990 Act in
helping protect the environment and ensuring that ‘the polluter pays’,
substantially undermined. This would be true particularly in the case of
voluntary liquidation of a solvent company. A solvent company holding a licence
that had become onerous could go into liquidation,
basis that the disclaimer was effective, the agency would not only be powerless
to enforce the performance of the conditions of the licence against a perfectly
solvent entity, it would also be unable to recover, for the benefit of the
public, a sum that it could be reasonably confident was sufficient to carry out
the appropriate work (ie the performance of the conditions of the licence if
the licence had continued to subsist). Meanwhile, the liquidator could
distribute the assets of the company, after paying off all other creditors,
among the shareholders.
Even
in the case of an insolvent liquidation, it seems to me wrong that the agency
should not even be capable of being treated as an unsecured creditor. If the
liquidator of an insolvent company can disclaim an onerous waste management
licence and the agency cannot prove under section 178(6), that is inherently
unsatisfactory if the company has some assets. Further, in such a case, the
unsecured creditors of the company would actually benefit from the liquidation
in an uncovenanted way. However, it would be wrong to make much of that latter
point, because, as Mr de Garr Robinson points out, if it is not open to the
liquidator to disclaim the licence, it can be said with equal force that the
unsecured creditors are disadvantaged in a potentially unfair way, in that the
expense of compliance with the licence may in practice rank ahead of any of
their claims (although I do not see, despite Mr Tedd’s brief submission to the
contrary, why the rights of secured creditors, save, perhaps, in so far as
their security consists of the site in question, would be affected by the
liquidator’s inability to disclaim a waste management licence).
Arguments the other way
Having
set out the reasons why, although it is ‘property’, a waste management licence
should not be capable of disclaimer, I turn to consider the arguments that are
said to point the other way. First, it is said such a conclusion is
inconsistent with the decision of Wynn-Parry J in Nottingham General
Cemetery, to which I have referred. In that case it was held that a liquidator
was entitled to disclaim property, notwithstanding that it was vested in the
company, on the basis that it was inalienable. I consider that that case is
distinguishable because the private statutory provision that was there said to
prevent disclaimer prohibited the company from selling or disposing of any of
its land. The judge held that disclaimer by a liquidator was not disposal by
the company, and, accordingly, was not precluded by the private statute. In the
present case, the statutory provision that is said to prevent disclaimer is in
very different terms and, for the reasons I have given, it does seem to me to
prevent disclaimer because, as I have said, disclaimer would bring the licence
to an end.
Second,
it is argued on behalf of Mr Stout that, if the liquidator is unable to
disclaim a waste management licence, it will cause the liquidation to be
continued for an unacceptable period of time, and conceivably indefinitely.
Accordingly, relying on observations I have already quoted from Re House
Property, it is said that an inability to disclaim the licence is
inconsistent with the whole purpose of liquidation.
decision of the Court of Appeal in Stanhope Pension Trust v Registrar
of Companies [1994] BCC 84, and, in particular, the policy considerations
discussed by Hoffmann LJ at pp88H–90A. At p89H he referred to the ‘principle of
finality’ as being one that did apply to liquidations, but, as he said at p90A
referring back to p89B–C, that principle is ‘qualified in various ways which do
not allow such broad brush strokes to present an adequate picture of the law’.
Indeed, it seems clear from what was said by Wynn-Parry J in Nottingham
General Cemetery in the second full paragraph at p697 (at a time when
disclaimer could be prevented by order of the court) that the principle that
liquidations should be disposed of promptly is one that can, and in appropriate
cases should, yield to other considerations.
Furthermore,
it is not as if the liquidator of a company that has a licence is powerless to
act. He can seek to transfer the licence, and in that connection it may be that
he would have to pay a ‘fit and proper person’ to take on the licence. He can
seek to negotiate a surrender of the licence to the agency; the agency is a
public body, and it appears to me that it is therefore bound to take into
account all the circumstances when it is approached with an offer to surrender
a licence.
In
many cases, the liquidator may well be able to arrive at a sensible modus
vivendi by reaching agreement with the agency, where necessary with the
sanction of the creditors’ committee. On other occasions, when he takes the
view that the agency is being unreasonable or he simply requires guidance
(particularly while the inter-relationship between liquidation and
environmental protection remains in its infancy) he can, respectively, appeal
against any decision of the agency to the Secretary of State pursuant to
section 43 of the 1990 Act or bring the matter before the court for appropriate
directions.
In
the case of a solvent liquidation, the liquidator would have an alternative
course open to him, in accordance with an approach adopted by Pearson J in Gooch
v London Banking Association (1886) 32 ChD 41, recently apparently
approved by the Court of Appeal in In re Park Air Services plc [1997] 1
WLR 1376 at p1385 A–E. The effect of this decision was described by Mummery LJ
at 1385A:
the
court had jurisdiction to restrain the liquidators of a solvent company in
voluntary liquidation from distributing assets of the company amongst its
shareholders, without setting aside sufficient assets to provide for the
payment of all future rent and liabilities under the lease [which the company
held from the landlord seeking the injunction].
In
the case of a solvent liquidation of a company with a waste management licence,
a liquidator could, by parity of reasoning, after having set aside a sufficient
sum to enable the company to comply with its obligations under the licence,
distribute the remaining assets of the company, after paying off all creditors,
to the shareholders. If there were any dispute or doubt about the appropriate
sum, it could no doubt be
Mr
de Garr Robinson also points to the fact that if a waste management licence
cannot be disclaimed, the whole basis of the liquidation changes from the
normal position. Thus, the normal principle is that, from the commencement of
its liquidation, a company’s assets are no longer in the beneficial ownership
of the company, but are subject to a sort of statutory trust — see, for
instance, per Lord Diplock in Ayerst v C&K (Construction)
Ltd [1976] AC 167 at p176F. However, it seems to me that the answer to that
point is that where the company has a waste management licence then, subject to
any question of its transfer, surrender or revocation, there is a super-added
statutory aspect of the quasi-trust. If I am right, and the relevant provisions
of the 1990 Act effectively prevent disclaimer, then that must be a necessary
consequence of the inability to disclaim a waste management licence.
It
is also said that the functions of the liquidator would be very different from
those that he normally has. Again, it seems to me that that must follow from
the conclusion that the liquidator cannot disclaim a waste management licence.
However, if the liquidator has not the necessary expertise to deal with such a
licence, he can no doubt employ an appropriate person to deal with it;
alternatively, he can step down as liquidator. It was also suggested that the
liquidator might be liable, even criminally liable, for the company’s failure
to comply with the conditions of the licence. In this connection, section
157(1) of the 1990 Act provides:
Where
an offence under any provision of this Act committed by a body corporate is
proved to have been committed with the consent or connivance of, or to have
been attributable to any neglect on the part of, any director, manager,
secretary or other similar officer of the body corporate . . . he as well as
the body corporate shall be guilty of that offence and should be liable to be
proceeded against and punished accordingly.
I
do not consider this provision need concern a conscientious, honest liquidator.
If the company has run out of money, and is therefore incapable of complying
with the conditions of a waste management licence, I cannot see how it could be
said that, unless the liquidator has in some way behaved imprudently or worse,
he could be liable under section 157 of the 1990 Act because he has not come up
with his own money to enable the company to comply with its obligations. Nor do
I see how the liquidator could be held liable, whether criminally or otherwise,
for the company having failed to comply with its obligations due to lack of
funds, simply because some of the funds of the company had been used to pay the
liquidator his reasonable fees, whether in connection with the licence or other
reasonable matters in connection with the liquidation.
Another
argument raised on behalf of Mr Stout was that if the company continued to hold
the licence and to be bound to perform its conditions, that would run counter
to the express prohibition against a company carrying on business once it goes
into voluntary liquidation contained in section 87(1) of the 1986 Act, which
provides:
In
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
its beneficial winding up.
It
appears to me that there are two answers to this point. The first is that if
failure to comply with the conditions of a licence could result in revocation
or suspension of what may be a valuable licence, or whether or not the licence
has value, in civil proceedings under section 42 of the 1990 Act, or even in
criminal proceedings, then in so far as activities in connection with the
licence would fall within the opening part of section 87(1), they could none
the less be carried on because they were ‘required for [the] beneficial winding
up’ of the company. Second, it seems to me that by continuing to comply with
conditions (eg those relating to monitoring the site and carrying out necessary
remedial works) that applied, notwithstanding that any tipping may have
stopped, the company would not be ‘carrying on business’ as a matter of
ordinary language.
A
further point raised on behalf of Mr Stout was that if a liquidator is obliged
to ensure that the company complies with its duties under a waste management
licence, there is no satisfactory basis upon which he can recover his costs or
even his fees. This raises a general point of concern: if it is known that
liquidators cannot recover their reasonable costs and a reasonable rate of
remuneration in respect of ensuring, so far as is reasonably possible, that the
company complies with a waste management licence, nobody would be prepared to
accept an appointment as a liquidator of a company with a waste management
licence. In my judgment, the answer to that point is that, on its true
construction, the 1986 Act (and the Insolvency Rules 1986 made thereunder)
would entitle a liquidator to recover such sums. In relation to a voluntary
winding up, section 115 of the 1986 Act provides:
All
expenses properly incurred in the winding up, including the remuneration of the
liquidator, are payable out of the company’s assets in priority to all other
claims.
That
provision was considered by Peter Gibson J in Re Berkely Applegate (Investment
Consultants) Ltd (No 3) (1989) 5 BCC 803. He said at p805D–E:
Looking
at s 115, for my part I have no doubt that the remuneration of the liquidator
for administering trust assets which are not the assets of the company and the
costs and expenses incurred by the liquidator, again not in getting in or
paying out or distributing the assets of the company, but in administering
trust assets, are outside the wording of the section. To my mind it is clear
that the section is simply dealing with the winding up of the company,
involving as it does the getting in of the assets of the company, ascertaining
its creditors, paying its liabilities in accordance with the statutory
provisions and distributing any surplus. I do not think that on any ordinary
reading ‘expenses properly incurred in the winding up, including the
remuneration of the liquidator’ would include expenses and remuneration which
the liquidator has incurred and has been awarded by
held by the company as trustee, and in my judgment the section must be
construed as limiting to the liquidator’s expenses in, and remuneration for,
dealing with assets of the company.
Those
observations were concerned with a liquidator’s expenses and remuneration in
connection with assets that were not beneficially the property of the company
and were not part of the winding up operation at all. In a case such as the
present, a waste management licence is beneficially the property of the
company, and remains so after the liquidation if it cannot be disclaimed. Thus,
if the liquidator negotiated a transfer of the licence, it could not, I think,
be seriously suggested that he could not recover his reasonable costs and
remuneration in connection with that transfer. Furthermore, if the liquidator
could not disclaim the licence, it would be a necessary part of his task, as
liquidator of the company, to ensure, so far as possible in light of the
financial situation of the company, that it complied with its obligations under
the licence.
A
further point that was raised on behalf of the liquidator was that if the
licence cannot be disclaimed, the result is that the cost of complying with the
licence will effectively rank ahead of the unsecured creditors of the company.
It seems to me that that must be right. In so far as they are substantial
institutional creditors, that should not cause concern; they will either be
secured creditors, as Mr de Garr Robinson argued, or they will be used to
adapting to the changing requirements of society and the law, as Mr Tedd
contended. However, smaller, less sophisticated creditors and public creditors
of an insolvent company with a waste management licence would be prejudiced.
That point appears to me to have a particular force when one considers the
position of preferential creditors, ie creditors for debts such as tax to the
Inland Revenue, value added tax, payments to employees, social security
contributions and pension payments (see section 386 of, and Schedule 6 to, the
1986 Act). Such preferential creditors are intended, for obvious reasons, to
have priority over other unsecured creditors — see section 175 of the 1986 Act.
The idea that compliance with a waste management licence should, as it were,
rank ahead of the preferential creditor may well seem unfair on those
creditors. There are, in my judgment, two answers to that point, both of which
I have already touched on. The first is that, unpalatable as it might be for
small unsecured creditors to be prejudiced, it is not particularly surprising,
in the present climate, that the public interest in protecting the environment
should rank ahead of their interests. Second, whatever decision one reaches as
to the ability to disclaim a licence, the result could be said to be odd so far
as the unsecured creditors are concerned: one way they will receive an
uncovenanted benefit, and the other way they will be unfairly disadvantaged.
Finally,
it was suggested on behalf of Mr Stout that, where a solvent company was put
into liquidation for the purpose of enabling the liquidator to disclaim a waste
management licence, the agency would have the right to apply to the court
pursuant to section 112 of the 1986 to
disclaim the licence. I have considerable doubts as to whether the court would
have the power to reverse a genuine and otherwise normal decision to put a
company into voluntary liquidation, save in the most exceptional circumstances.
It also appears to me that the power of the court to review a decision of a
liquidator to disclaim a licence could also only be exercised in highly
exceptional circumstances: see the discussion in Re Hans Place Ltd [1992]
2 EGLR 179 at pp182H–183D. On the face of it, it seems to me that if the
decision to wind up the company, and the decision to disclaim the licence, were
each arrived at on the basis that it was in the interest of the company, its
creditors, and its shareholders that such a course be taken, the fact that it
was unattractive or against the public interest would be a fairly shaky basis
on which to challenge either such decision. It is true that in Sargent v
Customs & Excise Commissioners [1995] 1 WLR 821, the Court of Appeal
held that, on the facts of that case, a receiver appointed under section 109 of
the Law of Property Act 1925 was not entitled to take a certain course in light
of what Nourse LJ called ‘the argument based on public policy’ (at p829C) and
also that, given the nature of the reasonable expectations of a third party,
the receiver could only exercise his discretion in a certain way (at p829G).
However, I am by no means convinced that such reasoning would necessarily apply
to a liquidator, particularly in the context of a licence with potential
long-term liabilities, and where the liquidator had himself done nothing to
give rise to the expectations of the third party (in this case the agency),
unlike the receiver in Sargent.
Quite
apart from this, it seems to me that there could be many cases where the
possibility of disclaiming a waste management licence is either one of a number
of reasons, or is by no means the main reason, for the decision to put the
company into liquidation, or where the liquidator’s decision to disclaim the
licence is based on a number of considerations, many of which cannot even be
said to be contrary to the public interest.
Conclusion on the issue of principle
In
all these circumstances, I have reached the conclusion that a waste management
licence, albeit that it is ‘property’ within section 436 and hence within
section 178 of the 1986 Act, is none the less not capable of disclaimer in
light of the provisions, and in particular section 35(11), of the 1990 Act. I
derive some comfort from the fact that my conclusion appears to be consistent
not only with the view of the Canadian courts (for instance in the Alberta case
of Panamericana, to which I have referred, and also Re Lamford Forest
Products Ltd (1991) 86 DLR (4th) 534 in British Columbia), but also with
the conclusion reached by the Supreme Court of the United States in Midlantic
National Bank v New Jersey Department of Environmental Protection
(1986) 474 US 494; 106 S Ct 755. However, it is right to add that those cases
turned on slightly different points, and, of course, on differently worded
statutes.
The liquidator’s application for directions
As
I have mentioned, Mr Stout seeks directions as to what he should do in the
event that I accept (as I have done) that the agency is correct in its
contention that the licence has not been effectively disclaimed. The agency is
concerned with the general principle raised by the purported disclaimer in the
present case and it does not, as I understand it, make any criticism of Mr
Stout’s conduct of the liquidation. More significantly on this aspect, it has
no submissions to make in relation to Mr Stout’s application. With that in
mind, I turn to the relief sought in that application.
First,
there is a claim that Mr Stout’s costs in connection with both applications be
costs payable out of the company’s assets pursuant to section 115 of the 1986
Act, and that he be not liable for the agency’s costs. The agency does not
oppose this; but the question of the liquidator’s costs is ultimately one for
me. I am quite satisfied that Mr Stout’s costs in connection with both
applications are expenses properly incurred in the winding up of the company,
and, accordingly, they should be payable pursuant to section 115 of the 1986
Act.
The
remaining specific directions that Mr Stout seeks concern the action that he
should take in relation to the licence, and in particular whether he should
apply the property of the company that has not so far been distributed in
discharging any of the conditions contained in the licence.
It
is not only the liquidator who is in some difficulties as to what to do in the
present case with regard to the licence. Given that the agency has no
submissions to make, given that I do not know what is going to happen, or indeed
what is happening, on the site, and given that I do not know what remedial
work, if any, may have to be carried out on the site in the future, it would
scarcely be realistic for me to give any directions so far as compliance with
the licence is concerned.
As
there is no evidence to suggest that anything specific needs to be done, as it
appears that the agency is prepared in principle to issue a new licence that is
less stringent than the current licence, and as the agency has no submissions
to make with regards to Mr Stout’s application for directions, I would, subject
to further argument, think it right to conclude that the liquidator should be
free to distribute the assets of the company among such creditors, if any, as
it still has, and then among its shareholders. I apprehend that that would
clearly be the appropriate course if the licence had been a private
arrangement, or the licensor was apparently merely concerned to establish a
principle and had no submissions at all to make as to the proper distribution
of the assets of the company.
I
am not entirely comfortable about taking such a course in the present case with
regard to possible obligations under the licence, because those obligations
arise under public law and breach of them could give rise to criminal
sanctions. Given that it is ultimately the agency which is responsible for
administering the relevant law under the 1990 Act, and in particular for
enforcing the terms of the licence, I consider that I should formally invite
the agency to confirm that that course is appropriate before I formally
sanction it. It may be that, having established the point of principle that is
of such understandable concern to the agency, the agency will now be happy to
accept the surrender of the licence in this case.
Conclusion
In
these circumstances, I conclude that the purported disclaimer by Mr Stout on
November 3 1997 was ineffective, because, although a waste management licence
is ‘property’ within section 436, it is not property that is capable of
disclaimer within section 178 of the 1986 Act. Subject to further argument, I
would think it right, on the basis of the current state of evidence and
submissions, to authorise Mr Stout to distribute the remaining assets of the
company on the basis that he effectively disregard the existence of the
licence. There will be no order for costs, save that, as the costs incurred by
and on behalf of Mr Stout in connection with both applications are expenses
properly incurred in the winding up of a company, they are payable out of the
company’s assets pursuant to section 115 of the 1986 Act.
Declarations
accordingly.
