Insolvency — Disclaimer — Environmental Protection Act 1990 — Waste management licence — Whether waste management licence ‘property’ within section 436 of Insolvency Act 1986 — Whether liquidator entitled to disclaim onerous waste management licence under section 178 of 1986 Act
The appellant Official Receiver was the liquidator
of two companies. Both companies had greater liabilities than assets, and both
companies held waste management site licences under the Environmental
Protection Act 1990. In respect of each licence the Environment Agency required
works to be carried out. The Official Receiver applied to the court for
directions as to whether he could disclaim the licences. Neuberger J, applying
his decision in Environment Agency v Stout (Liquidator of Mineral Resources
Ltd) [1998] 4 PLR 56, that a waste
management licence was property within the meaning of section 436 of the
Insolvency Act 1986, but that, where a licence was onerous, a liquidator could
not disclaim it, directed that the Official Receiver could not disclaim the
licences. The Official Receiver appealed, contending that although a licence
was property, he should be able to disclaim it. The respondent Environment
Agency sought to uphold the judge’s order that a licence could not be
disclaimed, but in the alternative it argued that a licence was not property.
an interest incidental to property, within the meaning of section 436 of the
1986 Act. There are certain features that are likely to be found if the status
of property is to be conferred on an exemption from some wider statutory
prohibition: (1) there must be a statutory framework conferring an entitlement
on one who satisfies certain conditions; this condition was satisfied by
section 35(2), 36(3) and 43 of the 1990 Act; (2) the exemption must be
transferable, and was satisfied by section 40(1); and (3) the exemption or
licence must have value, and it was common ground that money does change hands
between transferor and transferee. A waste management licence can be
disclaimed. Having regard to the public policy requirement that the property of
insolvents should be divided equally among their unsecured creditors, and the
important aspect of that policy of the ability to disclaim onerous property, it
would require clear words to exclude the operation of section 178 of the 1986
Act from specific items of property or specific insolvents. Section 35(11) of
the 1990 Act, which provides that a licence remains in force until revoked by
the authority or its surrender is accepted, and section 178, which allows
disclaimer of onerous property, are not mutually inconsistent and
irreconcilable.
The following cases are
referred to in this report.
Attorney-General of Hong Kong v Daniel Chan [1987] 1 WLR 1339
Bristol Airport plc v Powdrill [1990] Ch 744; [1990] 2 WLR 1362; [1990] 2 All ER
483, CA
Britnor, Re
[1876] 46 Bankruptcy Cases 85
Commonwealth of Australia v WMC Resources Ltd (1998) 152 ALR 1
de Rothschild v Bell
[1999] 2 WLR 1237; [1999] 1 EGLR 35; [1999] 16 EG 155
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
Hollinshead v Hazleton
[1916] 1 AC 428
Kirby v Thorn
EMI plc [1988] 2 All ER 947
Mineral Resources Ltd, Re [1999] 1 All ER 746; sub nom Environment Agency v Stout
(Liquidator of Mineral Resources Ltd) [1998] 4 PLR 56
Morris v Morgan
unreported 31 March 1998, CA
National Provincial Bank Ltd v Ainsworth [1965] AC 1175; [1965] 3 WLR 1; [1965] 2 All ER
472, HL
Nokes v Doncaster
Amalgamated Collieries [1940] AC 1014
Park Air Services plc, Re [1999] 2 WLR 396; [1999] 1 All ER 673; sub nom Christopher Moran
Holdings Ltd v Bairstow [1999] 1 EGLR 1; [1999] 14 EG 149
Potter Oils Ltd, Re [1985] BCLC 203
Rae, Re [1995]
BCC 102
Wilmott Trading Ltd No 1, Re The Times 28 April 1999
Wilmott Trading Ltd No 2, Re The Times 17 June 1999
This was an appeal by the
Official Receiver from an order given by Neuberger J on an application by the
Official Receiver for directions to disclaim onerous property under section 178
of the Insolvency Act 1986, in relation to two companies in liquidation, Celtic
Extraction Ltd and Bluestone Chemicals Ltd. The respondent was the Environment
Agency.
Richard Ritchie (instructed by the Treasury
Solicitor) appeared for the appellant; Roger Kaye QC and Stephen Moverley-Smith
(instructed by the solicitor to the Environment Agency) represented the
respondent.
Giving judgment, MORRITT LJ said: These appeals raise two questions: (1)
is a waste management licence granted under the Environmental Protection Act
1990 (EPA) ‘property’ within the meaning of that word as defined in section 436
of the Insolvency Act 1986? and, if so, (2) if it is onerous, is the liquidator
or trustee in bankruptcy of the holder of the waste management licence entitled
to disclaim it pursuant to section 178 of the Insolvency Act 1986? In Re
Mineral Resources Ltd [1999] 1 All ER 746* Neuberger J answered the first
question in the affirmative and the second in the negative. By orders made on
11 March 1999, Neuberger J applied his decision in Re Mineral Resources Ltd,
without further argument, to the applications for directions whether to
disclaim such licences made by the Official Receiver, as liquidator of Celtic
Extraction Ltd (Celtic) and Bluestone
*Editor’s note: Also reported at sub nom
Environment Agency v Stout (Liquidator of Mineral Resources Ltd)
[1998] 4 PLR 56
Chemicals Ltd (Bluestone).
These are the appeals of the Official Receiver as such liquidator. Though the
appeals are, in form, appeals from the judge’s orders made on 11
1999, in substance they are appeals against his judgment in Re Mineral
Resources Ltd. The Official Receiver submits that the judge was right on
the first point but wrong on the second. The respondent, the Environment Agency
(the agency), seeks to uphold the judge’s order on the second point, and on the
alternative ground that he was wrong on the first point, so that it is
immaterial whether he was right or wrong on the second point.
The relevant facts may be shortly stated. I will
refer first to those relating to Celtic. On 7 May 1992 Lliw Valley Borough
Council granted to Max Recovery (Holdings) Ltd, under the Control of Pollution
Act 1974, a waste disposal licence relating to parcel numbers 2932, 2709, 3817
and 4335, being part of Gwenlais Fawr Farm, Capel Road, Pontlliw, Swansea (the
Celtic site). The form of deposit to which it related was as a landfill site
and the types of waste of which the deposit was authorised were topsoil,
subsoil, brickwork, stone, concrete, clay, sand, silica (excluding finely
powdered materials) and glass. On 11 December 1992 an identical licence (the
Celtic licence) was granted by Lliw Valley Borough Council to Celtic by way of
transfer of the licence formerly granted to Max Recovery (Holdings) Ltd. The
Celtic licence contains 42 paragraphs setting out in detail the conditions to
be observed in the use of the Celtic site as a landfill site in accordance with
the Celtic licence. By a lease dated 10 February 1993 and made between David
Williams and Celtic, Mr Williams demised the Celtic site to Celtic for a term
of 15 years from 25 March 1987 at a peppercorn rent. Celtic covenanted to use
the site as a refuse tip only and in strict compliance with the provisions of
the lease and of the Celtic licence.
When the EPA came into force, the Celtic licence
became a site licence for the purposes of that Act: section 77(2). By an order
made on 30 June 1998, Celtic was put into compulsory liquidation and the
Official Receiver became the liquidator. On 10 August 1998 the Official
Receiver received from the agency a notice issued under section 42(5)(a) of the
EPA, specifying eight breaches of the conditions of the Celtic licence and
requiring remedial steps to be taken within 21 days. Having remedied the
matters complained of, on 15
the agency explaining that Celtic had no assets and asking the agency to
terminate the licence. On 24
notice under section 178 of the
Insolvency Act 1986 to disclaim the lease. By a letter dated
11
terminate the Celtic licence were not, in the circumstances, exercisable. On 11
March 1999 the Official Receiver applied to the Companies Court for directions
whether he could and should disclaim the Celtic licence. In his statement in
support of the application he explained that the only assets of Celtic are book
debts of £8,863 charged to the bank to secure a debt of £6,161; the liabilities
amount to £232,975. The total cost of the remedial work to date is £3,020,
which will have to be borne by the public purse.
Bluestone is the owner of freehold land at
Redwither Road, Wrexham Industrial Estate, Wrexham, Clwyd (the Bluestone site).
On 17 January 1994 Wrexham Maelor Borough Council granted Bluestone a waste
disposal licence (the Bluestone licence) under the Control of Pollution Act
1974 for the use of the Bluestone site for storage and chemical treatment in
respect of a number of types of waste product. The conditions for the operation
of the Bluestone site contained in the Bluestone licence are long, 32 pages,
and very detailed. When the EPA came into force the Bluestone licence became a
site licence for the purposes of that Act. By an order made on 11 November 1998
Bluestone was put into compulsory liquidation and the Official Receiver became,
and is, its liquidator.
The Bluestone site is charged to National
Westminster Bank plc to secure an outstanding debt of £441,662. On 30 November
1998 the agency wrote to the Official Receiver indicating the routine and
longer term measures required to be carried out on the Bluestone site, the cost
of which, the Official Receiver has been advised, may come to £300,000. The
Official Receiver has already incurred costs of £5,005 for which he cannot pay.
The estimated deficiency with regard to creditors is £1,122,232. In those
circumstances, the Official Receiver applied to the court for directions
similar to those he sought in the case of Celtic.
By his orders made on 11 March 1999 in the case of
both Celtic and Bluestone, Neuberger J directed that the Official Receiver
could not disclaim the Celtic licence or the Bluestone licence. In doing so he
applied his own previous decision in Re Mineral Resources. He recognised
the public importance of the issues and gave the Official Receiver permission
to appeal.
In the case of Wilmott Trading Ltd, Neuberger J
has heard two further applications to which I should refer at this stage. In
the first, Re Wilmott Trading Ltd No 1, The Times 28 April 1999, in his
judgment handed down on 31
held a waste management licence might be dissolved notwithstanding that its
liquidator could not disclaim it. In the second, Re Wilmott Trading Ltd No 2,
The Times 17 June 1999, Neuberger J decided that, on the dissolution of a
corporate holder of a waste management licence, such licence ceased to exist.
Neither of these points is directly raised in these appeals.
Before considering the decision of Neuberger J in Re
Resources and the arguments of counsel in support of and in opposition to
his conclusions, it is necessary to explain the relevant provisions both of the
environment legislation and of the Insolvency Act 1986.
Environment
legislation
Both the Celtic and the Bluestone licences were
originally granted under the Control of Pollution Act 1974. By section 3 of
that Act it was an offence for any person to deposit waste on land unless the
land was occupied by the holder of a licence granted under section
then only if the conditions of such licence were observed. Section 6 contained
provisions supplementary to section 5 and permitted the licence to contain conditions
as to its duration. By section 8(1) the holder might transfer the licence to
another but subject to the approval of the relevant authority. By section 8(2)
comparable provision was made for transmissions by operation of law.
On 15 July 1975 the European Commission made a
Directive on Waste (75/442/EEC). In the recitals to the directive, the
Commission recognised that the disparity in the treatment of the control of
waste by member states affected the functioning of the common market, and
should be harmonised with the essential objective of the protection of human
health and the environment against harmful effects of the collection,
transport, treatment, storage and tipping of waste. It enunciated a principle
of ‘polluter pays’ and required member states to take the necessary measures.
Naturally, it did not go into any detail and, in particular, was silent as to
the consequences of the insolvency of the polluter.
The EPA was enacted to give effect to the United
Kingdom’s obligations under the directive. The relevant part is Part II dealing
with waste on land. Section 33(1) provides that, subject to certain immaterial
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…
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 to 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.
If the offence is committed by a body corporate,
section 157 provides that any person with whose consent or connivance or
through whose negligence the offence was committed also commits an offence.
Section 34 imposes a duty of care on any person who imports, produces, carries,
keeps, treats or disposes of controlled waste to take all such
waste or transfers to any unauthorised person.
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…
By subsection (12) ‘licence’ means a waste
management licence and ‘site licence’ means a licence authorising the
treatment, keeping or disposal of waste in or on land. Subsection (2) provides
that a licence relating to the treatment, keeping or disposal of waste in or on
land shall be granted to the occupier of that land. Subsections (3) to (7)
authorise the imposition of conditions of various descriptions. 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… its surrender is accepted under section 39 below.
Section 36 provides for applications for site
licences to be made to the local waste regulation authority. A licence is not
to be granted if the intended use of the land is not permitted under the Town
and Country Planning Acts but otherwise, by subsection (3), shall be granted to
a fit and proper person, as defined in section 74, unless the authority:
is satisfied that its rejection is necessary for
the purpose of preventing
(a) pollution of the environment;
(b) harm to human health; or
(c) serious detriment to the amenities of the
locality;
Section 37 provides for the modification of
licences. Section 38 empowers a waste regulation authority to revoke or suspend
licences. Section 39 deals with ‘Surrender of Licences’. 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. The waste regulation authority is to
inspect the land and refuse to accept a surrender unless it is satisfied that
the condition of the land is unlikely to cause pollution of the environment or
harm to human health.
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)(a) above, the authority may take proceedings in the High
Court… for the purpose of securing compliance with the requirement.
Section 43 contains provisions that entitle an
applicant for, or holder of, a licence, who is dissatisfied with any decision
of a waste regulation authority, to appeal to the Secretary of State. Section
77 deals with the transition from the Control of Pollution Act 1974. Subsection
(2) provides:
an existing disposal licence shall, on and after
[1 May 1994], be treated as a site licence until it expires or otherwise ceases
to have effect; and accordingly it shall be variable and subject to revocation
or suspension under this Part of this Act and may not be surrendered or transferred
except under this Part of this Act.
The agency was constituted by the Environment Act
1995. The functions of the waste regulation authorities were transferred to the
agency by section 2(1)(b). Its principal aim (section 4) is to protect or enhance
the environment with a view to achieving sustainable development. Its pollution
control powers (section 5) are to be exercised for the purpose of preventing or
mitigating the effects of pollution of the environment. By section 41 the
agency is empowered to make a scheme imposing charges and has done so. We were
informed that in 1998 the fees payable in respect of the grant of a waste
management licence ranged from £375 to £14,000, and that the average fees for
modifications, transfers or surrenders were £3,000, £200 and £7,000. In
addition, there is an annual fee, which averages £20,000. In 1998 the income of
the agency from waste management licences was £19.55m.
Insolvency
legislation
Section 178 of the Insolvency Act 1986 provides
for disclaimers by the liquidator of a company. Comparable provisions in the
case of individual insolvency are contained in sections 315 to 321 of the
Insolvency Act. Applicable to all such provisions is the definition of property
contained in section 436, which provides that:
‘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;
Section 178, so far as relevant, provides:
(2) Subject as follows, the liquidator may, by
the giving of the prescribed notice, disclaim any onerous property and may do
so notwithstanding that he has taken possession of it, endeavoured to sell it,
or otherwise exercised 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, interest 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 of the
loss or damage in the winding up.
The effect of a disclaimer of a lease pursuant to
the provisions of section 178 was considered by the House of Lords in Hindcastle
Ltd v Barbara Attenborough Associates Ltd [1997] AC 70*. Lord
Nicholls of Birkenhead held that the disclaimer put an end to the obligations
of both landlord and tenant. At p87 he said:
Disclaimer also operates to determine the
tenant’s interest in the property, namely the lease. Determination of a
leasehold estate has the effect of accelerating the reversion expectant upon
the determination of that estate. The leaseholder’s estate ceases to exist.
*Editor’s note: Also reported at [1996] 1 EGLR 94
Lord Nicholls of Birkenhead then considered the
case where the landlord has the benefit of a guarantee. Having held that in
such a case, the liability of the guarantor continues notwithstanding the
disclaimer, he 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.
It is apparent that unless the object sought to be
disclaimed is property within section 436 it cannot be ‘onerous property’
within the scope of section 178(3). It was common ground that if a waste
management licence is property, then it falls within para (b) of the definition
of onerous property. Thus, the first issue is whether a waste management
licence comes within the definition in section 436 of the Insolvency Act.
Neuberger J held that it did. If it does, then, prima facie, section 178
would apply so as to enable the liquidator to disclaim it. The agency claims
that section 178 does not apply to a waste management licence on the grounds
that the application of the section to such an item of property would be
inconsistent with the overriding purpose of the EPA in general and the
provisions of section 35(11) in particular. This is the second issue. Neuberger
J decided that the application of section 178 was excluded.
Is a waste
management licence property within section 436 of the Insolvency Act 1986?
The agency submits that the judge was wrong. It
submits that the licence is not a contract, confers no rights on the holder and
is no more than a permission personal to the holder to do that which would
otherwise be an offence under section 33 of the EPA. It relies on Re Britnor
[1876] 46 Bankruptcy Cases 85 and the provisions in section 8 of the Licensing
Act 1964 as indicating a legislative assumption that a liquor licence is not
property.
The Official Receiver supports the judge’s
conclusion. He relies on the decisions of the Privy Council in Attorney-General
of Hong Kong v Daniel Chan [1987] 1
quotas, and of Warner J in Re Rae [1995] BCC 102, concerning an
entitlement to be considered for the grant of a fishing licence.
The word ‘property’ is not a term of art but takes
its meaning from its context: Nokes v Doncaster Amalgamated
Collieries Ltd [1940] AC 1014 at p1051; Kirby v Thorn EMI plc
[1988] 2 All ER 947 at p953. In the context of insolvency there is, as Lord
Atkinson observed in Hollinshead v Hazleton [1916] 1 AC 428 at
p436, a well established:
principle of public policy, which has found
expression in the provisions of the Bankruptcy Codes of… England… as estimable
and as conducive to the welfare of the community as any. It is this, that in
bankruptcy the entire property of the bankrupt, of whatever kind or nature it
be, whether alienable or inalienable, subject to be taken in execution, legal
or equitable, or not so subject, shall, with the exception of some
compassionate allowances for his maintenance, be appropriated and made
available for the payment of his creditors.
Thus in successive statutes dealing with
bankruptcy and insolvency the definition of ‘property’ has been progressively
extended (Morris v Morgan (Court of Appeal) unreported 31 March
1998); though however wide the definition, it is subject to the implied
exclusion of rights of the bankrupt with reference to his body, mind or
character: Heath v Tang [1993] 1 WLR 1421. It is apparent from
the terms of section 436 that the definition is to some extent circular but is
not exhaustive. Further, as Lord Browne-Wilkinson observed in Bristol
Airport plc v Powdrill [1990] Ch 744 at p759, it is hard to think of
a wider definition of ‘property’.
The decided cases can only give an indication of
the characteristics of ‘property’, but as the question whether statutory
exemptions or licences are property is likely to increase with increased
regulation, it may be helpful to consider some of them. In Re Britnor
[1876] 46 Bankruptcy Cases 85 a tenant of a public house had covenanted to
deliver up the liquor licences to his landlord on the termination of the lease.
The lease determined on his bankruptcy. The landlord sought to enforce the
covenant. The liquidator claimed that the licences had passed to him. Bacon CJ
considered that:
It is plain that under the terms of the Act this
licence did not become the property of the trustee, it was not assignable by
him and he could not use it;
Counsel for the agency relied on the provisions of
sections 8(1)(c) and 10(5) of the Licensing Act 1964 as recognising that the
benefit of a liquor licence does not pass to the trustee in bankruptcy, and
therefore could not be property within the definition. I accept the submission
but do not think that a legislative assumption in respect of a particular form
of licence is helpful in considering the proper construction of the definition.
Of more significance is the observation of Lord
Atkinson in Hollinshead v Hazleton [1916] 1 AC 428 at p440 on the
definition contained in the Irish Bankruptcy Act 1857 that:
These words could scarcely be wider. They cover
everything received which the bankrupt can retain and employ for his own use
and benefit.
In National Provincial Bank Ltd v Ainsworth
[1965] AC 1175, in the context of the acquisition of interests in land
enforceable against third parties, at pp1247G-1248A 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.
In A-G of Hong Kong v Daniel Chan
[1987] 1 WLR 1339 the Privy Council considered that textile export quotas were property
within the definition in the Theft Ordinance of Hong Kong and therefore capable
of being stolen. The definition was:
‘Property’ includes money and all other property,
real and personal, including things in action and other intangible property
The export of textiles from Hong Kong was
prohibited except under licence. A licence would be granted to the holder of a
valid quota allocation certificate. Such quotas were registered with the
Department of Trade and Industry and were transferable for value either
temporarily or permanently. The Judicial Committee considered that the benefit
of an export quota was not a thing in action but was a form of ‘other
intangible property’. As Lord Bridge of Harwich observed at p1342B:
In summary, to be registered as the holder of an
appropriate quota is a pre-requisite to obtaining an export licence; it confers
an expectation that, in the ordinary course, a corresponding licence will be
granted, though not an enforceable legal right… It would be strange indeed if
something which is freely bought and sold… were not capable of being stolen.
A similar conclusion was reached by Warner J in Re
Rae [1995] BCC 102. In that case a bankrupt had been licensed under the Sea
Fish (Conservation) Act in respect of four fishing vessels. The licences
terminated on his bankruptcy. But MAFF, the department that issued such
licences, recognised an ‘entitlement’ in the holder, or the person
to whom he ‘waived’ his entitlement, to be considered for the grant of new
licences. Such an entitlement had value. The question was whether the benefit
of the entitlement remained with the bankrupt or passed to his trustee for the
benefit of his creditors. Warner J decided that the ‘entitlement’ was within
the definition of ‘property’ as a present interest in property, namely the
vessels. He considered it to be immaterial that the entitlement was also
incidental to other things such as the exercise of the minister’s discretion.
In de Rothschild v Bell [1999] 2 WLR
1237* this court considered that the right to continue to occupy premises
conferred by Part I of the Landlord and Tenant Act 1954, though not derived
from any legal status under the former contractual tenancy, was property for
the purposes of the Insolvency Act. Buxton LJ acknowledged that the benefit of
a statutory tenancy is not such property because it is purely personal and
cannot be assigned, but distinguished the position of the occupant’s rights
under Part I of the Landlord and Tenant Act 1954. At pp1250-1251 he said:
First, and crucially, the issue… is whether the
interest or right is, in juristic terms, ‘property’. If the right is, in its
legal nature, property, it only falls outside the bankrupt’s estate by some
specific exclusion. That in practical terms the ‘property’ when held by a bankrupt
may be of no value to the creditors is nothing to the point. The issue is of
the general nature of the right created by Part I of the Act of 1954, and not
of its value in particular circumstances. I regard the continuation tenancy as
having clear incidents of a property nature, in particular because it retains
from the contractual tenancy the character of assignability:…
Second, even if the criterion stated in the first
point is not correct, and one does have to consider the value of the right in
the hands of a bankrupt, it is far from being so clear that a continuation
tenancy would never have value in the hands of a trustee in bankruptcy as to
disqualify the right from being ever a component of the bankrupt’s estate.
*Editor’s note: Also reported at [1999] 1 EGLR 35
I should also refer to certain dicta in Commonwealth
of Australia v WMC Resources Ltd (1998) 152 ALR 1. By the time this
case reached the High Court of Australia, it was common ground that a permit to
explore for petroleum in an area in the continental shelf, granted under the
Petroleum (Submerged Lands) Act 1967, was property within the meaning of the
Consequential Provisions Act, which required the Commonwealth to provide ‘just
terms’ for any acquisition of property. At p7 Brennan
agreement with the views of the lower courts. He observed:
Those rights were susceptible of exercise during
the currency of the permit. As a permit may be transferred and interests in a permit
may be created or assigned subject to approval, the interests of the permittee
and the interests of WMC were susceptible of… sale and assignment. These
qualities of the permit and WMC’s interest in it are indicative of the
proprietorial character of the rights possessed respectively by the permittee
and WMC.
At p18 Toohey J cited with approval the test
applied by Black CJ in the court below, namely ‘the rights… were clearly
identifiable, assignable, stable, potentially of very substantial value and not,
because of their statutory foundation, inherently defeasible’.
It appears to me that these cases indicate the
salient features that are likely to be found if there is to be conferred on an
exemption from some wider statutory prohibition the status of property. First,
there must be a statutory framework conferring an entitlement on one who
satisfies certain conditions, even though there is some element of discretion
exercisable within that framework (A-G of Hong Kong v Daniel Chan;
Re Rae; Commonwealth of Australia v WMC Resources). This
condition is satisfied by the provisions of sections 35(2), 36(3) and 43 of the
EPA. Second, the exemption must be transferable (National Provincial Bank
Ltd v Ainsworth; A-G of Hong Kong v Daniel Chan; Commonwealth
of Australia v WMC Resources; de Rothschild v Bell). This is satisfied by the terms of
section 40(1). The requirement that the transferor and transferee should join
in the application demonstrates the transferability of the waste management
licence even though it takes the form of a surrender and regrant by the agency.
Third, the exemption or licence will have value (A-G of Hong Kong v Daniel
Chan; Re Rae; Commonwealth of Australia v WMC Resources).
In Re Mineral Resources at p753 Neuberger J commented that there is a
market in waste management licences. There was no evidence to that effect in
these cases and the agency did not agree that there was any market. However, it
was common ground that money does change hands as between transferor and
transferee. Further, the very substantial fees that the agency is entitled to
charge, and in fact receives, are a good indication of the substantial value a
waste management licence possesses for the owners or occupants of the land to
which it relates.
In my view, a waste management licence comes
within the definition of ‘property’ contained in section 436. It is in my view
‘property’ properly so called. In the alternative I consider that it is an
‘interest… incidental to property’, namely the land to which it relates.
Does section 178 of
the Insolvency Act 1986 apply to a waste management licence?
In accordance with my conclusion on the first
question, it is necessary to approach the second issue on the footing that the
waste management licence is onerous property for the purposes of section 178 of
the Insolvency Act 1986. In Re Mineral Resources Ltd Neuberger J, for
the reasons set out in his closely reasoned judgment, answered the question in
the negative. He considered first whether the codes contained in the EPA and
the Insolvency Act were inconsistent. He considered that they were and then
dealt with the question of which one prevailed; he decided that it was the EPA.
The inconsistency on which the judge relied was
the contrast to be found in the effect of a disclaimer in terminating a lease,
as authoritatively described in Hindcastle Ltd v Barbara Attenborough
Associates Ltd [1997] AC 70, and the express provisions of section 35(11)
of the EPA that ‘the licence shall continue in force until it is revoked
entirely by the waste regulation authority under section 38… or its surrender
is accepted under section 39 below’.
The Official Receiver accepts that there are two
possible interpretations of section 35(11): the wide one adopted by the judge
so as to preclude any form of termination at all, save those expressly
mentioned, and a narrow one, which, save for those specifically mentioned,
precludes termination by act of the parties but not by external statutory
force. The Official Receiver contends that the court should adopt the narrower
interpretation. The agency supports the judge in adopting the wider
construction.
The agency relies on a number of indications,
which, it submits, show that parliament intended the wider interpretation to
apply. First is the principle of European Community law promulgated in the
directive that the ‘polluter pays’. If the disclaimer provisions applied, then
it would provide an easy escape from this obligation. Second, it is suggested
that a disclaimer of the licence, or indeed of the land to which it relates,
would give rise to an offence under section 33 of the EPA. In the case of a
disclaimer of the licence, this consequence would arise from the consequential
termination of the licence. Thereafter, keeping the controlled waste in the
land would not be under and in accordance with a waste management licence:
section 33(1)(b)(i). In the case of a disclaimer of the land there would be an
offence committed under section 33(1)(b)(i) and a breach of the duty of care in
section 34(1)(c), because the disclaimer would amount to a disposal of the
waste in the land otherwise than in accordance with a waste management licence
and to an unauthorised person. Third, as the effect of the disclaimer of the
waste management licence is to terminate it, the duty of the agency under
section 42(1) and its emergency powers conferred by section 42(3) would
terminate. I understood it to be submitted that as a consequence of the cesser
of its powers and duties, the agency would not be entitled to prove as a
creditor pursuant to section 178(6) of the Insolvency Act 1986. Fourth, it was
pointed out that the EPA extends to Scotland but section 178 of the Insolvency
Act 1985 does not. But that consideration does not appear to me to favour
either the wider or the narrower interpretation of section 35(11), particularly
as it appears that the common law of Scotland is broadly similar to the
statutory regime for disclaimer in England.
I prefer the submissions of the Official Receiver.
First, I do not accept the arguments for the agency. There is nothing in the
directive to suggest that the ‘polluter pays’ principle is to be applied to
cases where the polluter cannot pay, so as to require that the unsecured
creditors of the polluter should pay to the extent of the assets available for
distribution among them. Yet this is the consequence of the argument for the
agency that the costs of compliance have priority over provable debts, and that
the assets of the company must be set aside to pay for future compliance with
the terms of the licence before the company is dissolved.
Second, I do not accept that a disclaimer of the
land would constitute an offence under section 33 or a breach of duty under
section 34. Though the effect of a disclaimer is to terminate leasehold
interests and the obligations of landlord and tenant one to another, it does
not follow that a disclaimer of either freehold or leasehold land amounts to a
disposal or transfer of waste. If it did, then the dissolution of the company
or the death of the individual holder would do so too. Yet the agency accepts
that the first is permissible, and the second unavoidable. In the case of the
disclaimer of the licence there would be no transfer of the waste for the
purposes of either section 33 or section 34. I doubt whether, for the purposes
of criminal proceedings, an offence would be committed under section 33 the
next day by the owner of the land on the ground that he was ‘keeping’ waste
otherwise than under a waste management licence. But even if it was, the same
offence would arise on dissolution or death, which, the agency accepts,
terminates the licence.
With regard to the third point, it is true that
both the duty and the emergency powers arising under section 42 are limited to
the period ‘while a licence is in force’. But once again, that consequence will
also arise on the death or dissolution of the holder of the licence. This
consideration may cast doubt on the decision of Neuberger J in Re Wilmott
Trading Ltd No 2, a point that was not argued, but is a very tenuous reason
for denying the possibility of disclaimer to such an archetypal example of
‘onerous property’. I should make it clear that in referring to the decision in
Re Wilmott Trading Ltd No 2 I express no view on whether or not it was
rightly decided; before us it was conceded.
The affirmative reasons for disagreeing with the
judge start with the consideration of the very considerable and oft repeated
public policy requirement that the property of insolvents should be divided
equally amongst their unsecured creditors. An important aspect of the
implementation of that policy is the ability to disclaim onerous property;
otherwise the available assets are, in practice, appropriated to the future or
prospective creditor who holds the right corresponding to the onerous property:
cf Re Park Air Services plc [1999] 2 WLR 396* at p404. This is no
doubt why the restriction on the ability to disclaim thrown up by the decision
of Harman J in Re Potter Oils Ltd [1985] BCLC 203 was so swiftly removed
in the Insolvency Act 1986 section 178. In my view, it would require clear
words to exclude the operation of section 178 from specific items of property
or specific insolvents.
The researches of counsel demonstrate that
parliament is also aware of the need to make specific provision to deal with
such cases. Thus section 36 of the Coal Industry Act 1994 provides that a
licence under that Act is not to be treated as property for any of the purposes
of the Insolvency Act 1986, requires security to be provided for liabilities
thereby undertaken and enables the authority to apply to defer or cancel the
dissolution of the company. Section 9 of the Police Pensions Act and section 91
of the Pensions Act 1995 each provide that the entitlement to a pension shall not
be treated as property in the insolvency of the prospective pensioner.
*Editor’s note: Also reported sub nom
Christopher Moran Holdings Ltd v Bairstow [1999] 1 EGLR 1
Finally, there is the anomaly created by the
concession of the agency that the death or dissolution of the holder of the
waste management licence terminates it because the former holder ceases to
exist. But, if that is so, all, or virtually all, the deleterious consequences
on which the agency relies will occur anyway. In that event, I can see no
reason to give the provisions of section 35(11) of the EPA the very
wide-ranging effect for which the agency contends.
I should note that the Official Receiver also
contended that, because the licences in these cases were granted under the
Control of Pollution Act 1974, they might be granted with a limited duration
because of the provision to that effect contained in section 6(2)(a) of that Act.
When the EPA came into force, the provisions of section 77(2) applied, the
first part of which recognised that the licence might expire in accordance with
its terms. The consequence, so it is submitted, is that section 35(11) cannot
apply to any pre-EPA site licence. I can understand why the provisions of
section 35(11) might not apply so as to prolong a pre-EPA licence beyond the
term prescribed in the conditions subject to which it was issued. But I can see
no reason why the provisions of section 35(11) should be inapplicable to a
pre-EPA licence that never had any express termination date. I do not accept
this argument.
It follows that I do not agree with the conclusion
of Neuberger J that section 35(11) of the EPA and section 178 of the Insolvency
Act are mutually inconsistent and irreconcilable. In my view, the former can
and should be limited to termination by act of parties and not by external
statutory force. In that event, it is not necessary to consider the judge’s
reasons for concluding that the consequence of the irreconcilability is to
limit the application of section 178 of the Insolvency Act rather than that of
section 35(11) of the EPA.
Conclusion
For all these reasons I would allow the appeal,
declare that the Official Receiver is entitled to disclaim the waste management
licences and if necessary remit the matter to the judge to determine whether in
the circumstances he should do so and, if so, subject to what (if any)
conditions.
ROCH LJ and RATTEE J
agreed and did not add anything.
Appeal allowed.