Companies benefit from a special tax relief for expenditure on remediating contaminated land: essentially, relief is available for 150% of revenue expenditure incurred on fixing the problem.
However, a company doesn’t get the enhanced relief for clearing up its own mess – in the words of the legislation, if the land is in a contaminated state ‘wholly or partly as a result of anything done or omitted to be done at any time by the company or a person with a relevant connection to the company.’
Northern Gas Networks (‘NGN’) owned a network of gas distribution pipes, much of it in iron. The iron pipes were at risk of fracturing and leaking gas with potentially dangerous consequences. It was agreed that this amounted to ‘contamination’ of land.
However, the Court of Appeal held (in [2022] EWCA Civ 910) that the special relief wasn’t due for remedying (by replacing or lining the pipes). This was because the ‘contamination’ in question was caused by a combination of potentially leaky pipes (for which NGN couldn’t be blamed – they’d been installed many years earlier by someone else) and pumping gas through them (which was of course what NGN were in business to do). Fractured pipes didn’t themselves contaminate the land: pumping gas through pipes didn’t contaminate the land: what contaminated the land was pumping gas through fractured pipes. Therefore, the contamination was partly caused by NGN itself and they couldn’t have the relief.
Granted, a business that has to deal with fractured iron gas distribution pipes is a bit specialist: but there’s some useful commentary in the case on the position of someone acquiring land which is subject to ‘ongoing contamination’.
Counsel for NGN suggested:
The logical outcome of [the court’s] analysis is that if a company acquires contaminated land and does not immediately rectify the contamination; or if it only mitigates the contamination, then it is denied relief. That is inconsistent with the definition of relevant land remediation in paragraph 4 which expressly includes work for the purpose of “minimising … or mitigating the effects of, any harm.”
The Court didn’t accept that argument:
The facts of this case are quite different from a factual situation in which land is contaminated at the time of its acquisition and the new owner simply does nothing for a while. That is a situation in which the new owner is passive in the face of existing contamination, as opposed to a situation where the new owner actively perpetuates the contamination.
For example, take a leaky petrol filling station:
If it were acquired by a developer who wished to use it for, say, housing, the land would have been acquired in a contaminated state, for which the developer would not have been responsible. Mr Peacock argued that if the developer did not immediately remedy the contamination, but undertook a programme of investigation while considering what to do, it might be said against him that his omission to act was partly responsible for the continuing contamination. That example would, I think, call for a purposive interpretation of the word “omission” in paragraph 12 (4). In that context it would, I think, bear the first of the meanings given to it in the Oxford English Dictionary, namely:
“The non-performance or neglect of an action which one has a moral duty or legal obligation to perform”
The same would be true even if during the period of investigation hydrocarbons under the land migrated into the aquifers. In neither case would the developer have caused the contamination. If, on the other hand, the petrol filling station were acquired by an oil company which continued to store hydrocarbons which leaked onto the land, there would then be a causal connection between the acts of the land owner and the contamination.
So: allowing contamination to continue or even worsen while you investigate it won’t deny you your enhanced relief. But actively continuing to contaminate (even a small amount for a short period of time, and regardless how minimal the effect on the clean-up bill) will: as may a failure to act that endures long enough to amount to a breach of your ‘moral duty’. Where that point lies may be a case for another day.
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