Circular Facilities (London) Ltd v Sevenoaks District Council [2005] EWHC 865 (Admin)

Case No CO/5667/2004[2005] EWHC 865 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate Tuesday, 10 May 2005
Before
MR JUSTICE NEWMAN
Between
CIRCULAR FACILITIES (LONDON) LIMITEDAppellantSEVENOAKS DISTRICT COUNCILRespondent
(Transcript of the Handed Down Judgment ofSmith Bernal Wordwave Limited, 190 Fleet StreetLondon EC4A 2AGTel No: 020 7421 4040, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Mr Howard SMITH (instructed by Benson Mazure & Co) for ClaimantMr Meyric LEWIS (instructed by Sevenoaks District Council) for Defendant
JudgmentAs Approved by the CourtCrown Copyright ©
[1]This is an appeal to the High Court against the decision of a Magistrates’ Court by virtue of Regulation 13 of the Contaminated Land (England) Regulations 2000 (SI 2000 No. 227). Permission to appeal out of time was granted by Collins J. on 17th February 2005. It is the first appeal to reach the High Court arising out of Part IIA of the Environmental Protection Act 1990 in connection with a remediation notice served by a local authority in connection with contaminated land.[2]By the terms of a remediation notice dated 5th November 2002 Sevenoaks District Council (the Council) served Circular Facilities (London) Limited (CFL) as:
“an appropriate person within the meaning of the 1990 Act by reason of [having caused or knowingly permitted the substances, or any of the substances, by reason of which the contaminated land to which this Notice relates is contaminated land, to be in, on or under that land]…”
. The Council had, at an earlier date, served a notice identifying the contaminated land and the Council had concluded that the contaminated land was in such a condition, “by reason of substances in, on or under the land”, that there was an immediate danger of serious harm being caused.[3]An enforcing authority is under an express statutory duty to bring about the remediation of contaminated land in its area by virtue of section 78E of the Environmental Protection Act 1990 (the 1990 Act). In this instance, in accordance with the 1990 Act and other duties conferred on it by Part IIA of the Act, the Council identified a “significant possibility” of “significant harm” being caused by reason of the presence of decomposing organic matter in land at Well Close, Leigh, Tonbridge, Kent (the site). The land was developed by CFL in the early 1980s for residential purposes. The Council was bound to assess the liability of appropriate persons in accordance with the tests in the statutory guidance which is contained in Chapter A of Annex 2 to DETR Circular 2/2000.[4]In the course of 2002 and 2003 environmental consultants, acting on behalf of the Council, investigated the site and such investigations revealed that methane and carbon dioxide were being produced at the site in significant concentrations.[5]The investigation revealed that the “pathway” by which this “contaminant” would reach its “receptor” was by the service entry points, cracks or fissures in the concrete slab floors of the houses. The terminology “pathway” “contaminant” and “receptor” are all to be found in the Circular 2/2000.[6]Section 78A of the 1990 Act defines contaminated land as follows: “(2) ‘Contaminated land’ is any land which appears to the local authority in whose area it is situated to be in such a condition, by reason of substances in, on or under the land, that–(a) significant harm is being caused or there is a significant possibility of such harm being caused; or(b) pollution of controlled waters is being, or is likely to be, caused; and, in determining whether any land appears to be such land, a local authority shall, subject to subsection (5) below, act in accordance with guidance issued by the Secretary of State in accordance with section 78YA below with respect to the manner in which that determination is to be made”.[7]There is no issue raised on this appeal in connection with the determination by the Council that the land in question was contaminated. The issue is whether the Council was right to determine and the District Judge was correct in law to uphold the determination that CFL was an appropriate person who “… caused or knowingly permitted the substances, or any of the substances, by reason of which the contaminated land in question is such land to be in, on or under that land”.

The Essential Facts

[8]The relevant history in connection with the site commences in February 1965 when Mr Kinchen-Goldsmith was granted planning permission to infill clay pits at Well Close. The permission extended to infill with inert material, for example, builders’ rubble. Thereafter there was correspondence between the Council and Mr Kinchen-Goldsmith in connection with the infill which was being placed on the site. The first grant of planning permission for development of the land was granted in August 1977 to Mr Kinchen-Goldsmith who subsequently in 1978 transferred the land to Mr and Mrs Scott.

Soil Investigation Report

[9]Most importantly in connection with the issues which have arisen on the appeal, by a report dated 14th July 1978 in connection with events investigated on 7th July 1978, Mr C J Chalkley disclosed the results from the digging of trial pits at the site on 7th July 1978. The report refers to the earlier “relatively unsuccessful hand-augered investigation carried out on 9th May 1978” and the digging of five trial pits using a JCB digger on 7th July 1978. The report discloses that the bottom of the fill was at some 3.2 metres and the “black organic layer beneath this fill is believed to be the silt and vegetable matter in what was a waterlogged area prior to filling. There were indications that iris plants grew in the area prior to filling and it is said that there were also some poplar trees which were knocked down prior to filling. The clay stratum below the black organic layer appeared to be firm but friable”. So far as each trial pit was concerned, they were found to contain, in addition to the fill, black organic matter including branches, iris leaves and ashes and in one trial pit, trial pit 3, water entering excavation at this level and gases bubbling through it.[10]In February 1979 Mr Scott made a further application for planning permission.[11]The purpose of the trial pit investigations can be seen from the recommendation in the report disclosing the need for piled foundations. The conclusion was that, on a preliminary costing basis, it was to be assumed that six piles would be required for each standard terraced unit with associated ground beams and suspended slabs.[12]Thereafter, by a tender dated 18th June 1979, addressed to the architects and at a time when Mr and Mrs Scott were owners of the land, Frankipile Limited tendered for the installation of seventy two piles at the site: “… generally in accordance with our Drawing No. 78/844 and the soils information made available to us”.[13]On 12th November 1979 the land was transferred to CFL and thereafter development of the site took place in the early part of 1980. In March 1980 Frankipile were on site in company with the building control officer from the Council in connection with the sinking of piles and the adequacy of the foundations. The records of the Council disclose that in April 1980 the piling to the new houses was in progress under the hand of Frankipile Limited.[14]The date, the 25th March 1980, is particularly relevant because the copy of the soil investigation report, which is available from the records of the Council, is stamped with a date stamp receipt for the Council of 27th March 1980. The notes from the building control officer show that he visited the site on 25th March 1980. He visited again on 27th March 1980 and records:
“I called on site to meet the architect but he was not there. A recall will be made in the afternoon”
. The entry for 27th March 1980 p.m. is as follows: “I met the architect on site and discussed the arrangements for the rainwater disposal. It was agreed to provide beech filled soakaways about 1 metre cube with a polythene and concrete top. If it is subsequently found they do not function properly consideration will need to be given to allow connection to the foul sewer”.[15]The last house was sold in 1985.

The Case for the Council

[16]In summary, the case for the Council was that CFL, being the owner and developer of the land in 1980, when taken with action on the part of the company, by its servants or agents, in placing the report in the hands of the Council in March 1980, it was to be inferred that the contents of the report were known to the company. The contention was that, as a result, CFL had knowingly permitted the presence of the organic material to remain on site and that, pursuant to section 78F(9), CFL was to be regarded as having knowingly permitted there to be a substance by which the land was to become contaminated. In particular, subsection (9) provides:
“A person who has caused or knowingly permitted any substance (“substance A”) to be in, on or under any land shall also be taken for the purposes of this section to have caused or knowingly permitted there to be in, on or under that land any substance which is there as a result of a chemical reaction or biological process affecting substance A.”
[17]The Council’s case was that the presence of the organic material had given rise to the presence of gases as a result of a chemical reaction or biological process and, therefore, CFL was caught by subsection (9).[18]The difficulties to which this case gave rise relate not so much to questions arising in connection with the legislation, but with the difficulties of establishing facts, capable of giving rise to a conclusion that the requisite knowledge was held by CFL, at a date some twenty years prior to it being determined that the land was contaminated. A particular evidential difficulty arose because Mr Scott is dead.

The Hearing in the Magistrates’ Court

[19]CFL advanced a considerable volume of argument in support of a submission that Mr Kinchen-Goldsmith should have been regarded as an “appropriate person”. That is not a matter arising for consideration on this appeal. On the question of knowledge, the case for CFL was that the controlling mind of CFL has, at all material times, been Mr D J Ketteringham. He gave evidence to the effect that he did not see the soil investigation report until some time in 2002 or thereabouts and that he did not know, at any time before the houses forming part of the development were sold, that there was organic material in or below the infill. However, in his witness statement, he explained the nature of his relationship with Mr Scott in the following manner: “Sometime in 1978 I met Mr Scott who was in the process of purchasing the property from Mr Kinchin-Goldsmith. I agreed that the Company would assist him to purchase the site from Mr Kinchin-Goldsmith … with a view to the Company subsequently acquiring the site from Mr Scott who would continue to organise and supervise the entire project as I was fully employed managing a motor business 50 miles away in north west London”. (paragraph 16).[20]A little later in the statement he records: “I was not aware at the time of the Company’s purchase of the site in 1979 nor indeed until seeing the Weeks Report in 2003 that any infilling had taken place”. (paragraph 19).[21]At paragraph 25 of his statement he states:
“I understood from Mr Scott that the nature of the ground would require the houses to be constructed on deep driven piles upon which concrete rafts would then be placed so as to provide strong foundations for the houses”
. He then records that Mr Scott instructed a firm of builders who proved to be unsatisfactory which led Mr Ketteringham to instruct another firm to build the houses under the supervision of the architect, Mr Whitehead of HW Designs.[22]As I have observed, much of the statement was devoted to criticisms of Mr Kinchen-Goldsmith and trenchant criticisms of the Council, but in paragraph 36 Mr Ketteringham returns to the question of his state of knowledge and states: “… I was not even aware of the infilling. Neither was I aware of any Pit investigations. My only knowledge at the time would have been in respect of soil samples that were submitted to and presumably passed by the Kent County Council in or about February 1980”.[23]I shall have to examine the subject matter of the cross examination of Mr Ketteringham, but it is not apparent that inquiry was made as to what “soil samples” he was there referring to nor to the nature and quality of the information he was then given about the soil samples or what the sampling disclosed.

Cross Examination of Mr Ketteringham

[24]From his answers in cross examination it became apparent that Mr Scott undertook considerable responsibility in connection with the development on behalf of CFL. For example, he undertook responsibility in connection with planning matters. It is not clear from the record of the evidence, which is limited to a typed version of the notes prepared by the clerk to the Magistrates’ Court, whether Mr Scott was the person who submitted the soil investigation report to the Council. It was suggested, not unreasonably, that its submission was probably in connection with the building regulations. The papers suggest that Mr Whitehead, the architect, had a responsibility in connection with the building regulations and it is not known what part, if any, Mr Scott played. According to Mr Ketteringham, the architect, Mr Whitehead, was acting as the architect for CFL, but Mr Ketteringham did not know him. He had been instructed or introduced by Mr Scott. Alternatively, as Mr Ketteringham put it, he “acted for Mr Scott initially” (see line 25 first page of cross examination). This account of the development is consistent with Mr Scott and CFL, through Mr Ketteringham, being in some form of “partnership”.[25]In answer to a specific question “Mr Scott would have consulted you re additional cost”, Mr Ketteringham’s answer is recorded as “No, he just told me what needed … never really discussed it, unofficial partnership”. At line 32 on page 2 of the cross examination it was suggested that Mr Scott was supervising the development and he would have had an opportunity of removing the organic matter. Mr Ketteringham is recorded as having replied:
“had he been required to do so, apparently not required to do so”
. At page 2, line 21, Mr Ketteringham is recorded as answering this question:
“If building regulations require pile foundation you put in pile foundations don’t have a choice”
. Answer: “No sir because ground not strong enough I did not know of organic matter 20 storey buildings need pile foundations”.[26]It has to be observed that at no time in the course of cross examination was it suggested by Mr Lewis, counsel for the Council, that Mr Ketteringham was wrong when he stated he did not know of the presence of organic matter in or below the infill. It was not suggested he must be wrong because he was mistaken or that his recollection must be at fault because he was now failing to recollect something which he must have known. It was not suggested (quite properly in the light of the material available to the Council) that he was lying.[27]In his judgment, the District

Judge concluded as follows:

“It seems clear from the evidence that Mr Ketteringham was the “controlling mind” of Circular Facilities… He was either in an “informal” partnership with Mr Scott or he used Mr Scott as an agent of the company. He relied on Mr Scott and Mr Whitehead but his company bought the land and developed the site for housing. A commercial venture upon which he hoped to make a profit. The soil investigation Report of 7th July 1978 referred to the presence of “black organic matter” in the trial pits dug on the land and referred to “gas bubbling through water in trial Pit 3”
. This report was available on the planning register and must have been available to Circular Facilities. I believe that Circular Facilities must have considered the Risks of investing in land for development which had consisted of old clay pits and in assessing the Risk the soil inspection Report must have been considered. The company, in my view, must have been aware of the organic material and the gas and ought to have been aware of the Risk posed by landfill sites such as this”.[28]Earlier in his judgment, the Judge recorded that: “Mr Scott was responsible for arranging development of the site and Mr Whitehead was the architect employed by Circular-Facilities … He said that he relied on Mr Scott and that he did not know of the organic material which was revealed by the “test pit” results. Mr Scott got planning permission on behalf of Circular-Facilities to develop houses”.

The Judge concluded his part of the judgment concerning the liability of CFL as follows:

“The scheme of the Act is to make the developer of a site such as this responsible for the harm resulting from the contaminants on the site. Circular Facilities could have commissioned a report on the risk from the gas on the site and could have taken measures to remove the risk as Sevenoaks Council has now done. I accept that the failure of Circular Facilities to deal with the escaped gas is the same as permitting its presence. I find that Circular Facilities is a responsible person for the purposes of section 78F of the Act.”

The Issues on the Appeal

[30]Mr Smith, counsel for CFL (who did not appear below), submitted that three issues arose on the appeal:(1) The validity of the Judge’s finding that CFL knew of the presence of buried organic material or gases between 1979 and 1985.(2) Whether, assuming that there was knowledge of the contents of the report, such knowledge was sufficient for CFL to be found to have knowingly permitted the substances to be in or on the land.(3) Whether the Judge was right to conclude that the policy of the Act was to make developers liable.[31]I have the advantage in this court of a copy of the closing submissions on behalf of the Council made by Mr Lewis.[32]Paragraph 18 of those submissions is in the following terms:
“The Appellant “knowingly permitted” the “substance” (the organic material and gas) to be “in .. or under” the land at Well Close, The Appellant completed its purchase of the land at Well Close on 12 November 1979, see para 16 of Mr Ketteringham’s evidence at page 78 of Bundle A. Contrary to what Mr Ketteringham asserts at para 19 of his evidence on page 79 of Bundle A, the Appellant knew of the presence of the organic material and the generation of gas, having submitted to the Council (or having had submitted on its behalf by Mr Scott, Mr Ketteringham’s “agent” or “unofficial partner”) the soil investigation report (dated 7 July 1978) on 28 March 1980, see date stamp at page 103 of Bundle A. The presence of “black organic matter” in the trial pits dug on the land is confirmed on pages 104 to 106 of Bundle A and the report refers to “gases bubbling through” water in Trial Pit 3 on page 105. The report dictated the use of piled foundations for the houses constructed by the Appellant on the land and those foundations were duly provided. It is implausible to suggest that Mr Ketteringham did not have personal knowledge of the contents of the report. In any event, it is clear that his relationship with his agent/partner Mr Scott was such as to fix him with knowledge of the contents of the report.”
[33]Mr Lewis repeated the submission in this court and submitted that it was clear that the Judge must have concluded that Mr Ketteringham did know of the presence of organic material and the generation of gas. The difficulty in this court and the difficulty with his submission to the court below was that Mr Ketteringham had denied personal knowledge, but the submission of Mr Lewis was couched in terms that, whilst it was contrary to what Mr Ketteringham asserts, “….the Appellant knew of the presence of the organic material”. Significantly he did not submit that Mr Ketteringham knew, but CFL knew. So formulated, it begs the question as to how CFL knew if the Judge had concluded that Mr Ketteringham personally had no such knowledge. According to the submission, the contention that Mr Scott had submitted the report was relied upon for the argument. But the Judge made no finding about who submitted the report to the Council. Further, Mr Scott was not Mr Ketteringham’s agent, but CFL’s agent. It is not clear that the unofficial partners were Mr Ketteringham and Mr Scott.[34]It was open to Mr Lewis to submit that it was “implausible” to suggest that Mr Ketteringham did not have personal knowledge of the contents of the report, but it was for the Judge to reach a conclusion of fact on the balance of probabilities as to whether he did know or did not know. Whilst the Judge referred to a number of factors which were relevant to a conclusion in this regard, in no part of his judgment did he find what Mr Ketteringham did know or did not know. Had he found that Mr Ketteringham had the requisite knowledge, the company would be taken as having the same knowledge because he was the controlling mind of the company. Neither does the Judge set out adequate reasons for the conclusion reached by him that “… the company … must have been aware of the organic material…”. True it is that he referred to the informal partnership with Mr Scott, the use of Mr Scott as an agent of the company and to his views as to what he believed to be the risks of the company investing in the development and the need in connection therewith to assess the soil investigation report. But, that said, it is not clear in whom the judge concluded the requisite knowledge was reposed as a result of those considerations. It was incumbent upon the Judge to disclose his chain of reasoning, in particular if it led to a conclusion of fact contrary to the evidence of Mr Ketteringham. If the Judge’s conclusion was that Mr Ketteringham must have known, despite the evidence he had given to the clear effect that he did not, and, as a result, the Judge regarded him as mistaken in this regard, then he should have said so.[35]But in my judgment the lack of clarity goes deeper. The reference to Mr Scott as agent or partner probably derives from the last sentence in paragraph 18 of the submissions he had received from Mr Lewis. That submission, with respect, was misconceived. According to the evidence, Mr Scott was the agent of CFL and not the agent of Mr Ketteringham. Whilst circumstances can arise in which a principal is fixed with the knowledge of an agent, it is by no means straightforward to assert that, if the principal fixed with the knowledge of his agent is also the controlling mind of a company, the company is to be regarded as fixed with the imputed knowledge or constructive knowledge of its controlling mind. However, on a proper analysis, the evidence pointed to Mr Scott being the agent of CFL and, in that event, his knowledge could, according to the circumstances, be imputed to CFL even though Mr Ketteringham did not know. Nor again is it entirely clear that, even if Mr Scott and Mr Ketteringham were to be regarded as within a personal partnership relationship, CFL should be fixed with the knowledge imputed through that relationship. That being an alternative submission advanced by Mr Lewis, and having regard to the terms of the judgment, it is impossible to discern whether the Judge found that Mr Scott’s knowledge was to be imputed to Mr Ketteringham and, therefore, to CFL or whether he was finding that Mr Ketteringham did personally know but was mistaken in his recollection.[36]More than this, as it was recognised in argument by Mr Lewis, the relevance of Mr Scott’s agency was, on the evidence, his capacity as an agent for CFL appointed by Mr Ketteringham. In the circumstances of this case, it may have been arguable, if investigated, that according to the law of agency the knowledge of Mr Scott, as it seems the court is likely to have concluded existed, could, as a matter of law, in certain circumstances, be imputed to CFL. In particular, in this regard, the phrase “directing mind and will” can, according to authority, be the directing mind and will of a company which reposes in different persons in respect of different activities. See El Ajou v Dollar Land Holdings plc and Another [1994] 2 All ER 685, in particular the judgment of Hoffmann LJ.[37]Having regard to the way in which the matter was argued, this basis of imputing knowledge to CFL was not considered and not investigated in the evidence with a view to it forming a basis for the dismissal of the appeal.[38]I accept the force of the submissions advanced for CFL that if the Judge was rejecting Mr Ketteringham’s evidence to the effect that he did not know of the organic matter or gases at the material time then he should have made a clear finding in that regard giving his reasons for his conclusion. I agree that it is not clear from the judgment on what basis the Judge concluded that CFL and/or Mr Ketteringham had knowledge of the contents of the report. I accept the submission that if the Judge came to the conclusion that because the report was available on the planning register and was available therefore to CFL that that in itself was insufficient to impute knowledge of the contents of the report to CFL.[39]In my judgment it was incumbent upon the Judge to state whether or not he found, as a fact, that Mr Scott knew of the contents of the soil report and, if so, what legal conclusion that gave rise to. If the Judge was to impute Mr Scott’s knowledge to CFL then the legal basis for so doing should have been explored and disclosed. If the Judge found that Mr Scott submitted the report to the Council he should have said so.[40]In view of the above, I have reached the conclusion that this appeal must be allowed. This court, on a statutory appeal such as this, has the power to consider whether there should be a re-trial. In my judgment the underlying ambit of the evidence and applicable legal principle, when fully explored and considered, could give rise to a legitimate conclusion that CFL was an appropriate person to be served with a remediation notice. That being the case and there having been expenditure by the Council of money by way of remediation, I would be minded, in the exercise of my discretion, to conclude that there should be a re-trial. It is no answer to proceedings such as this, which inevitably involve the reviewing of matters which occurred many years ago, to simply exclude judicial inquiry long after the event. I agree that in the context of Magistrates’ Courts proceedings, without the benefit to be gained from disclosure obligations, that trials on matters as historic as this, without reference to adequate documentation, giving rise to complex principles of law, present a demanding set of proceedings for a district judge to resolve. Nevertheless, having weighed all these considerations, it seems to me that, subject to any specific representations from the parties, the matter should be re-tried.[41]It follows that it is not necessary for me to deal with the other grounds of appeal which were urged before me but, for the purposes of clarification, I should say something about the argument advanced on the basis that the meaning to be attributed to “knowingly permitted” required some knowledge of the potential harm from the substances in the land. Mr Smith submits that the court should not construe the section, in particular section 78F subsection (9), as rendering a person liable as having knowingly permitted a substance to be on the land, if the relevant person is not aware of the possibility that a chemical reaction or process could lead to the land being contaminated. He submits there must be some knowledge of the potential harm to which the presence of the substance in the soil could give rise.[42]In this regard, he refers to particular paragraphs in the circular, Annex 2, which have the status of guidance and thus do not dictate the meaning of the provisions.[43]In my judgment this argument simply cannot stand in the face of the express terms of subsection (9) of section 79F. By the terms of the section, a person needs only to have knowledge of a substance (in this case organic material) and the statute provides that in that event, having knowingly permitted that substance, referred to as “substance A”, to be in, on or under the land that person:
“… shall also be taken for the purposes of this section to have caused or knowingly permitted there to be in, on or under that land any substance which is there as a result of a chemical reaction or biological process affecting substance A”
. In my judgment there is no basis for limiting the ambit of the section to exclude responsibility to those who do not know of the potentiality for the chemical reaction or biological process which can affect substance A. The knowledge of the substance is taken to be the knowledge of the substance generated by the process.