Inner House case in which SEPA and others appealed against a decision of Lord Hodge in the Outer House to the effect that the liquidators of Scottish Coal could (1) abandon mining sites and (2) abandon/disclaim the related statutory licences/permits (which in effect allowed the liquidators to avoid onerous obligations requiring restoration of the sites).

SEPA’s arguments
Abandonment of land
SEPA argued that the liquidator did not have the power to abandon or disclaim property.  Whilst a liquidator could disclaim land in the sense of declining to deal with it, the land continued to be owned by the company and the liabilities arising from ownership continued to be enforceable. Lord Hodge, they argued, had been in error when he stated that a liquidator could disclaim “by taking steps to terminate the company’s ownership of the land”.

Abandonment of the statutory licences
With regard to the liquidator’s power to abandon or disclaim the statutory licences:

1. there was no power to “disclaim” in the sense that a liquidator could terminate a licence unilaterally and without reference to the statutory surrender procedures;
2. even if  1. were wrong and a liquidator did have a general power to disclaim property, the scheme laid out in the CARs[1] created a form of licence that could not be renounced in that way, even if other licences could be so renounced; and
3. it had been within the legislative competence of the Scottish Parliament to promulgate the CARs with that effect.

Decision
Abandonment of land
A person can abandon land, in the sense of leaving it physically, intending to give up its use permanently. However, the Inner House found that that was not what was under consideration in this case. What required to be decided was whether a person can “abandon” or “disclaim” ownership of land. There are a number of methods by which a person’s ownership can be terminated: destruction of the land itself, where the owner ceases to exist, by operation of law (e.g. enforcement of a security or a compulsory purchase) or by voluntary transfer to another person. However, there is no legal process whereby a person can transfer land into oblivion. A person cannot abandon the ownership of land in the sense of casting away the real right.

The court also noted the difference between the insolvency regimes in England and Scotland created by s178 of the Insolvency Act 1986, which allows a liquidator in England (but not in Scotland) to “disclaim” onerous property[2].

Abandonment of the statutory licences
The CAR regime prohibits activities which have or are likely to have a significant adverse impact on the water environment. In particular, activities liable to cause pollution are controlled but controlled activities can be carried out by a “responsible person” on the grant of a licence by SEPA. Liquidators are expressly included within the definition of “responsible person”. In addition to being an asset, licences bring with them associated liabilities and can be varied or terminated on application to SEPA which, if it grants an application to surrender a licence, must specify the steps necessary to avoid a risk of adverse impact on the water environment and to leave the water environment in a state that complies with European, UK and Scottish legislation.  On a broad interpretation of the regulations the provisions expressly impose the surrender regime on liquidators[3]. In the view of the Inner House:

“The alternative and narrower interpretation would require the CARs to be read in a way that goes against the ordinary meaning of the language used. Specifically, the CARs do not say that a liquidator is a “responsible person” only for so long as he does not exercise a power to disclaim. Such an interpretation is contrary to the plain meaning of the CARs and ignores the additional problem that a Scottish liquidator does not, in any event, have a general or statutory power to disclaim. It would be a curious construction of an explicit provision that a liquidator is a responsible person and, therefore, responsible for ensuring compliance with the statutory licence, only for as long as he chooses. The narrower interpretation of the CARs is further undermined by the existence of the specific surrender provisions.”

Competence of the CARs
In the Outer House Lord Hodge had the view that the Scotland Act 1998[4] required him to take a narrow interpretation of the CAR regime. However, the Inner House disagreed. Even when taking a broad approach to interpreting the provisions, and although the effects of the provisions would be felt by liquidators of companies being would up in England, the CAR regime dealt with matters which formed part of the law of Scotland and did not form part of the law of England. Also, when considering whether the provisions dealt with reserved matters (i.e. corporate insolvency) the court found:

 “The purpose of the CARs as a whole, and the provisions relating to a liquidator in particular, is an environmental one. Neither the CARs as a whole, nor the provisions relating to liquidators, have as their purpose an insolvency objective. The effect on liquidators of companies possessing a CARs licence is no more than a loose or consequential connection. In all the circumstances, those provisions of the CARs which are said to restrict the power of a liquidator cannot be said to relate to reserved matters.’”

The Inner House allowed the appeal and directed that the liquidators did not have the power to “abandon (otherwise disclaim)” the sites or the statutory licenses.

The full judgement is available from Scottish Courts here.

Outer House case in which the liquidators of Scottish Coal sought directions from the court in respect of several disused open cast mining sites owned by Scottish Coal.

The sites were subject to onerous statutory obligations aimed at controlling land use, protecting the environment, habitats and birds and ensuring public safety. The sites were also subject to obligations under planning legislation requiring restoration of the sites, the cost of which was estimated at £73m.

The liquidators sought directions as to whether they could abandon or disclaim:

1. the sites, thereby transferring ownership to the Crown; and
2. the statutory licences/permits authorising Scottish Coal to carry out its industrial activities (and imposing the obligations on Scottish Coal).

The Scottish Environment Protection Agency (SEPA) and Scottish Natural Heritage (SNH) were represented in court and argued that it is not possible for liquidator to do so as, under Scots law:

a)    there is no power to abandon the ownership of land; and
b)    ownerless land is an impossibility.

No authority could be found supporting the idea that an owner could abandon land in Scotland. However, after considering Roman Dutch law[1] and the German Civil Code[2], Lord Hodge found[3] that it may be possible for an owner to abandon land[4] and circumstances may arise when, on a disclaimer by the Crown, land becomes ownerless.

But, whilst the liquidators generally have power to disclaim property, where the company’s use of the land is governed by statutory permits, his ability to disclaim would depend upon the terms of the statutory provisions and the permits.

In this case the decision depended on whether the court took a wide interpretation (as argued for by SEPA and SNH) or a narrow interpretation (as argued for by the liquidators) of the relevant legislation[5]. Lord Hodge came to the conclusion that the Scotland Act 1998[6] required him to take a narrow interpretation leading to the conclusion that the liquidators could disclaim the sites and release themselves from the obligations.

The full judgement is available from Scottish Courts here.

(NB: see Inner House decision here)

All of our property and conveyancing case summaries are contained in the LKS Property and Conveyancing Casebook here.

Supreme Court decision considering an appeal from the Inner House in respect of a challenge to the schemes and orders made by the Scottish Ministers (under the Roads (Scotland) Act 1984) to allow construction of an Aberdeen bypass.

The bypass, as initially promoted by the Ministers, had its origins in a regional transport strategy published in March 2003 which, in addition to the bypass, had also considered various other proposals for reducing congestion in Aberdeen.  The Ministers decided to undertake the bypass. However, in December 2004, following a campaign against the routing of the bypass via Murtle of Camphill, previously discarded options were reconsidered and became part of a public consultation. Prior to making a decision the Minister for Transport, commissioned a report on an option which was a hybrid of two of these previous options.  That hybrid option (known as the Fastlink) which linked Stonehaven to the bypass was adopted (in December 2005) on the grounds it would also reduce congestion between Stonehaven and Aberdeen on the A90. The ministers then published Environmental Impact Assessments (EIAs) on the basis that the scheme fell within the scope of the Environmental Assessment Directive.

Following objections from Mr Walton[1] and others, a public inquiry was held into environmental and technical issues concerning the bypass. However it did not consider the more fundamental question of whether the bypass should be built at all.  Litigation then followed through the courts.

In the Supreme Court, Mr Walton’s primary contention was that the Fastlink was adopted without the public consultation required under the Strategic Environmental Assessment Directive[2].  Mr Walton also argued that common law principles of fairness required that the public inquiry should have considered the (economic, social or strategic) justifications for building the Fastlink.  Although Mr Walton only sought to quash the schemes and orders in so far as they concern the Fastlink, the Ministers maintained that if the schemes and orders were to be quashed to any extent, the scheme for the bypass would fall as a whole.

Requirement for a Strategic Environmental Assessment
In coming to its conclusion, the court took account of the differences between EIAs and Strategic Environmental Assessments (SEAs). It was noted that the EIA Directive is concerned with the assessment of the effects of “projects” on the environment. The SEA Directive, which was adopted 16 years later, is concerned with the environmental assessment of “plans and programmes” (which set the framework of future development consent of “projects”) and is intended to give consideration to environmental considerations at an earlier stage in the process[3].

The Supreme Court considered that, whereas the regional transport strategy (in March 2003) was a “plan or programme” in terms of the SEA Directive, the Fastlink was neither a “plan or programme” nor a “modification”[4] to a “plan or a programme” and did not trigger the consultation requirements under the SEA Directive.  It was instead a modification to a “project” and thus subject to the EIA Directive rather than the SEA Directive.

Compliance with common law principles of fairness
With regard to the common law principles of fairness concerning the holding of the public inquiry, in terms of the Roads (Scotland) Act 1984, the Ministers are under a duty to hold an inquiry if an objection is made to an order or scheme by any person who requires notification of the scheme (in terms of the 1984 Act) or any other person appearing to them to be affected.

As Mr Walton did not require to be notified of the scheme and nothing before the court indicated that he was regarded as a person affected, there was no suggestion that the Ministers were statutorily obliged to hold an inquiry into his objections. There was also no suggestion that he had any legitimate expectation that the remit of the inquiry would encompass the (economic, policy or strategic justifications) for building the Fastlink. No material before the court suggested that the Ministers were bound as a matter of fairness to include the justifications for the building of the Fastlink within the remit of the inquiry.

Whether remedies should have been available to Mr Walton
In the Inner House it had been observed that:

1.  if Mr Walton’s contentions had been accepted, the court would have exercised its discretion (under to the 1984 Act) to decline to grant him a remedy, the court noting that it was not contended that the schemes and orders would substantially prejudice his interests or affect his property;
2. Mr Walton was not a “person aggrieved”[5] in terms of the 1984 Act; and
3. Mr Walton would not have had standing even if the test were the same as would apply to a judicial review at common law.

Whilst reserving its opinion on the correctness of Inner House’s approach, the Supreme Court noted that, in terms of the Scotland Act 1998, the Scottish Ministers do not have the power to make subordinate legislation or exercise a function which is incompatible with EU law. It would therefore be necessary to consider the terms of the 1984 Act and the exercising of discretion under it in that context.

The Supreme Court also found that Mr Walton was a “person aggrieved” in terms of the 1984 Act. In coming to this conclusion, it noted his representations to the Ministers and his role in the local inquiry the fact that he lived in the vicinity of the bypass (if not the Fastlink) which would be busier as a result of the Fastlink. Also, his role in local environmental organisations and Road Sense helped to demonstrate that he was more than a “mere busybody interfering in things which did not concern him”.  As a consequence, the Supreme Court found him to have a genuine concern in what he argued was an illegality in the consent for a project which would have a significant impact on the environment.  In Lord Reed’s words he was “indubitably a person aggrieved within the meaning of the legislation”.

As regards the common law test, the Supreme Court found that the same factors which brought him within the definition of a “person aggrieved” would apply and he would have had standing to make an application for judicial review. Lord Reed also said:

 “Not every member of the public can complain of every potential breach of duty by a public body. But there may also be cases in which any individual, simply as a citizen, will have sufficient interest to bring a public authority’s violation of the law to the attention of the court, without having to demonstrate any greater impact upon himself than upon other members of the public. The rule of law would not be maintained if, because everyone was equally affected by an unlawful act, no-one was able to bring proceedings to challenge it.”

 The full text of the judgement is available here.