Dated (Nov 2011)
Matheson LLP – Nicola Dunleavy
In March 2011, the Irish High Court temporarily reversed a 10 year practice of imposing personal liability on company officers to pay for environmental clean up of the company’s waste. Since 2002, the Irish High Court has made what are called “fall-back orders”, imposing personal liability on those who “controlled” and benefited from an activity to pay for environmental clean-up costs. These orders were designed as a “fall-back” if the limited company did not have adequate funds to pay.
This practice was reversed in the decision in Environmental Protection Agency v Neiphin Trading Ltd & Others (and was reported on by MOP in our update on 16 June 2011). This decision had added significance given the increasing number of insolvencies in Ireland. As a result of this March decision it appeared that directors might no longer be held personally liable to pay for clean up.
However, in a more recent decision John Ronan & Sons/South Dublin County Council v Clean Build Limited (In Voluntary Liquidation), in August 2011, the High Court has relied on a different legal mechanism to again impose personal liability on directors for clean up costs for the unlawful accumulation of waste on a site.
The company, Clean Build Limited, which had caused the pollution, was “hopelessly insolvent”. Therefore, other potential targets to pay to clean up the site came into focus, including the liquidator of Clean Build, the directors, and the landlord of the site.
The High Court made three significant findings: (1) the directors (at the time of the pollution) were liable to pay; (2) the landlord was blameless but was fully liable to pay, subject to benefitting from indemnities from the directors; (3) the remediation required did not mean that the site had to be completely ‘cleansed’ of waste, provided that a stable solution did not cause pollution. The claim against the liquidator was abandoned.
This case shows that the courts remain reluctant to leave the clean-up bill for the taxpayer. Therefore the other ‘targets’ for liability must proceed on the basis that they may not escape paying for the clean-up, regardless of extent of blame.
This case demonstrates the Courts willingness to hold directors and landlords liable for the costs of clean up. Non-executive directors will presumably not be comforted by the indication in this case that they “might” not be liable to pay for clean-up. It also highlights an exposure for landlords which must be evaluated before and when tenants become insolvent.
Finally, the case again highlights the importance of directors, shareholders and landlords getting specific advice where polluting industries are involved, and insuring against potential civil liability.