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.