Pre-liquidation waste removal liabilities and insolvency – expense or unsecured claim?
Statutory environmental clean-up costs relating to a Waste Removal Notice served under section 59 of the Environmental Protection Act 1990 (EPA 1990), prior to liquidation, can be classed as an expense of the Insolvency Practitioner (IP) and not a contingent debt.
It is rare for a statutory liability to rank ahead of the claims of unsecured creditors of an insolvent company. However, this was the ruling in the Scottish case of Re Doonin Plant Ltd in August 2018 (Re Doonin Plant Limited  ScotCS CSOH 89). We await news regarding any appeal of this decision.
The Outer House of the Court of Session considered that it was the intention of Parliament for environmental clean ups to be carried out and associated liabilities should rank in priority to the claims of unsecured creditors. This upholds the polluter pays principle underlying the EPA 1990.
To alleviate concerns that the Insolvency Practitioners (IPs) may not be paid their fees and expenses, the Court, in this case, ordered a variation to the order of priority by ordering that the IPs fees and expenses ranked for payment in priority to the clean-up costs.
Although this is a Scottish decision (and the English courts may take a different approach) the relevant provisions of the EPA 1990 and insolvency legislation, apply in similar form in England and accordingly IPs subject to English law should take note of this decision in circumstances where they encounter an insolvency with environmental issues. Specialist environmental advice should always be sought.
Jane Haviland is a solicitor specialising in environmental law in the Business Services Team at Barker Gotelee Solicitors.