Liquidators will need to be more cautious when dealing with companies that have environmental liabilities, following a High Court decision not to review a Victorian ruling, according to law firm Ashurst.
The High Court yesterday refused a request for special leave to appeal made by a PwC-owned liquidation business that was found by Victoria's Court of Appeal to be liable for substantial environmental clean-up costs.
The liquidator was dealing with a site in Victoria near Geelong, where a substantial amount of waste was abandoned, and had unsuccessfully sought to disclaim responsibility for its clean-up.
The High Court refused it leave to appeal because its dispute with EPA Victoria (which successfully argued in Victorian courts that the liquidator was liable) turned on the interpretation of the Environment Protection Act 1970, which has now been repealed.
The case therefore doesn't raise an issue of sufficient public importance to warrant leave to appeal, the High Court said.
Liquidators exposed to liability
Ashurst projects practice partner Jane Hall told Footprint that insolvency practitioners and liquidators "can't go in with their eyes shut and assume that they will be able to disclaim property on the basis that it turns out to be heavily contaminated".
"Liquidators are now very much exposed to a liability that they didn't think they had," Hall said.
In addition, the EPA is likely to be emboldened by the decision to take a tougher approach to preventing taxpayers being left to pay for clean-ups, she said.
Hall noted that the original case had largely turned on whether the liquidator was an "occupier" within the meaning of the now-repealed Act. However, the term also appears in the new Act, she said.
The old Act had defined the term, she noted, while the new Act doesn't, but it separately refers to "persons in management or control of land", which is a phrase that was used in the definition of occupier in the old Act.
As a result, there are " a lot of questions about how this case would flow through under the new law", she said.
Further complicating matters, Hall noted that an indemnity provided to the PwC liquidators by a company related to the business that owned the site had been a crucial factor in the Victorian case.
Liquidators handling other matters would likely argue that this was an important distinguishing feature, she said.
However, on the flip-side, the Victorian Court had found that a person in control is an occupier – a finding that could be applied to a range of different circumstances, she said.
Hall's colleague, Ashurst insolvency partner Michael Sloan, said any entities looking to use insolvency to manage environmental liabilities "will need to very careful", because of the possibility that the EPA might pursue the practitioners involved.
Because of the particular circumstances of the case, "it doesn't mean that every single restructuring is going to be attacked by the EPA, far from it", Sloan said.
However, "it has demonstrated that, in appropriate circumstances, action can and will be taken", he said.
EPA Victoria did not respond to a request for comment.
