Environment case law continues to expand

United Kingdom

As environment public law expands and matures, environment case law likewise has increased not only in volume but also in scope. A notable feature is the increasing commercial content of environment case law. Two judgments in January 2018 are interesting in this regard.

At face value these two cases could not be more different. However when looked at from a wider perspective a number of similarities appear. In both cases (1) the claimants were beneficiaries (commercial and otherwise) of environment related schemes, (2) the claimants sought commercial betterment of their positions under these schemes and (3) a balancing act was required between the claimants’ positions and the positions of others. In each case the defendant was the Environment Agency (“Agency”). In each case the Agency won and convincingly so.

Geo Speciality Chemicals UK Limited v Environment Agency (2018 WL 00441692)

This was a decision of the First Tier Tribunal and relates to a dispute under a Climate Change Agreement (“CCA”) entered into by Geo Speciality Chemicals (a world leader in providing high quality cost effective chemicals).

CCAs are part of a statutory scheme which has been running since 2001 (under the Finance Act 2000, Climate Change Agreements (Administration) Regulations 2012 and the Climate Change Agreements (Eligible Facilities) Regulations 2012). Participation in the scheme is entirely voluntary. Pursuant to the scheme operators agree to improve their energy efficiency and reduce carbon emissions by reference to a % target laid down in the agreement. In exchange the operators benefit from a reduction in the amount of climate change levy which they are required to pay on their non-domestic energy bills. Where an operator does not meet the % target set by the CCA, it must pay a buy-out fee to cover the shortfall between the target and the actual reductions received.

Importantly the climate change scheme operates on a sector basis via an umbrella agreement signed by the relevant sector association (in this case the Chemicals Industry Associations’ Broking and Trading Agency) and the Agency acting as the scheme administrator on behalf of the Secretary of State. Various rules apply to bind the sector participants. The umbrella agreement includes targets which were negotiated and agreed by the Secretary of State and the sector association (commonly known as sector commitments). The Agency was not a party to such negotiation and agreement. This chemicals sector umbrella agreement (including the sector commitment) flows down to participating operators through underlying agreements between the operators (of which Geo Speciality Chemicals was one) and the Agency. Again in terms of the % target set out in the underlying agreement the negotiation, agreement and distribution of individual targets for operators was a matter for the sector association, the operators and the Secretary of State but not the Agency. The % target is based on baseline energy data.

The CCA provides for variation in certain circumstances. Due to unanticipated circumstances the baseline energy of Geo Speciality Chemicals increased significantly. When the CCA came for renewal in 2017 the Agency agreed to vary (which it had the power to do) the energy baseline but not the % target itself (and no request to vary this % target had been made at this time). Subsequently GEO Speciality Chemicals requested a variation to the % target itself. It does not appear that Geo Speciality Chemicals stipulated what the varied % target should be. The Agency did not vary the % target and was particularly concerned that to vary one operator’s % target (even if legally it could do so) would have a knock on effect on the overall sector commitment which is the combination of all the individual operator’s targets.

Geo Speciality Chemicals appealed to the First Tier Tribunal. The Agency contended that the Tribunal had no jurisdiction to entertain the appeal because in agreeing the CCA with Geo Speciality Chemicals it (the Agency) made no decision about the % target. The Agency therefore had not made a decision capable of being appealed. The Agency argued that the % target was not set by the Agency but rather by Geo Speciality Chemicals, the Secretary of State and the sector association. The Agency argued also that an operator entering into a CCA takes on a degree of risk about its ability to meet its target should there be unforeseen events. The Agency observed that it is not required to adjust the % target if an operator receives a windfall and there is no reason why the operator should receive an adjustment just because it is unfortunate.

In his judgement, Judge Simon Bird QC analysed and construed the various terms of the CCA and associated technical rules and methodologies relating to what could be varied and by whom. He recognised that Geo Speciality Chemicals had arguments based on these terms but concluded that these arguments had only a “simplicity and superficial attraction”. They failed to reflect the content of the CCA as a whole and were inconsistent with the statutory scheme for climate change agreements. Importantly the scheme focuses on a sector commitment set out in the umbrella agreement to be varied only by the Secretary of State on review. In particular the Judge recognised the role of the Agency as being an administrator operating targets fixed by others. He accepted the Agency’s argument that the scheme could be seriously undermined if operators were entitled to a change to the % target just because the projections they had made when the target was agreed were later proved to be incorrect. The Judge concluded that the Agency was correct and dismissed the appeal.

Christopher King & others v Environment Agency (2018 WL 00500348)

This case relates to flood defence. It arises out of a flood defence embankment at Minsterworth Ham on the banks of the river Severn near Gloucester. This area is in the flood plain and records over centuries demonstrate flooding (the floods could be fluvial, tidal or a combination of both). The embankment had been in existence for several decades. Predecessors of the Agency erected the embankment and these predecessors and the Agency maintained the embankment (at their cost).

The claimants own or farm adjacent lands and their agricultural productivity benefits from the embankment in terms of flood prevention. If the embankment was not present their lands would flood more frequently and suffer greater volume of flood water. Indeed some of the claimants were aware of the flood risk on purchase of the land and at times of investment in the farms.

Notwithstanding the embankment, the claimants’ lands have flooded at times when flood waters were so high they overtopped the embankment. Engineered outfalls in the embankment exist for such flood waters to escape back into the river, but this reverse flow only takes place when the river level drops appropriately and this can occur over prolonged periods. In effect on these occasions the area becomes a temporary store of flood water and the claimants have suffered both commercial losses, along with distress and anxiety. They do not receive any compensation for such losses. Gloucester benefits from this state of affairs.

The claimants alleged that in terms of the embankment (and other embankments in the area) the Agency adopted a strategy or policy to the effect that flood protection of Gloucester was increased at their expense (i.e. to protect Gloucester their lands would be allowed to flood). In doing so they alleged that the Agency had not assessed the burden on the claimants.

The claimants accepted that they had no legal right to be protected from flooding and its effects. The case against the Agency narrowed to claims under Article 1 Protocol 1 and Article 14 of the European Convention on Human Rights. Earlier claims under negligence and nuisance were not pursued at trial. Article 1 Protocol 1 provides for the right of protection against control of or interference with a person’s property and Article 14 prohibits discrimination in the enjoyment of (in this case) such right. The claimants alleged that the Agency discriminated against them on the grounds of property or other status, by paying compensation to other persons in other parts of the country who the claimants said were in a materially equivalent position.

In terms of Article 1 Protocol 1 the Court had to look at (1) whether the Agency had interfered with the claimants’ land or property by adoption of what the claimants contended was a strategy to protect Gloucester and (2) if so, whether in the adoption of that strategy a fair balance has been struck between the general interest of the community and the requirements of the protection of the claimants’ rights.

The trial involved an examination of numerous flood etc. reports and studies by the Agency or its predecessors (or consultants for them) relating to the embankment and the area, over several decades. The Judge concluded that the “Agency and its predecessors have had a policy that the Minsterworth Ham embankment should not be raised because of the detriment to Gloucester”, the “Agency and its predecessors are more likely than not to have had a policy, at least implicitly, that the claimants’ land acts to reduce the risk of flooding to Gloucester” and these “policies are based on expert assessments, supported by the reports of independent consultants”.

The Judge also observed that cost-benefit assessments have concluded that the economic case for raising the Minsterworth Ham embankment is not strong enough. The claimants did not contend that the Agency should have raised the height of the embankment. Rather they claimed that by controlling or interfering with their lands under the policy(ies) above the Agency had failed to conduct a proper assessment of the costs to them compared with the benefit of others, notably those in Gloucester. In terms of the fair balance required by Article 1 Protocol 1 the claimants’ position was that this could only be satisfied by the Agency carrying out an assessment of whether they bore an excessive burden of protecting Gloucester, and requiring the payment of some compensation to reflect their additional burdens.

The Judge rejected the proposition that the Agency controlled or interfered with claimants’ lands. This rejection was based in part on the fact that the claimants did not advance their case on the basis that the Agency should have raised the height of the embankment. Also the modelling evidence at trial did not establish that anything done by the Agency on the embankment or elsewhere increased the impact of flooding on the claimants’ lands.

Further the fact that the claimants benefitted from the embankment did not suggest “control” (in the normal sense of that word) by the Agency. Also this benefit provided by the presence of the embankment (paid for by the Agency and its predecessors) along with the steady stream of consultants’ reports and other papers over the years which evidenced the public interest (and which recognised the costs (and benefits) which some members of the community would bear from flooding events which cannot be mitigated) demonstrated that there was a fair balance.

Evidence was provided of four other flood alleviation schemes of the Agency about which compensation was paid to impacted persons. However the Judge held that those other schemes were materially distinguishable from the present case and hence did not provide evidence to support a discrimination claim under Article 14 (also the Judge held that Article 14 would not be engaged in this type of property case because the claimed discrimination is not on the basis of a personal characteristic).

The claim was dismissed.

Comment

These are interesting cases in their own right. From a wider commercial perspective they can be seen as examples of the testing of commercial elements of environment risks and environment law. It is not difficult to imagine that we will begin to see many more commercially centred environment claims being brought before the courts. Like these two cases, some of the future cases may also involve a balancing act of some sort between different interests.