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Lord Jenkin of Roding moved Amendment No. 229A:

Page 47, line 32, leave out from ("owner") to end of line 46 and insert:
("(a) ("in relation to any land in England and Wales, means a person who, is entitled to receive the rack rent of the land, or, where the land is not let at a rack rent, would be so entitled if it were so let, but does not include a mortgagee not in physical possession of the land or one who is in possession of the land only for the purpose of preserving,

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protecting, repairing, securing or selling it, or investigating the condition of it, and otherwise performs no operational function in respect of it; nor does it include a trustee who has no beneficial interest in the land;
(b) in relation to any land in Scotland, means the person for the time being who is entitled to receive, or who would, if the land were let, be entitled to receive the rents of the land, and includes a factor, guardian or curator and in the case of public or municipal land, includes the persons to whom the management of the land is entrusted, but does not include a person who holds a security over the land (whether heritable or otherwise) not in physical possession or who exercises it rights as security holder only for the purpose of preserving, protecting, repairing, securing or selling it, or investigating the condition of it, and otherwise performs no operational function in respect of it; nor does it include a bare trustee;
(c) in the Environmental Protection Act 1990, "owner" shall have the same meaning as in sub-paragraph (a) above and the definition of "owner" in section 81A(9) of that Act shall be repealed.").

The noble Lord said: In moving this amendment, I understand that we are considering also Amendments Nos. 238AA, 238D and 238E. My amendment is concerned with the potential liability of lenders of money (whether or not on the security of land) to a landowner whose land may well be contaminated.

When the Government published their document A Framework for Contaminated Land they stated quite clearly:

    "the act of lending, whether secured or not, does not of itself open the lender to liability for meeting the costs of remedying any damage caused by the actions or omissions of the borrower".

When the banks and building societies, which are the main lenders in this country, read that, they were reassured. However, when they came to read the definition of "owner" in this clause, it seemed to arouse a good deal of anxiety. Two problems need to be addressed. First, under the present drafting, lenders could be held liable for environmental damage where circumstances forced them into possession of a mortgaged property. It is not unknown for someone whose business is in great difficulties to abandon the premises and drop the keys through the building society's letter box.

It could also happen that an owner abandons a site and the bank or building society, given that it is not getting any payment, needs to take some action to make the premises secure. We should bear in mind that we are talking not necessarily about large and potentially extremely damaging sites, but about small businesses, such as dry cleaners, printers, petrol stations, farms or suppliers of agricultural chemicals—virtually any company that happens in the course of its business to handle chemicals that are hazardous to the environment. Many such businesses rely upon borrowing from banks, or in some cases building societies, to be able to carry on the businesses.

In the circumstances I have described, that could turn the lender into an owner, and therefore liable to all the procedures contained in the Bill. He could have a remediation notice served upon him. He could then be under an obligation to take the action necessary to clean up the site. If he does not, he can be liable to fines, and substantial costs if the local authority itself does the work.

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What is a bank or building society to do in such circumstances with that risk hanging over its head? The right answer might be to walk away from the security, have nothing to do with it, and abandon it with no owner and no occupier. I cannot believe that that is what my right honourable friends intend by that definition of "owner" in the Bill.

There is a second circumstance which needs to be addressed —that is, under the Bill as drafted, trustees who hold just the bare legal title to the land, with no beneficial interest in it, may be caught by the definition of "owner", and so held personally liable for the consequences of the contamination by the owner. The suggestion in the amendment is that they should be liable only to the extent of any trust assets they control.

I have been rash enough to include in the amendment an amendment to the law of Scotland. I hasten to say that I know relatively little about the law of Scotland, although I was born in Edinburgh. I am advised that the position should be the same as in England and Wales, and that the drafting of the amendment achieves that. That is not the case at present. There is an exemption for the mortgagee in possession, but not for what I understand in Scots law is called a heritable creditor, which I understand to be the equivalent.

I recognise that my amendments may not be in the right form, but they raise an important issue. I hope that my noble friend will be able to offer some comfort to those who are genuinely anxious that they will find themselves saddled with a liability. The result will be that they will be infinitely less willing to lend. Businesses will be unable to raise the finance to keep going because of the potential liability hanging over the heads of the lenders. It is a serious point. I hope that my noble friend will be able to offer us some comfort. I beg to move.

Lord Boardman: I support my noble friend's amendment. I shall say just two things. First, the proposals put forward originally, as my noble friend said, in A Framework for Contaminated Land made it clear that lenders would not be faced with the liability that the Bill now imposes upon them. That is unfortunate.

My second point is that if the Government want people to lend money on land which could possibly become contaminated, by this clause they will prevent that wish being realised. Lenders will not lend money on land that may be polluted—under the Bill they would be required to monitor it to ensure that it was not being polluted for the whole time the security was held by them—because of the danger that they might be faced ultimately with a large bill. That would be fearful, so I hope that if the amendment is not accepted my noble friend the Minister will at a later stage introduce an amendment to reduce the real threat to those who would otherwise hope to borrow effectively for such investments.

The Earl of Lytton: Perhaps it would be helpful to the Committee if I now spoke to my Amendments Nos. 245AZA and 245AZB, which relate to insolvency practitioners. It is part and parcel of the same issue and it may be appropriate for the Minister to deal with it

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now. Often insolvency practitioners and other receivers deal with land that is subject to contamination. I remember some time ago being instructed to value a piece of land that had been used for scrap metal processing. I do not know what they did with the sump oil and so forth—perhaps they just tipped it on the ground. That is what it looked like!

It would be unreasonable for people acting as insolvency practitioners, whether appointed as receivers or in some other capacity, to assume personal liability under Part II of the Environmental Protection Act 1990, unless they were responsible for causing the harm, in which case they must accept liability.

Clause 54, which is to be inserted in the 1990 Act as Section 78P(3), seeks to limit the liability. However, the present wording refers only to insolvency practitioners and ignores other receivers. That is inequitable. I have spoken to representatives of the Royal Institution of Chartered Surveyors, some of whose members act in such a capacity. They are most anxious about the provision. Perhaps the Minister will consider the matter.

As regards lenders, if the situation comes adrift and the loan is called in they may well appoint a receiver. He represents the lender's interests in trying to realise the asset value. The purpose of my amendments is to extend to all classes of receiver the protection that is already built into the Bill.

Baroness Hamwee: I speak to Amendment No. 238AA, which stands in the name of my noble friend Lord Beaumont and myself. It is not such a macro amendment as that moved by the noble Lord, Lord Jenkin of Roding. Paragraph (4) at page 50 refers to the consent required by the person in occupation of land in the circumstances set out in the provision. The amendment addresses the point, although probably not adequately. It deals with what happens if consent is not given.

Lord Annaly: I speak to Amendment No. 238D, which is a probing amendment. Its object is to obtain a commitment from my noble friend the Minister that the principles by which liability can be transferred are stated in the Bill.

An efficient market in contaminated land, which encourages investment in remediation, depends on a clear and equitable division of responsibility for the land following sale and purchase. It is important for business organisations to have reasonable clarity as to the extent of their liabilities and not to be unfairly haunted by the past if they are to trade and borrow on an equitable basis. The right to transfer liability is a vital condition if the market for contaminated land is to operate effectively. The Government have made provision for that in the new Section 78E(3) but the conditions under which transfer takes place, and how liability under this part can be transferred, is not clearly stated.

This is a complex area of private and public law and uncertainty may mean that the provision does not have its intended effect. I am looking to my noble friend the Minister for an assurance that the principles by which liability is transferred are stated expressly in the Bill and not left solely to guidance.

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10.45 p.m.

Baroness Hilton of Eggardon: I am speaking to Amendments Nos. 242B and 242C, which are in this group. They are probing amendments to ask the Minister what is meant by "hardship" when the authority is using its discretion in deciding what costs to recover. The local authority associations are extremely anxious about the provisions of Clause 54 which relate to hardship. Quite clearly they do not want the Bill to spell out a polluter's charter, such that responsibilities can be evaded, and some of the earlier amendments in the group seemed to suggest that people might seeks ways in which to evade liability for responsibility for pollution. But, on the other hand, local authorities recognise that an ability to exercise their discretion in the recovery of costs is an important local authority responsibility, and one which should be used only after considering a number of circumstances, of which hardship might be one factor.

Therefore, we are asking the Minister to outline what is intended by "hardship" and in what circumstances local authorities should be allowed to fund the clean-up of pollution.

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