Supreme Court rules appointed liquidators are liable for costs to clean contamination on ‘occupied’ land

Background facts

TASCO owned and leased 300-400 Broderick Road, Lara (the Land) to C&D Recycling which operated a materials recycling business. C&D Recycling ceased operating on the Land but left the Land contaminated with large stockpiles of mixed construction and demolition waste, which posed a serious fire threat. TASCO had liquidators appointed by way of a creditors’ voluntary winding up (Liquidators).

Prior to their appointment, the Liquidators were put on notice that TASCO was facing environmental issues due to the pollution of the Land caused by C&D Recycling. As a condition of the Liquidators being appointed, TASCO’s sole shareholder agreed to indemnify the Liquidators for an unlimited amount in respect of ‘Environmental Liabilities’ and up to $500,000 in respect of other claims in the event that TASCO’s assets were insufficient (Indemnity).

During the liquidation, the EPA exercised its power to enter the Land and conduct a clean up pursuant to ss55 and 62 of the Act. The EPA gave notice that it may recover from TASCO or the Liquidators any reasonable costs incurred in conducting the clean up of the Land.

Liquidators, who must act in the best interests of creditors, may on behalf of the company in liquidation, give up (disclaim) interests in any property where it is in the interests of the creditors to do so¹. In this case, the Liquidators disclaimed TASCO’s interest in the Land on the basis that the contamination made the Land unsellable and the estimated cost to clean up the Land exceeded the Land’s value (Disclaimer). However, the EPA had already incurred costs in cleaning up the waste stockpiles on the Land.

In the first instance, the Judge set aside the Disclaimer on the basis that it would cause very substantial prejudice to the EPA out of proportion to the prejudice suffered by TASCO’s creditors. The effect of the Disclaimer being set aside was that the Liquidators and their indemnifiers, as ‘the occupier’ of the Land, were liable to pay the clean up costs of the EPA.

The Liquidators appealed against the decision of the Judge to set aside the Disclaimer.

Whether the Liquidators were the ‘Occupier’ of the land

The first question in the appeal was whether the Judge erred in finding that the Liquidators were ‘the occupier’ of the Land within the meaning of ss4(1) and 62(2) of the Act?

As defined in s4(1), an occupier ‘includes a person who is in occupation or control of the premises whether or not that person is the owner of the premises‘. The Court held that this definition is broad and inclusive and could extend to the Liquidators.

The Court’s reasons included that:

1. The statutory test of ‘occupier’ does not require ownership or possession of the Land, but only one of occupation or control. The Liquidators fit this definition as:
   1. while TASCO remained the owner of the Land, the Liquidators had comprehensive power over the Land and the affairs of TASCO at the relevant time. This constituted the requisite level of physical and legal control for the purpose of categorising the Liquidators as the occupier per s4(1) of the Act.
   2. a liquidator’s role is to ‘collect, apply and distribute company property’, a role which fits within concept of someone in ‘control’ of the Land who was not otherwise an owner or in occupation.
   3. the Act explicitly excludes mortgagees from the definition of occupier. Liquidators are not excluded.
2. A liquidator being liable for clean up costs is consistent with the purposes of the Act. Any other interpretation would mean that a company going into liquidation would escape clean up costs that it would otherwise be liable to pay, such costs then falling to the State. The Court held that such consideration of the purpose of the Act was relevant in this case.

Can there be multiple ‘Occupiers’ of land?

A second question in the appeal was whether there be more than one person who is ‘the occupier’ of premises for the purposes of s62(2) of the Act?

The Court rejected the submission that the definition of ‘occupier’ only permits a single, exclusive occupier. s37(c) of the Interpretation of Legislation Act 1984 (Vic) states that, unless the contrary intention appears, words in the singular form include the plural.

The Court held that no such contrary intention appeared. Upon their construction there was nothing to suggest there can only be one person who can satisfy the definition of ‘occupier’ rather, the use of the word includes in the definition of occupier and the distinction between persons ‘in occupation’ or ‘in control’ suggests there may be one person in occupation and another in control.

The Applicant also submitted that other parts of the Act suggested the meaning of occupier should be constrained to the singular, especially s66B. The Court held that the operation of this section does not justify constraining the definition of an ‘occupier’.

Conclusion

The Court held that the Liquidators were occupiers of the Land for the purposes of the Act and were liable to pay the cost of the clean up.

This article was written by James Lofting, Partner, Josh Hanegbi, Law Graduate and Isabelle Turudia, Law Graduate.

¹Section 568(1) of the Corporations Act 2001 (Cth).