19 December 2006
Key Points:
A landlord must be prudent in ensuring premises are being used in accordance with a tenant's lease obligations particularly where the tenant has a history of non-compliance with planning controls.
Despite the "polluter pays" principle, the recent VCAT decision in Reading v Whittlesea CC [2006] VCAT 2181[1] highlights the potential for a landowner to be responsible for the clean-up of contamination caused by a previous tenant not only under environmental law but also under planning legislation in Victoria, where the polluting acts of the tenant have been carried out in breach of a planning permit issued for the land.
The land is polluted
The case concerned a protracted enforcement order application under the Planning and Environment Act 1987 (Vic) in relation to a materials recycling facility (used for the storage and processing of materials from building and demolition sites). The application alleged that the premises were being used for the illegal dumping of waste (including asbestos waste) contrary to conditions on a planning permit which had issued for the site.
Prior to Council making the enforcement order application, the Environment Protection Authority ("EPA") sought to deal with the dumping of waste on site by issuing various notices, including a clean up notice under section 62A of the Environment Protection Act 1970 ("EP Act"), against the tenant and his defacto employee. However, despite the service of these notices and protracted negotiations with the EPA, no real progress was made between the parties. In fact, evidence was presented that the facility continued to operate outside the conditions of its planning permit in the weeks leading up to the hearing in March 2006.
While the Council did not initially seek an enforcement order against the land owner, it reserved its right to do so pending the outcome of preliminary enforcement orders made against the tenant.
At the time of the further hearing in August 2006, the tenant had not complied with the Tribunal's orders and the Council not only sought an enforcement order against the tenant and his de facto employee but also the land owner.
On behalf of the owner it was submitted that it would be inappropriate, premature, unfair and contrary to common law to make any enforcement orders against SPI as the land owner particularly where there was no imminent risk of danger. It was further submitted that SPI was the "innocent" party, who:
In response, Council submitted that it had experienced problems with the owner's level of co-operation in addressing the contamination and had concerns about its level of commitment to clean up the site in the absence of an enforcement order.
Findings
The Tribunal found that the site was being used unlawfully as a landfill and for refuse disposal and that there was no genuine intention to use the site as a bona fide recycling facility. In particular the Tribunal found that the materials were dumped on site on a random basis and that compacting and burying of waste had occurred. Further, the Tribunal found that some of these materials (which included asbestos fragments and other contaminants) had been placed on part of the land that was flood prone and covered by a Land Subject to Inundation Overlay without the separate planning approval needed under this overlay.
The Tribunal found in favour of the Council and made enforcement orders against both the owner and former occupier of the premises in substantially the same terms as the clean up notice issued against the owner under section 62A of the EP Act.
In this regard the Tribunal referred to the decision of Central Pacific Holdings v Melbourne CC [1998] VCAT 514 and the test that is to be applied as a matter of fairness in seeking to strike a balance between the innocence of an owner and their incumbent responsibility under the Planning and Environment Act to ensure that the use and development of land is in accordance with a planning permit. In this decision the Tribunal stated:
"Apart from the fact of ownership, no matter has been placed before me to implicate the owner in the unlawfulness; nevertheless section 126 of the Planning and Environment Act appears to render an owner of land guilty of an offence if the land is used in contravention of a planning scheme. There is nothing in the section to require that the owner be implicated in illegal uses beyond the simple fact of ownership of the land upon which it takes place. This seems to me to indicate a policy in the Planning and Environment Act to render owners of land responsible for the uses and developments which take place on their land. One would not exclude the possibility that in certain circumstances one might, as a matter of discretion, withhold an enforcement order against an owner based upon particular matters of exculpation."
In relation to the issue of fairness the Tribunal went on to look at the broad objectives of the Planning and Environment Act and stated that what constitutes a fair outcome needs to be guided by the modern planning framework in Victoria such as:
The reference to these specific objectives, which are found under section 4 of the Planning and Environment Act, suggests that the innocence of the owner is to be weighed against the objective of protecting the natural environment in favour of the broader community.
The Tribunal also referred to the decision of Stonnington City Council v Blue Emporium Pty Ltd & B & I Holdings Pty Ltd 15 VPR 267, which concerned an interim enforcement application for failure of a nightclub to comply with a minimum car parking requirement contained in its planning permit. However, the Tribunal found that the case was to be distinguished on various grounds and in particular stated that:
"It would appear the owner essentially had no involvement in the day to day running of the nightclub and its compliance with its planning permit. By contrast, there are inherently higher risks associated with SPI allowing a tenant to run a materials recycling operation on the subject land. Given these higher risks, I consider that a prudent landlord in SPI's position should have been periodically inspecting the subject land to monitor Mr Reading's compliance with his lease obligations."
The Tribunal went on to state that even if the landowner was not aware of the dumping of waste on the land by the tenant, it should have been, particularly as it was necessary to obtain retrospective planning approval for the tenant's use of the site for materials recycling.
Planning enforcement orders vs environmental clean up notices
The Tribunal's decision is important not only for highlighting the potential liability of a landowner for the unlawful actions of its tenant but also for its discussion on the different roles of planning enforcement orders and environmental clean up notices under section 62A of the EP Act.
According to the Tribunal, the key focus of an environmental clean up notice is to require the clean up of environmental damage whereas the key focus of planning enforcement orders is to achieve compliance with the requirements of the planning framework.
Further the Tribunal noted that unlike environmental clean up notices, a planning enforcement order runs with the land to bind future owners and occupiers. Given both these factors, the Tribunal was satisfied that it was appropriate in the circumstances to make planning enforcement orders against both the owner and former occupier of the premises, in addition to the environmental clean up notice, to ensure an effective regulatory response to the environmental damage which had occurred.
However it was recognised by the Tribunal that the planning enforcement orders would need to be compatible with the environmental clean-up notice particularly given the provisions of section 62A(1B) of the EP Act which gives priority to compliance with a clean up notice despite anything to the contrary in the Planning and Environment Act and planning framework.
Conclusion
The case highlights the need for a landlord to be prudent in ensuring premises are being used in accordance with a tenant's lease obligations particularly where the tenant has a history of non-compliance with planning controls. In relation to industrial premises, this may require the landlord to regularly inspect the premises or impose specific obligations on the tenant under the lease to minimise the landlord's exposure to liability for the tenant's actions.
Further, before entering into a lease with a tenant (or before agreeing to assign the lease), there may be some instances where it is prudent to make enquiries in relation to that person’s environmental compliance track-record.
However, in the unlikely event that a landlord is served with notice of an application for an enforcement order under the Planning and Environment Act or a clean up notice under section 62A of the EP Act, these notices will need to be actively addressed and managed appropriately to avoid further sanctions being imposed. Nevertheless, where this occurs the landlord may be held liable regardless of whether or not someone else caused the contamination.
[1] The following decisions are to be read collectively as the Tribunal heard from the parties on various occasions and provided separate reasons in conjunction with its interim orders, directions and final orders (see Reading v Whittlesea CC [2006] VCAT 412 (No 1); Reading v Whittlesea CC [2006] VCAT 1688 (No 2) and Reading v Whittlesea CC [2006] VCAT 2144 (No 3))
For further information, please contact Sallyanne Everett.
