Director Liability for Environmental Clean Up 

January, 2012 - Alison Fanagan

2011 saw significant developments in the courts in relation to the issue of directors’ liability for the costs of remediation of waste sites, an issue which is particularly crucial where the company which disposed of the waste is not in a position to pay. 

The Waste Management Acts 1996-2011 provide a mechanism whereby individuals, local authorities and the Environmental Protection Agency can apply to the court for clean up orders where waste is being held, disposed of or recovered in a manner which causes (or may cause) environmental pollution. The court may order the relevant person or company to cease the polluting activities, and either carry out the necessary clean up or pay the costs. The High Court had held in a number of cases that where the company was not in a position to pay, due to receivership, insolvency or otherwise, that individual directors could be held liable on a “fall back” basis by the application of the EU “polluter pays” principle.  

In March 2011, in a preliminary issue heard in the case of EPA v Neiphin & Others, Mr Justice Edwards disagreed with these previous decisions and held that the “polluter pays” principle does not entitle the courts to pierce the corporate veil in order to impose “fall back” liability on directors for environmental clean up in the absence of clear language in the Waste Management Acts allowing it. It therefore seemed that, unless the directors were acting fraudulently, for example, the courts could not make directors personally responsible for the cost of environmental clean up.  

The subsequent case of Ronan v Clean Build & Others in August 2011 also dealt with an application for a clean up order. There were two cases, one where South Dublin County Council was suing Clean Build and its directors and the owner of the property (Ronan), and the other where Ronan was suing Clean Build and the directors as their tenant. The site had been operated for many years by the Ronan company to collect, store and treat animal by-products before being operated as a waste transfer station by Clean Build for the 4 years prior to the date of the case.  

Mr. Justice Clarke acknowledged the Neiphin decision but noted that this decision did not address the situation where a director/shareholder is found to be independently liable as a “holder” of waste. He noted that the fact that a business is run by a corporate entity does not prevent individuals from being “holders” of waste. On the facts, Mr. Justice Clarke held that each of the directors (except one who was very young and had no active role in the running of the company) had sufficient involvement in the day-to-day activities at the site to be considered “holders” of waste and thus were liable to pay for the clean up costs. Mr. Justice Clarke apportioned the costs in accordance with each of the directors’ respective responsibility for the waste on the site.  

While the previous activities of the landlord company did give rise to some pollution on the site, no liability was imposed on the landlord as the activities had all been carried out in compliance with the regulatory regime in place at the time. However, because the landlord is now the occupier as well as the owner, and therefore the current “holder” of the waste on the site, the court imposed a responsibility on the company to ensure that the site is remediated in accordance with the Order, albeit that he granted it an indemnity from the other parties in accordance with their percentage share of responsibility. 

Following these two decisions, it seems that, while the courts will not impose liability on directors where a company is not in a position to pay for clean up costs merely based on the EU “polluter pays” principle, directors can still be held personally liable where it can be shown that they were very involved with the operation of a site and exercised control over its activities.  

For more information contact Alison Fanagan, Head of Planning and Environment, at [email protected].


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