DIRECTORS’ LIABILITIES - 01.06.2006

Avoiding personal liability

In recent years, newspapers have been full of stories about directors coming unstuck for some wrongdoing or other. But what’s the position on getting it wrong on environmental issues? What does recent case law have to say?

Directors’ environmental duties

In terms of the environment, company directors have responsibilities under the Environmental Protection Act 1990 (EPA). S.157 provides that where an offence under the EPA has been committed by a company, and it’s been committed with the “consent, connivance or neglect” on the part of any director or manager, he, as well as the company, will be found guilty and punished accordingly. Such punishments range from a fine to imprisonment. The type of offence which would merit these penalties is very varied, but pollution is a common problem, including breaching the terms of a waste management licence.

Permission to store waste

The question of a director’s personal liability was looked at in a case against Clifford Matthews, the former managing director of Industrial Plastic Recyclers (IPR). In August 2002, the Environment Agency (EA) issued IPR with a waste management licence which allowed it to store fridges. Under its terms, the storage and processing of foam and plastics could only take place inside a building. However, this wasn’t allowed until IPR could prove that it had sufficient funds to pay for waste removal, if it ever became insolvent. It failed to do this and stored more fridges than the licence allowed for. In February 2003, trading ceased. The EA visited and found over 1,000 fridge doors and sacks of chopped refrigerator foam dumped outside. This was in addition to several thousand fridges found on a previous visit.

Coming badly unstuck

The EA prosecuted Matthews in his capacity as managing director of IPR. All three charges were brought under s.33 of the EPA and related to breaching the terms of the waste management licence and ignoring various warnings from the EA. He pleaded guilty and was imprisoned for four months. He was also disqualified from being a company director for three years by virtue of s.6 of the Company Directors Disqualification Act 1986.

Protecting your position

Even though the facts of this case are quite particular (and relate to breaching the terms of a waste licence), it shows how vulnerable directors of small businesses are in terms of environmental offences, particularly those involving pollution. This is especially so if you’re easily identifiable as being responsible for the problem under investigation.

Tip. If you hold a waste management licence, check its terms and conditions every six months or so to ensure continued compliance (you’re required to operate within the exact terms of the licence as it was issued to you). If you require any alterations, e.g. to store extra quantities or process new materials, you need to obtain written approval from your local EA office first. If you’re tempted to just go ahead, do be aware that the EA says that it’s increasing the number of spot checks it makes, including checking that waste transfer notes have been completed.