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You are here: BAILII >> Databases >> First-tier Tribunal (Tax) >> Devon Waste Management And Others v Revenue and Customs (LANDFILL TAX : Landfill tax) [2018] UKFTT 181 (TC) (11 April 2018) URL: http://www.bailii.org/uk/cases/UKFTT/TC/2018/TC06441.html |
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TC06441
Appeal numbers: |
TC/2013/00679, 01289 & 05254 (1) |
|
TC/2014/01464, 01468 & 06002 (2) |
|
TC/2014/01438 (3) |
|
TC/2014/01439 & 01440 (3) & (4) |
Landfill tax – first and
last layers of |
FIRST-TIER TRIBUNAL
TAX CHAMBER
|
BIFFA VEOLIA ES LANDFILL LIMITED (3) VEOLIA CLEANAWAY (UK) LIMITED (4) |
Appellants |
-and-
|
THE COMMISSIONERS FOR HER MAJESTY’S REVENUE AND CUSTOMS |
Respondents |
TRIBUNAL: |
JUDGE KEVIN POOLE JOHN AGBOOLA FCCA |
Sitting in public in the Royal Courts of Justice, London on 7 to 21 November 2016 (with subsequent written submissions)
Penny Hamilton QC and Zizhen Yang, instructed by KPMG LLP, for the First AppellantRoderick Cordara QC and Zizhen Yang, instructed by Ernst & Young LLP, for the Second Appellant
Sam Grodzinski QC and David Yates, instructed by Simmons & Simmons LLP, for the Third and Fourth Appellants
Melanie Hall QC, Brendan McGurk and David Gregory, instructed by the General Counsel and Solicitor to HM Revenue and Customs, for the Respondents
© CROWN COPYRIGHT 2018
DECISION
1.
These appeals are concerned with Landfill Tax. The appellants
maintain (in broad terms) that certain deposits of material in the “cells” of
their landfill sites amount to the “use” of that material, which was
accordingly not disposed of “as waste”
or “by way of landfill”; accordingly
those deposits are, the appellants say, not subject to Landfill Tax.
2.
The material in question is deposited at the base of the cell, up
its sloping sides and/or on top of the main body of landfilled waste
before the
cell is capped and restored for other uses. The nature of the material in question
is generally ordinary domestic
waste,
called “black bag
waste”
in the
waste
disposal business. In these appeals, it has also been referred to as “fluff”.
3. The appellants either operate or are the representative members of groups of companies that operate landfill sites at various locations throughout England and Wales (though all of sites considered in detail in this appeal were in England). The details of the sites involved and of their respective operators are not relevant to this decision, though we will refer to certain specific sites at various points.
4. We made a site visit to the third appellant’s landfill site at Ling Hall near Rugby to obtain a better understanding of the process involved in constructing and operating a landfill site.
5. We also received a large volume of documentary evidence (mostly covering the detailed regulatory arrangements applying to a sample of the appellants’ landfill sites) and witness statements from Steven Hadley and Neil Browne (on behalf of the first appellant), Jacqueline Doone and John Beaman (on behalf of the second appellant), Donald Macphail and Vinod Mehroke (on behalf of the third and fourth appellants), HMRC officers Morris Graham and Richard Hart (on behalf of HMRC) and Darren Legge of the Environment Agency (also on behalf of HMRC). We also heard oral evidence from all the above witnesses apart from officers Graham and Hart.
6. We also received expert evidence in relation to the design and construction of landfill sites (in the form of witness statements, supplemented by oral evidence) from Stephen Hodges (on behalf of the appellants) and Daniel Riding (on behalf of HMRC); there was also an agreed joint report from both expert witnesses setting out briefly the areas on which they agreed and differed.
7. We find the following facts.
8. The various landfill sites the subject of these appeals (like all landfill sites in England & Wales) are operated under a regulatory regime which has changed quite significantly over the years. Whilst the claims in question relate to various periods between November 2006 and December 2013 (when essentially the current regulatory regime was in force), the history of the regulatory regime has some bearing and a brief summary therefore follows. Most or all of the sites involved in these appeals were originally licensed under earlier regimes. Two (at Pitsea and Rainham, both in Essex) started operation over 100 years ago.
9.
Under the Control of Pollution Act 1974, waste
disposal licences
were granted by local authorities, acting as “
Waste
Disposal Authorities”; then
under the Environmental Protection Act 1990, local authorities granted
waste
management
licences, acting as “
Waste
Management
Authorities”, before that
function was centralised with the Environment Agency (“EA”). Then, following
the passing of the EU Landfill Directive in 1999, the regime was overhauled again,
tracking the UK’s obligations under that Directive. The Pollution Prevention
and Control Act 1999 and the Pollution Prevention and Control (England and
Wales) Regulations 2000 introduced “Pollution Prevention and Control Permits”
(“PPC Permits”) issued by the EA to replace the previous licensing regime, in
conjunction with the Landfill (England & Wales) Regulations 2002. This
basic structure remains, though there have been amendments to the relevant
legislation (the replacement of the PPC Regulations and the Landfill
Regulations by the Environmental Permitting Regulations 2007 and the subsequent
partial revocation and replacement of those regulations by the Environmental
Permitting Regulations 2010, resulting in the re-naming of PPC Permits as
Environmental Permits (“EPs”)). Since 1 April 2013, the permitting function in
Wales has been devolved and is administered by “Natural Resources Wales”.
10. The regime of PPC Permits/EPs is, on its face, less prescriptive than the previous licensing regime. Instead of the EA laying down detailed requirements as to the construction and operation of landfill sites, the new regime is more focused on specifying the outcomes required and leaving it up to the landfill site operator to provide detailed documentation in support of its application which set out in detail how it will achieve those outcomes. When a permit is finally issued in respect of the application, it is a term of its issue that the operator will comply with all the detailed processes and procedures set out in the application documents; the end result is therefore similar to the previous licensing regime, but the operator is given a greater role in devising the precise means by which it will ensure that the required outcomes are achieved.
11.
One of the key objectives of the regulatory regime (in its
various forms) has been to minimise the environmental impact of landfill sites
and one of the biggest concerns in that area is the risk of contamination of
the environment around landfill sites by substances emanating from the
landfilled waste,
especially landfill gas (a mixture of mostly carbon dioxide
and methane, generated from the decomposition of biodegradable
waste)
and
leachate (the highly polluting liquid which is produced as a result of such
decomposition, especially in combination with rainwater). As a result, a
landfill site is not simply a dumping ground for
waste;
it is a carefully
managed
location in which the design, construction and operation of the site
all play a part in reducing its environmental impact.
12. To that end, a landfill site is developed as a number of separate “cells”, which generally follow a reasonably standard model in terms of their design, construction and operation.
13.
Landfill sites are often located in worked-out quarries or mines,
which provide a ready made cavity or void into which the cells can be built.
Some sites (we understand generally older ones) do not follow this pattern, but
instead involve depositing the waste
onto land which has not previously been
excavated in some way – in the industry, these sites are often called
“landraise” or “land rise” rather than “landfill” sites. Many of the
techniques applicable to them are similar, but in the absence of some natural
side wall, they are built up in mounds which effectively lean against each
other.
14. Taking an ordinary modern landfill site as the paradigm, the cells are constructed in a generally similar way. This involves a number of elements:
(1)
First, the underlying ground must be prepared. Depending on local
groundwater characteristics, it may be necessary to install some subsoil
drainage to prevent later damage to the cell from underneath by “heave” caused
by pressurised groundwater. It will also generally be necessary to smooth the
site for the next element, and some profiling may be required to assist in the
collection of leachate. This is done by creating slopes in the floor of the
cell which cause the leachate to flow naturally downwards towards a central sump
or sumps, from which it can then be pumped out through appropriately designed
piping which is sunk into the waste
mass as it rises.
(2) Generally it will be necessary to place a lining layer of compacted clay (or similarly impervious material), typically to a depth of 1 meter, in order to provide a barrier for any leachate released through damage to the superposed elements, so as to prevent pollution of any nearby groundwater sources. The seepage rate of pollutants through such a layer is sufficiently low for it to provide adequate protection for minor damage except in particularly sensitive locations (e.g. close to aquifers from which drinking water is abstracted). If the existing geological strata are sufficiently impermeable, this layer may sometimes not be necessary.
(3) Once the compacted clay (or, if applicable, the underlying ground) has been appropriately profiled, flattened and smoothed, it is generally covered with a plastic membrane (known as a geomembrane).[1] This is made of high density polyethylene approximately 2mm thick, which is brought onto site in large rolls and laid out like a carpet. It is then welded together into a single completely impermeable sheet covering the entire “floor” of the cell and as far up the sides as is necessary and practical. This is an extremely skilled and expensive process, and the integrity of this layer (known as the “liner”) is central to the effectiveness of the entire cell in performing its environmental protection function. The liner for a single cell can cost up to £1.6 million on its own, sometimes more.
(4) Usually (though not, we understand, invariably) the plastic liner is then covered with a layer of a somewhat thicker (but permeable) synthetic material (“geotextile”), generally a non-woven needle-punched polypropylene, the purpose of which is to prevent damage to the plastic liner by the subsequent “drainage layer”.
(5) In order to facilitate the later drainage of leachate, the whole floor surface is then covered by a drainage layer or “blanket” which, in spite of its name, in fact consists largely of gravel or natural stone of mixed diameter in a layer 300mm to 500mm deep; a drainage system is incorporated into this layer, in which perforated drain pipes in a herring bone pattern connect into spine drain pipes leading to the sump or sumps from which the leachate can be pumped out via “leachate wells”.
(6) Up the sides of the cell there comes a point where it is no longer possible to extend the gravel drainage layer (Mr Macphail’s evidence was that this was often about 2 meters up the side wall); we infer this is because the slope would render such a layer unstable. Instead, a layer of sand or similar material, of between 200mm and 500mm is generally placed on top of the liner.
(7)
In some situations, a further thin synthetic filter layer is placed on
top of the gravel drainage blanket. This is done when there is concern about
fine particles of waste
washing into and blocking up the drainage layer
(whether because the gravel used in the drainage layer is smaller than the
ideal size, or because the main body of
waste
is expected to yield a
particularly large amount of fine particles).[2]
(8)
The first layer of actual waste
href="#_ftn3" name="_ftnref3" title="">[3]
is then laid. This is the layer referred to in these appeals as the “base
fluff” layer. It commonly comprises ordinary domestic
waste,
deriving from
regular collections direct from householders. As recycling has improved, the
volumes of this
waste
(commonly called “black bag
waste”)
have declined and
operators have on occasion resorted to using other materials in its place. A
key consideration in laying this first layer is to reduce the risk of puncture
to the all-important liner. Where black bag
waste
is used, it is inspected as
it is in the process of being laid, to ensure it contains no large, hard, sharp
objects (though, by its nature, it is extremely unlikely to do so) or
significant amounts of mobile fine particles that might block the drainage
blanket; it is spread carefully across the whole base of the cell and “lightly”
compacted into a layer of between 1 and 2.5 metres deep – using a low ground
pressure bulldozer (in contrast to the later layers of
waste,
which are
compacted much more heavily by a specialised heavy machine). It is also placed
against the sides of the cell, in a ring around the main body of
waste,
and
compacted in the same way (in which location it is sometimes referred to as
“side fluff”). It is said that this “light” compaction improves its drainage
characteristics (allowing leachate to flow through to the drainage blanket
without perching), though there is less evidence to support this supposed
secondary purpose.
(9)
Once the first layer of waste
has been laid, the cell is ready to
receive more heterogenous
waste
of all types (though
waste
that is deemed
hazardous is generally disposed of in special facilities). This
waste
is
tipped and compacted in layers, using heavy compactor vehicles with toothed
wheels which are designed to break up and compress the
waste
as it is laid so
as to utilise the expensive void efficiently, maximise the stability of the
waste
body and make it as homogenous as possible. At the end of each day’s
operations, there is a regulatory requirement for “daily cover” (usually of
inert soil-like material) to be laid over the freshly deposited
waste.
href="#_ftn4" name="_ftnref4" title="">[4] As the level of
waste
rises, the wells for the extraction of leachate are set into it, so that
in due course the leachate which settles to the bottom of the cell can be
pumped away, treated and safely disposed of.
(10)
The sides of a cell are also engineered to minimise leakage, though less
elaborately than the base. There may not be a plastic membrane or geosynthetic
clay liner extending all the way up the side walls, compacted clay instead
providing the required degree of impermeability. Some protection is provided
for the side walls by the layer of lightly compacted black bag waste
referred
to above.
(11)
When the level of waste
in the cell is nearing its final required height
and profile (due allowance being made for settlement over time), consideration
is given to “capping” it in order to insulate the restored earth surface above
from contamination by the
waste
below, in order to minimise the flow of
rainwater into the main body of
waste
(which would increase the amount of
leachate generated by it which is then required to be drained away and treated)
and to impede the escape of landfill gas (which is often captured and used for
electricity generation).
(12)
Commonly between one and two metres of fully compacted black bag waste
href="#_ftn5" name="_ftnref5" title="">[5] are placed on top
of the final layer of general
waste
and smoothed flat, before a 300mm
“regulating layer” of “fines” is generally placed on top.
(13) This latter layer is sometimes called the “regulation layer”, though this does not refer to any particular legal regulation. It is generally required as a condition of the relevant permit. “Fines” consist of a soil-like material which acts to fill cavities and even out irregularities in the surface below and provide a smooth top surface to receive the next element in the capping system.
(14) This next element is often a further plastic membrane, though it can be a geosynthetic clay liner, or even a compacted layer of clay (if in plentiful local supply). Depending on the specific site and the other elements of the capping system, there may be other layers of protection above it, involving further geotextiles, geocomposites or fine soils.
(15)
Finally, the top surface is restored with subsoil (or subsoil-like
materials) and topsoil in accordance with the approvals relating to the site.
This will include some kind of drainage management
system for surface water.
Wells for extraction of leachate and landfill gas will be accessed from the
surface.
(16)
As time goes by, notwithstanding the heavy compaction that is applied to
the main body of waste
as it is deposited, the contents of each landfill cell
will settle, generally by 25% to 30%. Although the
waste
is laid and compacted
carefully, invariably the settlement that occurs is differential, so that some
parts of the cell settle more than others. This creates obvious strains on the
capping system, but can also result in large hard sharp objects effectively
starting to protrude as other
waste
around them sinks, and even rupture the
capping system altogether.
15.
Industry practice and expertise on the design, construction and
operation of landfill sites has developed over the years. The most significant
early document to which we were referred was the Department of the
Environment’s “Waste
Management
Paper No 26 – Landfilling
Wastes”,
published in
1986 (“WMP26”). This paper ran to 236 pages and drew together the legislative
framework and contemporaneous best practice into detailed guidance on the
design, construction and operation of landfill sites. It was widely regarded
in the industry as the “go to” document for authoritative advice on all the
areas it covered.
“During the early phase of operation, particular care must be taken to ensure that traffic does not damage the liner…. Particular care should be taken in placing the first lift of refuse, and build up of water and leachate should also be controlled…”
17. Paragraph 5.56 of WMP26 then went on to say this:
“No bulky items, even after crushing, should be present in
the first lift of refuse deposited in a site lined with a polymeric membrane due
to the risk of damaging the liner (see paragraph 4.64[6]). Similarly,
bulky items should not be present in the final lift of waste
in sites that are
to be capped with a low permeability material since settlement of the refuse
may result in large items piercing the cap. After-use of the land may also be
adversely affected.”
18. Finally, it said this about protection of the capping system in paragraph 6.26:
“To assist in maintaining its integrity a cap should be
protected on both its upper and lower surfaces. Accordingly, before a cap is
emplaced the surface of deposited waste
should be graded and any irregular
objects should be removed. In providing a firm base to allow compaction of the
cap and to minimise damage from below, a buffer layer should be installed.
Where a synthetic material is to be used for capping, a buffer layer at least
0.5m thick is usually required. Inert material, which does not react with the
waste
or the cap, may be used as a buffer provided that it is free from large
stones and lumps. At the same time it should not be so fine that it can
permeate into the
waste.
Coarse or a mixture of coarse and fine gravel may be
suitable.”
19.
As experience and expertise developed, it was felt appropriate to
update WMP26 and accordingly a revised version “Waste
Management
Paper 26B –
Landfill Design, Construction and Operational Practice” (“WMP26B”) was
developed in conjunction with the industry and released by the Department of
the Environment in 1995.
20. WMP26B included the following passages:
“7.47 Following the successful installation of the liner system there is a risk that damage will occur to the liner by a number of routes, such as
· accidental damage…
…
7.48 Accidental damage may
arise where bulky difficult waste,
for example, lighting columns or concrete
lumps, is tipped carelessly onto the drainage or protection layer, and is able
to puncture and damage a liner system, especially a flexible membrane…
…
7.52 The designer should consider all possible causes of damage for the proposed site, and in conjunction with the operator ensure that appropriate measures are taken to avoid them. Precautionary measures may include
·
CQA[7]
procedures for the initial waste
infilling to minimise the risk of damage
caused by
waste
…”
21.
So far as protection of the cell capping system from damage by
underlying waste
was concerned, WMP26B contained nothing specific, only a
general reference to the fact that “construction methods, materials
specifications, testing and CQA procedures are essentially the same as those
used for construction of the landfill liner (see Chapter 7).”
22.
Other material is available which shows how industry practice was
developing. In a Department of the Environment document entitled “The
Technical Aspects of Controlled Waste
Management
– Research Report”, issued in
June 1996, the importance of protection for the flexible membrane liner was
discussed, and (although the normal immediate cover for the membrane envisaged
in that report was “a granular material such as sand or silt” in a normal
minimum layer of 300mm, but with a trend of increasing thickness up to as much
as 2 metres) it was specifically stated that “in addition, large sharp objects
should be excluded from the first layer of
waste”.
23.
Also included in our document bundle was a set of “Landfill
Operational Guidelines” issued in 2010 by the International Solid Waste
Association Working Group on Landfill. The ISWA is an international trade
association for the
waste
industry. That document also emphasised the
importance of the first layer of
waste:
“…The first layer of waste
placed in a cell is crucial for
the landfill operation. This layer needs to be placed as a loose cushion
layer, sometimes referred to as a ‘fluff’ layer…
This loose first layer is essential in order to avoid damage
to the liner and leachate collection system as a result of equipment tracking,
or the waste
itself penetrating the liner components during initial cell
filling. Damage to the base liner system can very easily occur if initial cell
filling is not carefully
managed
and such damage can soon negate good design
and construction, and compromise the containment performance of a landfill.
…
The correct procedure for the construction of the first waste
layer is as follows:
· The access road to the working face must be constructed from the top of the cell to the bottom in a way that ensures that the landfill vehicles will traffic over soil ramps and not the bottom of the landfill cell.
· At the end of the access road a relatively wide temporary area must be constructed for manoeuvring of trucks.
·
The first trucks must dispose of the waste
at the end of the
access road or a temporary movement area formed on the landfill base.
·
Bulky or hard wastes
capable of puncturing the liner must be
removed.
·
Depending on the waste
type, the first
waste
should be deposited
at a vertical layer thickness of at least 50 cm (often up to 1m or more if
bagged street collection of
waste
is used), and this layer must not be compacted,
so it then constitutes a protection layer to the liner and leachate drainage
system.
The above procedure ceases when the whole area of the
landfill cell base is covered with waste
to a depth of at least 50 cm (1m
recommended), so that no landfill equipment can track in close proximity to the
liner or the base drainage system of the landfill.”
24. Part of the old licensing regime was a requirement to create a “Working Plan”, referred to in WMP26 as “the central document for planning and disposal licence applications and also the blueprint for eventual operation of the site”. This document was developed in consultation between the operator and the licensing authority, individually in relation to each site but based on common guidance and a library of standard clauses. Strict compliance with the agreed working plan was a condition of the relevant licence. Whilst the working plan could be changed (indeed, it was described as a “living document” which would need to be updated as circumstances changed), no change to it could be implemented until the licensing authority had consented.
25. The general guidance given in WMP26 and WMP26B was therefore fleshed out a great deal for individual sites, both in the site licence and in the underlying working plan.
“Where an HDPE liner is installed, the deposit of the first
layer (2.0 metres) of waste
above or against the liner protection layer shall
be subject to strict and continuous supervision by the licence holder. Prior
to any deposit of
wastes
an inspection procedure shall be submitted and agreed
in writing by the
Waste
Disposal Authority. The following minimum conditions
shall be included in the agreed procedure: -
(i) only domestic wastes
collected by or on behalf of a
Waste
Collection Authority or “soft” commercial
wastes
shall be deposited in
the first 2.0 metres. The source of these
wastes
shall be agreed in writing by
the
Waste
Disposal Authority.
(ii) The first layer of wastes
shall be subject to minimum
compaction.
(iii) Any solid objects with a single dimension greater than
300mm shall be removed from the layer and re-deposited above the first layer of
wastes
….”
27.
The working plan also contained relevant provisions. The March
2000 version contained the following provisions in Section 6 (entitled
“Engineering Design”) under the heading 6.3.3 “Inspection of the First Layer of
Waste”
(which repeated, with some alterations, similar provisions which had
been contained in procedures specifically approved by the local authority
shortly before deposit of
waste
commenced in July 2005):
“The first 2.0m layer of waste
will be only domestic or soft
commercial and the source of the
waste
will [sic] subject to written
approval by the EA. The EA will be notified prior to the placement of this
waste.
Any solid objects with a single dimension greater than 300mm
shall be removed from the initial layer and re-deposited above the first layer
of waste.
Where on inspection the
waste
intended for the first 2.0m is thought
to contain objects greater than 300mm, it will not be used in the first 2.0m
layer and will be deposited in the usual manner described in Section 7. The
soft
waste
will be spread using a tracked machine not a compactor to ensure it
is subject to minimum compaction.
A written and photographic record will be maintained to include:
· Location
· Vehicle types
· Vehicle registration numbers
·
Types of waste
and materials provided.
This record shall be made available to the EA on request.
A depth profile of the waste
will be used to demonstrate that
the thickness of low compacted material meets the required 2.0m thickness and
the whole process will be carried out on [sic] the presence of a
suitably qualified person.”
28.
In the same document, under heading 6.5 “Extent of Works for Cell
Engineering”, it was said that “[i]n summary those engineering works which will
take place prior to waste
infilling will be…. [there followed a description of
the various phases of cell construction, then]… “the deposit of the first 2m
layer of
waste
as soft
waste
under a QA regime”. We were referred to an
incomplete earlier document dated January 1995 and entitled “Construction
Quality Assurance Plan to be Implemented During the Installation of the
Landfill Liner to Sandy Lane Landfill” as setting out the relevant QA (quality
assurance) regime, in which the following section 6 appeared (after various
other sections which related very clearly to the actual construction of the
liner):
“6. FIRST LIFT OF WASTE
The placement of the first lift onto the base and sideslopes
shall be supervised. This waste
should consist of selected light office
industrial
waste
processed in REL[8]
waste
material [sic] and should be loosely tipped.
The Engineer, with the aid of landfill operators will ensure
that material will be removed from the first waste
lift which could push
through the protective cover and puncture the liner eg. bed posts, steel
reinforcing bars.
The Engineer could be an appointed Engineer or Cleanaways[9] civil engineer representative.”
29. The second appellant’s working plan for its Skelton Grange landfill site near Leeds dated January 1999 included the following:
(1) In section 2.360, headed “Installation, Maintenance and Protection of Final Capping” (after setting out details of the engineered cap, subsoil and topsoil):
“The final layer of wastes
will be free from bulky items or
other materials likely to give rise to damage to the capping layer.”
(2)
In section 4.520, headed “Waste
Discharge and Emplacement” (and, in
particular, under the heading “
Waste
Placement & Compaction”, which
described the operational methods to be used):
“The first layer of waste
placed over the engineered parts of
the site will not contain large or bulky items in order to ensure that upon
compaction the integrity of the basal liner and leachate collection system is
not jeopardised. Crude domestic, commercial
waste
or other similarly generally
homogeneous
waste
types free from bulky items will be used in the first lift
placed over engineered parts of the site.
Waste
containing large or bulky
items will not be placed within 2m of the top of the basal liner or within 2m
of the flanks of the site.”
30. The first appellant’s site licence as at 31 July 1998 in respect of its Deep Moor site near Torrington included the following requirements:
(1) In section 2, headed “Landfill Site Development and Operation”, under subheading 2.17 “Preparation details” (which included detailed provisions about the installation of the membrane liner and the placement of a “protective covering” of 300mm of sand or other suitable material[10]):
“Measures shall be taken to ensure that there is no damage to
the membrane at any time. This shall include the placement of ‘selected
wastes’
to a depth of 1.0 metre on top of the protective sand layer. Selected
wastes
shall consist of domestic
wastes
or ‘soft’ commercial
wastes,
the source
of which shall be agreed by the Authority prior to their deposit. The
emplacement of this
waste
shall be under the strict and continuous supervision
of the Resolution holder.”
(2) In section 4, headed “Landfill Restoration”, under subheading 4.1, “Restoration Contours and Final Cover Layer”:
“The final layer of waste
deposited shall, to a depth of at
least 1.0 metre, be kept free of materials likely to interfere with final restoration
or subsequent after use.”
31. In 2003-2006, a major exercise was undertaken in which all landfill sites with licences under the old regimes were required to obtain PPC Permits or cease operation. This required operators to make formal applications, which included answers to specific questions, including the following:
“Are waste
deposit and emplacement procedures in place for
the installation, which ensure the following?
The first layers of waste
in a
new cell are selected and inspected during placement to ensure that these do
not cause damage to the installed barriers and liners.
…
The final layers of waste
are
selected and inspected during placement to ensure that these do not cause
damage to the final capping…”
32. We were not referred to any application in which any of the appellants had answered “no” to these questions[11], and we infer they alway answered “yes”, unless there were special circumstances. The procedures themselves were then included in the documents supporting the application, and typically referred to some special procedures as, for example, in Appendix 1 to the PPC Permit application relating to second appellant’s landfill site at Eye, near Peterborough:
“The first layer of waste
placed over the engineered parts of
the site will not contain large or bulky items in order to ensure that upon
compaction the integrity of the basal liner and leachate collection system is
not jeopardised. The first 2m layer of
waste
placed over engineered parts of
the site will comprise household and commercial, or other similar generally
homogeneous
waste
types free from large or bulky items. The first 2m layer of
wastes
over the base and the first 2m laterally from the perimeter engineering
(excluding the cap), will not comprise any special or difficult
wastes.
33. In the “Site
Management
Systems” document dated September 2003 applicable to the
third/fourth appellant’s site at Candles near Telford, the following
requirements were laid down under the heading “
Waste
Deposit and Emplacement”:
“5.2.2 Selection, Inspection and Deposit of Initial Layer of
Waste
Only selected waste,
which excludes large, bulky or sharp
items will be used to form the initial lift of
waste
in each cell immediately
above the liner system.
…
The selected waste
will be subject to a minimal amount of
compaction and will be used to form a “buffer” layer approximately 2 metres in
depth.
…
Selection and placement of the first layer of waste
will be
carried out under the supervision of a suitably trained member of the
operational team, whose role will be to: -
·
Visually inspect all waste
to be used in the initial layer
immediately following discharge;
·
Identify any unsuitable materials, which may comprise large bulky
or sharp items and ensure that such items are segregated and not placed in the
initial waste
lift;
· Observe the compaction and spreading activities to ensure there is no damage to the lining system;
·
Advise the site manager
in the event of damage being observed;
and
·
Ensure that waste
deposit operations cease immediately in the
event of any damage occurring.
The site manager
or nominated deputy will be responsible for
recording the placement of the first layers of
waste
and ensuring that the work
is undertaken to the correct standard.
…
5.2.4 Prevention of Damage to Barriers, Liners, Leachate and
Landfill Gas Management
Systems
Action that will be taken during the deposit of waste
to
prevent damage to the basal barrier, lining system and leachate
management
system is described in Section 5.2.2.
The selected waste
that is placed on the base of the site
will be progressively extended up the sidewalls to protect the sidewall lining
system. The selection, inspection and placement of these materials will be
subject to the same procedures as outlined in Section 5.2.2.
In order to avoid inadvertent damage to leachate extraction
and monitoring wells, a layer of construction or other selected waste,
which
will act as a buffer against subsequent damage by mobile plant, will be placed
around the wells.
…
5.2.7 Selection and Inspection of Final Layer of Waste
In order to prevent damage to the final capping system, only
selected waste
which excludes large and bulky or sharp items will be used to
form the final lift of
waste
in each cell immediately below the final capping
layer.
…”
34.
The first appellant’s Working Plan dated January 2001 for its
Deep Moor site was attached to its application for a PPC Permit and accordingly
was formed the basis of the management
system it was required to operate at the
site under its PPC Permit. The Working Plan contained no reference to any
specific procedures for placement of first or final layers of
waste.
35.
We are satisfied from the evidence before us that all the
appellants, in line with what they understood to be standard industry practice,
followed reasonably strict procedures, over the periods concerning these
appeals, in laying the first layer of waste
in a newly engineered landfill cell
so as to minimise the risk of damage to the lining system from operations
subsequent to its installation.
36.
Whilst domestic waste
appears to have been the material of
choice, other materials have on occasion been used – either experimentally or
because of an insufficient supply of domestic
waste
(the volumes of which have
reduced sharply as recycling has improved). Mr Mehroke, for example, gave
evidence that the shortage of available domestic and municipal
waste
resulted
in the use of non-hazardous soils (sometimes combined with trommelled[12] non-hazardous
industrial
waste)
to form the last lift of
waste
before the regulating layer, and Mr MacPhail gave evidence that if there was
insufficient domestic
waste
available, certain types of non-hazardous
commercial and industrial
waste
could be (and had been) used.
37.
As the market evolves and less black bag waste
is available,
operators are exploring the possible use of other materials for the first lift
of
waste
as well. Whilst soils would generally be expected to “clog” the
drainage of leachate, Mr Mehroke mentioned that the use of “fines” (having
somewhat larger particle sizes) combined with a layer of synthetic material called
“Terram” immediately above the drainage blanket was being considered for some
future operations; and Mr McPhail mentioned that “MRF residue” (the residue
from their materials recycling facility comprising common household recycling
that could not in fact be recycled, such as crisp packets, certain types of
paper and cellophane packaging) had been tried at the fourth appellant’s Blue
Haze site. He also mentioned that at the same site, it was much more
difficult to source domestic
waste
due to a local authority policy of
incinerating
waste;
so when the incinerator was out of action and domestic
waste
was routed to Blue Haze, some was stockpiled and covered, ready for later
deposit as the first layer of
waste
in a new cell. A similar process was
followed at its Sandy Lane site.
38.
We are also satisfied that the appellants all took similar care
in laying waste
against the sides of landfill cells and at the top of the body
of landfilled
waste,
immediately below the regulating layer. For the purposes
of the final layer, however, there was clearly no risk of damaging the
underlying liner; the concerns were more with accommodating differential
settlement and ensuring a smooth and consistent base layer to accept the
regulating layer above, so there was no problem with the final layer being
fully compacted (though it appears the top surface of it would generally then
be smoothed using a tracked vehicle before the regulating layer was placed on
top).
39. For the purposes of this hearing, we were not being asked to adjudicate on the amounts of material deposited as fluff by any of the appellants in pursuance of their various practices; we were being asked to adjudicate in principle upon the liability or otherwise of such deposits to tax. Accordingly we are not required to make detailed findings of fact as to the specific procedures followed by each appellant in relation to each of the sites under consideration in this appeal, or as to the amounts of material so deposited.
40. As to the detail of the processes by which the fluff was actually deposited – and in particular as to precisely who disposed of it into the landfill cells, whether such disposal was made on behalf of some other person (including at the request of, or in pursuance of a contract with, another person), we were not asked to make any findings of fact; this is because no such findings were required by reason of the agreement reached between the parties, in relation to these proceedings alone, as recorded at [76] to [80] below.
41.
In view of the arguments which were strongly pursued by HMRC in
written submissions following the release of the judgment of the Court of
Appeal in Patersons of Greenoakhill Limited v HMRC[13], however,
we should explain that the evidence around the precise logistics of deposit of
the fluff layers was somewhat sketchy (as this was not thought at the time to
be relevant to the issues to be decided by the Tribunal). Mr McPhail’s
evidence (for the third and fourth appellants) was the clearest on this. At
the very start of tipping into a new cell, the vehicles delivering the waste
would deposit it adjacent to the cell and that material would be used by Veolia
operatives to create an area within the cell upon which a ramp or tipping
platform could be formed (inspecting the material as this was done, in order to
ensure no potentially harmful items were in it). After the cell bund had been
appropriately thickened, a running surface would be created out of soil and
crushed aggregate to allow vehicles to enter the cell and deposit their loads
there. The material would then be moved into position using a tracked
bulldozer or excavator, being checked for potentially harmful items whilst being
moved. We infer that in view of the absolute prohibition against vehicles
running directly over the drainage blanket, a similar practice was followed by
all the appellants.
42. Thus whatever the detailed arrangements for the deposit of the fluff layers, we are satisfied that they were first deposited (either adjacent to, or more commonly in, the cells) for inspection and were only finally emplaced in the cells by the appellants’ operatives after that inspection had taken place.
43.
It is also clear that the appellants intended that all the waste
(whether domestic or commercial) received at their landfill sites which was
suitable for use as fluff would be placed in the landfill cells. That which
was not used as fluff would simply be deposited as part of the main body of
waste.
The contracts with the respective customers did not differentiate
between material which was suitable for use as fluff and that which was not.
44. Mr Legge had made a reasonably lengthy witness statement which focused mainly on the regulatory background, the role of the Environment Agency and his understanding of typical design and operation considerations at a landfill site. Whilst Mr Grodzinski cross examined him at some length (and in particular wished to explore the history of contact between HMRC and the Environment Agency on matters relating to fluff), we found neither Mr Legge’s witness statement nor the outcome of the cross examination to be of any material assistance to us in the matters which fall to be decided by this Tribunal, however relevant they might be to other proceedings involving these appellants.
45. The legislative provision at the heart of these appeals is subsection 40(2) Finance Act 1996 (“FA96”), which defines what is a “taxable disposal” for the purposes of landfill tax as follows:
“A disposal is a taxable disposal if –
(a) it is a disposal of material
as waste,
(b) it is made by way of landfill,
(c) it is made at a landfill site, and
(d) it is made on or after 1st October 1996.”
46. Section 64 goes on to provide some assistance in interpreting subsection 40(2)(a) (one of the pivotal subsections in these appeals) as follows:
“64 Disposal of material as waste
(1) A disposal of material is a disposal of it as
waste
if the person making the disposal does so with the intention of
discarding the material.
(2) The fact that the person making the disposal or any other person could benefit from or make use of the material is irrelevant.
(3) Where a person makes a disposal on behalf of another person, for the purposes of subsections (1) and (2) above the person on whose behalf the disposal is made shall be treated as making the disposal.
(4) The references in subsection (3) above to a disposal on behalf of another person includes reference to a disposal –
(a) at the request of another person;
(b) in pursuance of a contract with another person.”
47. Section 65 carries out a similar function in relation to subsection 40(2)(b):
“65 Disposal by way of landfill
(1) There is a disposal of material by way of landfill if –
(a) it is deposited on the surface of land or on a structure set into the surface, or
(b) it is deposited under the surface of land.
(2) Subsection (1) above applies whether or not the material is placed in a container before it is deposited.
(3) Subsection (1)(b) above applies whether the material –
(a) is covered with earth after it is deposited, or
(b) is deposited in a cavity (such as a cavern or mine).
(4) If material is deposited on the surface of land (or on a structure set into the surface) with a view to it being covered with earth the disposal must be treated as made when the material is deposited and not when it is covered.
…
(8) In this section “earth” includes similar matter (such as sand or rocks).
48. In addition, section 65A FA96 (which came into force on 21 July 2009), provides as follows:
“65A – Prescribed landfill site activities to be treated as disposals
(1) An order may prescribe a landfill site activity for the purposes of this section.
(2) If a prescribed landfill site activity is carried out at a landfill site, the activity is to be treated –
(a) as a disposal at the landfill site of the material involved in the activity,
(b) as a disposal of that
material as waste,
and
(c) as a disposal of that material made by way of landfill.
…
(9) In this section –
…
‘landfill site activity’ means any of the following descriptions of activity, or an activity that falls within any of the following descriptions –
(a) using or otherwise dealing with material at a landfill site;
(b) storing or otherwise having material at a landfill site.”
49. Pursuant to s 65A, the Landfill Tax (Prescribed Landfill Site Activities) Order 2009 (“the 2009 Order”) was made, coming into effect on 1 September 2009. Paragraph 3(1) of that Order designated as a “prescribed landfill site activity” for the purposes of s 65A, amongst other things:
“(a) the use of material to cover the disposal area during a short term cessation in landfill disposal activity;
…
(g) the use of material placed against the drainage layer or liner of the disposal area to prevent damage to that layer or liner;”
50. It is agreed that if the various deposits the subject of these appeals are “taxable disposals” within the meaning of that phrase in subsection 40(2) FA96, then the appeals must be dismissed. It is also agreed that the deposits all fall within subsections 40(2)(c) and (d) and therefore the only dispute between the parties is whether those deposits fall within subsection 40(2)(a) and (b) (interpreted by reference to sections 64 and 65 respectively).
51. The main questions for determination by the Tribunal are therefore:
(1)
Was the placement of fluff a “disposal of material as waste”?
(2) Was the placement of fluff “made by way of landfill”?
52. If the Tribunal found in favour of the appellants on either of these two questions (such that the deposits in question did not, in terms of the primary legislation, amount to “taxable disposals”), then the further issue arose as to whether Regulation 3(1)(g) of the 2009 Order took effect so as to bring the “top fluff” layer into charge to tax from 1 September 2009 (it being accepted that it did bring the base and side fluff layers into charge from that date).
53. The appellants submitted separate skeleton arguments. The first appellant’s skeleton ran to 29 pages, the second appellant’s to 27 pages (in terms which followed closely the first appellant’s skeleton) and the third & fourth appellants’ skeleton ran to 23 pages.[14] HMRC’s skeleton argument ran to 52 pages. It is therefore not possible to give a full exposition of all the detailed arguments employed on both sides, but the key arguments are summarised as follows.
54. The appellants argued, in outline, as follows:
(1)
There is clear and binding authority that there is no disposal of
material “as waste”
if it is “used” (see
Waste
Recycling Group Limited v
HMRC [2008] EWCA Civ 849, [2009] STC 200).
(2)
The material comprising the fluff layers was “used” and therefore was
not disposed of “as waste”.
The condition in section 40(2)(a) was therefore
not satisfied. This was because the material formed an integral part of the
landfill containment and barrier system, and was specifically selected and
inspected, and its placement supervised, for that purpose. The fluff was
indistinguishable, from a legal point of view, from the daily cover in respect
of which the Court of Appeal in WRG had found there to have been no
disposal “as
waste”.
(3) As the fluff was deposited for a useful purpose (again, equivalent to the material used for road construction and daily cover in WRG), it was not “disposed of by way of landfill”. The condition in section 40(2)(b) was therefore not satisfied either.
55. As to the effect of the 2009 Order, the appellants argued that since the “top fluff” layer was not “placed against the liner” (being separated from it by the regulating layer, and having been put in place before either that layer or the capping liner), the wording of the 2009 Order simply did not encompass it.
56.
Essentially, Ms Hall argued that the appellants’ deposits of fluff
amounted to “nothing more than the careful management
of material…deploying
waste
deposit and emplacement procedures which are appropriate for black bag
domestic
waste
being deposited and emplaced at that stage of the landfilling
process. Those procedures minimise the risk of damaging the containment
system, which in turn minimises the risk of harming human health and the
environment. In that regard, the procedures are materially indistinguishable
from those that apply to all landfilled
waste.”
During the hearing, Ms Hall expressed
the argument very concisely when she said:
“The mere fact that you can
deposit and emplace waste
in a manner which serves a useful function does not
lead to the conclusion that you do not intend to abandon it.”
57. In response to the three main limbs of the appellants’ arguments Ms Hall, in outline, argued that:
(1) by asking whether the fluff had been “used”, the appellants were posing the wrong question. Effectively they were imposing an unwarranted gloss on the statutory phrase “disposal… with the intention of discarding the material”.
(2) in any event, the fluff had not been “used” in any relevant sense, nor did the “use” which the appellants sought to rely on negate their intention to discard the material. Rather than simply focusing on the question of “use”, the Chancellor in WRG had specifically used the phrase “retention and use”, which clearly had some wider meaning than simply “used”.
(3)
viewed in the wider context of the EU and UK waste
legislation, the
deposits of fluff in this case were clearly “made by way of landfill” and “as
waste”.
58. There was at one stage the possibility of HMRC seeking to argue that the Tribunal should consider the “intention” of local authorities and other suppliers of fluff, but this line of argument was dropped (see [76] to [80] below).
59. As to the argument on the 2009 Order, Ms Hall’s response was that paragraph 3(g) was concerned with the function of the relevant material, namely protection of the liner; the word “against” must therefore be construed with that purpose in mind; that whilst the fluff might not be immediately adjacent to the liner, its purpose was clearly to protect the liner in the same way as an overcoat might protect the skin from cold, even though not directly adjacent to it; and in any event the liner and the regulating layer should be seen for these purposes as a single entity, which the top fluff was intended to protect.
60.
There are two main questions to be decided in this case. The
first is whether, in the circumstances described above, the fluff was disposed
of “as waste”,
in particular whether the disposal was made “with the intention
of discarding” it. The second is whether the disposals were “by way of
landfill”.
61. The Chancellor in WRG at [29] gave a strong reminder that each case must be determined on the basis of its own facts by reference to the legislation, and not by seeking to apply past judgements to the facts of the current case:
“Whether or not there is a liability to landfill tax in
respect of the materials to which this appeal relates depends on the proper
interpretation and application of the provisions of Part III of the 1996 Act.
We are bound by the decision of this court in Customs and Excise Comrs v
Parkwood Landfill Ltd
href="#_ftn15" name="_ftnref15" title="">[15]
in respect of the aspects of interpretation with which it dealt. But we are
not concerned with the applicability to the facts of this case of the judgement
of this court in the Parkwood case or of Moses J in Customs and
Excise Comrs v Darfish
Ltd.
in my view the decisions of both the tribunal
and Barling J are open to the criticism that too much time was taken up with
the application of those judgements to the 11 categories which I have mentioned
and not enough to the application of the legislation to the facts of this
case.”
62. That said, the above passage also highlights that we must derive such general guidance as is possible from the earlier cases in seeking to interpret the words of the legislation in applying them to the present case.
63. It is clear (see the Court of Appeal in Parkwood at [22], confirmed by the Court of Appeal in WRG at [30] and noted by the Court of Appeal in Patersons of Greenoakhill v HMRC[16] at [17] and [19]) that all four conditions for liability specified in subsection 40(2) FA 96 must be satisfied at the same time and that that time must be when the last of them is satisfied, which is likely to be the moment when the material is actually disposed of. None of the parties disagreed with this as a general proposition, or argued that we should apply the statutory test at any time other than the moment of deposit of the fluff in the landfill cells. There was no material argument before us about whether that moment would be the moment of initial unloading of the material (typically from the vehicle delivering it into the cell) or the moment when the material was manoeuvred into its final position by the appellants’ operatives. We consider the latter to be the relevant moment, on the basis that the earlier physical deposit was clearly intended not as the final emplacement of the material but only as a step towards such final emplacement.
64. One preliminary point of interpretation is the extent to which we should have regard to the apparent policy behind the legislation or the various EU law provisions to which we were directed when applying this piece of UK legislation to the facts of these appeals.
65. In Parkwood, the Court of Appeal set out its view of the policy underlying the legislation:
“[9] landfill tax was introduced as from 1 October 1996 by
the Finance Act 1996. The tax is a creature of domestic statute in that it is
not a tax required under any provisions of Community law. However the United Kingdom
does have obligations in Community law to take appropriate steps to encourage
the prevention, recycling and processing of waste
under EC Council Directive
75/442 of 15 July 1975 on
waste
(OJ L194 25.07.75 p 39). The Environmental
Protection Act 1990 is the key piece of domestic legislation enacted to meet
this obligation. Landfill tax can therefore be seen as a separate domestic
initiative aimed at protecting the environment and securing the ambitions of
the directive.
[10] A government White Paper of December 1995 entitled
Making Waste
Work (CM3040) preceded the imposition of landfill tax. It
examined the strategies to be adopted to reduce the environmental impact of
waste
disposal. So far as landfill was concerned, three main objectives were
set out. First, to reduce the amount of
waste,
second to reduce the amount of
material going to landfill and third to place the cost of landfill on the
person disposing of the
waste.
In that way
waste
producers would become aware
of the cost of their activities. The central purpose of the landfill tax was
stated (at para 1.68) to be –
‘… to ensure that landfill costs reflect
environmental impact thereby encouraging business and consumers, in a cost
effective and non-regulatory manner, to produce less waste;
to recover value
from more of the
waste
that is produced; and to dispose of less
waste
in
landfill sites.’”
66.
In Patersons, the Upper Tribunal[17] said that the
policy was of little weight in the interpretation of legislation. Arden LJ in
the Court of Appeal agreed “in principle”, but also said that as the ‘central
purpose’ described above included the production of less waste,
it was “open to
the UT to hold that activities which encourage the supply of
waste
to the LSO [i.e.
landfill site operator] did not further the purpose of the legislation, and
to say that remained so even if by-products from the deposited material were
later recycled.”
67.
Ms Hall argued that if the appellants succeeded in their appeal,
the effect would be to encourage the landfilling of domestic waste,
making it
commercially attractive not to divert
waste
from landfill. This, she
submitted, was clearly contrary to the stated policy. The appellants on the
other hand argued that some kind of protection layer was required for the cell
liner and it was preferable, in line with the stated policy, to “recruit”
material that was already on its way to landfill to fulfil that function,
rather than to use virgin material, thereby increasing the overall amount of
material going to landfill.
68. To us, these arguments illustrate graphically the extremely limited usefulness of applying “policy” in attempting to interpret this legislation in the present context. We therefore give it little or no weight in our consideration. We note, however, that the appellants’ argument on the matter proceeded on the premise that the material in question was destined for landfill in any event.
69. So far as EU law is concerned, Ms Hall sought to persuade us that there were three core reasons why we should consider EU law in interpreting the UK legislation:
(1)
One of the policy aims of landfill tax is to achieve EU law targets in
the reduction of waste
sent to landfill.
(2) EU law imposes a general obligation to interpret national law as a whole to achieve the aims of EU law, such as the Landfill Directive.
(3)
Where domestic law incorporates concepts of EU law, regard must be had
to the EU law interpretation of those concepts “to ensure a uniform
interpretation of domestic and EU legal instruments”. In the present case,
“waste”,
“disposal by way of landfill” and “at a landfill site” were all
concepts derived from the EU
Waste
Framework and Landfill directives.
70. The appellants argued that even if Ms Hall were right, it would not advance HMRC’s case; and in any event she was wrong. They observed that the Court of Appeal in Patersons had stated at the outset that they did not wish to hear any EU law submissions, and none were made. Whilst we simply do not know whether this was the case, none of the judgements of the Court of Appeal contain any reference to it. Nor did it feature materially in any of the earlier decisions.
71. Whether or not landfill tax is a response to the U.K.’s obligations under the EU directives mentioned above, it is clear that they do not require the imposition of a landfill tax (indeed HMRC did not dispute the appellants’ assertion that 11 EU member states have no such tax), still less can they be regarded as having anything meaningful to say about the interpretation of what is an entirely domestic tax. Ms Hall referred us to Pontina Ambiente SRL v Regione Lazio [2010] 3 CMLR 1, in which the CJEU found that if a member state chose to introduce a landfill levy (as Italy had in that case), the levy had to comply with the requirements of Article 10 of the Landfill Directive 1999/31, which included the following text:
“Member States shall take measures to ensure that all of the
costs involved in the setting up and operation of a landfill site, including as
far as possible the cost of the financial security or its equivalent referred
to in Article 8(a)(iv), and the estimated costs of the closure and after-care
of the site for a period of at least 30 years shall be covered by the price to
be charged by the operator for the disposal of any type of waste
in that site.”
72.
In that case, the Italian landfill site operator was obliged to
account to the regional authority for a landfill levy on waste
disposed of at
its sites. Its customers, local councils, were obliged to pay the operator for
disposing of their
waste,
including the cost of the levy. There were many
problems with late payment (and possibly even non-payment) of fees by the
councils, as a result of which the operator was unable to pay the levy on time
and was accordingly penalised. It appealed against the enforcement of the levy
and the penalties, and its appeal became the subject of a reference to the
CJEU, to resolve the question of whether the Italian legislation requiring
payment of the levy and penalties for late payment, irrespective of the failure
of the councils to pay the operator, was incompatible with the above provision.
73. The CJEU held that it could be (the actual decision being one for the national court):
“In the light of the foregoing, the answer to the first
question must be that Article 10 of Directive 1999/31 must be interpreted as
meaning that it does not preclude a national provision, such as that at issue
in the main proceedings, which makes the operator of a landfill site subject to
a levy to be reimbursed by the local authority depositing the waste
and which
provides for financial penalties to be imposed on that operator for late
payment of the levy, on condition that those rules are accompanied by measures
to ensure that the levy is actually reimbursed within a short time and that all
the costs of recovery, and in particular, the costs resulting from late payment
of amounts which that authority owes to the site operator on that account,
including costs incurred in order to avoid any financial penalty which might be
imposed on the site operator, are passed on in the price to be paid by the authority
to that operator. It is for the national court to ascertain whether those
conditions have been satisfied.”
74.
In other words, the CJEU found that the imposition of a landfill
levy was an acceptable way of achieving (wholly or partly) compliance with
Article 10, but as that levy was part of the costs of the operator, it would
only be permissible if its terms were such that the cost of paying the levy and
any associated penalties fell on the local authorities (as the entities
actually responsible for sending the waste
to landfill and meeting the full
costs of landfilling under the “polluter pays” principle).
75.
We do not consider this decision advances Ms Hall’s argument in
any way, and we find nothing of any relevance to the dispute before us in the
various EU law provisions or cases to which she referred us. It may well be
the case that FA 96 borrows the language of waste
management
used in the EU
provisions, but we do not see how that logically leads on to the argument that FA
96 should be interpreted so as to bring fluff within the scope of landfill tax
for the purposes of these appeals.
Whose “intention” is relevant for the purposes of sub-s 64(1) FA 96?
76. As is provided in
sub-s 64(1) FA 96, a “disposal of material is a disposal of it as waste
if the
person making the disposal does so with the intention of discarding the
material”. The first obvious point arising from this provision is that it is
the intention of “the person making the disposal” which determines whether the
material is disposed of “as
waste”.
There is a slight gloss on this (see sub-s
64(3) FA 96) where someone makes a disposal “on behalf of another person”
(including “at the request of another person” or “in pursuance of a contract
with another person” – see sub-s 64(4) FA 96).
77. In the present case, HMRC’s skeleton argument, delivered shortly before the hearing, explicitly raised for the first time an argument which had not previously been canvassed. They referred to the detailed practical arrangements for placing the fluff in the cells and sought, for the first time, to advance an argument that it was the intention of the local authorities who delivered the material to the landfill sites that was the relevant intention for the purposes of sub-s 64(1) FA 96.
78. Previously unaware that HMRC wished to advance this argument, the appellants had made no preparations to meet it, either by argument or by gathering of detailed evidence relevant to the point.
79. There was some disagreement as to where responsibility lay for this point arising so late in the day. Ultimately, faced with the risk of derailing the whole hearing, HMRC withdrew this point on the basis of the following undertaking:
“HMRC undertake that they will not, in these appeals, raise any argument to the effect that the relevant intention for the purposes of Finance Act 1996, section 64, was that of any person other than the Appellants. In particular, HMRC will not raise any argument to the effect that Local Authorities or other customers were the persons making the disposals for the purposes of section 64. This undertaking applies to all stages of these appeals, including any appeals to the Upper Tribunal, Court of Appeal or Supreme Court.”
What was the intention of the appellants when the fluff was deposited?
81. So when the fluff was deposited, did the appellants have the intention of discarding it?
82. Parkwood does not really assist us in answering that question, because in that case HMRC did not dispute Parkwood’s claim that it did not intend to discard the relevant material (see [13] – [14]), where Aldous LJ said this:
“…they [i.e. Parkwood] submitted that the condition in
subsection (2)(a) of section 40 was not satisfied as the disposal was not “as
waste”.
As the definition of
waste
in section 64(1) makes clear, material used
for roads and the like is not
waste
as the person making the disposal,
Parkwood, did not intend to discard the material.
[14] The Commissioners accept the submission of Parkwood in so far as it goes, but they submitted that Parkwood’s submission concentrated upon the wrong disposal. Upon the facts as found, the city council disposed of the material.”
83.
In Parkwood, the appellant company operated the landfill
site and its subsidiary company, Parkwood Recycling Limited (“Recycling”),
carried on the business of recycling waste.
The material in question in that
case was mainly derived from
waste
from highway works carried out by the local
authority, though some other
waste
was mixed in with it. The VAT & Duties
Tribunal[18]
(at [22]) described the process applied to the material as follows:
“For present purposes, the materials deposited at the
recycling plant are first divided into waste
and recyclable material. Those in
the latter category are recycled into aggregates and fines. Aggregates are
concrete and other materials sorted, crushed and mixed so as to form mixed
aggregate in pieces of 70 mm, or less, in diameter. Fines are a soil like
material produced by sorting and mixing suitable materials to form a product
which has the appearance and many of the characteristics of soil, including the
ability to support the growth of plants, and consists of pieces of material of
12 mm, or less, in diameter. (That diameter has now been increased to 25 mm or
less).”
84. The tribunal went on to give more detail of the materials involved and what happened to them. The material received from the local authority was “loads consisting entirely, or almost entirely, of concrete, brick, tarmac and soil.” When received by Recycling:
“…it is first sorted by hand to ensure that true waste
materials such as plastic, wood and paper are removed from it. They are
dispatched to landfill. Brick and tarmac are also removed by hand as they too
are unsuitable for recycling purposes. (Crushed brick is however suitable as a
base for informal footpaths, and crushed tarmac (planings) is predominantly used
for under surfaces of footpaths. Consequently, there is a market for both
materials of which Recycling takes advantage). The remaining material is then
subjected to primary screening over the first screening station. That which is
too big to pass through the screen is passed through the primary crusher, and
is then fit for use as a coarse road sub-base. The material which has passed
through the screen is separated into aggregates and fines…”
85. These aggregates and fines were then passed on to Parkwood and used by it for landscaping (the tribunal referred specifically to “intermediate blinding” and “final site restoration work”) and road making.
86. Parkwood was mainly concerned with whether the person making the relevant disposal of material was Parkwood or the city council, and whether the presumed intention of the city council to discard the material at an earlier point in time could satisfy condition (a) in sub-s 40(2) FA 96 whilst leaving conditions (b), (c) and (d) to be satisfied when the material was later deposited at Parkwood’s landfill site. In holding that all four conditions had to be satisfied at the same time in relation to the same disposal, the Court of Appeal held (at [31]) that:
“The tribunal were correct to concentrate upon the disposal
at Parkwood’s landfill site because it was that disposal which was made by way
of landfill. They rightly held that that was not a disposal as waste.
class=MsoFootnoteReference> [19]”
87.
So, having identified that the relevant disposal was made when
the material was actually deposited by Parkwood, it was Parkwood’s intention
that was determinative. HMRC had not disputed Parkwood’s assertion that
“material used for roads and the like is not waste
as the person making the
disposal, Parkwood, did not intend to discard the material”; but even if they
had, the above passage shows that the Court was clearly of the same view. So
the Court of Appeal must have agreed that use for “road making and landscaping
purposes” by Parkwood showed it had no “intention of discarding” the material
in question.
88.
The other conclusion that can clearly be drawn from Parkwood
is that there is no rule that once material has been discarded as waste
by
somebody, it remains “
waste”
for the purposes of any subsequent disposals (this
was described by Mr Cordara before us as “the once
waste,
always
waste
heresy”,
echoing the comment of the Chancellor in WRG referred to at [92] below). As Aldous LJ said (at [27]):
“The commissioners also submitted that there was nothing in
the statute which suggested that material which had been discarded as waste
ceased to be
waste
because it had been successfully recycled. That submission
is contrary to common sense. Take material which is thrown away. That is
waste.
Melt it down and mould it into a spare part for a machine and it is not
waste.
There need be no change in chemical substance to convert
waste
into a
useful product. It is the act of recycling which is important.”
89.
This was summed up by the statement (at [28]) that “The purpose
of the legislation was to tax waste
material deposited at landfill sites and
not to tax deposits at landfill sites of useful material produced from
waste
material”,
which was in turn reinforced by the decision of the Court of Appeal in WRG
(see below).
90. Matters moved on a little in WRG, to which we now turn.
91.
That case was concerned with the taxability of inert waste
used
by WRG either to provide daily cover for the active
waste
deposited in its
landfill cells (as required by the terms of its licence) or in the construction
of roads on its landfill sites[20].
The material in question was all sourced by WRG through its own
waste
transfer
stations (to which local authorities and businesses brought their
waste)
and
civic amenity sites which it operated under agreements with local authorities
(to which members of the public brought their
waste).
The VAT and Duties
Tribunal found that some of the material used for site engineering and daily
cover was “accepted by WRG mixed with other inert material, and WRG itself
extracts the material suitable for the purposes identified, while putting the
remainder into the site as taxable landfill”. In other words, WRG had, by a
process of separation, created material that was useful to it out of
waste.
“[33] In those circumstances, in my view, it is clear that, assuming there to have been a disposal at all, the disposal relevant for the purposes of s 40(2)(a) was made by WRG on its own behalf. So the question posed by s 64(1) is whether WRG then intended to discard the materials. The word ‘discard’ appears to me to be used in its ordinary meaning of ‘cast aside’, ‘reject’ or ‘abandon’ and does not comprehend the retention and use of the material for the purposes of the owner of it. I agree with counsel for WRG that s 64(2) does not apply in such circumstances because there is, at the relevant time, either no disposal or no disposal with the intention of discarding the material.
[34] It follows from this conclusion that the relevant
intention may well not be that of the original producer of the materials. There
is no principle that material once labelled as ‘waste’
is always ‘
waste’
just
because the original producer of it threw it away. That is not the relevant
time at which the satisfaction of the condition imposed by s 40(2) is to be
considered. Recycling may indicate a change in the relevant intention but it
is not an essential prerequisite; re-use by the owner of the material for the
time being may do likewise.”
93. The precise wording of paragraph [33] of the Chancellor’s decision, in particular his comments about the meaning of the word “discard” and his related comments about “retention and use” was the subject of extensive debate before us, indeed in many ways the appeals revolved largely around that paragraph.
94. In summary, the appellants sought to persuade us that “use” was the antonym of “discard” (largely on the basis of that paragraph); that the evidence showed the appellants quite clearly “used” the fluff for the purpose of protecting the cell liner and cap (indeed, Ms Hall conceded as much); and that accordingly such “use” necessarily negated any suggestion that the appellants had “the intention of discarding” the fluff. They pointed to the fact that the daily cover in WRG, which ended up in the cell, was held not to have been put there with the intention of discarding it.
95.
Ms Hall sought to persuade us that when considered in context,
the Chancellor’s decision in WRG was not intended to lay down any
general test of “use” as the means by which to assess whether there was an
“intention to discard”; he had in any event referred to “retention and use”,
rather than “use” alone; the fluff was not “used” in any relevant sense (being
itself part of the biodegradable waste
that the cells were intended to
contain); and in any event the purported “use” that the appellants sought to
rely on did not negate the otherwise clear intention to discard. In effect,
the “use” argued for by the appellants was no more than the careful
management
and emplacement of
waste
material.
“One [licence] condition which, I understood, applies in every case is that the operator must keep sufficient stocks of inert material or suitable substitutes for use as daily cover…”
Thus it must
clearly have been in the Chancellor’s mind that material intended for use as
daily cover would generally be stockpiled (though of course there might be
occasions when incoming waste
would be used as daily cover without first being
stockpiled).
97.
In the nature of site engineering, particularly the construction
of roads, this is likely to be an activity involving times of great activity
(e.g. the construction of a new cell or laying of new haul roads) and times of
little or no activity. Thus it is to be expected that materials to be used for
such purposes, if sourced out of incoming waste
streams, are also likely to be
stockpiled pending later use.
98. So whether considering site engineering or daily cover, he clearly contemplated the relevant material generally being in some way held back or set aside before it was actually used (or re-used) for its intended purpose. In that context, the significance of his comment (at [33]) that
“the word ‘discard’ appears to me to be used in its ordinary meaning of ‘cast aside’, ‘reject’ or ‘abandon’ and does not comprehend the retention and use of the material for the purposes of the owner of it”
becomes clearer. It does not in our view establish (or even support) the proposition, as the appellants argue, that “use” is the antonym of “discard”; it merely emphasises that “retention and use” of material in the manner under consideration in WRG does not amount to “discarding” such material.
99. Further light is cast on the Chancellor’s thinking by the fact that he was quite clearly in doubt as to whether WRG’s actions amounted to a “disposal” at all, let alone a disposal with the intention of discarding (as he explicitly phrased his reason for disregarding s 64(2) as being “because there is, at the relevant time, either no disposal or no disposal with the intention of discarding the material.” [Emphasis added])
100. We note that in Patersons (considered further below), Rose J in the Upper Tribunal said this at [42]:
“I do not read the Court of Appeal’s decision in WRG
as requiring that some act of ‘retention’ or separation out of a part from the
rest of the whole must be identified before an operator can be said not to be
discarding the waste
for the purposes of s 64.”
101.
Mr Grodzinski in particular urged us to regard this passage as
making it clear that no separate “act of retention” was required in order to
demonstrate an intention not to discard the relevant material. At this point
in her decision, Rose J was considering whether the fact that the biomass was
not segregated in any way from the inert waste
should be seen as implying that
the biomass was simply “discarded” as part of the whole load of mixed
waste.
HMRC had sought to argue that because the biomass had not been so segregated,
it had clearly not been “retained and used” (as referred to by the Chancellor
in WRG) and therefore must have been disposed of as
waste.
All that
Rose J was saying in the above passage was that she did not consider the Court
of Appeal to have laid down a specific requirement in WRG that some identifiable
act of retention or separation was required before part of a larger body of
waste
could be regarded as “used” rather than “discarded”. Nonetheless, she
went on to say that she regarded the lack of segregation or retention as “an
indicator” (but no more) that there was no intention to use the relevant part of
the overall material, only to discard it.
102. The above discussion brings into sharp focus the Chancellor’s warning (at [29]) that the task before us is to consider “the application of the legislation to the facts of this case”.
103. We now turn to consider Patersons in more detail. At the time of the hearing, the Court of Appeal decision in that case was awaited. After it was issued, we took written submissions from the parties on its significance to this appeal.
104.
It will be recalled that the context in Patersons was
different again. The appeal was concerned with the applicability of landfill
tax to some proportion of biodegradable waste
that was disposed of by way of
landfill. The argument was that because the taxpayer intended to use the
landfill gas generated by the
waste
it had deposited in producing electricity,
“at least one of the criteria under section 40(2) Finance Act 1996 is not
fulfilled and no tax is due.”[21]
105. The Upper Tribunal (Rose J) in Patersons held at [45] as follows:
“In my judgement, the concept of intending to use something, as the antithesis of intending to cast it aside or abandon it, involves some action to harness the properties of an item and direct them towards a purpose of the user.”
The appellants, of course, seize on this passage and point to the particular properties of fluff, and their supposed harnessing of those properties in order to protect the liner from damage.
106. Rose J then went on to say that the biomass had not been “used”,
“because all that happens is that the biomass decomposes in the normal course and generates the gas…. I therefore hold that the biomass is not ‘used’ to make methane because the methane production is an inevitable consequence of tipping biomass into the landfill site and will occur whether the methane is collected or not and whether it is flared or not.”
107. The Court of Appeal saw things somewhat differently. So far as Arden LJ was concerned (at [51]), the appeal fell to be decided “on the meaning of ‘material’… rather than on the basis of ‘use’…”. By this, she meant that the “material” which had been disposed of was the biomass, and Patersons could not be said to have any intention to use that material; its intention was to use “all that that may become” (at [43]). The “material” referred to in the legislation was the material which was deposited, and Patersons had no intention to use that material, only the gas that was ultimately derived from it. To summarise (as Black LJ put it at [69]), “the material was the biomass and the biomass, as such, was discarded”.
108. As she considered the appeal should be decided on this basis, Arden LJ did not need to address arguments about “use”.
109. King LJ agreed with Arden LJ, but also said this:
“In so agreeing I would not however wish it to be thought that I do not recognise that a consideration of ‘use’ may in some circumstances be a valuable point in determining whether, per s 64(1), a disposal has been made ‘with the intention of discarding it’. WRG is an example of the importance of this.”
110. Black LJ was less certain than Arden LJ that “use” could be disregarded. Mr Cordara had offered an example of a seed, which was not in his submission discarded when it was placed in the ground, but used in order to derive benefit later when it grows. In effect, the seed was being “used” to produce a later harvest. Black LJ said this (at [72]):
“Although the question is certainly not without difficulty, I would, on balance, conclude that Patersons cannot be said to use the material, the biomass, by virtue of harvesting methane produced in the course of its decomposition. As I see it, Patersons was intending to get rid of the material by way of landfill and the methane came naturally, and inevitably, as a later by-product of that activity. To revert to the seed example, they were not planting the seed but dumping it.”
111. The appellants submitted that the Court of Appeal’s “key reasoning” was of no application in the present appeals. In their submission, however, it was noteworthy that the decision contained no consideration of EU law (indeed it repeated the earlier statement in Parkwood that landfill tax is a domestic tax that is not a tax required under EU law), and that there was no indication of “retention” being a relevant consideration alongside “use”.
112. Ms Hall for HMRC submitted, most significantly, that the Court of Appeal’s emphasis on the nature of the material in question at the moment of its disposal was highly relevant, as in the present appeals the fluff only acquired its crucial characteristics (its suitability for protecting the liner, etc) as a result of its inspection and the consequent removal of any large, heavy and sharp objects after it had been deposited (whether directly into the cell or adjacent to it) but before its final emplacement. Thus at the moment of deposit, it was only of potential use as fluff, and was rendered properly suitable for that use only by means of the further process which it underwent after its initial deposit. In that sense, it was similar to the undifferentiated biomass in Patersons, which was not the material which the taxpayer intended ultimately to use.
113.
We consider that the ratio of the Court of Appeal’s
decision in Patersons is only of marginal relevance to the present
appeals. In focusing on the difference between the “material” that was
deposited and the “material” that was intended to be used, they were comparing
two very different things: the bulk of the biomass at the moment of deposit
when it had not started to decompose to any material extent; and the landfill
gas that would eventually emanate from the biomass as a result of prolonged
chemical reactions. At its highest, Ms Hall would ask us to draw a similar
contrast between two almost identical things: the black bag waste
as first
deposited and the same
waste
a few moments later after any offending items had
been removed following inspection (and, where relevant, after it had been
manoeuvred into place and compacted). We decline to do so. We consider there
was insufficient change to the “material” by reason of that process to
transform the material initially deposited into some entirely different
material in the same way as happened in Patersons. Furthermore, as we
have said at [63] above, if the moment of initial deposit (for inspection) is
to be differentiated in this way from the moment of ultimate emplacement (after
inspection), the initial deposit could not in our view be regarded as a
“disposal by way of landfill”, the site operator necessarily having the
intention to make a further deposit of the suitable material in its final
resting place in the cell after the inspection had taken place and all large,
hard or sharp items had been removed. Following this to its logical
conclusion, at the relevant moment of deposit, the inspection would have
taken place and the material in question would have acquired its defining
characteristic as argued by the appellants.
114. But the Court of Appeal’s comments about “use”, such as they are, make it clear that use is “only an indicator” (albeit a potentially valuable one), and not determinative. (See King LJ’s comment at [109] above.) This makes it clear that not everything that could be characterised as “use” is sufficient to negate an intention to discard. It is appropriate to look at the wider economic and other circumstances to reach a view. As Barling J said in the High Court in WRG[22] at [50] (in a passage tacitly approved by the Court of Appeal in WRG at [35]):
“No factors which serve to indicate as a matter of fact whether material is being discarded by the person concerned should be excluded from consideration unless such an interpretation of the provision is unavoidable.”
115.
We also note that sub-s 64(2) FA 96 provides that “the fact that
the person making the disposal or any other person could benefit from or make
use of the material is irrelevant” to the question of whether the material in
question is disposed of as waste.
Ms Hall submitted, in the following terms,
that this provision applied directly to the present case:
“…it is not known at the point of deposit whether in fact the material that has been deposited can be used as fluff. The material that comes through the gate is only potentially useful, this is the core of the appellants' case. It is only potentially useful because it is of no use to these appellants if it contains large, hard or sharp objects. That is the very reason that they remove them.
So at the point of deposit, at the point of making the disposal, the deposit into the cell, it is … not known whether it will be useful, it will be put to use or could benefit the appellants. It could. It depends what is in the bag. That is why it is said that there are checkers or spotters or whatever they are called. The gentleman to which Mr Hodges referred at Ling Hall was in the cell, asking himself the question essentially: is this material right for fluff? Some of it was, some of it wasn't.
So with respect, the appellants can't have their cake and
eat it. They were either selecting and inspecting to take out the large, hard
and sharp objects so as to make the fluff usable, or they were using all of the
waste
which means they are simply putting landfilled
waste
to a useful
purpose.”
116.
We note that in the Court of Appeal in WRG at [33], the
Chancellor said sub-s 64(2) FA 96 “does not apply” in a case where there has
been “retention and use of the material for the purposes of the owner of it…
because there is, at the relevant time, either no disposal or no disposal with
the intention of discarding the material”. These comments were made (and must
be understood and interpreted) in the context of the facts of that case, as
summarised at [96] above. In saying this, he was not disagreeing with what had
been said by Barling J in the High Court (at [38] and [50]), to the effect that
a finding of material being discarded as waste
renders irrelevant any question
of its potential future usefulness. Having decided that the relevant moment of
deposit was, in each case, when the relevant material was finally emplaced
following inspection, we consider Ms Hall’s argument based on sub-s 64(2)
cannot offer a “knock-out blow” for these appeals. The underlying question
remains as to whether the material in question, when it was finally emplaced,
was the subject of a disposal with the intention of discarding it.
117.
In one sense, it is clear that the material (typically black bag
waste)
is “used” to protect the lining system – indeed Ms Hall accepted this
was the case. But as we have identified above, that is not the end of the
matter. It is clear that all the material was destined for landfill in any
event, in the main body of landfilled
waste
if not as “fluff”. During the hearing,
we raised the example of someone who had some
waste
bubble wrap and a broken
glass and wrapped the glass in the bubble wrap before throwing it away, in
order to avoid the glass cutting through the bin liner. When asked whether the
bubble wrap should be regarded as “discarded” in this situation, Mr Grodzinski
said this:
“It is not discarded because if you didn't have the bubble wrap, you would nonetheless have to find some other material with which to wrap the broken glass and protect whoever picks up the bin bag from the bin from cutting themselves on the side of the glass. So you are not discarding it and you are using it.”
118.
This example was of course concerned with a specific item of
waste
(the broken glass) which offered a quite clear and specific threat of
damage to the bin liner in which it was to be placed. The position in these
appeals is somewhat different. It is known that in general the overall body of
waste
to be placed in a cell will almost inevitably contain items which offer a
threat of damage to the liner or capping system. In order to minimise the risk
of such damage, the overall process of disposal into a cell is required to be
managed
so that such items are placed a safe distance from the vulnerable liner
and cap. In practice, operators have found that an effective means of
achieving this is to deposit domestic (or sometimes commercial, and
occasionally other)
waste
streams as the first and last layers of
waste;
such
streams are, in effect, pre-sorted by reason of their source so that they
almost never contain items which represent a risk to the liner or cap and any
residual risk is (hopefully) eliminated by the visual inspection to which they
are subjected as they are laid. Going back to the domestic bin analogy, it is
as if the householder appreciates that he or she may well be putting sharp
objects into the bin which could cut the bin liner, and is therefore careful to
ensure that when filling the bin he or she first places items in it which offer
no risk of cutting the liner and afford a degree of “padding” to prevent any
sharp objects later disposed of from doing so.
120.
It should not be forgotten that the vast majority of the
documents we were referred to, both in terms of industry-wide guidance and those
produced by the appellant specifically in relation to its own operations,
referred to the material in question in one way or another as “waste”
or
“refuse”, and its deposit as being the first (or last/final) layer (or lift) of
it. See, for example, [16], [17], [20] and [26]
to [33] above.
121.
Mr Cordara would of course accuse us of falling into the “once
waste,
always
waste
heresy” by viewing matters in this way. We do not consider
such an accusation would be justified. All of the relevant material is being
disposed of into the cell, whether or not it is “needed” for “use” in the
“fluff” or “protection” layer. There is no physical difference between
the material used as fluff and the rest of the similar material which is simply
landfilled along with all other general
waste
in the cell, apart from the fact
that items posing a potential threat to the liner or cap have been removed from
it. The only other difference is the “use” to which it is supposedly put and
the different way in which it is accordingly emplaced. We do not consider that
to be sufficient to negate the otherwise obvious intention to discard the material.
Were the disposals made “by way of landfill”?
122. One point that was not in issue in WRG was whether the condition in sub-s 40(2)(b) FA96 was satisfied, i.e. that the relevant disposal was “made by way of landfill”; that point had been conceded by WRG. The Chancellor however expressed doubts about whether this concession had been correct (at [31]):
“WRG concedes that the material with which this appeal is
concerned was disposed of by way of landfill as defined in s 65 because the
provisions of sub-s (1) were literally complied with. Whether that concession
is rightly made I leave to another case. For my part I entertain some doubt
because although the definition in sub-s (1) is, in terms, exhaustive and
unqualified it is coloured by the qualification introduced into the defined
term itself by the words ‘by way of landfill’, see, for example, Delaney v
Staples [1992] 1 All ER 944 at 947, [1992] 1 AC 687 at 692 and 44(1) Halsbury’s
Laws (4th edn reissue) para 1389. Indeed sub-s (4), though
primarily dealing with timing, might be thought to draw a distinction between
the material deposited as waste
and the earth or other inert material with
which it was covered so as to exclude the letter from being deposited by way of
landfill. If that is so then why should material used for daily cover be
regarded as disposed of by way of landfill, particularly if so used more than
once? Material used in road building might be regarded as more obviously not
disposed of by way of landfill notwithstanding that it is necessarily deposited
on the surface of the landfill site.”
123. Smith LJ did not comment on this point, whilst agreeing generally with the Chancellor’s judgement. Arden LJ specifically expressed “no view on the correctness or otherwise of the concession” by WRG.
124. It is clear therefore, that WRG does not actually decide that the use of inert material for road making and daily cover is not a “disposal by way of landfill”. So what of the doubts expressed by the Chancellor, and seized on by the appellants in this case?
125. All parties are agreed that the above comments were obiter, and as such they are not binding on this Tribunal, though of course due consideration must be given to them.
126. The appellants argued, on the strength of the comments made by the Chancellor, that where material is used (rather than simply discarded), it is entirely inapt to regard it as having been disposed of “by way of landfill”. Ms Hall argued that the comments made by the Chancellor in relation to the construction of site roads and the laying of daily cover did not apply to the deposit of fluff. The construction of site roads took place entirely outside the cells, and his comments in relation to daily cover were “rooted” in s 65(4) FA 96, which itself appeared to draw a clear distinction between deposited material and the cover that was placed over it.
127. We take a different view of the significance of s 65. On its face, its purpose is to clarify the concept of “landfill” and the time when a disposal by way of landfill takes place. “Landfill” is a composite word, denoting the “filling” of land, thus implying some kind of cavity or depression to be filled. It is true that landfill sites often do take advantage of either natural or man-made cavities and depressions (which will generally be depressions on the surface but can be totally subterranean cavities – s 65 itself refers to “a cavern or mine”); they can however take the form of “land rise” sites, such as Pitsea (referred to above), which take advantage of neither. We see s 65 primarily as an interpretation provision which is intended to ensure that disposal into any of these types of facilities will count as a disposal “by way of landfill”. To head off any argument that no land has been “filled” with material until the land surface over it has been reinstated by covering that material with earth, sub-s 65(4) then makes it clear that the moment of deposit (rather than the moment of covering) is what generates the tax.
128.
For what it is worth, we do not consider that the reference to
being “covered with earth” in either sub-s 65(3) or (4) is (or can properly be
construed as) a reference to daily cover but to the ultimate covering of the
waste
mass as a whole; just because as a matter of good practice and statutory
regulation all
waste
in a conventional landfill site must be temporarily
covered at the end of each day, that does not in our view mean that each
deposit is made “with a view to it being covered” with such daily cover.
Additionally, as was made clear in the evidence before us, a great many
different materials may be used for daily cover, only some of which would fall
within the definition of “earth” in sub-s 65(8).
129. We do however accept that the simple act of depositing material on the ground anywhere in a landfill site cannot have been intended to constitute a “disposal by way of landfill”. To take an absurd example, the workman who builds a security hut inside the entrance to the site, cannot reasonably be said to have disposed of the building materials by way of landfill, even though the bare wording of s 65 might be said to have been satisfied. Similarly, the stockpiling of materials of any kind for later use would, in our view, not amount to a disposal by way of landfill, for the reasons expressed by the Chancellor in WRG.
130.
In our view, in line with the Chancellor’s comments in WRG,
the qualification inherent in the phrase “by way of landfill” allows a filter
of common sense to be applied, to exclude deposits which are clearly not
by way of landfill on any sensible interpretation. Landfill sites are designed
to accommodate the landfilled material permanently in cells and not elsewhere,
and we consider that the deposit of material into a landfill cell is an indicator
that the material is being disposed of by way of landfill for the purposes of s
65, deposit outside such a cell being an indicator that there is no such
disposal taking place. There will no doubt be some exceptions to this (the
infrastructure for capturing landfill gas or pumping away leachate springs to
mind), but we do not consider the deposit in a landfill cell of black bag waste
which is intended to remain there permanently to be one of those exceptions.
Arguments around the purpose for which the material was deposited and the
intention associated with such purpose are, in our view, addressed purely by
reference to sub-s 40(2)(a) and s 64 and have no place in a consideration of
sub-s 40(2)(b) and s 65. Were it otherwise, the arguments as to the
applicability of the two sub-sections have a large degree of overlap (as
effectively happened in the hearing before us), which cannot have been the
draftsman’s intention.
132. As when interpreting any legislative provision, we must do so in accordance with its purpose. That purpose must generally be discerned from the wording actually used in the relevant context; only if the purpose still remains unclear after doing so is it permissible to look further in order to discern that purpose.
133. We consider that the language of paragraph 3(g) was quite clearly drafted with base fluff and side fluff in mind. It specifically and directly applies in those two cases, as Ms Hall accepted. It expressly contemplates there being an existing “drainage layer or liner” against which the material is placed, not the subsequent placement of a “drainage layer or liner” after the material in question has been deposited, still less the subsequent placement of a liner with a regulating layer interposed (invariably, according to the evidence) before doing so.
134. Also, as the draftsman was sufficiently acquainted with the detailed design of landfill cells to refer specifically to both the liner and the drainage layer, it can be assumed that if the protection layer beneath the regulation layer had been intended to be included, he would have had no difficulty in including appropriate wording to do so.
136.
We consider the various deposits of base, side and top fluff were
all made with the intention of discarding it as waste
(see [119]
above).
137. We consider that those same deposits were all made by way of landfill (see [131] above).
138. If we are wrong on either of those two points, we do not consider that s 65A FA96 and paragraph 3(g) of the 2009 Order bring deposits of top fluff back into the charge to landfill tax from 1 September 2009 (see [135] above).
139. Accordingly the appeal is DISMISSED.
140. This document contains full findings of fact and reasons for the decision. Any party dissatisfied with this decision has a right to apply for permission to appeal against it pursuant to Rule 39 of the Tribunal Procedure (First-tier Tribunal) (Tax Chamber) Rules 2009. The application must be received by this Tribunal not later than 56 days after this decision is sent to that party. The parties are referred to “Guidance to accompany a Decision from the First-tier Tribunal (Tax Chamber)” which accompanies and forms part of this decision notice.
[1] On some occasions, there may instead be a geosynthetic clay liner (a thin layer of clay bonded to a layer or layers of geotextile) or similar material which provides an equivalent degree of protection. In very occasional cases, there is no artificial barrier at all, the underlying clay being considered sufficiently impermeable.
[2] There is however some
concern that such layers, if they become blocked by fine particles, may
themselves stop the free flow of leachate into the drainage layer beneath.
This phenomenon is known as “perching”, wherever it occurs in the body of
waste.
[3] We only use the word
“waste”
because that is the common parlance. We should not be taken, by using
this word, to be prejudging the issue before us.
[4] This is required in order
to minimise the amount of windblown waste
and to reduce smells and vermin. For
more explanation of the details of “daily cover”, see
Waste
Recycling Group
Ltd
v HMRC, referred to below.
[6] This cross reference appears to have been an error, and should be to 4.66.
[7] “CQA” stands for “Construction Quality Assurance”, i.e. quality assurance procedures applicable to construction operations, to ensure they are carried out to the planned standard. It is common for a supervising engineer to oversee the operation of CQA procedures, either as an employee of the operator or as an independent contractor.
[8] REL apparently refers to “rear end loader”, typically a normal domestic refuse collection lorry
[9] Cleanaway were the operators of Sandy Lane at the time.
[10] We were informed that in fact gravel was used instead of sand, as part of the leachate drainage blanket
[11] With the exception of (a) the use of material to cover the disposal area during a short term cessation in landfill disposal activity;
…
d
[12] Trommelling was
described as a mechanical process to break up the waste into particles no
larger than 100 mm across
[13] [2016] EWCA Civ 1250, [2017] 1WLR 1219, [2017] STC 225
[14] In addition, the appellants submitted a further joint skeleton argument of 15 pages in response to HMRC’s EU law arguments in their skeleton argument
[18] [2001] Decision L00011, [2001] UKVAT(Landfill) L00011
[19] In fact, the VAT & Duties Tribunal had made no such finding; they held that the relevant disposal was that from Parkwood Recycling Limited to Parkwood Landfill Limited (see [56] and [60] of their decision)
[20] The VAT & Duties Tribunal had referred at [3] to “site engineering purposes, particularly the construction of roads within the site which lorries may use in order to reach the point at which their loads are to be discharged.” This suggested that some further, unspecified, “site engineering purposes” might have been mentioned to it. The Chancellor in the Court of Appeal however (at [1]) referred only to “daily cover… or… the construction of roads”, without mentioning anything else to indicate that other “site engineering” uses were also in contemplation.
[21] As recited at [6] and supplemented at [8] in the decision of the FTT.
[22] [2007] EWHC 3014 (Ch), [2008] STC 1037