Case law: Recalling Lambson v Merlion

Keith Davidson from LexisPSL on the ongoing importance of Lambson v Merlion for environment practitioners

The 2008 case of Lambson Fine Chemicals v Merlion Capital Housing EWHC 168 continues to have implications for developers of brownfield sites, particularly the need for good due diligence. The 40-acre site in Castleford had been used to manufacture chemicals since the 1860s.

Lambson Fine Chemicals operated at the site for 30 years and in 2004 sold the property to Merlion Capital Housing for £12.2 million for proposed commercial and residential development. Lambson spent a year demolishing the factory, with Merlion retaining £500,000 to deal with the costs of the resulting clean up.

After the purchase, Merlion found that 14,000 tonnes of soil at the site contained “blue billy”, a waste product that contains high concentrations of cyanide. Merlion refused to pay back all of the retention money, claiming that the cost of removing the blue billy would amount to £425,000.

Merlion’s legal case was that Lambson had fraudulently misrepresented the sale in that a director had stated in writing that the firm had “no knowledge of any further contamination… other than that specifically identified in the environmental survey report” (ESR).

In the counterclaim, Lambson highlighted that full disclosure had been made and referred to environmental provisions in the sale contract.

The judge held that: Lambson had given full disclosure by providing the ESR; both parties were fully aware the site was contaminated; there was no actionable misrepresentation, because Lambson had no knowledge of any further contamination; and Merlion should pay the balance of the retention.