The Waste You Left Behind: Polluter Liability as Tort Korean Supreme Court Decision (2009 Da 66549)

in Asian Yearbook of International Law
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i Introduction

Traditionally in Korea, environmental rights under the Constitution and environmental laws form the basis of an individual’s public obligation to prevent environmental pollution. Thus, environmental pollution has not, until now, been considered the subject of private law. This is reflected in the Supreme Court Decision of 2002, where a buyer of land (Plaintiff) sued the seller (Defendant) who had polluted the land, for the cost of purification in the form of damages under tort. In this particular case, the Supreme Court held that a tort could not be found because the Defendant had not harmed anyone other than himself, since at the time of pollution, the land belonged to the Defendant. Therefore, since the Supreme Court found that there was no damage to another, it held that an award in tort for damages was inappropriate. The importance of environmental awareness is growing all over the world, shaping every discipline. This trend is also reflected in the change in stance of the Supreme Court. The 2016 Supreme Court dramatically changed its position after fourteen years and stated that the current landowner had the right to impose liability on the former owner, (the polluter), for committing tort against the current owner, by infringing the current owner’s right to enjoy ownership of untainted land. In effect, the Supreme Court’s holding allows for a current landowner to hold a former landowner liable for costs incurred for the purification of polluted land where there were no other contractual or legal relations whatsoever between the two, other than the fact that both parties owned the same piece of land at different times. Many are concerned that the changed decision of the Supreme Court exceeds the bounds of civil regulations for the sake of promoting environmental conservation.

Whether environmental rights can be based on civil liability is still the subject of controversy among legal scholars in Korea. At the very least, it is notable that in this case, the Supreme Court recognized tort liability borrowing from principles of environmental rights under the constitution and environmental laws.

ii Facts of the Case and Issue

Diagram 1
Diagram 1

Fact pattern

Download Figure

1 Facts of the 2016 Supreme Court Case (As illustrated in Diagram 1 above)

  • Company A (“Defendant Company A”) had been operating a casting foundry for roughly twenty years since 1973 and caused soil contamination. On 21 December 1993, Company A sold one-half of the land to Company B (“Defendant Company B”) and Company D (“Plaintiff”), respectively.

  • In 1993, Company C demolished the casting foundry and underwent reclamation works (project outsourced by Defendant Company A), and proceeded to perform works such as surface grading in order to build an automobile shipment factory (project outsourced by Defendant Company B). Company C tore down the surface structures, excluding the subterranean structures located below the surface of the land and buried the construction waste. Company C then proceeded to carry out surface grading and asphalt overlaying works. From around July 1994, Defendant Company B had been using the land as an automobile shipment factory.

  • On June 28, 2000 Company E purchased Company C’s share of the land.

  • In planning to build a multi-electronics distribution center on the land, Company D purchased one-half of the land from Company E in December 2001 and purchased the remaining half from Defendant Company B in February, 2002. Company D purchased the Instant Land without being aware of the soil contamination.

  • The price paid by Company D (Plaintiff) for the land was 24,500,000,000 krw (approximately 21.5 million usd). However, on top of that, Company D (Plaintiff) paid an additional 10,879,199,388 krw (approximately 9.6 million usd) in clean up costs for the disposal of contaminated soil and waste on the land during construction. As a result, Company D (Plaintiff) was made to bear unexpected clean up costs amounting to almost half of the purchase price.

2 Issue

The main issue of this case is whether Company D (Current Landowner) can claim damages against Company A (Polluter) despite not having a direct relationship?

a Need to Find Tort Liability for the Current Landowner (Company D)

In cases where the current landowner, without having been aware of the land contamination at the time of purchase, incurs costs from the purification of contamination or from the removal of waste, he may impose liability on the former owner, the vendor of the contaminated land, for the default of obligation or warranty for defects derived from imperfect fulfillment. However, it is often difficult for the purchaser to become aware of the existence of latent defects, such as “hidden” contaminated soil or waste buried underground, particularly in cases where there is no cause of doubt giving rise to a reason to know of the contamination. It is common in such situations that the purchaser would not have an opportunity to reach a reasonable agreement for such conditions at the time of signing the contract, or that the purchaser may fail to seek compensation within the appropriate time period for default of obligation or warranty for defects. In the present case, the Supreme Court recognized the contractual liability of Company B. However, due to the existence of an agreement of exemption with regards to liability between Company D and Company E, Company D was unable to bring a lawsuit against Company E. Therefore, Company D was unable to recover half of the purification fee, which is why Company D commenced litigation against Company A, the original polluter.

b The Difficulty of Finding Liability against Original Polluter (Company A)

In cases where the landowner causes soil contamination on the landowner’s own land and the contaminated land is then sold to two different owners who subsequently sell the land, there is no contractual relationship between the very first landowner (the polluter) and the current landowner. Thus, the current landowner cannot hold the first owner liable for the default of obligation or responsible for a warranty against defects. However, as mentioned above, considering the difficulty in seeking compensation for damages incurred by “hidden” contamination and the burden of costs incurred by the current owner for the actions of another in contaminating the land, it is justifiable to establish the liability of the first landowner to compensate the current owner. However, problems arise from two elements; on what grounds and to what extent may the current landowner hold the first landowner liable for compensation?

iii Decisions of the Supreme Court

1 The Supreme Court Decision of 2002 Resulted in “No Finding of Tort Liability.”

Prior to the present case, cases with similar facts had been brought to court. In each instance, there was an initial polluter (Defendant) who polluted the land, sold the contaminated land to a buyer, who in turn subsequently sold the land to the current owner (Plaintiff), who later discovered that the land had been contaminated. Following numerous cases, the Supreme Court Decision 99Da16460 decided on 11 January 2002 held that:

  1. Setting aside the fact that the Defendant, without obtaining approval from the Minister of Environment, etc. as prescribed by the Wastes Control Act, buried waste on the land of the instant case which was owned by the Defendant, and thereby having received administrative sanction or criminal punishment, the Defendant’s act was committed against oneself rather than a third party and thus, tort is not established. In addition, as the Defendant’s act in and of itself cannot be deemed to have caused any damages whatsoever to the Plaintiff, it cannot be concluded that the Defendant committed an unlawful act against the Plaintiff who obtained ownership of this case’s land after the Defendant buried the waste.

  2. Although tort can be established in cases where the Defendant’s act of burying the waste caused damages to owners of nearby land or residents, the Defendant cannot be said to be liable for tort committed against the Plaintiff (new buyer) and the Plaintiff does not have the right to claim damages incurred therefrom.2

The Supreme Court expressed that, even if a person buried waste in one’s own or another’s land, the said person could not be held liable for tort committed against the buyer of the relevant land. In short, there was no finding of tort between the original polluter and the current owner. This ruling remained the established precedent for fourteen years until 2016 and the ruling of the present case.

2 Decision of 2016 in Which “Tort Liability was Established”

a Decisions of the Court of First Instance3 and the Appellate Court4

Following established precedent, the first trial held that the case did not establish tort since the unlawful act was not committed against a third party. The act of contaminating the soil or burying the waste in and of itself could not be deemed to have caused damages to the one who acquired ownership of the land after the contamination had been carried out. In addition, it also stated that because the Waste Control Act regulates administrative duties, civil compensation for damages cannot be acknowledged directly under the abovementioned regulations; as long as general tort is not established, special tort, based upon the Soil Environment Conservation Act and Framework Act on Environmental Policy, also cannot be established.

However, on appeal, the Appellate Court held that tort could be established in this case. When the first landowner, who had contaminated the land, sold the land without notifying the subsequent owner of such conditions, the costs expended in land purification and the removal of waste were deemed to be foreseeable. The court also stated that the actions of the first landowner harmed the safety of transactions concerning the land and that it could be deemed the equivalent of creating a defective product and selling it to others, thereby damaging the trust of those who would acquire the land in the future.

Moreover, cause and effect was established by the court between the contamination caused by the polluter which resulted in damages in the form of waste disposal and land purification costs for which the current owner was left to bear. Such tort, established on the basis of one’s illegal act, yields damages over time and when those potential damages become actualized, the tort could be said to be established upon the discovery of the land contamination and the duty to remove such contamination by the new landowner.

b The Decision of the Supreme Court5

In accordance with the decision of the Appellate Court, the Supreme Court determined that its 2002 ruling had been incorrect and sought to overturn it decision. The present case was heard before the entire bench of the Supreme Court of fourteen judges. The Majority held that where a previous landowner sells land after either:

  • causing soil pollution by discharging, leaking, dumping; or

  • neglecting soil contaminants without subsequently purifying the contaminated soil, or

  • illegally burying waste without subsequently treating the waste, the said act could be regarded a tort committed against the current owner of the land in question.6

Furthermore, the previous landowner, as the tortfeasor, could also be liable for compensating the current landowner for damages, in the form of costs incurred or to be incurred for purifying the contaminated land or treating the buried waste. In reaching their conclusion, the Majority referred to Article 35(1) of the Constitution, the former Framework Act on Environmental Policy, the former Soil Environment Conservation Act, and the former Wastes Control Act.

iv Impact of the 2016 Decision

1 Heavier Responsibility of the Polluter

As discussed above, the change in position of the Supreme Court allows the current landowner to hold the former landowner (polluter) responsible for tort committed in civil law. It could be said that the responsibility of the former landowner (polluter) has been aggravated in many ways.

It is possible for the Polluter to be held liable in tort even without direct contractual relationship. Moreover, regardless of a special agreement concerning the exemption of the duty of land purification at any stage in the chain of land transactions, the current landowner can still bring an action in tort against the Polluter to recover the cost of land purification. Thus, even if the Polluter sells the contaminated land at a lower price to factor in the purification costs, as long as the waste remains on the land, the Polluter is potentially at risk of paying purification costs to landowners further down the chain. Therefore, this doubles the Polluter’s burden.

2 Risk of Infringement on the Freedom of Contracts

Up until now, the Polluter was able to exercise his right to negotiate the terms of a contract and could sell contaminated land at a cheaper price to reflect the purification costs. However, after this decision, even if such negotiations have taken place, the Polluter may still be liable to future land owners who succeed in bringing a case against the Polluter, rendering validly contracted provisions ineffective. This could present a threat to the freedom of contracts. Also, the dissenting opinion of this decision pointed out that it was possible for contaminated land to be the subject of a contract. Therefore, it is arguable that this decision infringed upon property rights as prescribed under Article 23(1) of the Constitution.

3 The Incapacitation of the Statute of Limitations and Resulting Uncertainty with Regard to Potential Liability

The Supreme Court held that the point in time the buyer of contaminated land incurs purification costs is when actual damages are incurred. On this point, the dissenting opinion was concerned that the requisite point in time could be arbitrarily determined by the buyer, which in turn made it possible for the buyer to arbitrarily set the starting period for the calculation of the statute of limitation.7 This is the equivalent of excluding the application of the statute of limitations clause with regards to unlawful acts involving soil contamination.

The Soil Environment Conservation Act, Article 10-4(3) states that the one who must carry the responsibility of the land purification includes “the one who started the land contamination due to merger or inheritance or for any other reason, the one who owned or possessed a land contamination management facility which caused the land contamination at the time of land contamination, or the one who inherited the rights and the duty of an operator of the land contamination management facility.”8

In accordance with the abovementioned article, the current owner may impose liability on the heir of the polluter for the tort committed and may also claim the associated compensation for costs incurred in the disposal of waste on the relevant land, incurred during the development of the land that the current owner decided to carry out even after a hundred years from the date of purchase of the land.

This results in the opposite of what the policy of the statute of limitation intends, which is to seek the stability of one’s right in time.

v Conclusion

1 The Intent of the Supreme Court in its 2016 Decision

In effect, the Supreme Court established the doctrine of strict liability with regard to environmental pollution. This is in line with the “polluter pays principle,” the widely accepted principle which holds those responsible for producing pollution for bearing the costs of damage done to the environment. It is part of a broader set of principles designed to provide guidance in a move towards worldwide sustainable development. In overturning established precedent and interpreting existing regulations to hold the polluter liable for environmental contamination, it can be demonstrated that the Supreme Court is realizing its intent to align national practices with those of the wider global community with its aim of using a legal framework to manage the impact of human activity on the environment.

2 Negative Effects of Overly Austere Environmental Laws on Environment Conservation

The other aspect that needs to be discussed is whether the changed decision of the Supreme Court indeed has a solely positive effect on environmental conservation. When the Comprehensive Environmental Response, Compensation, and Liability Act (cercla) of the United States imposed heavy responsibility placed upon polluters, people appointed by the government as being potentially responsible for contamination spent more time and financial resources on different investigation and litigation to avoid responsibility, rather than cooperating with one another to restore the land.9 In addition, industrial facilities on which hazardous substances had once been used were turned down by investors who took precautions by utilizing land which had never been used before, destroying green tracts of land to build new industrial facilities in order to avoid even the remote possibility of potential responsibility for existing pollution on brownfield sites.10

In the same vein, the Soil Environment Conservation Act of Korea Article 10-3, Section 1 states no-fault liability, Section 2 states that in cases whereby there are two persons or more who have caused soil contamination and there are no means to accurately apportion blame for the damage done, they both share joint responsibility to compensate, as well as the sharing of the duty to purify the land.11 In accordance with this, land owners who operate businesses that could be deemed to have caused contamination will not attempt to sell land to a buyer who may potentially use hazardous substances. As a result, there is a possibility that new facilities which could be harmful to the environment may only be built on greenfield sites, thus yielding negative effects on the environment.

3 Necessity of Presenting an Alternative Solution, Other than Relying on Tort Liability

In accordance with the purport of the Framework Act on Environmental Policy which states, “all citizens must put effort in reducing the environmental pollution and damage and in conserving national land and the natural environment,”12 the changed decision of the Supreme Court is a welcome one. It puts a heavier responsibility on the land polluter on the grounds that, unlike general consumer goods in which the owner can use and dispose of it at his or her will, land should not be subject to environmental pollution even if it is carried out by the owner of the land.

However, there are major concerns caused by the finding of tort liability, which could lead to other problems in addition to those mentioned above. For example, in relation to the incapacitation of the statute of limitations, another potentially unfair consequence for the heir of the polluter would be that of inflation; the costs incurred from the cleanup would be incomparably high in comparison to the value of the land at the time of the sale. To resolve such inadequacies, the Supreme Court needs to make decisions in a more detailed manner, clearly and specifically stating who is responsible and the appropriate prescription. Moreover, aside from the law of torts, it is necessary to consider the enactment of new legislation that does not subject the polluter to crushing liability, but allows the polluter to be subject to a burden proportionate to the action.

Kyu Rang Kim and Seong Won Lee are both JD Candidates, Inha University Law School, ­Korea. This article has been edited by Hana Shoji, Research Fellow, The Development of International Law in Asia-Korea (DILA-Korea), Korea.

Supreme Court Decision 99Da16460.

Seoul Central District Court Decision 2006GaHap7988.

Seoul High Court Decision 2008Na92864.

Supreme Court en banc Decision 2009Da66549, Decided 19 May 2016 (First Draft), available at: http://library.scourt.go.kr/SCLIB_data/decision/22-2009Da66549_soil%20contamination_jh.htm.

Ibid.

Ibid.

Ibid.

“Polluter Pays Principle” in Reality: concerning Cleanup Responsibility under cercla, Young-geun Chae, Journal of Environmental Law 23-2 (In Korean).

Ibid.

Soil Environment Conservation Act of Korea Article 10-3 (Strict Liability, etc. for Damages Resulting from Soil Contamination).

“(1) Where any damage occurs due to the soil contamination, a person who has caused the contamination shall compensate for such damage and take measures, such as purifying the contaminated soil: Provided, That the same shall not apply to cases where the soil contamination has been caused by a natural disaster, war, or force majeure. <Amended by Act No. 12522, 24 March 2014>

(2) Where at least two persons have caused the contamination, and it is impracticable to find out which one has caused the damage under paragraph (1), each one shall jointly and severally compensate for such damage and take measures, such as purifying the contaminated soil. <Amended by Act No. 12522, 24 March 2014>”

[This Article wholly Amended by Act No. 10551, 5 April 2011].

Framework Act on Environmental Policy Article 6 (Rights and Duties of Citizens)

“(1) All citizens shall have the right to live in a healthy and agreeable environment.

(2) All citizens shall cooperate in environmental preservation policies of the State and local governments.

(3) All citizens shall endeavor to reduce any environmental pollution and environmental damage that may result from their daily lives and to preserve the national land and natural environment.”

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