wastePart 1 - Liability in Business

When a financial consultant conducts a wealth review of your assets everyone thinks of a balance sheet, debtors, creditors, stock, raw material, banks, business goodwill and customer orders as a good starting point to let you know what you can expect in retirement from the business.

How many financial consultants will ask you about the amount of waste arising from your business? How many will tell you of a possible hidden financial liability that may present itself in the future. How many business owners would consider their company broke the law when it comes to disposing of their waste. How many business owners take over a business and buy this liability for past failings just lumped in with the office furniture.

The answer from most business owners would run along the lines of “I bought the industrial site from you but I did not buy the large pile of hazardous waste you had piled down the back of the industrial site”. They may even tell you the EPA want you to remove the waste to an authorised facility and they agree with them. Now you could claim inability to pay but that leaves you with the awkward question of explaining what you did with all that retirement money you got for the site, or your pension or that house you own.

To illustrate this, let’s take an example of a company in the courier business that has ten vans on the road. The business produces very little waste, old pallets are recycled, packaging waste is recycled, office waste is shredded for recycling and the company even makes a small donation to the local national school to support the Green Schools program.

To save on costs, the company engages a self-employed mechanic who repairs the vans. He changes the batteries, replaces light bulbs, changes the oil, and replaces the oil filters. The mechanic pours the oil into a drum at the back of the small company workshop, places the vehicle batteries on a pallet for possible reuse and places the used oil filter into an open top container with a lid. Nothing wrong with that you say.

Now let me ask you a question. Would you store a barrel of hazardous waste at the back of your office, which is flammable, not labeled and contains a possible cancer causing agent?

Would you let one of your drivers carry sulphuric acid in his van amongst all those packages, a corrosive toxic chemical that can cause severe chemical burns to the skin of any person who may come in contact with the acid? Of course not you say. In the first place the driver is not trained, authorised or even insured to take such chemicals and, if he did, he would not be long with the company.

So what has all this got to do with liability, the business and wealth management you may well ask? Firstly let us look at the cost of doing things right first time and disposing of the waste in a responsible manner. If you are a very small operation, you may be able to take the battery and oil to your local recycling center and recycle the hazardous waste at no cost.

If you are a larger business, you could get a list of authorised recyclers from your local government office and contact the recyclers to collect the waste. The local government office will have a lot of helpful information about the relevant permits required by the person collecting the hazardous waste and the facility accepting the waste. In some cases, when the commodity price of lead increases, recyclers will collect a box of vehicle batteries at no charge, especially if the collection is in the area.

Alternatively you could just ignore the issue, let the oil, oil filters and vehicle batteries build up at the back of the small garage, and have the odd oil spill from the oil barrel which over a few years can build up into a lot of silt oil.

Now the new owner discovers that the half acre at the back of the industrial site is contaminated and also has 50 barrels of industrial hazardous waste. He proposed to clean it all up and send you the bill. Hold on, hold on, you shout, this is not my place any more. The new company man agrees with you and directs you to your old company and your old insurance policy. The insurance company tells you that your business should have disposed of the waste properly before profits were calculated and they direct you back to the company profits. Get the profits back from your friends the co-directors. Meanwhile the new company owners are getting impatient and want you to spend some of that hard-earned retirement package to clean up the mess and they are right. It is your mess.

Richard D’Arcy continues his two-part article on company liability for waste disposal next week and looks at scenarios where a possible civil case might occur. Part 2 here.

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