Law Firm Support

Law Firm Support

Prior to commencing his own specialist practice in 2012, Vincent Brown had been the lead environment law partner in two all-service commercial law firms for over 20 years. As such, he had managed the internal supply of specialist environment law support for his corporate, real estate, banking, and construction partners during that period.

Vincent Brown is accustomed to working in very close co-operation with national and international law firms. The service available is significantly wider than the traditional forms of ‘transaction support’, and extends beyond corporate, real estate and funding transactions, into areas such as the provision of bespoke specialist clauses for construction and engineering contracts, industrial regulation and permitting, and ‘environmental Brexit’.

The precise manner in which the service is delivered is entirely bespoke, to suit the requirements of the particular law firm, partner, client or transaction. This can be as simple as providing very discrete behind the scenes support to the law firm in a way which enhances the specialist offer of the firm itself. This has to be done seamlessly – in terms of scope, method and cost of work – so that the client experience is as if Vincent is part of the law firm.

Alternatively, or in addition, where preferred by the client partner, the service can be provided in a more direct manner to the law firm’s client. The latter situation most commonly applies to situations where the complexities of the risk and underlying law, as well as the transaction deadlines, are such that swift and direct communication between the specialist and the client is required, under the overall direction and supervision of the law firm’s client partner.

In all cases, Vincent Brown commits to obligations of absolute confidentiality and respect for the law firm’s established client relationships – including a commitment not to communicate with the relevant client of the firm other than as directed by the client partner.

A critical point about this particular service line is that, in most cases, our ‘client’ is the law firm itself, and the essence of the service is to provide the law firm with a seamless package of expert advice and deliverables which enable the law firm to deliver to its clients. For law firms without in-house specialists, or where there is resource but not to the extent considered prudent in a high value transaction involving potentially grossly contaminated land or complex industrial regulation, there is the opportunity to out-source specialist advice for their own protection and the benefit of their clients.

Lawyer to lawyer service based on pragmatism and service of the deal
In this context, specialist expertise in pollution, waste and contamination law is a given. The real differentiating factor is swift and effective client communication, in terms especially of sound and pragmatic assessment of actual risk and the measures the client should take to address that risk.

Environmental risk is often perceived rather than real. Conversely, there can be some situations where a ‘special’ high value risk does indeed exist but cannot reasonably be picked up by the non-specialist lawyer or there is an exaggerated perception of risk which threatens to undermine a deal. The critical service required by transaction lawyers is measured assessment of the risk and a solution which enables the transaction to proceed. In most cases, the risk is indeed nothing more than perception or it is otherwise easily managed through drafting, due diligence, and clear, non-technical reporting to the relevant client.

Specialist advice is more effective the earlier it is brought on board in these transactions. Sometimes site investigations are required to assess risk, and these can take time, so it is important to identify early on whether they will be needed. This will ensure there is sufficient time for the parties to obtain the necessary information to decide how to address environmental issues in the transaction, and for those decisions to be negotiated and reflected in the transaction documents, within the timescales of the deal or matter.

The legal drafting has to be precise and unambiguous – and not just the drafting of the specific sections of the relevant contracts, but the reports and opinions that go to the clients and their funders and investors. For example, the usual ‘stock’ environmental warranties rarely serve the deal well. They simply run up legal time and result in a fudged contractual compromise that rarely serves either party. The contracts have to address the real issues head-on and set out who is going to do what, when and how. The objective is therefore clarity and precision of contractual risk allocation and the avoidance of future unanticipated liability and/or wasteful litigation.

The reporting to clients has to be equally precise but also pragmatic and commercially focused, including advice on the ‘level’ of due diligence your transaction or client requires, and ‘cut to the chase’ advice and guidance on the issues (if any) that really matter, what needs to be done, who should pay for what, real liability exposure and how to deal with it, and how to handle all this in the context of the transaction’s financial and time constraints.

Categories of Law Firm Support – Service Menu

Real Estate Sales      
• Review of environmental readiness for sale packages;
• advance identification of potential price-chipping issues;
• drafting of environmental heads of terms;
• drafting of necessary environmental content for sales particulars;
• sale contract drafting and subsequent negotiation support;
• supporting client in resisting price-chipping on environmental grounds;
• management of any environmental completion requirements.

Real Estate Acquisitions
• Pre-acquisition due diligence – ‘translation’ of environmental search results and vendor site data into accurate identification of the transaction risk profile;
• early advice on contractual principles;
• drafting of environmental heads of terms;
• provision of requisite clauses for purchase contract and subsequent negotiation support;
• pragmatic advice to purchaser for addressing residual risks;
• clear and succinct reporting to clients;
• attendance at client meetings if requested to explain issues/solutions and take Q&A.

Real Estate Long Leases and Assignments

Caution is necessary where the interest being conveyed is akin to ‘ownership’ via the mechanism of a long lease but with the freehold retained elsewhere. Most environmental liability regimes (including for example the contaminated land liability regime under Part IIA of the Environmental Protection Act 1990) treat tenants under such long leases as ‘owners’, reinforced by obligations of statutory and general legal compliance imposed through the long lease. Therefore, in these situations, the tenant of real property affected by environmental liability can face both public liability from the regulator and contractual obligation to the freeholder.

Therefore, pre-assignment due diligence is important, and law firms have to be covering the point with pragmatic advice to the assignee client on residual risks through clear and succinct reporting.

Real Estate Commercial Leases: Landlord
Obviously, the relevance of environmental advice, and contractual provision in the agreement for lease and the lease itself, will depend heavily on the type of property and its proposed use. Standard FRI leases contain boiler-plate clauses to cover areas such as nuisance and general statutory non-compliance arising from the tenant’s permitted use. However, in leases for manufacturing or other industrial or potentially contaminative activities, landlords should consider whether the standard FRI form adequately expresses the specific rights and (tenant) obligations necessary to ensure that the landlord’s investment is protected.

Even in ‘non-contaminative’ tenant uses, but where there has perhaps been some redevelopment by the landlord on former industrial land, the landlord may wish to ensure that in the agreement for lease, and the lease itself, there are sufficient protections against claims from tenants arising out of contamination.

Real Estate Commercial Leases: Tenant
The boot is on the other foot when acting for tenants. Care is required to ensure that unforeseen liabilities are not incurred. Whilst from the landlord’s perspective we caution against inadequate drafting of tenant operational obligations and/or potential claims from tenants arising out of landlord-developed post-industrial land, the converse also applies, especially where the lease is an occupational one rather than a genuine long lease. The combination of the statutory compliance and service charge provisions of a typical commercial lease can impose financial responsibility on a tenant for the effects of historic contamination or inadequate remediation for which most occupational commercial tenants will not consider themselves responsible. Tenants need advice to ensure that this is covered, preferably with explicit carve-outs in the lease of liabilities they do not intend to bear.

‘Leasehold Sales’: Assignments of Occupational Commercial Leases
For both assignor and assignee, these transactions are not unlike real estate sales and purchases, in terms of the respective objectives of each party, but with the two critical differences:

• firstly, the lease brings with it (for the incoming tenant) the contractual pitfalls of an occupational lease, including the possible spectre of ‘environmental dilapidations’ or remediation costs imposed through the service charge;
• secondly, the transferred interest in the land and buildings is relatively short term and as such the commercial rationale of inheriting such liabilities is low to non-existent.

Contracts of assignment may well purport to apportion liability between the assignor and assignee at the transfer date, but this is not really satisfactory for either party: the assignor ideally needs to be ‘in the clear’ on transfer, while the assignee is usually still nonetheless wholly responsible in a question with the landlord for all liabilities of the tenant, and any right of relief for pre-transfer liabilities is susceptible to the usual risk of lack of adequate assignor covenant, including insolvency.

Corporate Share Sale Contracts
Similar principles apply here, but with potentially more complexity depending on the operations of the target company and whether it is a group of companies which is being sold. Vendors need to ensure that they get as clean an exit as possible, but there has been a tendency in recent years to impose environmental warranties upon vendors in a manner analogous to tax warranties. As a general rule, this should be resisted unless, like a tax warranty, there is a specific situation which can only be covered by warranty. This should be rare if proper due diligence is being applied by the purchaser.

The tighter the transaction deadlines and/or the less due diligence material available for purchaser reliance, the trickier the task of avoiding warranties. As with real estate sales, Vincent Brown has long experience and specialist expertise:
• to maximise the environmental readiness for sale packages;
• to obtain advance identification of potential price-chipping issues; and
• to provide sale contract drafting and subsequent negotiation support to minimise vendor exposure.

Corporate Share Purchase Contracts
The transfer of share capital in companies usually brings with it all of the assets and liabilities of the target. In environmental terms, this drives the due diligence process and, to the extent this is deficient, how risk is defined and allocated in the context of the transaction. As all corporate lawyers are well aware, if a target is ‘carrying’ liability potential arising out of any of its pre-completion operations, the purchaser will after completion inherit the liability via its ownership of the share capital. This is all obvious to practitioners in these fields, but the environment law implications are perhaps not so obvious, especially where the target group or company operates in a regulated industry

Moreover, there are limits on the extent to which this can be avoided through the contract, especially in relation to ‘public’ legal liability where regulators can impose clean-up or financial penalties on the target without any regard to who happens to own it. Even an indemnity from the vendor is subject to the same weaknesses (strictly construed, usually hedged with time and value limits, and wholly dependent on continuing vendor covenant).

Therefore, in share acquisitions, especially where the business involved is manufacturing or other industrial or potentially contaminative activity, pre-acquisition due diligence is really important, as is pragmatic advice to the purchaser on residual risks through clear and succinct reporting. This is especially relevant where the group or individual target corporation operates in a regulated industry, subject to EU environmental regulation (or the potentially chaotic and volatile post-Brexit mix of UK law and retained EU law) on operational permitting, industrial emissions, chemicals, waste, and pollution liability. For example, these regimes usually have built-in capital expenditure obligations driven through the permits which, unless the permits are properly reviewed, are latent liabilities for the unsuspecting purchaser.

As such, our available services in the M&A market include:
• Pre-acquisition sites due diligence – accurate identification of the sites risk and overall transaction risk profile;
• Permits due diligence – this is critical: liability very often comes most directly and easily via operational permit obligations enforced by regulators;
• early advice on contractual principles;
• drafting of environmental heads of terms;
• provision of requisite clauses for Share Purchase Contract and subsequent negotiation support;
• pragmatic advice to purchaser for addressing residual risks;
• clear and succinct reporting to clients;
• attendance at client meetings if requested to explain issues/solutions and take Q&A.

Business Assets Sale and Purchase Contracts
Similar considerations apply to sales and purchases of businesses, as with real estate and share capital transactions, but they are something of a ‘half-way house’. Unlike a share transaction, the transfer of non-real estate assets, including business contractual commitments and operational permits, is not ‘automatic’, but invariably express provision is made for the transfer of such assets, and this differentiates these transactions from both (a) pure real estate transactions and (b) corporate share sales and purchases.

This is all obvious to practitioners in these fields, but the environment law implications are perhaps not, especially where the business operates in a regulated industry, and subject to the EU regimes (and subsidiary UK/Brexit systems) exemplified above. For example, it is critical (for both parties) that in any such business transfer there is sufficient time for core operational permits to be transferred to the purchaser, and that the purchaser demonstrably meets the legislative criteria for such transfer, under the various permitting regimes which regulate a wide variety of industrial processes.

Therefore, in addition to the menu of service deliverables referred to in the previous transaction categories, a critical service available in business sales and purchases is that of “Permits Support” – whereby we advise on and can execute the necessary transfer and/or variations procedures with regulators.

Development Agreements & Packages
When it comes to liability for the remediation of historic industrial ‘legacy’ contamination, and where the major liability litigations have occurred for such contamination, real estate redevelopment is probably the arena where the exposure is greatest. The really catastrophic liability examples are few and far between, but the fact that they have happened at all and could easily be repeated when all ‘prefect storm’ factors converge means we all have to be on our guard – and not least lawyers who might walk blindly into such a situation. For example, the claim levels (and the ‘every day ordinariness’ of the circumstances) in cases such as Sandridge St. Albans are red flag warnings for law firms and lawyers to ensure that they cover themselves and their clients.

One of the most important aspects of our service lies in knowing intuitively whether a transaction carries a major risk, and where it does not, and providing unequivocal reporting which leaves no room for doubt as to the discharge of the law firm’s duty of care.

Of course, there is a vast range in terms of ‘significance’ of liability exposure, and the really bad examples are few and far between, but that does not mean that other redevelopment proposals do not carry financial liabilities which would be viewed by the client. Unexpected increased development cost and delay arising from legacy contamination and remediation requirements are an ‘everyday’ occurrence in brownfield development, and it is in these more common scenarios that lawyers have to be sure that the client is not looking to them to preserve them from ‘abnormal’ costs and/or programme delays.

The most obvious legal source of such cost lies in the remediation planning conditions on brownfield developments which are notoriously open-ended. They potentially place the developer at the mercy of the discretion of the local authority contaminated land officer and what he or she (or their consultant) considers ‘satisfactory’ remediation. Developers really need to be alive to this. For example, if the planning authority insists on groundwater remediation, the costs can be such as to blow the development financial appraisal.

Construction and Engineering Professional and Design Contracts 

Vincent Brown has years of experience working with developers, contractors, project managers, engineers and other design professionals in the framing of the specialist sections of design and other professional contracts. The construction and civil engineering sector does of course have standard forms, but these never address the critical drafting of remit and the technical alignment of the terms of the professional contract with the outcomes and objectives of the site investigation data and the relevant project

For example:
• what precisely is it that the developer wants the consultant to design in terms of site investigation works or remediation works themselves?
• what outcomes does the developer client expect from the work?
• what are the boundaries between the professional and the contractor, and are they properly drafted?
• is there a remediation works supervisory role for the remediation designer?

Getting the answers to these clear and understood, as well as unequivocally documented in the appointment contract, is usually vital, not only in the direct relationship between the developer and the professional, but in the future marketability of the development (in which context, of course, collateral warranties based on accurate definition of the professional designer’s duties, for purchasers, funders and tenants is usually critical).

In addition, from everyone’s perspective, the dangers of ambiguous drafting in the context of design liability are clear from recent case law.

Construction and Civil Engineering Contracts
On a brownfield site, there are rarely any ‘construction’ contracts which do not require a specialist environmental wording check. In some cases, they need much more than that, whether you are acting for employer or contractor. Contamination is a notorious, and obvious, source of claims for additional costs and time extensions, and by its nature usually unquantifiable at the time of signing the contract.

Vincent Brown has worked on major projects, including in the post-industrial development areas of east London, where he has had legal overview of, and responsibility for managing, in conjunction with the construction lawyers, the following critical factors influencing contractual content:
• the contamination risk of the site and its locale;
• the site investigation data;
• the remediation strategy;
• the remediation works;
• the expectations of the regulators – planners and Environment Agency;
• the risks posed by enabling works, sub-structure works, river wall replacement works and, especially, deep foundation and piling works;
• the overall interaction on a complex site of all these activities;
• the critical supporting contract documents and how these must be incorporated into the construction contracts;
• the preferred standard forms of the construction lawyers and the ‘normal’ amendments

With this overview, he has wide experience of adapting the standard forms to ensure that responsibility lies where it is intended, and that the specifics of that responsibility are clearly expressed. For example, what are the precise rights and obligations of the parties, and what procedures are to be followed, where unforeseen contamination arises (which always happens to some degree)?

Even more than professional contracts, it is in the critical design and build area of construction and civil engineering contracts that the dangers of ambiguous drafting in the context of design liability are clear from recent case law.

Remediation Works Contracts
These are a specialist form of the construction contracts package on a brownfield development, but of course a pivotal one. Even before drafting, key advice is required for both parties, including the fundamental questions of:
• design responsibility;
• works specification;
• any performance standard or other objectives which need to be tied into the regulatory requirements under the planning permission;
• what will need to be validated in order to secure regulatory discharge.

These in turn affect the post-remediation construction phase, for example the piling and sub-structure contracts, and so on into the commercial transactions for the sale, letting and funding of the completed development.

Specific care is required where the remediation works are design and build. Design responsibility is always a difficult matter where what is to be designed and built has a measure of complexity to it or is not necessarily easily defined in terms of what it should look like and/or how it should perform. Remediation of a contaminated site on a brownfield development comes into this category, especially if (as is often the case) regulators are insisting in the remediation planning conditions on specific results being achieved. The dangers of ambiguous drafting in the context of design liability are clear from recent case law.

Deeds of Environmental Indemnity
These can be standalone deeds or incorporated as clauses of indemnity into wider contracts. They can apply in any commercial context. They can be ‘buried’ in standard forms or in bespoke contracts through the mere introduction of the word “indemnify”. They are invariably more contentious than the other contracts listed here, because an indemnity is such an onerous undertaking, in theory committing one party to pay a defined sum to another on the occurrence of some trigger event or state of affairs.

The main consideration is understanding and defining correctly just what the parties intend:
• Do they simply wish the so-called ‘indemnity’ as a bolster of the normal damages that the law would allow for a breach of contract?
• Or is the intention to allow more than that, extending to losses that would not fall within the normal foreseeable damages that would arise on breach of contract?
• If the latter, just how far does that go, and are the parties truly agreed on it?

In the environmental sphere, as in other indemnity contexts, there are specific pitfalls that have to be addressed, and none more so than careful definition of exactly what it is that will trigger the indemnity and what the categories of financial damage will be. Indemnities relating to environmental liabilities – for example, the consequences of contamination, or regulatory enforcement of new permitting obligations on an industrial business – are particularly tricky to draft, because the range of factual circumstances that might arise, and thus the range of potential losses, is wide and often not obvious.

Aside from the contract drafting itself, the critical thing for the lawyers is to ensure that their clients are absolutely clear in their instructions as to what they intend the indemnity to achieve should the relevant trigger arise, and then to make sure that any limitations that the law and/or the draft contract places on those are clearly understood and communicated.

Commercial Contracts

As a specialist, Vincent Brown does not handle general commercial contracts, but does have extensive experience of specialist commercial contracts – for example:
• contracts for the management of hazardous waste,
• contracts for the sale and purchase of specific products such as ‘end of waste’ recovered products;
• contracts for the sale and purchase of chemicals where the EU chemicals regime is in play.

Special Contracts
This refers to anything not in the normal categories of real estate, corporate, commercial, or construction contracts where there is a need to cover environmental risk. Examples of Vincent Brown’s experience in such ‘one-off’ contracts include – the contractual arrangements for a novel scheme to carry out open cast mining underneath a longstanding and heavily contaminated landfill; and contractual arrangements for a surface mining project involving the draining and remediation of a lake, seeking to ‘future proof’ against liability under the EU Water Framework Directive and Groundwater Directive.

Client Reports

In the delivery of this service line, our ‘client’ is the law firm itself. One of the critical areas of expert support Vincent Brown provides is the supply of ‘ready to use’ reports, or sections of reports, which can then be used by the law firm in order to provide accurate and measured reporting to its client. As already observed, this is one of the most critical responsibilities of the law firm, both to its clients and to itself. The uses of this service are wide-ranging, from complete standalone advice reports to small summary clauses for use by the law firm in a larger due diligence report.

Whatever the format or substance, it is often the critical transactional document, especially where complex liability issues or potential need to be clearly stated and understood, and more so when document will be reviewed by funders or investors adopting highly risk averse positions in a given case.

In all cases, we adopt a combination of:

• summary reporting of the basics in non-technical language but focused on the commercial impacts (or possibilities) of a given legal position; and
• face to face explanation, and addressing specific questions, to law firm clients and/or their clients.

Precedents
The service can be a ‘one-off’ provision of key specialist clauses or entire model contracts from a practitioner in the field with the most up to date and workable precedents. Examples of the types of precedents available are identifiable from the various support services outlined above.

These include individual clauses and key supporting defined terms for all manner of real estate contracts (acquisition, lease, funding etc.), development contracts, corporate share sales and purchases, business assets sales and purchases, construction contracts, civil engineering contracts, professional design contracts, insurance and other indemnity contracts, and general commercial contracts.

Alternatively, entire contracts may be appropriate, such as entire Remediation Works design/build contracts or Deeds of Environmental Indemnity.

In each case, supporting legal commentaries can be provided for specific clauses or entire contracts, with up to date legislative and case law references.