Blue Circle Industries Plc v Ministry of Defence

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeLord Justice Aldous,Lord Justice Chadwick,Lord Justice Simon Brown
Judgment Date10 June 1998
Judgment citation (vLex)[1998] EWCA Civ J0610-16
Docket NumberCase No: CHANF 96/1794/3
Date10 June 1998

[1998] EWCA Civ J0610-16




Royal Courts of Justice

Strand, London, WC2A 2LL


Lord Justice Simon Brown

Lord Justice Aldous

Lord Justice Chadwick

Case No: CHANF 96/1794/3

Blue Circle Industries Plc
Ministry Of Defence

Charles Flint QC and Thomas Croxford (instructed by The Treasury Solicitor) for the Appellant

Ronald Walker QC Antony Edwards-Stuart QC and Stephen Worthington (instructed by Reynolds Porter Chamberlain) for the Respondent

Lord Justice Aldous

On 6 July 1989 there was a storm. The rain caused ponds situated on the land of the Atomic Weapons Establishment (AWE) at Aldermaston to overflow. That overflow passed down a stream through marshland into a lake on the Aldermaston Court Estate that was owned by Blue Circle Industries Plc (BCL). The result was that the marshland became contaminated with radioactive material. That came to the knowledge of AWE later that month and late in 1989 they informed HM Inspectorate of Pollution. However it was not until January 1993 that BCL were properly informed about the contamination. Remedial work which consisted of removing the contaminated top soil of the marsh started on 23 May 1994 and was completed by 19 December 1994.


By writ BCL claimed against the Ministry of Defence ( MoD) damages for breach of duty arising under the Nuclear Installations Act 1965, for nuisance and under the doctrine of Rylands v Fletcher. Those claims were resisted. Carnwath J in his judgment of 26 November 1996 held that there had been a breach of statutory duty and awarded damages of £6,045,617.65 inclusive of interest. Against that order the MOD appeal and BCL served a Respondent's Notice.


The facts


The facts are fully and accurately set out in the appendices to the judgment of the judge to which recourse can be made. I therefore confine this part of my judgment to an outline of the facts as found by the judge.


BCL acquired the Aldermarston Court Estate in 198l. At that time it consisted essentially of a large Victorian house, the Manor House, surrounded by about 137 acres which included landscaped gardens, an ornamental lake, four lodges and the marsh that was subsequently contaminated. It adjoined land owned by AWE. In 1983 BCL constructed a new office building beside the lake comprising about 80,000 sq. feet which they called Portland House. It was designed to be a showpiece and won an award for its design in 1986. Since 1988 The Manor House has been run as a hotel and conference centre under a series of management agreements with BCL. It is able to seat 140 for weddings and conference dinners.


By January 1988, BCL had decided to move to smaller premises and therefore put the estate as a whole on the market. Initially the asking price was £34m. It did not sell despite the price being reduced to about half. The property market collapsed in the autumn of 1989 and a decision was taken to let parts of Portland House while at the same time trying to sell the estate as a whole. In April 1991, BCL moved back into Portland House.


In about May 1992 Sun Micro Systems Ltd (Sun) became interested in purchasing the estate and by September 1992 they had formed a view that it was suitable for their requirements. On 23 September 1992 they made an offer of £10m for the estate or £9.25m excluding the Manor House and its surrounds. The offer was rejected by BCL. On 27 December 1992 the offer was increased to £10.1m and the evidence was that they would have increased it again to £10.6m. On paper there was a wide gap between BCL and Sun, but BCL had a strong incentive to arrive at an agreement. On 5 and 6 January 1993 the MoD disclosed the contamination and Sun broke off further negotiations.


The judge held:

"An important issue in the case is whether Sun's offer would have materialised into a concluded contract in the absence of the contamination report, and if so at what price. In my view there is a strong probability that such a contract would have been concluded.


I conclude that agreement would have been reached by the end of January at a price of close to £10.5m, leading to a concluded contract. That cannot of course be regarded as a certainty, but I would estimate the likelihood at 75%."


Despite the fact that the contamination occurred on 6 July 1989 and it was initially discovered l4 days later, its extent and importance was not disclosed to BCL until 5 January 1993. That delay has to be considered in a context where the MoD knew by the end of 1991 that the levels of radioactivity in the marsh were in places above the threshold set by the Radioactive Substances Act 1960 and associated Statutory Instruments and they had by May 1992 realised that the contamination should be removed.


Upon being told of the contamination, BCL started their own investigations. The report of July 1993 that they commissioned confirmed the results of the MoD. In the meantime the MoD submitted an application for consent to dispose of the contaminated waste. It was granted. The remedial work consisting of removing the topsoil of the marsh with the trees and vegetation began on 23 May 1994 and was completed in December 1994 with the result that the site was returned to BCL on 19 December 1994.


The Judgment


The judge held that there had been a breach of the duty imposed by Section 7(1)(a) of the Nuclear Installations Act 1965. He concluded that BCL had lost the chance of the sale to Sun and assessed it as a 75% chance. He held that the correct approach to quantify BCL's loss was to arrive at a figure reflecting the difference between the value of the estate as it would have been without contamination and as it in fact turned out, and then reduce the resulting figure by 25% to reflect the uncertainty of the sale to Sun. He concluded that in April 1993 BCL would have received £10.35m and in July 1996 the estate was worth £5m that being the date upon which the parties assumed the trial took place. As the estate had been run at a loss during that period he added 75% of the running costs of £964,479 and special damages of £143,963 which he held were attributable to the costs of BCL in the clean-up operation. After judgment he ordered interest at a rate agreed between the parties.




The claim under the Nuclear Installations Act 1965


The Nuclear Installations Act 1965 was enacted to consolidate the Nuclear Installations Act of 1959 and its amending Act of 1965. Those Acts were passed to reflect the requirements of the 1960 Paris Convention and the 1963 Vienna Convention. The United Kingdom neither signed nor ratified the Vienna Convention. Those conventions are of historical interest, but in my view do not throw light upon the issue of construction raised by the MoD.


Section 7 of the 1965 Act imposes a duty upon the licensee of a licensed site, such as AWE, in this way:

"7. (1)[Subject to subsection (4) below),] where a nuclear site licence has been granted in respect of any site, it shall be the duty of the licensee to secure that -

(a) no such occurrence involving nuclear matter as is mentioned in subsection (2) of this section causes injury to any person or damage to any property of any person other than the licensee, being injury or damage arising out of or resulting from the radioactive properties, or a combination of those and any toxic, explosive or other hazardous properties, of that nuclear matter; and

(b) no ionising radiations emitted during the period of the licensee's responsibility -

(i) from anything caused or suffered by the licensee to be on the site which is not nuclear matter; or

(ii) from any waste discharged (in whatever form) on or from the site,

cause injury to any person or damage to any property of any person other than the licensee.

(2) The occurrences referred to in subsection (1)(a) of this section are -

(a) any occurrence on the licensed site during the period of the licensee's responsibility, being an occurrence involving nuclear matter;



The right to compensation for breach of the duty imposed in Section 7 is provided for in Section 12.

"12 (1) Where any injury or damage has been caused in breach of a duty imposed by section 7, 8, 9 or 10 of this Act -

(a) subject to sections l3(l), (3) and (4), l5 and 17(1) of this Act, compensation in respect of that injury or damage shall be payable in accordance with section l6 of this Act wherever the injury or damage was incurred;

(b) subject to subsections (3) and (4) of this section and to section 21(2) of this Act, no other liability shall be incurred by any person in respect of that injury or damage.

(2) Subject to subsection (3) of this section, any injury or damage which, though not caused in breach of such a duty as aforesaid, is not reasonably separable from injury or damage so caused shall be deemed for the purposes of subsection (1) of this section to have been so caused."


Section l6 limits a licensee's exposure as follows:

"16(1) The liability of any person to pay compensation under this Act by virtue of a duty imposed on that person by section 7, 8 or 9 thereof shall not require him to make in respect of any one occurrence constituting a breach of that duty payments by way of such compensation exceeding in the aggregate, apart from payments in respect of interest or costs, [[£140 million] or, in the case of the licensees of such sites as may be prescribed, [£10 million]]."


Section 26 defines "nuclear matter" and "occurrence" as:

"nuclear matter means, subject to any exceptions which may be prescribed -

(a) any fissile material in the form of uranium metal, alloy or...

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