Eastren Counties Leather Plc v Eastern Counties Leather Group Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE BUXTON,Lord Justice Simon Brown,LORD JUSTICE CARNWATH,LORD JUSTICE SIMON BROWN |
| Judgment Date | 30 October 2002 |
| Neutral Citation | [2002] EWCA Civ 1636 |
| Docket Number | A3/2002/0848 |
| Court | Court of Appeal (Civil Division) |
| Date | 30 October 2002 |
[2002] EWCA Civ 1636
IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT
CHANCERY DIVISION
(Lord Justice Blackburne)
Royal Courts of Justice
Strand
London, WC2
Lord Justice Simon Brown
(Vice President of the Court of Appeal, Civil Division)
Lord Justice Buxton
Lord Justice Carnwath
A3/2002/0848
MR J MARTIN QC AND MR N LEVISEUR (instructed by Lester Aldridge, Bournemouth BH8 8EX) appeared on behalf of the Appellant
MISS S PROUDMAN QC AND MR A FRANCIS (instructed by Taylor Vinters, Cambridge CB4 0DP) Appeared on behalf of the Respondent
A company which I will for the moment simply call "Eastern Counties Leather" had for many years conducted a long-established tannery business at Sawston in Cambridgeshire. From the late 1960s the business used a chemical, perchloroethene ("PCE"), as a solvent for the cleaning of animal skins. In circumstances with which we are not concerned, that solvent contaminated the underground water table in that area. The detailed history of those events is to be found in the judgments and speeches in the House of Lords in Cambridge Water Company v Eastern Counties Leather [1994] 2AC 264. In that litigation Eastern Counties was successful, the House of Lords having disabused a number of lawyers (including possibly this court) of the view that foreseeability was not a necessary element in liability in Rylands v Fletcher (1866) LR 3 HL 330.
That, however, was simply a private law matter: Eastern Counties was still exposed to liability in public law and, more particularly, to claims brought by the statutory body charged with enforcing water quality standards. Initially that body was the National Rivers Authority ("the NRA"). During the period with which this case is concerned, it has changed its constitution, and indeed incarnation, but for simplicity's sake I will continue to refer to the public enforcing authority as "the NRA". Put shortly, and relevantly to this case, the NRA could, under section 161 of the Water Resources Act 1991, carry out works to correct cases of pollution and, having so done, could recover the cost thereof from the polluter; and it was that possibility to which Eastern Counties continued to be exposed.
Against this background took place the sale of the business to new owners. Again it is not necessary to go into any detail. The essence, relevantly to present purposes, is that in 1994 the control and operation of the business passed from persons whose corporate entity was the appellant in this case (to whom I shall refer as "Group"), to persons whose corporate entity was the respondents ("Plc"). Because of the uncertainty about future claims likely or possibly to be brought by the NRA, Plc sought protection from Group in respect of such claims. That was undertaken by an agreement, described as "the deed of indemnity" (elsewhere referred to as the "pollution indemnity agreement", or "PIA") made between Group and Plc on 30 March 1994. By clause 2 of that deed of indemnity, Group gave to Plc an indemnity against any future pollution claims brought by the NRA. That indemnity was, however, conditional on clause 4 of the agreement, which it is necessary to set out. (Here, as elsewhere, I will attempt to substitute in the documents, where appropriate, the designations "Plc" and "Group" that I have already adopted.)
"4.1 Plc undertakes to Group that subject to obtaining the Consents it will carry out the Works in accordance with the NRA's requirements insofar as those requirements relate to the Boreholes or any substituted borehole or boreholes as may be required from time to time by the NRA and shall ensure that the water is pumped therefrom in accordance with the requirements of the NRA but not further or otherwise.
4.2 The indemnity contained in clause 2 is conditional upon Plc complying with clause 4.1 but for the avoidance of doubt Plc shall not be regarded as being in breach of that clause by reason only that the pumping operations of Plc have not at the relevant time … achieved a reduction in PCE to the levels mentioned in the Letter."
A good deal of that is not comprehensible unless one turns to some of the definitions to be found in clause 1 of the agreement. First of all, "the Works. "The Works" are defined as follows:
"the steps to be taken by Plc and as requested by the NRA (provided that such steps are generally in accordance with the Letters) in an attempt to remedy the pollution allegedly caused by the Pollution Incident as described in the Letters."
The "Pollution Incident" there referred to is described as:
"the alleged spillage by Plc of PCE on the site or the dumping by Plc of waste contaminated by PCE in either case prior to 1976."
That is a description, effectively, of the matters of which complaint was made in the earlier proceedings to which I have already referred.
"The Letters" are described as follows:
"a letter dated 25th February 1994 from Berrymans Solicitors to the NRA together with the NRA's reply dated 22nd March 1994 and the memorandum of understanding referred to therein a copy of each of which is annexed hereto."
The Memorandum of Understanding ("the MoU") was indeed annexed to the agreement. It was the outcome of, and to some extent quoted verbatim from, the exchange of letters to which the definition has already referred. It is a memorandum of understanding between Plc and the NRA (not at that stage, before its incorporation in the PIA, involving Group) and it was understood, and indeed strenuously stated, on the part of really both parties but certainly Plc, to be of a non-binding nature. It read as follows:
"Plc will provide the groundwater abstraction pump (or pumps), the electricity and the pipework from the borehole designated by the NRA on the company's property at Sawston to the factory. ECL will extract water up to the amount allowed by the existing effluent discharge agreement and will continue the works until such time as further pumping will no longer achieve a significant reduction in PCE or to a level of not more than 100 microgrammes per litre for six consecutive months.
It is recognised between the parties that further boreholes may be required in future. Should any further boreholes be required, these will not be funded at the NRA's expense, however the NRA will continue to carry out additional monitoring at the site should this be necessary in pursuance of its statutory functions."
The effluent discharge agreement ("EDA") that is referred to in the MoU was an agreement or licence issued under the terms of the Public Health Act 1961 and dated 2 April 1965, though later amended. It permitted a maximum annual volume of discharge of water of 132,703 cubic metres. That detail is of some importance in respect of an argument raised later in the proceedings.
The overall objective of, and reason for, these provisions is not hard to seek. If Group was going to indemnify Plc against claims by the NRA, it was fair and reasonable that Plc should do what it could to help itself by cooperating with the NRA by itself taking action as required by the NRA to clean up the pollution; and thereby deter or prevent the NRA from itself doing the works, charging for them under section 161, and thereby exposing Group to liability under its indemnity.
I turn to this litigation. After many exchanges of correspondence (which are all detailed by the judge in his judgment) the NRA in the year 2000 indeed served on Plc claims for what were described as "groundwater remediation works", that is to say, claims for clearing up pollution. Because this was a claim of the type envisaged as covered by the indemnity under clause 2 of the PIA, Plc sought to pass the claim on to Group. Group denied liability on a series of grounds, all of which were considered by Blackburne J in the proceedings before him. Group failed on all of these before the judge, and it maintains its appeal to this court on only one ground, which involves the construction of clause 4.1. Group contends that Plc has not fulfilled its obligations under clause 4 and thus, by reason of clause 4.2, is not entitled to an indemnity.
That claim, in my view, involves answering the following questions. I have separated them out in an attempt to achieve clarity, but the answer to some of the questions tends to affect, or cast light on, the answers to others. The questions that I shall address are these:
(1) What is the meaning of the expression in clause 4.1 "carry out the Works in accordance with the NRA's requirements"? In order to understand that question, the expression has to be set out as expanded by the definition of "the Works": "Plc … subject to obtaining the Consents, will carry out the steps to be taken by Plc and as requested by the NRA (provided that such steps are generally in accordance with the MOU) in an attempt to remedy the pollution … in accordance with the NRA's requirements." Does that expression, as Group contended, place Plc under an obligation towards Group to act in accordance with the MoU; or, as Plc contended, is the effect of the reference to the MoU only to place a limit or ceiling on Plc's obligations?
(2) If Plc is under an obligation towards Group to act in accordance with the MoU, what is the true content of that obligation?
(3) If, by contrast to the assumption made in question (2), Plc is right and the MoU only places a limit or ceiling on Plc's obligations to Group, what is the source of the content of those obligations, and has Plc fulfilled them in this case so as...
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Ben Pontin, Nuisance Law and Environmental Protection: A Study of Nuisance Injunctions in Practice, Witney: Lawtext, 2013, 224 pp, hb £45.00.
...regulator had to address the question of cleanup (see Eastern Counties Leather plc vEastern Counties Leather Group [2002] EWCACiv 1636; [2003] Env LR 13). Even if the claimant had been successful in thatcase, damages had been sought simply for the relocation of the claimant’s watersupply, n......