Eastren Counties Leather Plc v Eastern Counties Leather Group Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Blackburne |
| Judgment Date | 26 March 2002 |
| Neutral Citation | [2002] EWHC 494 (Ch) |
| Docket Number | Case No: TLC 183/01 |
| Date | 26 March 2002 |
| Court | Chancery Division |
[2002] EWHC 494 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Blackburne
Case No: TLC 183/01
Sonia Proudman QC and Andrew Francis (instructed by Taylor Vinters) for the claimant
John Martin QC and Nicholas Leviseur (instructed by Lester Aldridge for the defendant
Hearing dates : 14, 15, 18, 19, 20 and 21 February 2002
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
The Hon Mr Justice Blackburne
Mr Justice Blackburne
Introduction
The principal purpose of these proceedings is to establish whether, in the events that have happened, the claimant, which I shall refer to as Plc, is entitled to be indemnified by the defendant, which I shall refer to as Group, under the terms of what is described as a pollution indemnity agreement dated 30 March 1994 against the cost to it (subject to an upper limit of £980,000) of complying with the requirements of a letter from the Environment Agency dated 1 March 2000. The PIA as I shall call it was one of a series of agreements entered into on 30 March 1994 under which control of a tannery, and of the tannery business conducted from it by Plc, passed from the Moore family to the Byrne family.
The background
The tannery is in Sawston, a few miles south of Cambridge. Tanneries have been located in or near Sawston for very many years. There is currently one other tannery in the immediate area.
Tanneries require a plentiful source of water for use in the cleaning and treatment of the animal pelts. For some years until the early 1960s, Plc used a chemical solvent called trichloroethene (or TCE) as a degreasing and cleaning agent. In the 1960s TCE was replaced by perchloroethene (or PCE). PCE is also sometimes referred to simply as perc or by its alternative chemical name tetrachloroethene. PCE continued to be used at the tannery until January 1992.
In 1983 elevated concentrations of PCE and TCE were discovered at the Cambridge Water Company public water supply borehole at Sawston. PCE was found to be by far the bigger pollutant. Water contaminated in this way constitutes a health hazard. In the words of Mr Paul Waldron, currently Area Environment Planning Manager for the Central Area of the Environment Agency's Anglian Region (and a witness called by Plc):
"PCE is a List 1 substance in terms of the EC Groundwater Directive (EC Directive on Protection of Groundwater against pollution caused by certain Dangerous Substances—80/68/EEC). It is also the subject of a separate EC Dangerous Substances daughter directive concerning surface waters (90/415/EEC amending Annex II to Directive 86/280/EEC). There would be concern at any concentration of PCE in controlled waters in excess of 10 microgrammes per litre. The groundwater under the ECL Plc [ie Plc's] tannery contained up to 30,000 microgrammes per litre. Further, the contamination was spreading down [the] hydraulic gradient in the chalk aquifer, with water in springs found to contain up to 4,000 microgrammes per litre of PCE."
The view taken was that the source of the pollution was Plc's tannery and the other tannery nearby. There were thought to be two sources of contamination under Plc's site. The first, a so-called deep plume (in effect a subterranean pool) which accounted for the bulk of the contamination and was thought to have arisen from spillages in the course of past use of PCE in the tanning process; and the second, a shallow plume (at a lesser depth below the surface) which was thought to have been formed from sludge disposal resulting from the tanning process.
The polluted groundwater became the subject of legal proceedings between the Cambridge Water Company and Plc in which Plc was sued in nuisance and also under the rule in Rylands v Fletcher. The case went to the House of Lords. Reversing the Court of Appeal, the House held that Plc was not liable because the water company was not able to establish that pollution of the water supply by PCE was in the circumstances foreseeable. The decision was given on 9 December 1993 and is reported at [1994] 2AC 264. In the course of the litigation, it was established that, from the commencement of use until 1976, the solvent was delivered in 40 gallon drums and that, as and when needed, a drum was taken by a forklift truck to the cleaning machine and tipped into a tank at the base of the machine. From 1976 to 1991, it was delivered in bulk and kept in a storage tank from which it was piped directly to the machine. The amounts of solvent so used were said to vary between 50,000 and 100,000 litres per year. The trial judge found that the spillages took place during the period up to 1976. However, apart from identifying a minimum spillage of 3,200 litres, it was not found possible even to guess at the maximum. The judge held that some of the solvent made its way into the aquifer below the tannery and that this in turn had resulted in contamination of the groundwater below and downstream of the tannery.
Although Plc was ultimately successful in the litigation, in that it was absolved from any liability at common law, it found itself exposed, because of the findings, to statutory claims under legislation concerned with the maintenance of water quality standards. By 1993 the agency charged with enforcement of these standards was the National Rivers Authority (the NRA) established under the Water Act 1989. After 1 April 1996 it was the Environment Agency (the EA) established under the Environment Act 1995.
As the relevant legislation stood in 1993, the NRA had power under section 161 of the Water Resources Act 1991 to carry out anti-pollution works and recover the costs. The section, so far as material, was as follows:
"(1) Subject to subsection (2) below, [irrelevant for present purposes] where it appears to the Authority that any poisonous, noxious or polluting matter or any solid waste matter is likely to enter, or to be or to have been present in, any controlled waters, the Authority shall be entitled to carry out the following works and operations, that is to say –
(a) in a case where the matter appears likely to enter any controlled waters, works and operations for the purpose of preventing it from doing so; or
(b) in a case where the matter appears to be or to have been present in any controlled waters, works and operations for the purpose –
(i) of removing or disposing of the matter;
(ii) of remedying or mitigating any pollution caused by its presence in the waters; …
(3) Where the Authority carries out any such works or operations as are mentioned in subsection (1) above, it shall, subject to subsection (4) below, be entitled to recover the expenses reasonably incurred in doing so from any person who, as the case may be —
(a) caused or knowingly permitted the matter in question to be present at the place from which it was likely, in the opinion of the Authority, to enter any controlled waters; or
(b) caused or knowingly permitted the matter in question to be present in any controlled waters."
The expression "controlled waters" is defined as including "groundwaters, that is to say, any waters contained in underground strata" (see section 104(1)(d) of the same Act).
With effect from 29 April 1999, a new provision, section 161A (inserted by the Environment Act 1995), was added and amendments were made to section 161. Section 161A is as follows:
"(1) Subject to the following provisions of this section, where it appears to the Agency that any poisonous, noxious or polluting matter or any solid waste matter is likely to enter, or to be or to have been present in, any controlled waters, the Agency shall be entitled to serve a works notice on any person who, as the case may be, —
(a) caused or knowingly permitted the matter in question to be present at the place from which it is likely, in the opinion of the Agency, to enter any controlled waters; or
(b) caused or knowingly permitted the matter in question to be present in any controlled waters.
(2) For the purposes of this section, a "works notice" is a notice requiring the person on whom it is served to carry out such of the following works or operations as may be specified in the notice, that is to say —
(a) in a case where the matter in question appears likely to enter any controlled waters, works or operations for the purpose of preventing it from doing so; or
(b) in a case where the matter appears to be or to have been present in any controlled waters, works or operations for the purpose —
(i) of removing or disposing of the matter;
(ii) of remedying or mitigating any pollution caused by its presence in the waters;…
(4) Before serving a works notice on any person, the Agency shall reasonably endeavour to consult that person concerning the works or operations which are to be specified in the notice."
The reference in that provision to the Agency is to the EA. Section 161 continued (and remains) in force but was amended so that the EA became empowered to carry out investigations for the purpose of establishing the source of the matter and the identity of the person who has caused or knowingly permitted it to be present; and the EA's power to carry out works and operations and recover the cost is only to be exercisable in a case where the EA considers it necessary to carry out forthwith any works or operations falling within paragraphs (a) or (b) of the subsection or where it appears to the EA, after reasonable enquiry, that no person can be found on whom to serve a works notice under section 161A. See section 161(1A).
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