Ewart Charles Legg and Others v Sterte Garage Ltd (First Defendant) Aviva UK Ltd (Second Defendant/Appellant)
| Jurisdiction | England & Wales |
| Judge | Lord Justice David Richards,Lord Justice Sales,Lady Justice Gloster,and,or |
| Judgment Date | 23 February 2016 |
| Neutral Citation | [2016] EWCA Civ 97 |
| Docket Number | Case No: B2/2014/1884 |
| Court | Court of Appeal (Civil Division) |
| Date | 23 February 2016 |
and
[2016] EWCA Civ 97
Lady Justice Gloster
Lord Justice Sales
and
Lord Justice David Richards
Case No: B2/2014/1884
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE COUNTY COURT AT BOURNEMOUTH AND POOLE
DEPUTY DISTRICT JUDGE COPPEN
8PH04003
Royal Courts of Justice
Strand, London, WC2A 2LL
Michael Kent QC and Simon J. Brown (instructed by Berrymans Lace Mawer) for the Appellant
John Ross QC and Geoffrey Weddell (instructed by Jacobs & Reeves Solicitors) for the Respondents
Hearing date: 10 December 2015
Introduction
Proceedings for damages for negligence and nuisance, and under the rule in Rylands v Fletcher, brought against a garage company in November 2008 were defended by its public liability insurers until September 2010. The insurers then ceased to conduct the defence, and judgment in default of defence was entered against the garage company. The garage company was insolvent and unable to meet either any liability under the judgment or the costs order made against it. The claimants applied for an order that the insurers pay their costs, which the insurers resisted. Deputy District Judge Coppen, sitting in the County Court at Bournemouth and Poole, ordered the insurers to pay the claimants' costs of the proceedings.
The insurers appeal against the order for costs against them, with permission granted by Sir Stanley Burnton. Surprising as it may seem, the appeal lies to the Court of Appeal, as the order for costs was a final decision in an action allocated to the multi-track: article 4 of the Access to Justice Act 1999 (Destination of Appeals) Order 2000 and Fox v Foundation Piling Group Ltd; Thorne v Courtier [2011] EWCA Civ 104; [2011] PIQR Q3.
The judge made the order on two separate grounds. First, he made it in exercise of the court's discretion to order costs to be paid by a non-party, pursuant to section 51(3) of the Senior Courts Act 1981. Secondly, he made it on the basis that the insurers were liable under the policy to indemnify the garage company against its liability for costs to the claimants and, as a result of the liquidation of the garage company, the claimant succeeded to the garage company's rights under the Third Party (Rights Against Insurers) Act 1930.
On this appeal, the insurers contend that the order should not have been made on either basis.
The facts
The following summary of the facts leading up to the issue of proceedings is taken largely from the skeleton argument of counsel for the claimants, the respondents to this appeal.
The claimants are the owner-occupiers of semi-detached houses at nos. 82, 84, 86, 88 and 90 Sterte Road, Poole, Dorset At no. 78 Sterte Road, is Sterte Garage which was operated by Sterte Garage Limited (Sterte) as a car repair business and sometime supplier of petrol and diesel fuel.
In 2003 residents of Sterte Road began to notice unpleasant diesel smells in their gardens and also inside their homes. The local authority, Poole Borough Council, was contacted and as a result it made enquiries of Sterte's employees. These enquiries revealed that there had been a spillage of some 300 litres of diesel from an above ground tank at the garage. It was later ascertained that this had occurred in August 1997.
The council commissioned an expert report from Marcus Hodges Environment Limited, environmental consultants. The report dated 1 July 2003 noted that an above ground fuel tank failed "approximately two years ago", resulting in the loss of about 200 litres of fuel. The report stated that, although much of the fuel was cleaned up, "there is potential for this spill to have resulted in hydrocarbon contamination leaking into the ground and groundwater adjacent and beneath 80 Sterte Road resulting in the odours present". The report also identified diesel underground storage tank(s) as a site-specific potential area of concern. The report recommended monitoring.
The council also commissioned reports from engineering consultants, WS Atkins Consultants Limited (Atkins). Atkins carried out intrusive investigations of some of the affected properties (nos.78, 80 and 82), before producing their first report in May 2004. The report's executive summary stated that "Characterisation of the free phase plume has led to the conclusion that the original source is most likely to be the above ground diesel storage tank located on the garage site (78 Sterte Road) directly to the rear of the property at 80 Sterte Road. This tank is reported to have failed around 1998 releasing approximately 300 litres of fuel". The report stated that the diesel was moving northwards, from Sterte's premises through the claimants' land, and migrating upwards through the surface of the soil and into the air inside the claimants' homes. It stated that the presence of the diesel represented a significant health hazard to the residents of Sterte Road. The presence of two underground storage tanks, with capacities of 2,270 litres and 13,638 litres, was noted.
In August 2004 the council served on the affected residents notice that it had determined that their land was contaminated. The notice summarised the evidence on which the assessment was based. It specified that council officers had spoken to employees of Sterte who had confirmed that there had been a spillage of some 300 litres of diesel fuel from the above ground tank in 1998. A substantial scheme of remediation was put in place by the council to deal with the threat to human health posed by the presence of the diesel and the emergence of particulates through the soil and into the air. The residents were moved away from their homes for nine weeks whilst building work was carried out. The work consisted of the removal of the ground floor of each property and its replacement after airtight bunds were installed. Substantial chemical monitoring and extraction equipment was installed in the houses and their gardens.
In April 2005, March 2006 and August 2006, further reports were obtained by the council from Atkins. In each of these reports it was stated that the most likely source of the pollution was the above ground diesel storage tank. The 2005 report gave the estimated spillage from the diesel tank as 700 litres.
The only information that the claimants had about the cause of the diesel pollution was what was passed on to them by the council, including copies of the experts' reports.
In 2004 the first and second claimants, Mr and Mrs Legg, the owner-occupiers of 82 Sterte Road, instructed solicitors who wrote to Sterte. Sterte failed to provide any information about what had happened, although its solicitors were slightly more helpful.
In February 2005 the claimants' solicitors wrote a letter of claim to the appellant insurers (Aviva), who appointed a broker, Questgates, to investigate the claim.
On 6 May 2005 Questgates wrote to the claimants' solicitors on Aviva's behalf asking for evidence to be provided that Sterte was legally responsible for the spillage and that the spillage was the cause of the diesel smells. The letter promised that a decision would be made as regards Sterte's liability and whether any liability of Sterte was covered by the public liability insurance following receipt of the information. The claimants duly sent a full summary of the claim and provided copies of the expert reports that had been released by the council. There followed a series of chasing letters from the claimants' solicitors, with no substantive response until 11 September 2006, when Aviva wrote a short letter stating:
"Our enquiries into Policy indemnity have been completed. As advised previously, the pollution cover provided by our Policy is restricted to damage caused by sudden unintended identifiable and accidental events. It does not extend to gradual pollution.
It is now apparent that, on balance, the incident in August 1997 is not the source of damage to your clients' properties which is the subject of current claims against our Insured. Accordingly the Policy will not respond and we are unable to provide an indemnity to our Insured."
By June 2008 the claimants' solicitors were ready to issue proceedings. They wrote to Sterte's solicitors asking where the proceedings should be served. They received a reply from the insurers, stating that "our position on policy indemnity remains unchanged" and that they had appointed solicitors who would accept service of proceedings on behalf of the insurers.
The public liability insurance
Cover for public liability was provided as part of a Motor Trader's Combined Insurance Policy issued by General Accident. The appellant insurers, Aviva, accept that they are liable for any valid claim made under this policy. Section E contains the public liability insurance under which cover was provided in the event of, among other things, accidental loss of or damage to property or nuisance, arising in connection with Sterte's business. Among the exclusions are:
"(a) liability arising from pollution and contamination of buildings or other structures or of water or land or the atmosphere
and(b) Bodily Injury or loss of or Damage to Property directly or indirectly caused by such pollution or contamination"
That exclusion is in turn subject to a limited exception for which cover is provided:
"other than caused by a sudden identifiable...
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