Court of Appeal: oil leak was not 'continuing nuisance'

Out-Law Analysis | 03 Feb 2021 | 3:57 pm | 6 min. read

A recent decision by the Court of Appeal creates some important and binding legal authority on undecided points of law in relation to 'continuing nuisances'.

The appeal court's decision, in a case involving an oil leak from a submersed flexible flowline off the coast of Nigeria, provides welcome clarity on various issues which are relevant to UK-domiciled companies whose business activities - both inside, and, in some cases, outside the UK - can inadvertently result in damage being caused to third-party properties surrounding their operations.

What is an actionable 'nuisance'?

A private nuisance is an act or omission which interferes with another person's exercise or enjoyment of their land, or that person's rights over land. Common examples of nuisances include odours, flooding, encroachments of poisonous waste and interference with rights of light.

Bartle Richard_November 2019

Richard Bartle

Senior Associate

Common sense underpins this decision. It must be right that a one-off nuisance event, which has been abated, will only give rise to one cause of action

A right to sue for nuisance can arise on the date that the relevant unlawful act occurs. However, it can also continue to arise every day that the unlawful act persists. Lawyers refer to the latter as a "continuing cause of action".

A nuisance claim must be brought by the claimant/innocent party within a six year 'limitation period'. If it is not, the right to bring a claim for the nuisance will be lost. The parties to any nuisance claim must therefore establish the date that the limitation period runs from.

If the nuisance is not a continuing nuisance, then the limitation period usually runs from the date that the innocent party's 'cause of action', or its 'right to sue', accrues. However, if the nuisance is continuing, then a new right to sue arises, in effect, every day that the nuisance continues. That means that the limitation period will only expire six years after the last day on which a new right to sue for the nuisance arose.

There are some exceptions which can postpone the running of the limitation period.  An obvious example is where there has been a 'cover up' by the party which has committed the nuisance, which is often referred to as a 'deliberate concealment'. However, such exceptions only occasionally arise in nuisance cases such as this one, and did not arise in this case.

What happened in this case?

Shell and its Nigerian subsidiary operated an oil field 120km off the coast of Nigeria. The field included a floating production storage and offloading facility, which was linked to a single point mooring buoy (an SPM) by three 'submersible flexible flowlines', which are flexible oil pipes through which oil, which has been extracted from the seabed, is transported to the SPM and then on to vessels and tankers.

In December 2011, one of the flowlines ruptured and a spill started, leaking oil into the sea for around five or six hours before the flowline was switched off. The oil from the leak washed up on the coastline in Nigeria several weeks later.

The claimants in this claim were a group of some 27,800 individuals and 457 communities who live and work on the affected stretch of coastland.

In a decision on a wide range of issues, the High Court at first instance held that the alleged ongoing pollution from the spill on the claimants' land was not a continuing nuisance. The six-year limitation period therefore started to run on the day that the oil reached the shoreline - by which time the flowline which had caused the leak had stopped leaking - and thus expired in early 2018. That was a critical determination by the High Court because it meant that many of the claimants' claims had been brought after the 6-year limitation period had expired.

The claimants appealed. The issue on appeal was whether the claim in nuisance accrued shortly after the oil reached the shoreline in Nigeria, or whether there was a continuing nuisance with a fresh cause of action arising every day that the oil remained on the claimants' land.

The Court of Appeal dismissed the claimants' appeal.

Firstly, it was held that there will not be a continuing nuisance where the nuisance is caused by a one-off or isolated event and the nuisance has been abated. Critically, in this respect 'abating' a nuisance means dealing with the state of affairs that created the nuisance - it does not mean remediating the damage caused by the nuisance. Here, the single event in question was the one-off leak from the flowline. That leak was remedied within a few hours of occurring, and therefore also before the oil from the spill reached the shoreline some weeks later. As such, the nuisance could not be said to be continuing after the date that the oil reached the shoreline, even though it allegedly remained on the shoreline after that.

In seeking to argue that the nuisance was continuing, the claimants had, as it was put by Lord Justice Coulson in his leading judgment, "equate[d] nuisance with physical damage or harm". It would, Lord Justice Coulson went on to say, "be a radical departure from the case law to say that a continuing nuisance does not require a continuing event or hazard, but merely continuing harm after the single event has ended, or the hazard has been removed".

Secondly, the court held that those liable for a nuisance are not required to actually 'remedy' it. So in this case, Shell and its subsidiary were not required to undertake clean-up operations on land which they did not own. It is, of course, the case that those liable for nuisances can be sued for damages arising from their unlawful acts. Such damages may well include the cost of any clean-up operations and the cost of remedying any damage caused to the property or business of others. But the claimants' remedy in such circumstances is limited to a payment of damages (i.e. money) only. 

Common sense underpins this decision. It must be right that a one-off nuisance event, which has been abated, will only give rise to one cause of action – in this case, which arose on the date the oil reached the shoreline. The alternative to that would have been to impose an open-ended liability on Shell, which, as Lord Justice Coulson noted, could mean that a one-off oil leak such as this could result in E&P companies being "faced with litigation 50 years later" if the harm from the nuisance subsisted for that long. In that respect, if the appeal had succeeded operators would now, in practice, be faced with the unappealing and uncommercial prospect of things such as having to make and maintain substantial additional provisions for future liabilities, each for very long periods of time, and/or obtaining more extensive insurance coverage. 

The issue of potential liabilities for nuisance may also be relevant to English-registered parent companies with operations outside the UK, particularly those operating in the energy and mining sectors. In 2019, a landmark Supreme Court decision established that (and when) parent companies registered in England and Wales can, in certain circumstances, be sued in the courts of England and Wales for acts of nuisance committed by their subsidiaries in overseas operations. In that case, 1826 Zambian villagers sued Vedanta Resources Plc alleging (amongst other things) negligence arising from the discharges of toxic matter from a nearby copper mine into watercourses. In itself, that decision raised serious management, liability and insurance-coverage issues for UK-registered multinationals with operations outside the UK, even where those operations are undertaken by locally-registered subsidiaries

However, two competing points should be noted. Firstly, and following the recent repeal of the relevant EU law which allowed such claims to be brought in the UK, there will now, again, be more scope, for the time being at least, for UK-registered parent companies to challenge the jurisdiction of the English courts in any new claims against them which arise from events outside the UK.  But secondly, and conversely, it should still be possible for certain foreign litigants to bring such claims in the English courts, notwithstanding the repeal of the relevant EU law referred to above.

The appeal court's decision in this case, that businesses which commit nuisance will not be required to remedy the effects of that nuisance on third-party land over which they have no rights or control, either generally or as a de facto condition to stop the limitation period running, is best viewed as confirmatory only. There was very limited authority to support the claimants' submissions to the contrary. Again, the alternative would have been to impose potentially insurmountable practical issues, and a potential inability to mitigate losses, on any party which has committed and abated a nuisance.

Distilled to its essence, this decision underscores the need for those who have suffered a nuisance to issue their legal claims - or make material amendments to those claims once issued - in good time. Nuisance claims are often complex and can take time to properly prepare. In particular, establishing causation and compiling evidence relating to losses can be challenging. This case is a good example of that. It involved thousands of different claimants; various heads of loss, relating to various different uses of land and sea; and, given the spill occurred in Nigeria, various jurisdictional issues.

Early planning can mitigate the risk of the claim failing for being out of time. It can also allow the claim to be issued in good time before the expiry of the limitation period. By doing so, any material amendments to the claim, which need to be made after the claim is issued, can also be made before the expiry of the limitation period.