Monday, February 22nd, 2016
Esso Petroleum Company Ltd v The Scottish Ministers and others  CSOH 15
The pursuers own a (disused) filling station in the Tradeston area of Glasgow, adjacent to subjects (“the Albion site”) acquired by the Ministers for the M74 Completion project. The whole area is one which historically has been used for a variety of heavy – and polluting - industries. A number of contaminants of concern were found throughout the area during initial site investigations for the project. The Albion site had been used as a chemical works for many years prior to commencement of the M74 project. The pursuers aver that the M74 works caused contamination (in the form of toxic VOCs such as vinyl chloride) to migrate from the Albion site onto their site.
The pursuers case – and the defenders’ position
The pursuers plead cases in nuisance against the Scottish Ministers and Interlink M74 JV, the joint venture engaged by the Ministers as main contractors in the works. Interlink in turn sub-contracted the design work for the project to specialist consultants, Jacobs UK and Atkins. The defenders each plead inter alia that an employer has no liability for the acts or omissions of a competent independent contractor (Stephen v Thurso Police Commissioners (1876) 3R 535). The pursuers countered that that rule does not apply where the operations undertaken are “inherently hazardous” (see the discussion in Stewart v Malik 2009 SC 265). The question whether the operations undertaken here were inherently hazardous in the required sense came before Lord Tyre for a preliminary proof.
The Lord Ordinary’s Opinion
Lord Tyre found that the operations were hazardous so as to displace the general rule on independent contractors. It was foreseeable that the defenders’ operations would be likely to cause contamination to migrate to neighbouring land unless steps were taken to prevent their migration. There was no evidence of a discrete contaminative pathway by which humans or drinking water might be affected. However, the nature of the contaminants was such that their migration caused “at least a theoretical risk to human health”. These findings were sufficient to invoke the “hazardous operations” exception in Scots law. To escape liability, it was not enough for the employer to instruct the contractor to take “appropriate and adequate precautionary measures” and to impose elaborate contractual obligations to that effect, as was done in this case. Reasonable precautions are not enough. What is required is that “specific steps” be taken or instructed to prevent the hazard from eventuating [paragraph 23]. The reasonableness of the specific steps taken to avoid damage is to be assessed at the time when the operation is undertaken. While an employer is liable for the fault of the contractor in a “hazardous operation”, the contractor is not liable for the fault of a sub-contractor [paragraphs 25-27].
This decision has important implications for almost all large-scale construction projects, and many small ones. Almost all construction projects involve hazards. Many will create at least a potential risk of harm to neighbouring property. This decision means that even if a competent contractor is engaged, the employer remains liable if “specific steps” are not taken to prevent harm. Lord Tyre expressly held [para 23], however, that the hazardous operations exception does not just apply to cases in which one proprietor owes an obligation of support to another (compare Stewart v Malik, above), but applies more widely to cases in which:-
“…(a) the operation will or is likely to cause damage to the neighbour’s land however much care is exercised, or (b) it is necessary to take steps in the carrying out of the operation to prevent damage to the neighbour’s land, and those steps are not taken by the landlord either personally or on his instructions. As regards alternative (b), I interpret Lord Jauncey’s reference (in Noble’s Trustees v Economic Forestry 1988 SLT 662) to “necessity” as meaning steps specifically taken to avoid damage to the neighbouring property which would otherwise occur or be likely to occur, as opposed to taking reasonable precautions when carrying out a hazardous operation to prevent a risk of damage or injury from eventuating.”
This account of the hazardous operations exception in Scots law differs from the English position which now appears to be confined to head (a) in the passage quoted above (compare Biffa Waste v Maschinenfabrik Ernst Hese  QB 725). It is an interesting development, since the exception in Scotland seems originally to have been derived from English law in this area.
Moreover, in most construction projects, the employer will rely upon specialist contractors to advise on the appropriate precautions necessary in order to prevent harm. It is difficult to see how an employer can instruct the necessary “steps” without relying on advice from the contractor, except perhaps in those cases in which the necessary steps are blindingly obvious - but the ambit of this decision appears to go far beyond such cases. Liability from the point of view of the employer would appear essentially to be strict in those cases in which the exception applies.
It is unclear how this position fits with the general Scots law rule that liability in nuisance requires proof of culpa – a rule which Lord Jauncey was at some pains to emphasise in Noble’s Trustees – or “some degree of personal responsibility” (RHM Bakeries v Strathclyde RC 1985 SC (HL) 17 at 44) . A motion for leave to reclaim from this preliminary decision has been refused and the matter will now proceed to a proof at large in September 2016. In the meantime, it is important to emphasise the need for great care in the contractual allocation of liability in projects where independent contractors and sub-contractors are engaged. Householders who engage apparently competent contractors should ensure that their home insurance covers damage to neighbouring property caused by the contractors’ negligence.
David Sheldon QC was Senior Counsel for the First Defenders. A copy of the Court's Opinion can be found here.