Nuisance law in industrial Wales – local and national conflicts (part two): oil refining, the common law and regulation – Mark Wilde

Introduction: from copper refining to oil refining

As the copper-refining industry withered and eventually died out, another form of mineral refining, namely oil refining, was on the ascendancy further along the coast in Pembrokeshire.1 However, by this stage the legal landscape had altered in that a more comprehensive system of environmental regulation had evolved. Atmospheric emissions from industrial facilities such as oil refineries were subject to the control of the Alkali Inspectorate (an anachronistic title given that the industry from which it had taken its name had largely died out by this time) and local authorities, which had statutory nuisance powers under the Public Health Acts. However, the Alkali Inspectorate was notorious for its cosy relationship with industry and the opacity of its decision-making processes. It was not greatly in evidence regarding the problem of atmospheric emissions from the oil-refining industry, and this may have been one of the factors that compelled local residents to seek a remedy under the common law in Allen v. Gulf Oil Refining Ltd.2

The fact that public law regulation had by now occupied territory that had largely been the domain of the common law at the time of the copper-smelting cases created new tensions between public and private laws. This centred on the extent to which public powers should be permitted to abrogate existing private rights. Of particular concern was the defence of statutory authority, which effectively established immunity from civil liability in respect of nuisances caused by activities authorized under statute. The defence is largely based on an assumption that the legislature must have foreseen possible nuisances yet deemed them to be an acceptable price to pay for the economic benefits flowing from the land use. If such a calculation has been made it would be morally repugnant to require the unfortunate local residents to shoulder the costs of the unwanted by-products of the scheme such as pollution without compensation. However, this is the outcome of the only reported case to emerge from nuisance disputes regarding the UK oil-refining industry, Allen v. Gulf Oil Refining Ltd.

As will be seen, the issue remains of contemporary importance in that statutory authority has been expressly preserved by the latest planning legislation. As noted in the general introduction to this two-part analysis, this is a cause for concern in the light of the proposed spending on large-scale infrastructure projects. Given the centrality of statutory authority in this context, it is necessary to consider the origins and scope of the defence in some detail.

The statutory authority defence in nuisance and Rylands v. Fletcher

The defence of statutory authority applies in public and private nuisance and Rylands v. Fletcher.3 In short, where a development has been sanctioned by legislative powers, such as a private Act of Parliament, the promoter is empowered to cause harm that inevitably flows from the use of those powers. Such harm would otherwise constitute an actionable nuisance or liability under Rylands v. Fletcher. The defence arose as a direct result of the ‘railway revolution’ in the nineteenth century. In R. v. Pease the Court of Kings Bench acknowledged that a railway could not be operated without causing certain nuisances; the startling of horses by steam locomotives in this case.4 As the enabling Act expressly authorized the operation of steam locomotives, it was safe to assume that, by conferring those powers, Parliament had intended to bestow a degree of immunity upon the promoters in respect of that type of harm.5 This new defence of ‘statutory authority’ was later invoked in respect of all manner of railway nuisances including the famous ‘railway sparks cases’ used by Pigou and Coase to illustrate the contrasting economic analyses of law.6

The defence was not used in an environmental context until the case of Manchester Corporation v. Farnworth, which concerned crop damage caused by a new coal-fired power station.7 The House of Lords interpreted the defence in a narrow manner and held that the defendant would have to show that the plant could not have been better designed. In this case it was clear that the plant should have been built with taller chimneys to disperse the pollutants. An injunction was granted and then suspended in order to facilitate the investigation of pollution abatement options. There are no further reports of legal proceedings, although the historical record shows that the height of the chimneys was raised.8 This was despite vigorous assertions made in the litigation to the effect that reconfiguring the plant in this way would be too costly and impracticable. The House of Lords would not visit the subject of statutory authority, in the context of nuisance and infrastructure projects, until some fifty years later.

Allen v. Gulf Oil Refining Ltd

The historical context of the case

In the mid-1960s, Gulf Oil Refining Ltd was authorized to construct an oil refinery at Milford Haven as part of a massive expansion of its European operations. The plant was built on a 450-acre greenfield site, comprising mainly farmland, between the shoreline and the village of Waterston situated half a mile inland. It is important to note that there were two aspects to the planning process. Having taken legal advice, Gulf elected to promote a private Bill to authorize certain aspects of the scheme. This resulted in the enactment of the Gulf Oil Refining Act, which authorized the acquisition of land and the construction of a railway branch connecting the plant to the main line and berthing facilities (including a number of large jetties) to enable tankers to deliver the crude oil. Second, planning consent was sought from Pembrokeshire County Council in respect of the erection of the main refinery. The Bechtel International Corporation was contracted to build the refinery and an integral petrochemicals plant. Work started soon after the Act received the Royal Assent. It was opened by Her Majesty the Queen on 10 August 1968.9

The new plant towered over the village and significantly disrupted the lives of the villagers from the moment it was put into operation.10 The local authority (Haverfordwest Rural District Council) and the refinery general manager (R. J. Horsak) began receiving complaints almost as soon as the boilers were fired up for the first time during commissioning work in May 1968.11 Residents suffered from substantial nuisances including loud roaring and whistling noises, vibration, foul odours, gas flares and the emission of noxious gases including sulphur dioxide.12 Certain residents also complained that the fumes induced nausea and caused sleepless nights and that they lived in perpetual fear of an explosion at the refinery. The fear of explosions was far from fanciful. A major fire had broken out during commissioning work just weeks before the royal opening ceremony, much to the alarm of the villagers, who witnessed workers running for their lives and scaling the perimeter fence.13 The change to the neighbourhood brought about by the construction of the refinery is most vividly described by one villager in the following terms: ‘This lane was once a quiet secluded area, which is why I decided to live here sixteen years ago – now it resembles an active volcano.’14

In the 1960s there was no formal requirement to conduct an environmental impact assessment or anything of the like. Nevertheless, such atmospheric pollution and the effect on nearby populations was not unforeseeable. Pollution caused by other refinery projects, especially in the Thames estuary, had been a cause for concern and had led to questions and debates in Parliament, largely at the instigation of Mr Bernard Braine, the Member of Parliament for Billericay. In 1953 Mr Braine was assured by the then Minister for Housing and Local Government, Mr Harold Macmillan, that the Alkali Inspectorate had the matter well in hand.15 In 1958 the residents of Leigh-on-Sea (coincidentally organized by another Mrs Allen) submitted a petition with 5,800 signatures to Mr Braine, which he forwarded to the Minister for Housing and Local Government, which by this time was Mr Henry Brooke.16 Mrs Allen had also collated letters from local residents, which were submitted with the petition. These catalogued adverse effects from oil refining that precisely anticipated those later reported by the residents of Waterston. The discomforts and nuisances endured by residents in the Thames Estuary included headaches, nausea, sleepless nights and glare from gas flaring and floodlighting. The Minister echoed his predecessor’s confidence that the Alkali Inspectorate was on top of the problem.17 However, by the mid-1960s it seems that the situation was little improved.18 The archival evidence regarding the Gulf project suggests that concerns of this nature were barely addressed at any stage in the planning of the refinery at Waterston.

The Ministry of Fuel and Power was strongly in favour of the Gulf scheme and provided substantial advice and support to the promoters.19 The development of domestic oil-refining capacity was deemed to be in the public interest and a vital means of improving the nation’s balance of payments. The Welsh Office viewed the new refinery as a welcome boost to a depressed local economy and a source of new jobs. Overall, the government of the day was anxious not to stand in the way of the Bill and it was noted with some relief that there was insufficient opposition to merit a public enquiry. Petitioning against a private Bill in order to force an enquiry was a complex and costly process necessitating the use of expensive Parliamentary Agents. This would have provided the only opportunity for raising public health or environmental concerns; however, no objections of this nature appear to have been received. As regards the planning application, public health and environmental concerns were voiced during a meeting of the planning committee, although the matter was not debated at length.20 Nevertheless, the concerns did at least result in the inclusion of a planning condition to the effect that ‘arrangements be made for the purpose of avoiding any nuisance from air pollution, smell, noise, dust or effluent.’21

Whatever arrangements were put in place, and it is not clear what form they took, they were clearly insufficient to avoid the harm. The early complaints raised by the villagers were dismissed as teething problems associated with commissioning work. However, the problems persisted once the plant was put into full-scale production. Nevertheless, the local authority expressed confidence that Gulf had done everything that could be done to mitigate the nuisances. There is no indication that the Alkali Inspectorate was approached and at no point did the local authority consider instigating proceedings in public nuisance or using its powers under the Clean Air or Public Health Acts.22 By 1972, conditions had deteriorated to such an extent that the local public health inspector proposed that Gulf Oil Ltd should purchase every property in the village and pay for the construction of a new settlement some distance away.23 This solution raised the spectre of the economic analysis of tort whereby the polluter is able to buy out conflicting land uses – although, in this case, conditions had become so intolerable that the villagers actively supported the proposal.24 The solution would have been relatively straightforward in that most of the villagers were council tenants. Thus, moving the village would simply have entailed paying the council to build a new development of council properties rather than engaging in individual negotiations with each householder. Initially, Gulf also expressed support for the proposal, and for a time it seemed that a solution had been found; however, without warning the company adopted a much more hard-line attitude. Not only did Gulf reject the proposal to move the village, it denied any liability in respect of the nuisances.25 The company did, however, agree to construct blast barriers, consisting of mounds of earth commonly used at munitions factories, to direct the blast from the village should an explosion occur.26

The litigation

Thus the proposal to move the village never came to pass and in 1975 over 50 villagers commenced proceedings in nuisance; one of those actions was brought by Elsie May Allen and this was selected as a test case.27 Having lost on a preliminary point of law in pre-trial proceedings, on the grounds that Gulf Oil had a defence of statutory authority under the 1965 Act, the case was appealed to the Court of Appeal, where the matter was heard by Lord Denning MR and Cumming-Bruce LJ.28

Lord Denning was heavily influenced by the Victorian railway nuisance cases referred to above.29 He noted that the defence of statutory authority was available only where the Act which authorized the construction of the railway line also extended to the operation of locomotives upon that railway; otherwise damage caused by a locomotive would be without prejudice to existing common law rights. This restrictive approach may have been due to the fact that the legislation did not usually provide for any alternative means of compensation. Turning to the 1965 Act, Lord Denning noted that those parts that enabled the construction of the main refinery and the railway branch line and jetties were silent on the operation of the refinery. In contrast, a provision on subsidiary plant and equipment including machines, pumps, buildings and railway sidings made express reference to the use of such equipment; furthermore, the provision included a right to compensation in respect of harm caused by such use. Lord Denning concluded from this that the draughtsman was well aware of the importance of the distinction between building and operating a plant. Where it was felt necessary to restrict existing common law rights in order to facilitate operation, this was explicitly set out and the possible hardship was offset by a statutory right to compensation. The fact that no similar right to compensation was included in those parts of the Act dealing with the main refinery, railway lines and jetties demonstrated that there was no intention to oust common law remedies.30

The most interesting aspect of Lord Denning’s judgment concerns the observations he made regarding how such statutes should be interpreted in future. In short, he stated that, where statutes do not allow for compensation, they should be construed as operating without prejudice to the common law unless express words are used to justify the harm. In the worst-case scenario, such as a major accident not attributable to any negligence on the part of the operator, Lord Denning clearly felt that it would be extraordinary if injured parties were left without a remedy on the grounds that such harm was authorized:

This is a telling statement, as it shows that Lord Denning was aware of a serious flaw in the legislation in that it did not provide for adequate compensation. By emphasizing the risk associated with the activity, Lord Denning justified interpreting the legislation in a manner that would allow the common law of nuisance to subject the plant to strict liability.32 This reflects the classic justification for strict liability, which is that the person who creates a risk by conducting a hazardous activity should bear the risk of accidents irrespective of whether they are attributable to any fault on his or her part.33

Cumming-Bruce LJ agreed that the wording of the 1965 Act did not establish a statutory authority defence in respect of the operation of the refinery; thus, on this ground, Allen was successful in her appeal. However, although he was conscious of the narrow issue upon which the court was required to rule, in obiter comments Cumming-Bruce LJ was anxious to address wider issues that he considered would be of importance if the case were to proceed to a full trial of the facts. In short, he noted that Allen’s claim did not allege ‘material’ damage to property and it would thus fall to be determined whether the refinery was out of keeping with the character of the neighbourhood according to the test enunciated by Lord Westbury in St Helens Smelting v. Tipping.34 In this respect Cumming-Bruce LJ proposed that the fact that Parliament had authorized the construction of a refinery, which is a large-scale infrastructure project, meant that Parliament must have intended there to be a change in the character of the neighbourhood.35 This view later received some support in a number of cases regarding the effect of planning permission on the character of the neighbourhood.36 However, the nuisances endured by the villagers in Waterston amounted to a substantial interference with the use and enjoyment of property, although they fell just short of the material damage threshold demanded by the ‘character of the neighbourhood’ test. In fact, the arbitrary nature of the distinction between ‘material damage’ and ‘sensible personal discomfort’ is clearly exposed by applying the test to the facts of this case. It seems extraordinary to suggest that nausea, sleep deprivation and fear of explosions should be regarded as the reasonable consequences of living in the shadow of an oil refinery that has arrived uninvited upon one’s doorstep. Yet the material damage threshold trivialized these significant harms. Had the case proceeded to a full trial then would evidence of a few dead plants in Mrs Allen’s back garden have tipped the harm across the material damage threshold? In fact the archival evidence reveals that certain residents could have made out a case of physical damage. One complainant pointed to the fact that it was impossible to tell that her cottage had been recently whitewashed because of the deposition of dirt and soot.37 Harm of this nature constitutes physical damage for the purposes of private nuisance, although, from the claimants’ perspective, the noise, vibration and sleep deprivation would probably have seemed the most serious harms. Notwithstanding the existence or lack of physical damage in this particular case, it has been questioned whether, in Tipping, Lord Westbury intended to set out a general proposition to the effect that ‘material damage’ must always denote physical loss; an alternative explanation is that ‘substantial interference’ could meet the material threshold.38

The Court of Appeal was mindful of the fact that by ruling in favour of the plaintiff it was clearing the way for proceedings that could conceivably result in the granting of an injunction forcing the closure of the plant. However, Lord Denning suggested that, given the economic benefits of the facility, this was a case in which it would be appropriate for a court to exercise its discretion to grant damages in lieu of an injunction in respect of the ongoing harm.39 In the event the need for a court to make this determination was removed by a successful appeal to the House of Lords on the scope of the statutory authority defence.40

Whereas the Court of Appeal had subjected the text of the 1965 Act to close scrutiny, the majority in the House of Lords adopted a broad-brush ‘common sense’ approach. Lord Wilberforce stated that the extension of statutory authority to the operation of the plant was a ‘necessary implication’ of the power to acquire lands and build upon it.41 The ability of a resident to restrain Gulf from operating the plant would have ‘remarkable consequences’ in that the company would be left with a useless multimillion-pound refinery on its hands on land that could not be used for any other purpose.42 In similar vein Lord Diplock added, ‘Parliament can hardly be supposed to have intended the refinery to be nothing more than a visual adornment to the landscape in an area of natural beauty.’43 Lord Roskill agreed that the respondent’s restrictive interpretation of the Act would lead to a ‘most curious’ and ‘illogical’ result.44