How to avoid being an 'industrial nuisance'

Written by: Neil Ham | Published:

Recycling and waste management operations can generate potential issues such as offensive odours, noise, vibration and fly infestations. If the boundaries set by good neighbour principles are breached, then this leaves the door open for claimants to seek hefty compensation. Neil Ham, partner with Clarke Willmott, explains how businesses can protect themselves from claims.

Industrial nuisance claims are a particular risk for recycling and waste management plants when residential properties are located nearby, or at least within the affected zone. This can sometimes be fairly remote from the site - up to one kilometre or so where the prevailing wind is in that direction. The 'character of the locality' is also an important factor.

Damages awards reflect compensation for the inconvenience suffered by claimants.

The length of time covered is typically the six-year period running up to when the claim was filed, but the total period involved can be more than eight years when allowing time for the court trial to take place.

This quickly multiplies out in financial terms and large claims can potentially run into the millions. This can ruin businesses, particularly where payments need to be made within a matter of weeks following the court's decision. However, many industrial nuisance claims are entirely avoidable.

Pointers

Listen to your neighbours; claims are usually preceded by complaints. Therefore, to avoid a potentially costly legal battle, it is essential that you take these complaints seriously and try to resolve the issues before they have to involve lawyers. Putting your head in the sand is not always the most advisable strategy.

Operate responsibly and, if there is inevitable potential nuisance from your operations, ensure that appropriate abatement and improvement measures are in place in order to minimise nuisance to those around you.

Respect the rules; avoiding a claim in the first instance is the best course of action. Operate within and respect the conditions contained in the environmental permit and any planning permission. These are often imposed for public benefit - including 'odour boundary conditions' - and can be useful evidence to support civil claims if they are breached.

Insurance; some claims might be covered by insurance, so check whether your insurance policy does so. Your insurer needs to be informed early to avoid late notification avoidance of cover by them, and liability should not be admitted by the operator. This is essential to avoid the insurer escaping its indemnity cover under the policy. Also, remember to involve your insurance provider in any communications with prospective and current claimants.

Cooperation is key; if a claim has been intimated or issued, then you ought to cooperate relatively fully to avoid criticism by the court (which can also be inflicted by it through adverse costs orders).

Claimants want to be as well prepared as possible and will usually request documentary ammunition to support their claims. If the operator is not prepared to volunteer it, claimants can apply to court for an order requiring compulsory disclosure of often commercially sensitive documents. These can be management/board minutes, emails, electronically-recorded data held on SCADA (supervisory control and data acquisition) systems, daily worksheets, delivery details, supplier/customer profiles and other highly confidential or price-sensitive information. It can even include 'deleted' files where secondary evidence is available in hard copy or back-up data tapes.

Don't underestimate claims: If the nuisance is significant, it is quite possible that your business will be forced to stop or significantly reduce its operations, which can be disastrous as suppliers as well as customers could be lost in favour of your competitors.

Benchmark ruling

However, injunctions are now more difficult to obtain following a decision of the Supreme Court in Coventry v Lawrence, which is the modern benchmark ruling, meaning that fewer injunctions can be expected nowadays to remedy infringements of property rights.

The case strongly criticises the previous tendency to mechanically apply rigid principles and award an injunction rather than damages. In fact, the tendency previously was to award an injunction even if the loss suffered by the claimant was minimal, but the impact on the guilty operator severe.

Get legal advice: Successful industrial nuisance claims can not only financially cripple your business, but could also result in unlimited fines and even imprisonment.

There are also potential collateral, financial and commercial criminal consequences of court claims. Previously completely private internal information can become public in court hearings (subject to some exceptions) and this can subsequently be used, even if only indirectly, to launch a criminal prosecution.

Directors can be faced with prison sentences, especially where breaches are deliberate, flagrant or repeated and cause material damage to people or the environment.

The Proceeds of Crime Act 2002 has also increasingly been brought into play, where 'confiscation orders' can be made against the operator. These attach to all 'illegal' income generated as a result of the offence, namely the total gross amounts, not just the profit element.

This is a valuable and correspondingly attractive cash incentive for the government/Environment Agency and also local regulators councils.

Examples seen in decided court cases include matters such as breaches of planning permission (where revenue such as rental income can be confiscated) although the principle is equally applicable to other regulated operations such as waste disposal or recycling, where the gross revenue figures would be assessed, and then forfeited.

There is generally a six-year limitation period for civil damages claims, but there is no time limit at all for prosecutions brought on indictment. The proceeds confiscated could therefore relate back to many previous years of business, particularly given the availability of computerised electronic records.

This could therefore represent a substantial commercial exposure for businesses, particularly those operating 'on the fringes'.

Take complaints seriously

Claims can not only be costly but can, in some instances, result in injunctions preventing your business from operating and even, in some cases, imprisonment sentences for directors found guilty of criminal offences, which include breaches of environmental permit conditions.

In order to prevent claims from being successful, you need to respect those around you and not act beyond the good neighbour reasonable principles. An environmental permit or planning permission having been granted is not a defence.

Your business, as well as your staff, still need to operate responsibly, within the conditions set by your environmental permit or any planning permission.

If nuisance is inevitable, try making improvements in order to minimise disruption to others, together with prompt and full liaison with any regulatory body and also reasonable cooperation with the claimants.

Also, remember that liability should not be admitted unless absolutely necessary. Acute care needs to be taken in the distribution of any documents or communications - internal or otherwise - to minimise the risk of compulsory disclosure in any civil, regulatory or criminal proceedings, since their being 'commercially confidential' or 'sensitive' is not enough to protect them.

Neil Ham can be contacted at Neil.Ham@clarkewillmott.com or on 0845 209 1386



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