COLOUR QUEST LTD AND OTHERS V TOTAL DOWNSTREAM UK PLC

[2009] EWHC 540 (Comm), Queen's Bench Division, Commercial Court, Mr Justice David Steel, 20 March 2009

Tortious liability – Explosion at oil refinery – Vicarious liability –Employee whose actions causative of explosion at storage site employed by one company but seconded to other company managing the site – Liability for actions of employee – Application of rule in Rylands v Fletcher – Effect of consent – Private nuisance – Public nuisance – Economic loss – Whether proprietary or possessory interest in property required to claim damages – Damages claim from claimant with mere contractual rights

At about 06.00 on Sunday 11 December 2005, a number of explosions occurred at the Buncefield Oil Storage Depot in Hertfordshire. The cause of the explosion was the ignition of an enormous vapour cloud that had developed from the spillage of some 300 tons of petrol from a storage tank. The large fire engulfed a further 20 fuel storage tanks and burned for a considerable period emitting large volumes of black smoke which remained visible over Southern England for several days. The Buncefield depot was a large and strategically important fuel storage site or tank farm used by a number of oil companies. There was a throughput of 2.5 million tonnes per year. The depot received petrol, aviation fuel, diesel and other fuels by pipeline. There were two groups of claimants referred to respectively as “outside the fence” (OTF) and “inside the fence” (ITF) claimants, depending on the type of claim and its relation to the storage facility’s perimeter fence, which would affect the application of the rule in Rylands v Fletcher to the claimant. Among the defendants were Chevron and Total, two oil companies active on the site. The primary issue between them was whether Total or Hertford Oil Storage Ltd (HOSL), a joint venture between Total and Chevron, was vicariously liable for the faults in the operation of the Buncefield site which were causative of the explosion. There was no suggestion that both companies were liable. The issue arose only in regard to those employees engaged in work at Buncefield and in particular Mr N, the supervisor on duty at the HOSL site at the time of the incident. It was accepted that his want of care was causative of the explosion. Mr N’s contract of service was with Total, but Total argued that he having been seconded to or borrowed by HOSL was to be regarded as the employee of HOSL thus rendering it liable in place of Total. The issue was whether the power of direction of the group of employees that included Mr N (together with all others working at the HOSL site) had been transferred from their legal employer Total to HOSL. This issue included focus on a number of factors including: (a) Who engaged and paid Mr N? Who could dismiss him? (b) How long had he worked at the HOSL site? (c) Whose equipment was he using? d) What role did the off-site Total staff have in regard to giving instructions to the “site staff”? The judge held that on an assessment of all factors, Total had failed to discharge the burden of establishing that HOSL was responsible for the negligence of Mr N and was therefore vicariously liable for his negligence. As a result, Total accepted liability to OTF claimants on the basis of the rule in Rylands v Fletcher, that is, it had kept the petroleum products on the HOSL site and they had escaped and caused damage to OTF claimants and no fault was required on the part of Total. In relation to ITF claimants, the judge declined to apply the consent exception from Rylands v Fletcher, rejecting Total’s argument that the ITF claimants had given their consent to the bringing of oil product onto the HOSL site and its accumulation there. The question was also the relationship between Rylands v Fletcher liability and liability for nuisance. As for the case for private nuisance, Total’s argument was that no claim in private nuisance could be advanced for a short-term or isolated escape, as opposed to a state of affairs. The judge rejected Total’s defence, saying that on appropriate facts there could be liability in private nuisance for a single or isolated escape as opposed to a state of affairs where there was both unreasonable or negligent use of land and foreseeability of escape. In addition, the judge found that the claim against Total for loss in public nuisance had been made out. The right to claim was not confined to rights of enjoyment or use of proprietary rights. Shell claimed against Total in negligence, Rylands v Fletcher and nuisance under three heads, two of which were resisted by Total on the argument that they were pure economic losses. Having concluded that an immediate right to possession, leaving aside any equitable interest that the claimant may have, does afford a sufficient interest in property to allow recovery for losses flowing from damage to or loss of the property, the judge nevertheless went on to hold that none of the claims succeeded; Shell having had mere contractual rights and not a legal ownership or possessory title. The rule was not affected by any of the four grounds advanced by Shell, namely that: (a) Shell was entitled to immediate possession of the damaged assets; (b) The claim fell within the exception to the general rule identified in Morrison Steamship Co Ltd v Greystoke Castle [1947] AC 265; (c) The claim fell within the exception to the general rule identified in Caltex Oil (Australia) Pty v The Dredge “Willemstad” (1976) 136 CLR 529; or (d) The exclusionary rule was no longer good law.