SHELL UK LTD AND OTHERS V TOTAL LTD AND ANOTHER (THE BUNCEFIELD LITIGATION)

[2010] EWCA Civ 180, Court of Appeal, Lord Justice Waller, Lord Justice Longmore, Lord Justice Richards, 20 March 2009

Tortious liability - Explosion at oil refinery - Mere economic loss - Whether proprietary or possessory interest in property required to claim damages for economic loss - Damages claimed by claimant with mere contractual rights - Contract interpretation - Contract failed to mention negligence - Indemnification against own negligence

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 which had been overfilled. The incident caused widespread damage. Mr N, the site supervisor, had caused the explosion and the dispute between Total and Chevron was whether Total on its own or a joint venture company owned by both was vicariously liable for N's actions. The judge at first instance ([2009] 2 Lloyd's Rep 1) had held that Total was vicariously liable for the negligence of N. There was no appeal against that decision, but Total appealed against the decision on the applicability of the indemnity provisions in the relevant site agreements. There was also a cross-appeal by Chevron against the judge's decision that at the time of the incident, Total had indeed become a participant in the facility within the meaning of the relevant agreements, and that it was therefore entitled to an indemnity under the agreements. There was also an appeal by Shell with Total as respondent. As a result of the explosion, Shell had suffered loss or damage to their own fuel in relevant tanks and pipelines owned by UKOP Ltd and WLPS Ltd. These were service companies in which legal title to the land and the facilities in which Shell had a beneficial interest was vested. That loss had been compensated by Total. However, Shell had also suffered losses through its reduced ability to supply fuel to customers. Shell had brought proceedings in negligence, nuisance and Rylands v Fletcher against Total in order to recover that cost. Shell's claims had failed at first instance because it was unable to overcome the rule that there can be no recovery for negligent infliction of mere economic loss. Its argument was that: (i) even if it had no possessory title to the damaged tanks and pipelines it had a (shared) equitable ownership of them and that was enough to give it title to claim for its economic loss. To the extent that it needed to join the legal owners of the pipelines, it had done so because UKOP Ltd and WLPS Ltd were parties to the action; (ii) it anyway did have a good (shared) possessory title to the pipelines at the time of the damage; (iii) the rule requiring a legal or possessory title before recovering for economic loss had always been subject to exceptions and justice required a further exception to be made to fit the facts of this case; (iv) the rule should anyway be abandoned; and (v) Shell had alternative claims in nuisance and under the rule of Rylands v Fletcher, which cover the same ground; beneficial ownership of land had always been sufficient to sustain a claim in nuisance, of which the rule in Rylands v Fletcher was an aspect. Total, who had admittedly damaged the pipelines owned by UKOP Ltd and WLPS Ltd, submitted that it owed no duty to Shell who had a contractual right to have its fuel loaded into, carried and discharged from the pipelines.