Laying down the law - when the regulator gets it wrong

28th October 2016

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  • Business & Industry ,
  • Waste ,
  • Water ,
  • Prosecution ,
  • Corporate fine


Aliyssa Glen

Simon Colvin gives an update on recovering damages and financial losses from environmental regulators

The recent cases of Sebry and Mott, alongside the reported instances of the Environment Agency voluntarily contributing to the clearance of some illegal waste sites – such as at Great Heck in Yorkshire (see panel), and at Orpington in Kent – suggest the prospects of recovering compensation and damages from the regulator might be better now than in the past.

Just two years ago (the environmentalist, July 2014, p15), it seemed almost impossible to bring a damages claim to recover any financial losses a business might have suffered as a result of the regulator making a mistake.

A special relationship

The 2013 case, Dodson v Environment Agency, illustrated how difficult it could be to show that a regulator owed the person that had suffered a loss a duty of care, which would underpin any damages claim. That is because the courts set the bar very high. They were looking for either a ‘special relationship’ and an ‘assumption of responsibility’, or a situation where it is fair, just and reasonable to impose a duty and there is proximity of relationship between the parties.

However, a watershed moment occurred in Sebry v Companies House and The Registrar of Companies [2015]. A company described as Taylor and Sons was marked on the Companies House public register as being in liquidation. However, the correct name of the company that had collapsed was Taylor and Son – not Sons.

The effects of this mistake were that Taylor and Sons lost key contracts, supplier credit terms and cash advances from its bank, all of which led to the company filing for its own administration. The owner of the firm, Philip Sebry, successfully pursued a claim against Companies House for damages. The court decided that the register of companies did owe Taylor and Sons a duty of care on the basis there was a special relationship between the parties and there had been an ‘assumption of responsibility’ by Companies House towards the company.

On the face of it, this case may not seem immediately relevant to environmental regulators. However, the key issue relates to the liability of a government agency for negligence. As such, the fact that Companies House was held to be liable for getting Taylor and Sons’ name wrong is relevant when looking at the liability of the Environment Agency for damages for its own negligence.

Human rights

R (Nigel Mott) v Environment Agency [2015] centres on salmon fishing on the River Severn using baskets known as putcher ranks. The case highlighted another possible route to the recovery of damages from environmental regulators: the Human Rights Act 1998 (HRA). In Mott, the Environment Agency imposed restrictions on the use of putchers to catch salmon in the Severn. The restrictions had a significant impact on Mott who had a lease of fishing rights on the river where he used the baskets to catch salmon for a living. The agency did not offer Mott any compensation for the resulting impact on his livelihood. He brought an action against the regulator claiming its restrictions were unlawful. Mott sought damages for a breach of Art 1 Protocol 1 of the HRA, which relates to the protection of property.

The Court of Appeal had to consider whether the restrictions amounted to ‘control’, which did not trigger a right to compensation, or ‘deprivation’, which did. The court decided that, because the restrictions would ultimately reduce the number of salmon Mott could catch by 95%, this amounted to deprivation. Mott was therefore entitled to compensation and his claim for damages was allowed.

The case is important because the HRA protects companies and individuals. As a result, the agency needs to have regard to the impact of its actions and the restrictions that it imposes on individuals and companies. If those restrictions can be said to amount to deprivation, compensation may be payable. If it is not paid, the agency may find itself subject to a claim for damages.

The right foundations

The foundations on which to base an action against environmental regulators to recover financial compensation and damages are stronger than they were previously. The courts will always be reluctant to impose a duty of care on the environmental regulators, but the mountain is now a little easier to climb.


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