Putting a price on "residual stigma'

Roger Pearson looks at an Appeal Court ruling on residual stigma which could affect the outcome of future environmental waste cases. AN Appeal Court decision is being viewed as a signpost ruling for the future assessment of damages in land pollution claims.

The Ministry of Defence (MoD) was sued following leaks of radioactive uranium and plutonium from the Atomic Weapons Establishment (AWE) at Aldermaston in Hampshire.

It is hoped that the subsequent decision will expand the scope for recoverable damages in such cases into new areas.

The case centred on Blue Circle Industries' (BCI's) claim that an estate which it owned was polluted by atomic waste after ponds on the adjacent AWE site flooded in storms and overflowed.

BCI's site included a 137 acre estate comprising a large Victorian manor house that operated as a hotel and conference centre, an 80,000 sq ft showpiece office building, four lodges, an ornamental lake, landscaped grounds and other uncultivated areas.

AWE knew of the contamination, which later proved to be above legally acceptable levels, within a month of it happening in 1989. However, the full extent of the leak was only disclosed to BCI in 1993, when it was negotiating to sell the site for more than £10m. As a result, the sale fell through.

When BCI sued in the High Court under the provisions of the Nuclear Installations Act 1965, Mr Justice Carnwath awarded damages calculated on the basis primarily of the lost sale and the cost of holding the estate during the period it was unsaleable. But two weeks ago, BCI's original High Court award of £6,045,617 with interest was increased in the the Court of Appeal by a further £329,571.

Amanda Shepherd of Reynolds Porter Chamberlain, who with partner Diane Donnelly was instructed by BCI, says: "The decision has important implications for polluters, their insurers and those valuing polluted property."

The MoD, which spent £350,000 on a clean-up operation, challenged the finding that in the eyes of the law there had been damage to property. It argued that even if there had been damage, it was only to marsh land and compensation for damage should not be extended to the rest of the estate.

However, in what Shepherd believes is its first ruling on the point, the Court of Appeal held that BCI was entitled to damages in respect of its own clean-up costs and "residual stigma" – the continuing diminution in value of the property as a consequence of its pollution history. This, she says, "expands recoverability of damages into new areas" in pollution cases.

"The court's treatment of residual stigma will be of particular interest to all involved in cases dealing with valuation of stigmatised land," she says.

"The court has accepted that stigma resulting from contamination is recoverable and is distinct from stigma resulting from fear of future recurrence, which is not. This decision has important implications for polluters, their insurers and those valuing polluted property.

"It will not be every case where the contaminant is something as controversial as plutonium, but it is possible that contamination by other substances, such as PCBs or asbestos could also, in the right circumstances, produce the same result."

She adds: "This appears to be the first Court of Appeal authority for the proposition that in some circumstances both the costs of repair and the diminution in the value of the relevant property can be claimed."