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For businesses operating in the manufacturing sector, good compliance in this stringent regulatory landscape can provide a false sense of security. This is because compliance does not necessarily provide protection from expensive disputes such as nuisance claims. Manufacturers are most at risk of claims of private nuisance which arise where something a person is doing on their own land, which they are lawfully entitled to do, becomes a nuisance to neighbours in the surrounding area. An increase in the number of nuisance claims over recent years means that it is now more important than ever for manufacturers to actively safeguard their businesses against the potential costs of defending a nuisance claim.
Manufacturers will be alert to the potential consequences of enforcement action from the regulators for non-compliance with applicable legislation. It is worth noting that the new Sentencing Guidelines for environmental offences sentenced after 1 July 2014 have resulted in a substantial increase in the scale of fines being imposed on corporate defendants. This approach has been upheld by the Court of Appeal in the recent case of Thames Water Utilities Ltd, R v [2015] EWCA Crim 960, where a fine of £250,000 was considered appropriate for a very large company “to have a material impact on the finances of the company as a whole”. In addition, new powers of sentencing have been given to the lower courts to be able to impose larger fines for offences committed after 12 March 2015. Alternatively, civil sanctions may be considered for certain offences under the Regulatory Enforcement and Sanctions Act (RESA) 2008.
However, even where a manufacturer has complied with the applicable regulations, it may still be at risk of claims by aggrieved individuals who consider an act of the manufacturer has become a nuisance to them. The rise in nuisance claims is attributable to a variety of factors, in particular significant changes to the law. The Court of Appeal clarified the position in the case of Barr v Biffa Waste Services [2012] stating that a business will be unable to rely on a defence that they have complied with the terms of an environmental permit under the Environmental Permitting (EP) Regime and thus no nuisance has occurred. More recently, the Supreme Court has further confirmed in Coventry v Lawrence [2014] that the grant of planning permission would not prevent a party from bringing civil proceedings with respect to nuisance.
It is becoming increasingly common for law firms to target companies who are susceptible to nuisance claims. Once identified, these firms market heavily to residents and businesses in the surrounding areas and advertise “No Win No Fee” conditional fee arrangements. Group Litigation Orders are promoted by these solicitors as saving legal costs (as they would be divided between a large number) and can result in claims from many individuals.
In cases of non-compliance, a manufacturer can therefore be exposed to a potential two-pronged attack from both the regulator and individual claimants resulting in high costs in legal fees, fines and damages, whilst resources would be better placed in abating the nuisance.
Damages for private nuisance claims have traditionally been modest. However, the costs of settling a Group Litigation Order to compensate a number of individual claimants, whilst in some cases also defending enforcement action from a regulator, is likely to have significant consequences for businesses.
Steps to take
Manufacturers should take early action to avoid nuisance claims by keeping in contact with the regulator to ensure compliance with the relevant legislation and by communicating with the local residents to make them aware of the resources that are being spent on reducing any nuisance.
There is an argument that these types of nuisance claims should be heavily resisted by manufacturers as succumbing to such pressure may only lead to similar action in the future. In any event, it is critical that the full range of implications for those operating in the manufacturing sector are understood and that safeguarding measures are rigorously implemented.
For further information please contact Alice Daniels at alice.daniels@michelmores.com, 01392 687534 or Nicola Canty at nicola.canty@michelmores.com, 01392 687760.
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