Oil company Total is facing a substantial “economic loss” claim from rival oil company Shell, arising from the explosion at the Buncefield oil depot in Hertfordshire in 2005.
Waller, Longmore and Richards LJJ ruled that Shell is entitled to claim for lost profits after fuel stored at the depot was destroyed in the explosion, which resulted from Total’s negligence.
Shell, which used the Buncefield plant to store aviation and other fuels claimed that it should be compensated for the considerable disruption that the explosion had caused to its business.
Total argued that Shell was not entitled to compensation because it was not the legal owner of the pipelines and storage facilitiesthat it used at Buncefield and that only the legal owner can claim compensation for damage to property caused by negligence.
Overturning the March 2009 decision of David Steel J dismissing Shell’s claim, the Court of Appeal ruled that Shell was the “beneficial owner” of the facilities, which is sufficient ground to claim damages for loss of business caused by the fire.
A further hearing will be held to determine how much Total will have to pay.
The judges also rejected Total’s challenge to the High Court’s decision that it alone was liable for the blast – the company had argued that Chevron, the
Ted Greeno, the lead partner at Herbert Smith, which acted for Chevron, commented: “This is a resounding victory for our client. Chevron has always maintained that Total should take responsibility for the consequences of its negligence in running the Buncefield terminal.
“The judgment of the Court of Appeal confirms that the complex arrangements for the joint venture have not at any time in its history afforded Total an indemnity for the consequences of its own negligence as the operator of the terminal,” he said.
Shell UK Ltd and others v Total UK Ltd and another; Total UK Ltd v Chevron Ltd Court of Appeal (Waller, Longmore and Richards LJJ) 4 March 2010.
Laurence Rabinowitz QC, Edwin Johnson QC and Richard Handyside QC (instructed by Simmons & Simmons) appeared for the appellant in the first appeal; Lord Grabiner QC, Christopher Butcher QC, Alan Maclean QC, and Alexander Antelme (instructed by Davies Arnold Cooper LLP) appeared for the first respondent in the first appeal; Justin Fenwick QC and Paul Sutherland (instructed by Pinsent Masons LLP) appeared for the second and third respondents in the first appeal; Lord Grabiner QC, Christopher Butcher QC, Alan Maclean QC, Alexander Antelme and Colin West (instructed by Ashurst LLP) appeared for the appellants in the second appeal; Jonathan Sumption QC and Michael Bools (instructed by Herbert Smith LLP) appeared for the respondents in the second appeal.
