The Land and Environment Court of Appeal (“MÖD”) handed down a judgment in Case No M 13114-20 on 18 January 2022. The case concerned environmental damages in accordance with Chapter 32 of the Swedish Environmental Code (1998:808) (“MB”) due to disturbances as a consequence of redevelopment work in the Slussen area of Stockholm.
According to the judgment, the City of Stockholm (the “Municipality”) is obliged to pay approximately SEK 18.5 million in environmental damages to Erik Gondolen AB (the “Company”).
The judgment is interesting because it shows that disturbances resulting from a project as large as Project Slussen cannot be considered to be common in that location or in general. The judgment also clarifies that disturbances that go on for a long time without interruption (which in the case in question was approximately two years) should not reasonably be tolerated if they have given rise to significant damage. That applies regardless of whether the activities giving rise to the disturbances could be regarded as socially beneficial.
Concerning the legal regulation of environmental damages
According to the MB, damages are payable for personal injury, property damage or pure economic loss that an activity linked to a particular property has caused in its surroundings. As a general rule, the liability is strict, which means that the person causing the damage is not required to have acted intentionally or negligently. In accordance with the provisions, it follows that damage that was not caused intentionally or due to negligence is only compensated if the disturbances that caused the damage should not reasonably be tolerated in view of the circumstances at the location or their general occurrence under comparable circumstances.
The disturbances covered by the environmental damage regulations are listed in Chapter 32, section 3 MB. Disturbances that may give rise to liability for compensation include pollution of water areas, contamination of groundwater, change in groundwater level and air pollution, which also includes troublesome harmless odours, soil pollution, noise, tremors and other similar disturbances. Other similar disturbances are not defined in the provision but may include cordoning-off of streets, spoilage of the landscape, discomfort to animals, sparks and bright lights.
In accordance with Chapter 32, section 6 MB, the person who is liable for damages is the person who carries out the damaging activity or who has the damaging activity carried out in the capacity of a property owner or landowner, i.e. the operator. Others making use of the property for business or public activities can also be liable for environmental damages. This may be a tenant or a leaseholder, for example, and may also be a contractor carrying out a building project. If the property is not used for business purposes, liability for disturbances in accordance with Chapter 32, section 3 MB only applies in the event of damage caused intentionally or due to negligence.
The liability of those responsible is joint and several, though the parties themselves can regulate how the liability is to be allocated. This normally occurs, for example, in construction contracts between clients and contractors. The contractual regulations applying between a client and a contractor, for example, are not binding on an injured third party, but that party can choose to bring an action against any of the parties identified as liable in Chapter 32 MB.
In environmental damage cases, there is a clear relaxation of proof regarding the causal relationship between the disturbance and the damage. According to that rule on relaxation of proof, it is considered sufficient for the injured party to be able to show that it is highly likely that such a causal relationship exists.
Background to case No M 13114-20
In autumn 2013, the Slussen Local Development Plan gained legal force and in early 2016 the City of Stockholm began demolition and construction work in and around the lock in order to carry out the changes to the Slussen area outlined in the local development plan. This means, among other things, construction to make new public spaces, quays and streets possible as well as to enable new sluice channels and discharge channels to be constructed from Lake Mälaren to the Saltsjön. The work is expected to continue until 2025.
The Company has been carrying on a restaurant business in premises on a property within the planning area of the local development plan and entered a petition in the case that the Municipality be ordered to pay environmental damages of SEK 37,723,602.
As a basis for its action, the Company stated that the redevelopment of Slussen disrupted its business through noise, tremors, disruption of access, cordoned-off areas, traffic diversions and spoilage of the landscape.
In support of the assertion that the disturbances should not need to be tolerated, the Company stated that the redevelopment is not an ordinary, normal feature of the urban environment. It was stated that the implementation of the project included investment expenses of SEK 12.1 billion, which the Company compared to other infrastructure projects such as Norra Länken, which cost SEK 10.6 billion, or the City Tunnel in Malmö, which cost SEK 8.6 billion.
The Municipality opposed the action, stating that the Company did not suffer any damage. If it could be verified that the Company had suffered damage, the Municipality argued that it had not been caused by the redevelopment work at Slussen.
Furthermore, the Municipality stated that the redevelopment work had not disrupted the Company’s business through tremors, noise or spoilage of the landscape. According to the Municipality, the cordoned-off areas due to the redevelopment of Slussen had not disrupted access to the restaurant. Nor did any other disturbances occur that could be related to the redevelopment of Slussen. The Municipality also stressed that any disturbances should reasonably be tolerated since the redevelopment of Slussen was in the public interest in order to secure the regulation of Lake Mälaren and thereby prevent future flooding as well as the redevelopment of the old central traffic installation. The Municipality also stressed that infrastructure projects such as the one in question were common in urban environments.
Judgments in the courts
The questions disputed in the case included what disturbances the work on Slussen caused, whether the Company suffered damage, whether there was a causal relationship between the disturbances and the damage and whether the disturbances in such cases were common in that location and in general and should reasonably be tolerated. Below we go through the parts of the courts’ judgments that we consider most interesting.
The Land and Environment Court of Appeal
The Land and Environment Court of Appeal upheld the judgment handed down by the Land and Environment Court and stated in its brief findings that the court fully agreed with the judgments by the lower court relating to disturbances, damage and causal relationship. The only clarification issued by the Land and Environment Court of Appeal in its findings stated that the disturbances from the redevelopment of Slussen, due to the length of time they had been going on (over two years) and because of the extensive damage that the disturbances were judged to have caused, did not reasonably need to be tolerated in view of the circumstances at the location or of their general occurrence under comparable conditions.
The Land and Environment Court
What disturbances did the redevelopment give rise to?
The Land and Environment Court did not consider that Project Slussen’s alleged spoilage of the landscape constituted a disturbance in accordance with the MB. This is because the view, which consisted of construction cranes, etc. during the construction period, did not constitute a permanent aesthetic change. The court also pointed out that the view did not appear to have adversely affected the experience of the restaurant guests, according to reviews cited in the case.
The question of noise and tremors was considered to be a disturbance, because restaurant guests expressed discomfort relating to blasts and to the fact that it was not possible to talk in a normal conversational tone while the blasts were going on. The Land and Environment Court considered that the oral evidence produced by the Company provided a clear view of the situation and it was not contradicted by the Municipality’s evidence, which is why it was considered to have been demonstrated that the business was subjected to these disturbances.
The question of disruption of access as a result of the redevelopment of public transport and parking was considered to constitute another disturbance in accordance with Chapter 32, section 3, first paragraph, subparagraph 8 MB. According to the court, it had been shown that the demolition work made it impossible for vehicle traffic to reach the main entrance in the same way as prior to the redevelopment. Although no full cordoning-off had taken place, the court considered that the ability to reach the main entrance was also adversely affected by the restructuring to public transport which resulted in longer walkways.
Damage and causal relationship between disturbances and damage
The Company considered that it had suffered a pure economic loss in the form of a reduction in the number of guests, which entailed a reduction in total sales. In support of this, the Company presented a study consisting of the previous capacity and the expected capacity during the years of damage. The Land and Environment Court did not consider that the supporting evidence cited by the Municipality indicated that the Company would be able to continue to perform in the same way as before the disturbances began, so that damage was considered to exist.
The damage was finally estimated at SEK 18.5 million. The court did not consider that the Company should receive the full amount claimed because the court considered that the Company had not shown that the damage should be calculated against economic performance improving over the years. According to the Land and Environment Court, the damage calculation would therefore take place during the years of damage, taking as a starting point the level of total sales that existed prior to the base year of 2015.
With regard to the causal relationship between the damage and the disturbances, the Company cited evidence in the form of reviews and awards which, according to the court, provided grounds for the assessment that the decrease in total sales was not due to poorer quality, as the Municipality argued. The Municipality was considered unable to provide evidence that contradicted the Company’s claimed causal relationship and for that reason the standard of proof was considered to have been met.
Are the disturbances common at that location or in general and should they reasonably be tolerated?
The Land and Environment Court initially stated that the assessment of whether such disturbances were normal at that location should be carried out in the restricted area in question and not compared to general circumstances in and around Stockholm. The extensive change and redevelopment that Project Slussen would entail occurs only on a few isolated occasions per century. The disturbances such as noise, tremors, cordoning-off and restricted access resulting from the project were therefore not to be considered normal or common in general.
According to the court, the assessment of whether the disturbances should reasonably be tolerated must therefore be carried out in the light of a free weighing of reasonableness, taking into consideration factors such as the nature of the disturbance, the combined impact of several different disturbances, whether the disturbance could have been foreseen, whether standards for disturbances were exceeded, the extent of the damage, whether the injured party is particularly sensitive to disturbance and whether the injured party is a private individual or a company. In general, an injured party may have to endure slightly more if the activities that have given rise to the disturbance are in the public interest.
The court issued the assessment that although the Municipality attempted to minimise the damage to the Company by, for example, arranging temporary footbridges where public transport was affected or providing information on Project Slussen and changes in the area in the press and on social media, the disturbances occurring are not something that the Company should reasonably tolerate. This is mainly due to the fact that the disturbances have been going on for an extremely long time. The pure economic loss that the Company was considered to have suffered amounted to a significant sum. The fact that the Slussen project is indisputably a socially beneficial activity was not considered to alter the assessment. Nor did the court consider that the assessment would be affected by the fact that the project had been discussed for a long time before it gained legal force. That circumstance could not mean that the Company should have foreseen the damage or that it took a deliberate risk through its establishment on the site in 1994.
Comments
The judgment raises a number of interesting aspects for both clients and contractors, as well as for businesses and property owners affected by disturbance.
The ruling illustrates that environmental damage may come about in the case of disturbances deriving from a socially beneficial activity. It also shows that disturbances caused by extensive works resulting from construction in accordance with a local development plan or major infrastructure project may constitute disturbances in accordance with the MB that are not common in that location or in general and should not reasonably be tolerated. That is the case even if it is work carried out in a central urban environment and is of social importance. One decisive factor for determining whether they can be considered as common in that location or in general is how often projects of the size in question occur and the period for which the work is carried out and the extent of the damage to which the disturbances give rise. However, when assessing whether such disturbances are common in that location or in general, an assessment must always be carried out in relation to the area in the vicinity of the project in question. That means that the assessment could have had a different outcome in different parts of a city.
One key question affecting clients and contractors is the settlement of the final cost and ensuring that measures to minimise the damage are adopted during the implementation of the project. During an ongoing project, the risk of environmental damage can also give rise to cost adjustments. Measures adopted to complete work within the prescribed period that risk causing noise, for example, may also risk causing disturbances that provide grounds for compensation.
The ruling is also interesting in terms of the assessments of the various disturbances as constituting disturbances. The judgment finds, for example, that restructuring public transport caused disruption and made it more difficult to reach the Company’s main entrance. That was despite the fact that no full cordoning-off had taken place. Longer walkways had been installed instead. Traffic diversions would also have meant that vehicle traffic could not reach the main entrance in the same way as before. Both the Land and Environment Court and the Land and Environment Court of Appeal found that the disruption to access in the case constituted a disturbance in accordance with Chapter 32 MB. However, it needs to be noted that the disruption in the individual case should not reasonably be tolerated in order for such a disruption to access to qualify as environmental damage. Since traffic diversions or restructuring of public transport may involve what is referred to as “other disruption”, it is important for a client and contractor to ensure, when implementing such measures, that measures are adopted to minimise the damage in order to minimise the risk of damage to the businesses concerned.
The case also makes clear the importance of evidence and the fact that, despite a relaxation of proof in the question of the causal relationship between disturbance and injury, the injured party is required to be able to prove the extent of the damage. In the case, the Company had requested compensation of SEK 37.7 million, though the final amount imposed amounted to approximately SEK 18.5 million because the Land and Environment Court did not consider that the Company had shown that the economic performance of the business during the years of damage would have had the outcome that the claim was based on. In our opinion, this shows the importance of documentation relating to total sales, visitors and economic performance over time.
Given the large number of infrastructure and urban development projects in progress at present, our assessment is that the number of environmental damage cases may rise. The ruling in the judgment with which we are concerned will then be able to form a basis for arguments as to what should be regarded as common at that location or in general and where the limit is for what should reasonably be tolerated from neighbours and other parties concerned.
Do you want to know more about the judgment or did the article raise other questions? You are welcome to contact any of us or your regular contact at Lindahl.
