Supreme Court rules on liability for dike shifts - International Law Office

Background
Supreme Court decision

On December 17 2010 the Supreme Court delivered an important judgment which will have repercussions for the insurance sector concerning loss or damage resulting from a dike shift.(1)

Background

During the night of August 25 to 26 2003, the intermediate drainage embankment at the Ringvaart belt canal in Wilnis shifted by between 5.5 metres and 7.5 metres along a length of 60 metres in the direction of the residential area behind it. This caused some 230,000 square metres of water to flood the polder, and consequently the residential area. This embankment is a peat dike which was created during the draining of the polder at Groot Mijdrecht about 150 years ago. The embankment in question is a secondary, regional water-retaining structure. The Higher Water Board for Amstel, Gooi and Vecht is the proprietor and administrator of this intermediate drainage embankment.

A number of reports were issued in connection with the cause of the dike failure.

In the proceedings that followed, the municipality sought an order for damages against the Higher Water Board in connection with the loss and damage incurred as a result of the dike failure in question. The municipality based its claim on Book 6, Section 174(1) of the Civil Code. Under this section the owner of a structure which fails to meet the relevant mandatory requirements, thus exposing persons and structures to risk, will be held liable if the risk is realised. However, this liability does not arise if the proprietor would have known the impending danger as soon as it arose and could not have prevented the damage or loss. In the case of public roads, this strict liability rests with the government body that is charged with maintaining the condition of the roadways. 'Structures' are defined as permanent buildings and works with permanent foundations, whether directly connected to the ground or to other buildings or works. For the purposes of this section, the 'public road' is also defined as the road body and the equipment on the road.

The court dismissed the municipality's claim. It ruled that the 'embankment' was to be defined as a structure, but that it conformed to the mandatory requirements that would be deemed applicable in the given circumstances. The Higher Water Board was not obliged to regard the prolonged drought immediately preceding the dike failure as a threat to the stability and safety of water defences.

However, the court of appeal held the Higher Water Board liable, relying on Book 6, Section 174 of the code (strict liability for structures). Based on the reports, the court of appeal ruled that adverse conditions led to the embankment defect. On those grounds, the embankment did not comply with the mandatory requirements that would be deemed applicable in the given circumstances. The court of appeal ruled that this did not take away from the fact that the extreme drought had not been recognised as a risk to the stability of peat dikes. Owing to this lack of awareness, the Higher Water Board was liable.

Supreme Court decision

The Supreme Court first held that for purposes of Book 6, Section 174(1) of the code, the Higher Water Board was the proprietor of the embankment.

The Supreme Court based its ruling on the principle that the term 'structure' has a broad interpretation under the provisions of Book 6, Section 174 of the code. A structure within the meaning of this provision cannot arise merely due to a natural occurrence, but rather must have been brought about by human intervention. Human activity must have contributed to the (lasting) purpose or function of the work in question. The extent to which human intervention has contributed to the same will depend on, among other things, the type of work and the purpose or function. The Supreme Court ruled that the court of appeal's finding that the dike body had arisen as a result of earthworks and land reclamation was based on the knowledge of water defences, was maintained in accordance with the requisite guidelines governing same and was provided with a retaining wall, justified the finding that the peat dike could be classified as a structure within the meaning of Book 6, Section 174 of the code.

In relation to the faulty condition of the embankment, the point at issue was the safety requirements to which the structure must conform.(2) In setting these requirements, matters such as standards of conduct, safety regulations and standards of care play an important role. However, the mere circumstance that a structure generally conforms to the mandatory safety requirements does not alter the fact that the structure may be defective nonetheless. The faulty condition will depend on a variety of circumstances, including the nature of the structure (whether it is a work or building that is accessible to the general public, or a private house or work situated on private grounds), the function of the structure, the physical condition of the structure at the time of the occurrence of the danger and the anticipated use of the structure by third parties.(3) The other factor to be taken into account, according to the Supreme Court, was the likelihood of the danger to the structure being realised, together with the possibility and inconvenience of the safety measures that must be taken. The discretionary powers accorded to the government body charged with the management of the structure and the financial resources at its disposal were also matters to which significance may be attached.

These aspects restrict liability pursuant to Book 6, Section 174 of the Civil Code. The intention of the legislature is to prevent the proprietor of the structure from becoming too broadly liable by arranging for certain requirements governing liability pursuant to a wrongful act to apply also to this liability. Therefore, the issue of a guarantee standard applying to the proprietor of the property does not arise.

On the basis of objective criteria it must be determined to what extent the structure meets the mandatory requirements applicable thereto, having regard to the anticipated use or purpose thereof. Another relevant factor is how great is the likelihood of the danger being realised and what maintenance and safety measures are feasible and may reasonably be requested.

Having regard to the nature, function and designated use of a peat dike and embankment, the occurrence of an embankment failure in general will give sufficient cause for assuming that the embankment or dike did not comply with the mandatory requirements that would have applied in the given circumstances, except where proof to the contrary is provided by the proprietor (in this case, the Higher Water Board). The designated use and the guarantee function of an embankment are important factors in this regard, particularly in view of the Higher Water Board's argument that the danger of an embankment failure was not foreseeable.

The Supreme Court held that the court of appeal had erroneously assumed that the matter at issue was not the expertise concerning failure mechanisms available at the time or the then-applicable standards affecting load-bearing situations. The court of appeal also erroneously disregarded the aspects concerning the scientific and technical knowledge available at the time and the financial constraints within which the Higher Water Board was endeavouring to implement its policy statements. These aspects were vital in determining the issue of liability. The argument that the embankment failure had occurred as a result of a specific and exceptional circumstance was also important. Broadly speaking, according to the Supreme Court, it was incorrect to state that the Higher Water Board's lack of awareness of the danger should result in its liability under the law.

The Supreme Court set aside the judgment of the court of appeal and referred the case to the Hague Court of Appeal for a further hearing and decision.

For further information on this topic please contact Wim Weterings or Rob Elzas at Dirkzwager Advocaten En Notarissen by telephone (+31 26 353 8300), fax (+31 26 351 0793) or email (weterings@dirkzwager.nl or elzas@dirkzwager.nl).

Endnotes

(1) National Case-Law Number BN6236, Higher Water Board for Amstel, Gooi and Vecht/Municipality of De Ronde Venen (the Netherlands).

(2) Compare Supreme Court judgment of June 15 2001, Dutch Law Reports 2002, p 336, and Supreme Court judgment of October 20 2000, Dutch Law Reports 2000, p 700.

(3) Supreme Court judgment of November 17 2000, Dutch Law Reports 2001, p 10.