Strict neighbour liability applies in the event of settling damages

The Supreme Court's judgment shows that the party that is carrying out ground work on a property, regardless of the risk considerations that have been made and the precautions that have been taken, must expect to cover the neighbour's loss if the work leads to settling damages. Neither an unusual course of damages nor a large scope of damage could exempt the developer from bearing the loss.

In order to be able to impose liability for damages, there must be basis of liability, which in this case was the provisions of the Norwegian Neighbour Act.

Section 9 of the Neighbour Act states that the liable party must bear the financial loss in the event of a breach of Sections 2 and 5 of the Neighbour Act, "whether he himself or someone he is liable for has been guilty of negligence or not". The provision expresses a liability regardless of subjective fault, but requires that one of the provisions in Sections 2 and 5 of the Neighbour Act has been breached. The provisions of Sections 2 and 5 of the Neighbour Act may at first glance seem more lenient towards the developer, but the Supreme Court has now clarified how the wording should be understood.

Section 2 of the Neighbour Act states that no one should "implement anything that unreasonably or unnecessarily is to the detriment or disadvantage to a neighbouring property." For the Supreme Court, the question was whether the liability for damages according to Section 2 is triggered by the fact that a measure has resulted in a damage that is unreasonable, or whether the party liable for the measure, objectively speaking, has acted
in a way that must be characterized as unreasonable or unnecessary towards the neighbour.

Section 5 of the Neighbour Act, on the other hand, obliges the party performing ground work to carry out "necessary precautions" against "settling" etc.. For the Supreme Court, the question was whether liability for damages according to Section 5 may be triggered even if all necessary precautions had been taken.

The aforementioned questions had not previously been decided in Supreme Court practice. After a review of the preparatory works and legal theory, the Supreme Court concluded as follows:

"Liability for damages is triggered by the measure having resulted in damage that it is unreasonable or unnecessary for the injured neighbour to endure, even if the liable party has carried out a risk assessment that satisfies all reasonable requirements, and has taken all precautions that such an assessment would require".

With the Supreme Court's judgment, it is thus clear that as long as the so-called "tolerance limit" has been exceeded, a strict liability applies for the party behind the measure, cf. Section 9 of the Neighbour Act, see also Sections 2 and 5.

In the case before the Supreme Court, the settling damages were extensive. The result of the measure was unreasonable, and thus went beyond what the neighbour had to endure. For the Supreme Court, it was not necessary to decide whether there at all is a tolerance limit for settling damages to buildings.

In addition to the fact that there must be basis of liability, the damage suffered must be in causation to the tortious act.

The starting point for the assessment of causation is the but-for test, i.e. that the tortious act must have been a necessary prerequisite for the damage. Where there are several necessary prerequisites – contributory causes – the tortious act must be so significant for the damage that it is natural to link liability to it. In the case before the Supreme Court, the damage would not have occurred if there were better ground conditions on the property, but the well drilling was such a significant factor for the damage that it was natural to link liability to it. The condition of actual causation was therefore fulfilled.

In addition to actual causation, there must be legal causation or "adequacy". Decisive in this context is whether the damage is such an unpredictable, remote and derived consequence of the tortious act that it is not reasonable to link liability to it. The Court of Appeal believed this, and therefore gave judgement in favour of the well owner and the well drilling company. In the Court of Appeal's view, the course of the damage and the scope of the damage in the case were both atypical, unusual and an extraordinary consequence of the tortious act. Reference was made to, inter alia, the ground conditions on the property, geological challenges that the well drilling company encountered along the way, and the unusually large amount of damage that occurred on the neighbouring property.

The Supreme Court clarifies in the judgment that the assessment of adequacy must be linked to the consequential damage (the settling damages) – this is what cannot be unpredictable, remote or derived. An unusual course of damage (geological challenges) and scope of damage (the size of the settling damage) could not exempt the developer from liability for foreseeable consequential damage.

As regards the consequential damage, the Supreme Court notes that as long as the tortious act generally increases the risk of a specific type of damage, this consequential damage must be taken into account. It does not matter how the sequence of events leading up to the damage was. Settling damages are generally not unexpected in case of ground interventions. New and important information for the Supreme Court indicated that settling damages were also not outside of what was foreseeable during well drilling in the area in question. When the drilling was such a significant factor in the cause of the damage that it was natural to link liability to it, the damage could not be considered remote or derived either.

In the adequacy assessment, the Supreme Court also placed emphasis on reasonableness assessments of where the risk should be placed. It was more reasonable for the developer, who could provide insurance and who had also constructed the well for their own benefit, to bear the loss, rather than an accidentally affected neighbour. Where the final loss ends up was a matter between the well owner and the well drilling company or its insurance company.