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Judicial Conservatism v. Economic Liberalism: Anatomy of a Nuisance Case

Published online by Cambridge University Press:  12 February 2016

David Kretzmer
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When an industrial concern pollutes the environment thereby interfering with neighbouring homeowners' use and enjoyment of their property, may the homeowners enjoin the pollution even where compliance with an injunction could force the polluting industry to stop production?

Faced with this kind of question the initial reaction of people concerned with protecting the environment against pollution is almost certain to be in favour of granting the injunction. However, the problem has received considerable attention in contemporary legal literature and much of what has been written tends to show that this reaction is both simplistic and somewhat unrealistic. It is simplistic because an economic analysis of the facts of any given situation—which for want of a better term may be called a “nuisance-situation”—may well reveal that the defendant should be allowed to continue his polluting activity (though other measures should be taken to protect its victims from its effects); it is unrealistic because even if an injunction is granted by the court, means will probably be found to enable the polluting activity to carry on if it is economically or socially desirable for it to do so.

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Articles
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Israel Law Review , Volume 13 , Issue 3 , July 1978 , pp. 298 - 325
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Copyright © Cambridge University Press and The Faculty of Law, The Hebrew University of Jerusalem 1978

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References

1 See Coase, , “The Problem of Social Cost” (1960) 1 J. of Law & Econ. 1CrossRefGoogle Scholar; Michelman, , “Pollution as a Tort: A Non-Accidental Perspective on Calabresi's Costs” (1971) 80 Yale L.J. 641CrossRefGoogle Scholar; Calabresi, and Melamed, , “Property Rules, Liability Rules and Inalienability: One View of the Cathedral” (1972) 85 Harv. L. R. 1089CrossRefGoogle Scholar; Ellickson, , “Alternatives to Zoning” (1973) 40 U. Chi. L. R. 681CrossRefGoogle Scholar; Posner, , Economic Analysis of Law (1972Google Scholar) Chap. 2; Ogus, and Richardson, , “The Role of Private Law in the Protection of Pollution Victims” (1976) 40 Rabels Zeitschrift für ausländisches und internationales Privatrecht 449.Google Scholar

2 (1976) (III) 30 P.D. 785.

3 See Michelman, supra n. 1, at 667: “…our society is not — cannot sanely be — committed to preserving absolute and pristine environmental ‘purity’ no matter what the cost”.

4 See Freeman III, Haveman, and Kneese, , The Economics of Environmental Policy (1973)Google Scholar; Dolan, , Tanstaafl. The Economic Strategy for Environmental Crisis (1969)Google Scholar; Meyers, , “An Introduction to Environmental Thought: Some Sources and Some Criticisms” (1975) 50 Indiana L.J. 426Google Scholar; Tarlock, “Comment on Meyers”, ibid., at 454; Krier, , Environmental Law and Policy (1971).Google Scholar

5 See Freeman III, Haveman and Kneese, supra n. 4, chap. 5. See also Baxter, , People or Penguins: The Case for Optimal Pollution (1974) 8–13.Google ScholarPubMed

6 See, e.g., Kneese, and Bower, , Managing Water Quality: Economics, Technology, Institutions (1968)Google Scholar; Kneese, and Schultze, , Pollution, Prices and Public Policy (1975)Google Scholar; Hite, , Macaulay, , Stepp, and Yandle, , The Economics of Environmental Quality (1972).Google Scholar

7 See Freeman III, Haveman and Kneese, supra n. 4, at 83 ff.

8 The “Coase Theorem” which is based on Coase, supra n. 1, has been defined as follows: “All externalities can be internalized and all misallocations [of resources], even those created by legal structures, can be remedied by the market, except to the extent that transactions cost money and the legal structure itself creates some impediments to bargaining”: Calabresi, , “Transaction Costs, Resource Allocation and Liability Rules — A Comment” (1968) 9 J. of Law and Econ. 67, 68.CrossRefGoogle Scholar

9 See Posner, supra n. 1, at 174.

10 See Coase, supra n. 1.

11 See Calabresi and Melamed, supra n. 1; Samuels, , “The Coase Theorem and the Study of Law and Economics” (1974) 14 Nat. Res. J. 1Google Scholar; Ogus and Richardson, supra n. 1, at 467–470.

12 There is some doubt whether in a one-to-one relationship a hold-out by the homeowner for more than the market price of his home may be called a “transaction cost”. Posner suggests that such a hold-out merely reveals that the subjective value of the property is more than the objective market value: Posner, supra n. 1, at 21–22. While it is indeed true that the difference between the subjective and objective values of the property should not be regarded as a transaction cost, we have our doubts whether a hold-out always does flow from such a difference. (Can an attempt to get more than one would normally be content to receive because one realises the vulnerability of the other party's position be regarded as demanding the “subjective value” of the property?) Be this as it may, it seems clear to us that the inequality in positions of two parties may impede a transaction between them.

13 See Calabresi and Melamed, supra n. 1.

14 See Calabresi and Melamed, ibid.; Ogus and Richardson, supra n. 1.

15 It must be admitted that case 3 is somewhat problematical. Technically, it may be argued that the homeowner does not have to make adjustments in his home so as to lessen the noise caused by the factory and that he is entitled to compensation for the damage caused to him, as his property stands. In our hypothetical case this would amount to IL.100.000. We maintain, however, that in a case such as this the court should not adopt the diminution in the saleable value of the house as the basis for computing damages, but should, and may, prefer the minimum cost of placing the plaintiff in the position he would have been in, save for the noise-causing activities of the defendant: see Ogus, , The Law of Damages (1973) 163–65Google Scholar. An alternative position of the court could be that if the noise were really prevented by investing IL.40,000, the drop in value due to the noise would disappear.

16 See Michelman, supra n. 1; Calabresi and Melamed, supra n. 1. Also see Posner, supra n. 1, at 16–29.

17 See, e.g., Boomer v. Atlantic Cement Co. 26 N.Y. 2d 219; 257 N.E. 2d 870 (1970).

18 See Calabresi and Melamed, supra n. 1, at 1119–1121.

19 The most likely transaction cost if an injunction were awarded would be a hold-out by the plaintiff for more than the value of the property. But see supra n. 12.

20 However, it postponed the force of the injunction for 90 days so as to allow the defendants time to meet its terms without closing down. Such postponement of an injunction so as not to cause hardship to the defendant is a well accepted technique of the English Courts: see Ogus and Richardson, supra n. 1 at 463.

21 [1895] 1 Ch. 287.

22 See Pride of Derby and Derbyshire Angling Association Ltd. v. British Celanese [1953] 1 Ch. 149; Morris v. Redland Bricks Ltd. [1967] 1 W.L.R. 969. This view is also generally accepted in Canada: see K.V.P. Co. Ltd. v. McKie [1949] 4 D.L.R. 497; Stephens v. Village of Richmond Hill [1956] 1 D.L.R. (2d) 569. And see McLaren, , “The Common Law Nuisance Actions and the Environmental Battle — Well-Tempered Swords or Broken Reeds”? (1972) 10 Osgoode Hall L.J. 505, 547–560Google Scholar; Ogus and Richardson, supra n. 1, at 463.

23 See Maktin v. Maktin (1962) 16 P.D. 945; Amrami v. Dahbash (1961) 15 P.D. 1557.

24 See Ata judgment at 800.

25 Ibid., at 817.

26 Ibid., at 790–791.

27 Supra n. 21.

28 See Jordeson v. Sutton (1899) 2 Ch. 217; Cowper v. Laidler [1903] 2 Ch. 337; Saunby v. Water Commissioners of the City of London [1906] A.C. 110; Gillings v. Gray [1910] 27 T.L.R. 39; Morris v. Redland Bricks Ltd. supra n. 22.

29 In his judgment in the Shelfer case, A.L. Smith L.J. made it quite clear that these were two separate conditions. The Ata Court also began its analysis of sec. 74 by listing four distinguishable conditions required by the section as grounds for refusing an injunction: see Ata decision at 800. And see Tedeschi, , ed., The Law of Torts (General Part) § 325.Google Scholar

30 Cf. Ogus, supra n. 15, at 164 for the distinction between holding land as an economic asset and a place to live in.

31 Cf. Tedeschi, supra n. 29. The view taken by Barak in this text is that only property damage may be estimated in money, but that not all property damage can be adequately compensated by a money payment. We on the other hand would claim that even non-property damage may be estimated in money, if it is reflected in market values. Thus noise in my house may be estimated in money; whereas endangering my life in the street may not. Whichever view we accept, it is clear that in the case of noise or air pollution which affects one's reasonable enjoyment of his property, an injunction should not be refused.

32 See the Ata decision at 801.

33 Ibid., at 810.

34 The Court repeated this point a number of times at 810, 811, 812.

35 Ibid., at 805.

36 Ibid., at 815.

37 Ibid., at 811.

38 Ibid., at 811.

39 Clearly, however, if the lesser of these two costs exceeds the firm's profits, imposing these costs on the firm may force it to close down. But, from the economic efficiency point of view, this is only right, because if its costs exceed its returns the firm's existence is unjustified.

40 See Michelman, supra n. 1, at 671, n. 44.

41 This was the course adopted by the Court in Boomer v. Atlantic Cement Co., supra n. 17.

42 See Baxter, and Altree, , “Legal Aspects of Airport Noise” (1972) 15 J. of Law and Econ. 1CrossRefGoogle Scholar; Michelman, supra n. 1, at 671.

43 See Samuels, supra n. 11.

44 See Wildavsky, , “The Political Economy of Efficiency: Cost-Benefit Analysis, Systems Analysis and Program Budgeting”, in Meyers, and Tarlock, , Selected Legal and Economic Aspects of Environmental Protection (1971) 20–24Google Scholar; Liebhafsky, , “The Problem of Social Cost: An Alternative Approach” (1973) 13 Nat. Res. J. 615.Google Scholar

45 See Wildavsky, loc. cit.; Hamill, , “The Process of Making Good Decisions About the Use of the Environment of Man” (1968) 8 Nat. Res. J. 279Google Scholar; Liebhafsky, supra n. 44; Ogus and Richardson, supra n. 1. Connected to the premise that the market-place should determine the value of all resources is the notion that value is determined by willingness to pay: see Posner, supra n. 1, at 4. It is recognised, however, that willingness to pay depends on the distribution of wealth in society. Ibid. The environmental needs of the rich are therefore likely to be valued at a higher rate than those of the poor: see Ogus and Richardson, ibid.; also see Leff, , “Economic Analysis of Law: Some Realism about Nominalism” (1974) 60 Va. L. R. 451CrossRefGoogle Scholar; Dworkin, , “Hard Cases” in Taking Rights Seriously (1977) 81, 96–98Google Scholar. But cf. Calabresi and Melamed, supra n. 1, who admit that efficiency arguments have distributive implications but try to show that it is never quite clear which economic or social class they are going to favour.

46 See Calabresi and Melamed, supra n. 1 at 1097–1105. For an argument that economic efficiency should not be the model for environmental decision-making see Hamill, supra n. 45. Hamill claims (at 279–80) that the “confidence in economic theory is misplaced. There are, in fact, major objections to the use of economic theory as a basis for making decisions about the use of resources or environments”. Also see Liebhafsky. supra n. 44; Schumacher, , Small is Beautiful (1973).Google Scholar

47 See Oppenheimer v. Minister of Interior (1966) (I) 20 P.D. 309; Peranio v. Minister of Health (1972) (I) 26 P.D. 809. The Ata Court referred to the Abatement of Nuisances Law, 1961 (15 L.S.I. 52) in its judgment (at 794). It mentioned that regulations had not been promulgated and added that if they had been promulgated, the operating licence of the defendants would have been dependent on observing the rules laid down in the regulations. We fail to see the connection between the promulgation of regulations and the validity of the defendants’ licence. Sec. 9 of the Abatement of Nuisances Law lays down that any licence required by statute for the operating of a factory, is deemed to be conditional upon fulfillment of the provisions of this Law. As we have noted, it has been held that the provisions of the Law apply even though regulations have not been promulgated. Thus, the licence of the defendants was conditional on their refraining from causing loud or unreasonable noise which disturbed, or was likely to disturb people in the vicinity or passers-by. Shortly after judgment was given in the Ata case, noise regulations were published. These regulations provide that in a residential area at night any noise which lasts for more than 10 minutes is unreasonable if it is above 45 dBA's. If it lasts for more than 30 minutes it is unreasonable if it exceeds 40 dBA's (night is the period between 22.01 and 05.59) : See Nuisance Abatement Regulations (Unreasonable Noise), (1977) K.T. no. 3650, p. 716. In the Ata case the plaintiff proved that the noise in his house between the hours of 9–11 at night was 57–58 dBA's.

48 The Abatement of Nuisances Law does provide that the Ministers of Interior and Health may promulgate regulations which grant exemptions from some or all of the provisions of the Law, if they see that this is necessary in order to protect a public right which is to be preferred to the right which will thereby be affected. This authority has been given to political organs who face political responsibility for their actions and not to a court.

It may, of course, be argued that one cannot judge the commitment of society to certain values on the strength of its written laws. We are all familiar with cases in which the laws (and especially the constitutions) of countries reveal commitment to lofty ideals while the actual commitment of these countries to those ideals is highly dubious. A social observer could therefore hardly judge a society's value commitments by looking at its laws alone. We maintain, however, that a court is in a different position: it cannot ignore the collective decision reflected in the written laws and must regard these as the primary source of the society's value commitments.

49 As far as noise goes the first Annual Report on the Quality of the Environment in Israel (Environmental Protection Service, 1973) states (at 91): “The essence of noise in Israel as a social problem has not yet been made known to the public and quiet has not yet been acknowledged to be a human and cultural value.”

50 In other words, if we assume that the “formal” argument of the Ata Court was unfounded.

51 The most extreme statement of the English view is contained in a dictum in Attorney General v. Birmingham (1858) 70 Eng. Rep. 220, 225: “Now with regard to the question of the plaintiff's right to an injunction, it appears to me that, so far as this court is concerned, it is a matter of almost absolute indifference whether the decision will affect a population of 250,000, or a single individual carrying on a manufactory for his own benefit… I am not sitting here as a committee for public safety…” (emphasis added). Also see the authorities cited supra n. 22.

52 See infra part. IV.

53 See Land Ordinance (Acquisition for Public Purposes) 1943. The main provisions of this ordinance are described infra, nn. 60, 61, 64, 65.

54 The ease with which land can be expropriated in Israel throws into doubt whether there is any real parallel to be drawn between the situation in Israel and America, where “eminent domain” presents serious constitutional questions. Granting an injunction in an American jurisdiction may well mean that the defendant has to stop the pollution, reach a deal with the plaintiffs or close down. Thus if economic efficiency clearly favours a deal with the plaintiffs (as the total benefit to be gained from continuation of the pollution exceeds the cost of stopping it) the only way of reaching the efficient solution in a case in which transaction costs are likely to be high might be for the Court to refuse an injunction and to grant damages instead.

In two Canadian cases the Ontario Legislature passed special legislation which dissolved injunctions, replacing them by damages. See: K.V.P. Company Limited Act, 1950, Ontario Statute, 1950, ch. 33, dissolving the injunction granted in K.V.P. Co. Ltd. v. McKie, (supra n. 22) against a paper-mill which was the major source of employment in a small town; The Public Health Amendment Act, 1956, Ontario Statutes, 1956, ch. 71, dissolving the injunction given in Stephens v. Village of Richmond Hill (supra n. 22), which restrained a municipality from discharging sewage into a stream.

55 On the limitations of a court making policy-decisions on the strength of the restricted input of information see Wells, and Grosman, , “The Concept of Judicial Policy-Making: A Critique” (1966) 15 J. Publ. Law 286Google Scholar. Also see Weiler, , “Two Models of Judicial Decision-Making” (1968) 47 Can. B. R. 406.Google Scholar

56 See Freeman III, Haveman and Kneese, supra n. 4, at 29.

57 See Ogus and Richardson, supra n. 1, at 464–65.

58 See Fuller, “The Forms and Limits of Adjudications”, (unpublished paper, on file with writer).

59 The sequel of events is set out in the Court's decision in Schwartz v. Minister of Finance (1977) (II) 31 P.D. 800.

60 Under the Land (Acquisition for Public Purposes) Ordinance; 1943 the Minister of Finance has the power to acquire private rights in land if he is of the opinion that such acquisition is needed for a public purpose. Sec. 22 of the Ordinance provides that any person may apply to the Minister to acquire land for his use, and that if the Minister reaches the conclusion that acquiring the land for that person's use would be useful to the public he may authorise purchase of the land under the provisions of the Ordinance.

61 The Ordinance does not require the Minister to consult before using his powers, but in practice an advisory committee exists to which applications to acquire land are referred.

62 See Schwartz v. Minister of Finance, supra n. 59. The authorisation notice was published in Yalkut Hapirsumim, no. 2302, p. 1971.

63 Judgment was given on 28 April 77. The expropriation order was published in Yalkut Hapirsumim, no. 2317 of 1 May 77, p. 1286.

64 According to the Ordinance, the expropriation only takes effect from the date. specified in a further order published under sec. 19. Until the expropriation has become effective pursuant to such an order the expropriating body may revoke its initial expropriation notice.

65 According to the Ordinance the compensation to be paid on expropriation of land is the sum which the expropriated rights might be expected to realise if sold on the open market by a willing seller.

66 In its judgment in the Ata case the Court expressly stated that if the defendants managed to reduce the noise level so that the damage became small, they would apply to Court and try to persuade it that the conditions of sec. 74 of the Civil Wrongs Ordinance now pertained, and that the terms of the injunction should therefore be modified: see Ata case, at 817.

67 I am grateful to Ata's advocate for this information.

68 Another argument which may be raised is that the Ata Court did the plaintiff no great favour in leaving him to the mercy of expropriation, as the sum of compensation he would be likely to receive under the law of expropriation would be less than the damages he would receive in a tort action. Our reply to this argument is twofold: first, it is not at all clear that his compensation would indeed be less; secondly, there is no place here for paternalism. The plaintiff demanded his injunction and it would have been quite out of place for the Court to tell him that it was turning down his demand for his own good.

69 In truth the choice is somewhat more complicated. The industry will examine the marginal benefit of increases in abatement costs as against compensation. It is therefore quite likely that the final decision will involve a combination of two courses of action: abating the pollution to some degree and compensating for the damage caused by the remaining noise.

70 See Ogus and Richardson, supra n. 1, at 467–68.

71 Of course, much will depend on the degree of uncertainty involved and the supposed cost of acquiring the necessary information.

72 The defendants spent IL850,000 in abatement; the government land assessor valued the plaintiff's home at IL550,000: see Schwartz v. Minister of Finance, supra n. 59.

73 In an affidavit to the Supreme Court one of Ata's directors stated that Ata had not been able to meet the plaintiff's compensation demands, because of the fear that other neighbours would demand equal treatment: Schwartz v. Minister of Finance, supra n. 59.

74 See Calabresi and Melamed, supra n. 1.