THE owners of a pub who allowed foul-smelling water to leak into the basement of a shop were ordered to pay their neighbours £35,000 compensation yesterday.

The Talbot, in Richmond, North Yorkshire, was identified as the source of the sewage, which had flooded the neighbouring premises on several occasions since 1994.

After hearings in 2001 and last year, Newcastle County Court ordered the hotel's owners to put an end to the nuisance.

Judge Moir also ordered Phoenix Inns and Unique Pub Properties to pay Violet Fawcett's family substantial damages, including £20,000 for lost rent from March, 1998.

But the owners challenged the ruling and the case went before the Appeal Court in London yesterday.

The hotel's solicitors claimed there was no way management could have known about the flooding. Even if they had been aware of the problem, they could have done little to stop it.

But Mr Justice Aikens, sitting with Lady Justice Arden and Lord Justice Schiemann, agreed the criticisms of Judge Moir's original ruling were "unfounded" and there was no proven flaw in his judgement.

The owners have until May to rectify the faults. They have also to pay legal costs.

The earlier hearings were told that, in one incident in the summer of 2000, shop staff had to use buckets to get rid of the foul-smelling water throughout the day.

Last night, family spokesman Peter Schollick declined to comment on yesterday's ruling.