Sealing capacity of clay layers is a key parameter in many fields of geoscience, such as CO2 storage, hydrocarbons trapping, and waste disposal. In the context of deep geological disposal of radioactive waste, clayey formations are studied as potential host rocks. This work deals with tectonic fracturing, fluid flow, and the sealing capacity of clay layers in an outcropping formation sharing similarities to these potential host rocks. The Blue Clay formation (Maltese islands) outcrops between two limestones affected by slight extensional tectonics. Zones of oxidation around fractures are interpreted as evidence of palaeofluid circulation, and are used to assess the role of joints and faults in controlling the hydrological communication between adjacent layers. Joints and small faults (displacement < 5 m) seem to die out quickly up-section within the Blue Clays, and appear to have played an insignificant role in the palaeohydrology of the area. In contrast, large faults (displacement > 50 m) display clay smear structures, and the lack of oxidized zones around them suggests they served as barriers to fluid flow. Intermediate-sized faults die out up-section into complex deformation zones comprised of irregular joints that are filled with gypsum and surrounded by oxidation zones. These observations indicate that these intermediate-sized faults, usually considered as sealed by classical predictive methods such as “Shale Smear Factor”, may have played a significant role in the local palaeohydrology.