The Manchester Ship Canal Company Ltd v United Utilities Water Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Fancourt |
| Judgment Date | 15 June 2021 |
| Neutral Citation | [2021] EWHC 1571 (Ch) |
| Date | 15 June 2021 |
| Court | Chancery Division |
| Docket Number | Case Nos: HC-2010-000054; BL-2020-001972 |
[2021] EWHC 1571 (Ch)
Mr Justice Fancourt
Case Nos: HC-2010-000054; BL-2020-001972
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Rolls Building
7 Rolls Building
Fetter Lane, London
EC4A 1NL
Mr David Hart QC, Mr Charles Morgan and Mr Nicholas Ostrowski (instructed by BDB Pitmans LLP) for MSCCL
Mr Jonathan Karas QC, Mr Richard Moules and Mr James McCreath (instructed by Pinsent Masons LLP) for UUWL
Hearing dates: 26, 27, 28 April 2021
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HON. Mr Justice Fancourt
This is a judgment on a preliminary issue in the original 2010 claim by the Manchester Ship Canal Company Limited (“MSC”) against United Utilities Water Limited (“UU”) and on a separate Part 8 claim issued by UU in 2018 seeking negative declaratory relief. As its name suggests, MSC is the owner of the Manchester Ship Canal (“the Canal”), which runs for over 35 miles from just east of Salford Quays in Greater Manchester to the Mersey Estuary at Eastham. UU is the water and sewerage undertaker for the North West region, appointed under the Water Industry Act 1991.
The preliminary issue is something of a loose end, remaining after UU was granted summary judgment on issues in the 2010 claim by Newey J as long ago as February 2012. His judgment was overturned by the Court of Appeal and finally restored by the Supreme Court: [2014] UKSC 40; [2014] 1 WLR 2576. The preliminary issue for decision relates to only 5 of the 121 sewerage outfalls in total that are vested in UU and discharge into the Canal. It concerns the inter-relationship between the implied statutory right to continue to discharge from outfalls that vested in a statutory undertaker before 1 December 1991, as held to exist by the decision of the Supreme Court, and the termination after that date of contractual licences (or tenancies) then existing permitting use of 5 outfalls (“the licensed outfalls”). The issue is whether the implied statutory right arose and exists as regards (or UU is otherwise entitled to continue to drain from) the licensed outfalls if the discharge was consensual on 1 December 1991.
The 2018 claim raises a more substantial point. It was issued by UU when, following refusal by Newey J in 2016 of permission to amend the remainder of its original claim, MSC threatened to issue new proceedings in trespass, claiming damages for the unlawful discharge of inadequately treated sewage effluent from about half the total number of outfalls into the Canal (“the category B outfalls”). It is common ground that any such discharge only happens on occasions, as it does in regions throughout the country when particularly heavy rainfall causes the capacity of the sewerage system to be temporarily exceeded. Complete data on the number of occasions on which contaminated effluent has entered the Canal is not available. MSC contends that even though UU has an implied statutory right to discharge from the category B outfalls, any discharge that is insufficiently treated is unauthorised by statute and therefore a trespass.
In the 2018 claim, UU seeks a declaration that any such complaint, premised only on the alleged fact of discharge of contaminated effluent from UU's category B sewerage outfalls into the Canal, is not actionable by MSC in a private law action, as a matter of construction of the Water Industry Act 1991. It contends that the only remedies for the owner of a watercourse in such circumstances as exist here are those provided by the regulatory and enforcement machinery of the Act.
The parties exchanged evidence in relation to the preliminary issue in the 2010 claim. UU also served detailed evidence concerning the regulation of its sewerage business and the nature, extent and condition of its sewerage infrastructure, today and in 1991, in support of its Part 8 claim. MSC decided not to serve any evidence in reply, considering that UU's evidence was irrelevant to the issue of statutory construction raised by the claim.
As will be evident from this brief introduction, MSC's original claim and the issues for determination now arise out of the terms and effect of the water industry legislation of 1991, which followed the radical privatisation and regulatory reforms of the Water Act 1989. Under the 1989 Act, the water and sewerage infrastructure, apparatus and functions originally vested in local authorities and then in public sector regional water authorities (under the Public Health Acts 1875 and 1936 and the Water Act 1973 respectively) were vested in approved, private water and sewerage undertakers. The principal 1991 statute is the Water Industry Act 1991, which was in large part a consolidation Act but also includes some reforms recommended by the Law Commission. Other statutes forming part of the 1991 legislation are the Water Resources Act 1991, the Land Drainage Act 1991 and the Water Consolidation (Consequential Provisions) Act 1991. It will not be necessary to refer in any detail to the latter statutes and accordingly I will refer to the Water Industry Act hereafter as “the 1991 Act”.
Decisions of the higher courts on the 1991 Act
The reforms of 1989 and the effect of the 1991 legislation, in particular the 1991 Act, have been considered in some detail by the higher courts, including by the Court of Appeal in British Waterways Board v Severn Trent Water Ltd [2001] EWCA Civ 276; [2002] Ch 25 (“ BWB”), by the House of Lords in Marcic v Thames Water Ltd [2003] UKHL 66; [2004] 2 AC 42 (“ Marcic”) and by the Supreme Court in its decision in this case in 2014.
In BWB, the Court of Appeal concluded that, although provisions similar to many sections in the 1991 Act could be found in the Public Health Acts 1875 and 1936, the overall purpose of the 1991 Act was very different, and therefore previous authority on the existence of an implied right to drain into watercourses did not apply under the 1991 Act. The implication of a general power to discharge treated effluent was inconsistent with the provisions of the 1991 Act. Chadwick LJ considered that the judge had been led into error by assuming that the pre-1989 law remained unchanged save to the extent that changes could be identified in the 1989 Act. That, he said, was the wrong approach: the new statutory code had to be construed as a whole.
In Marcic, Lord Nicholls of Birkenhead and Lord Hoffmann each explained that the 1991 Act contains an elaborate regime for regulation of the water industry in the public interest, with a view to securing environmental benefits, improvements to the infrastructure, a reasonable return on capital for the private commercial undertaker and a better service for customers, both as regards prices charged and quality of service. The legislation contains its own enforcement and remedial schemes. The various objectives of the regulatory scheme entail that a contravention of a statutory duty does not necessarily result in enforcement.
Mr Marcic was held to have no private law claim in respect of severe consequences of flooding of his property because the existence of a private claim would be inconsistent with (indeed, would “set at nought” or “subvert”) the detailed statutory scheme, which contemplates an approved scheme of priorities for capital expenditure to achieve the regulatory objectives as a whole. Although the law of nuisance had previously been to similar effect under the Public Health Acts, in that a mere failure by a local authority to build more or better sewers was not an actionable nuisance, it was on the basis of the different provisions of the 1991 Act, not the previous law, that the Supreme Court allowed Thames Water's appeal and denied Mr Marcic's claim. It will be necessary to consider the basis of that decision in some detail later.
In this case, the Supreme Court in 2014 held that the Court of Appeal in BWB had been right to hold that the 1989 and 1991 Acts changed the law that previously allowed a local authority or regional water authority to drain surface water and treated effluent into a watercourse. No such general right was conferred by the 1991 Act: a statutory sewerage undertaker wishing to acquire such a right had to negotiate terms or exercise its powers of compulsory acquisition. However, the Supreme Court allowed UU's appeal on a narrower ground, namely that it was implicit, by reason of the terms of s.116 of the 1991 Act, that where a right to discharge through an existing outfall had vested in the undertaker prior to 1 December 1991, that right continued under the 1991 Act, otherwise UU would not be able to comply with its duties under ss. 94, 106 and 116 of the 1991 Act. The right was held to continue in perpetuity, not just until the necessary rights could be acquired by the undertaker.
As a consequence, UU established that it had a right in principle to continue to discharge surface water and treated effluent into the Canal. Despite that, many issues remain between UU and MSC about the extent of the right and whether UU is contravening other statutory provisions.
It is clear from the decisions of the higher courts referred to above that decisions on the wording of similar statutory provisions in predecessor legislation, or about the availability of common law remedies alongside that legislation, will not provide a reliable guide to the meaning and effect of the 1991 Act. The question of whether a common law remedy can exist alongside the...
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