Supreme Court rules on entitlement of canal company to bring an action against water company for sewerage discharges

In a landmark ruling on a case dating back from 2010, the UK Supreme Court has ruled that United Utilities Water Ltd (United Utilities) can be held liable for damage caused by sewage discharges.

The Supreme Court was asked to decide whether the owner of the beds and banks of a canal, the Manchester Ship Canal Company Ltd (the Canal Company), can bring a claim in nuisance or trespass when the canal is polluted by discharges of foul water from outfalls maintained by United Utilities.

This article considers the Manchester Ship Canal Company Ltd v United Utilities Water Ltd case in detail, exploring the Supreme Court’s decision on whether the Water Industry Act 1991 (the 1991 Act) excludes common law rights of action in nuisance and trespass

Background of the case

The Canal Company threatened to bring a claim against United Utilities for trespass and nuisance. In response, United Utilities asked the court to make a declaration that the Canal Company had no right of action. 

The court was not asked to decide whether the Canal Company’s claim would be successful on the relevant facts. Rather, the question was whether the claim would barred by the statutory scheme for regulating sewerage established by the 1991 Act. 

Previously, the High Court and the Court of Appeal decided that no owner of a canal (or other watercourse or body of water) can bring a claim based on nuisance or trespass against a sewerage undertaker in respect of polluting discharges into the water, unless the sewerage undertaker is guilty of negligence or deliberate wrongdoing. 

The Canal Company appealed to the Supreme Court and the court unanimously allowed the appeal. It held that the 1991 Act does not prevent the Canal Company from bringing a claim in nuisance or trespass when the canal is polluted by discharges of foul water from United Utilities’ outfalls, even if there has been no negligence or deliberate misconduct. 

Does the 1991 Act exclude common law rights of action in nuisance and trespass?

A body which exercises statutory powers, such as a sewerage undertaker, is liable in the same way as any other person if it is responsible for a nuisance, trespass or other tort, unless either it is acting within its statutory powers or has been granted some statutory immunity from such claims. 

The 1991 Act does not expressly authorise United Utilities to cause a nuisance or to trespass by discharging foul water through the outfalls into the canal. United Utilities’ entitlement to use the outfalls derives from section 116 of the 1991 Act. However, the court explained, this entitlement is subject to a number of statutory protections for watercourses. 

The polluting discharges similarly cannot be regarded as having been impliedly authorised by parliament, since they are not an inevitable consequence of a sewerage undertaker’s performance of its statutory powers and duties. 

United Utilities argued that the Canal Company had no cause of action because the only way to avoid the discharges of foul water into the canal would be to construct new sewerage infrastructure. It relied on the House of Lords’ decision in the 2003 Marcic v Thames Water Utilities case, which it says established that parliament’s intention was that the construction of new sewerage infrastructure should be a matter for the secretary of state or the regulator, the Water Services Regulation Authority (Ofwat), not the courts.

The Supreme Court rejected this argument on the following grounds.

• Deciding that section 186(7) provides for arbitration where water quality has been damaged without consent, at the option of the party complaining. This, the court explained, strongly suggests that the complainant could alternatively choose to pursue a common law claim.
• Secondly, section 180 of the 1991 Act gives effect to Schedule 12, which makes provision for statutory compensation. Compensation is available for damage caused by the authorised acts of sewerage undertakers, but not for damage caused by acts which are unauthorised, such as the discharges of foul water into the canal. This indicates that the victims of unauthorised damage retain their common law rights of action. Otherwise, they would be left without any remedy for the damage they have suffered, which would be anomalous.
• Thirdly, depriving the victims of a nuisance or trespass of their common law rights of action would be a substantial change to the law as it stood before the 1991 Act was enacted. It is unlikely that a change of this kind would have been made in a consolidation statute. Consolidation acts are not designed to make substantive changes to the law, but rather to reorganise and restate the existing law so that it is clearer and easier to understand. 

In addition, the principle of legality holds that fundamental common law rights, such as a right of action to protect private property, are not to be taken to be overridden in the absence of express language or necessary implication.

United Utilities relied on section 18, which empowers the secretary of state and Ofwat to make enforcement orders for the purpose of securing compliance by sewerage undertakers with statutory and certain other requirements. 

The Supreme Court accepted that the regulatory scheme established by the 1991 Act, including the making of enforcement orders under section 18, might be disrupted if the court were to grant injunctions which required a sewerage undertaker to spend large sums on new infrastructure as a remedy for interferences with private property rights. That might be so if such an injunction conflicted with the arrangements in the act for the regulatory approval of capital expenditure and the charges imposed on the sewerage undertaker’s customers. 

However, this does not mean that common law rights of action are excluded in such a case. Instead, the courts may make an award in damages, both for past invasions of property rights and for future or repeated invasions of those rights. This would vindicate property rights in relation to watercourses until the sewerage undertaker is in a position, with Ofwat’s approval, to invest in a long-term solution. 

How can these decisions be reconciled?

The Supreme Court’s conclusion that the 1991 Act does not prevent the Canal Company from bringing a claim in nuisance or trespass when the canal is polluted by discharges of foul water from United Utilities’ outfalls can, it explains, be reconciled with the decision in Marcic on the following grounds.

First, because it did not concern the limits on the authority conferred on sewerage undertakers by the 1991 Act set out in sections 117(5) and 186(3). 

Secondly, the defendant sewerage undertaker had not created or adopted the relevant nuisance, as it has in the present case. Instead, it was said to be liable for continuing the nuisance by failing to take reasonable steps to avert it by constructing a new public sewer. 

An essential ingredient of the cause of action was therefore that the defendant was under a duty to build a new sewer, in accordance with section 94(1) of the 1991 Act. That duty could only be enforced by the secretary of state or Ofwat under section 18, not by the courts. In contrast, the Canal Company’s proposed claim against United Utilities is not based on a breach of section 94(1), or any other requirement enforceable under section 18, but rather on independent common law causes of action in trespass and nuisance.

The Supreme Court’s decision could result in an increase in this type of claim, something we’ve commented on before in our article here, and owners of waterways may consider taking action against sewerage undertakers for polluting water.

For further information, please contact Paul Collins.