Court of Appeal ruling on discharges ‘welcome confirmation’ for sewerage companies

Michael Smith of Pinsent Masons said the Court of Appeal’s decision came amid “ongoing media attention and pressure on sewerage undertakers to reduce the impact of their discharges into watercourses”. He added that the ruling, which upheld an earlier High Court judgment in the long-running legal battle between the Manchester Ship Canal Co Ltd (MSCC) and United Utilities Water Ltd “will be welcome confirmation for those in the industry”. Pinsent Masons has acted for United Utilities throughout the dispute.

At the High Court, United Utilities sought a declaration that MSCC, which owns the Manchester Ship Canal, had no right to pursue a private law claim against United Utilities in respect of unauthorised sewage discharges into the canal. United Utilities, the water and sewerage undertaker for the North West of England, accepted that any such discharges would represent a breach of its statutory duty, but said that a private law action by an affected landowner was not the appropriate remedy.

It argued that, except for deliberate or negligent discharges, the matter of enforcement should be dealt with by the industry regulators, Ofwat, and the Environment Agency. The High Court sided with United Utilities, following the 2003 decision of the House of Lords in Thames Water Utilities Ltd v Marcic that preventing such involuntary discharges would require new infrastructure, the creation and management of which the government had left in the hands of regulators.

MSCC appealed against the High Court’s decision and was supported by a consortium led by the Good Law Project, who intervened in the appeal. It argued that the High Court had adopted an over-broad interpretation of the Marcic ruling and was wrong to find that United Utilities’ unauthorised discharges into the canal had been involuntary. Handing down the Court of Appeal’s decision, however, Lord Justice Nugee found that "[neither] the grounds of appeal advanced by MSCC nor such additional points as were made by the interveners" persuaded him that the High Court’s ruling was wrong.

The Court of Appeal accepted United Utilities’ submission that it would be inconsistent with the comprehensive statutory scheme in the 1991 Water Industry Act for concurrent private law claims to be permitted. It added that Ofwat and the Environment Agency held responsibility for regulatory enforcement over involuntary discharges.

The Court of Appeal did, however, overturn the High Court’s decision on a second issue concerning the power of local authorities to have entered into agreements allowing discharges through sewers and outfalls which could be removed on the service of notice by the canal owner. The court found that local authorities, which previously fulfilled the role of sewerage undertakers, could enter into such agreements.

Lord Justice Nugee said: “Once it is accepted…that the local authorities had the power to acquire rights to construct sewers by agreement, then in my judgment there is no reason why they could not agree to acquire limited and determinable rights if that is what they were offered. They did not need to contract on those terms and could have relied on their statutory powers instead; but having chosen to contract on terms that they acquired a determinable, not a permanent, right, that in my view is all they acquired.”

Smith said: “In the midst of ongoing media attention and pressure on sewerage undertakers to reduce the impact of its discharges into watercourses, this statement of the law will be welcome confirmation for those in the industry. The court found that the underlying principle of Marcic ‘applies equally to this situation’ and that to ‘hold United Utilities liable for trespass – or nuisance – for unauthorised discharges into the canal would be equally inconsistent with the statutory scheme applicable to it as sewerage undertaker.’  As Lord Justice Nugee put it: ‘the fact that all MSCC actually wants is money…does not seem to me to change the position.’”

Smith added: “This decision will hopefully enable United Utilities to continue to focus its resources on serving its customers, fulfilling its obligations under the new Environment Act and continuing its substantial and ongoing investment in improving the quality of our rivers and seas, rather than defending itself in court.”