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In this post, Grant Arnold, a paralegal in the litigation team at CMS, previews the decision awaited from the Supreme Court in The Manchester Ship Canal Company Ltd v United Utilities Water Ltd No 2.

Background 

The appeal stems from a long-standing dispute between The Manchester Ship Canal Company Ltd (“MSCC”) and United Utilities Water Ltd (“UU”), regarding unauthorised discharges by sewers operated by UU into the Manchester Ship Canal. MSCC is the owner of this canal, whilst UU is the sewerage undertaker for the North West of England, following the privatisation and reform of the sector in 1991.

This case follows a Supreme Court judgment in 2014 ([2014] UKSC 40), which decided that UU had inherited statutory rights of discharge from pipes and outfalls constructed pre-privatisation, which endured once the Water Industry Act 1991 (the “WIA 1991”) came into effect. See our case comment here, for further detail.

The Decision of the High Court

The present appeal concerns MSCC’s private law claim in nuisance and/or trespass against UU in respect of the discharge that arises in instances where heavy rainfall causes the sewerage system to overflow ([2021] EWHC 1571). At first instance, Fancourt J ruled in favour of UU. It was decided that absent an allegation of negligence or deliberate wrongdoing on the part of UU leading to the discharge, no such private law claim could be made out under a true construction of the WIA 1991. To that end:

“UU accepted that if there had been any such discharges it would have acted in breach of its statutory duty, but said that the only remedy available was regulatory enforcement under the relevant statutory provisions, not a private law action by the landowner affected.”

In essence, it was found that MSCC was not entitled to bring a private law claim for an injunction or damages where the remedy, in practice, necessitates the construction of a better sewerage system. Doing so would ultimately undermine both the integrity of the regulatory scheme and the statutory remedies already provided for in the WIA 1991.

The Decision of the Court of Appeal

On appeal ([2022] EWCA Civ 852), Lord Justice Nugee – with the agreement of Lady Justice Asplin and Lord Justice Arnold – upheld the decision of Fancourt J. MSCC had attempted to challenge the High Court’s decision on the following five grounds:

  • Fancourt J erred in concluding (i) that unauthorised discharges constituted a de jure breach of the general duty in s. 94(1)(b) of the WIA 1991, and (ii) that that breach resulted in the s. 18 machinery operating to the exclusion of private law remedies.
  • Fancourt J’s interpretation of the principle in Marcic v Thames Water Utilities Ltd ([2003] UKHL 66) (“Marcic“) was overly broad.
  • Fancourt J’s reading of the foul water provisos found at ss. 117(5) and 186(3) of the WIA 1991, was in effect, to render them null.
  • Fancourt J was wrong in deciding that the polluting discharges were involuntary.
  • Fancourt J was incorrect in finding that a purely involuntary act is not an act of trespass.

However, Lord Justice Nugee remained unconvinced by all of the grounds of appeal, and the additional points put forward by various interveners with expertise in environmental law, including organisations such as the Good Law Project and the Environmental Law Foundation.

MSCC tried to distinguish its case from Marcic on the basis that it concerned unauthorised discharges into a waterbody, rather than those onto land. Despite this, the crux of Lord Justice Nugee’s judgement was that it was for the industry regulators – OFWAT and the Environment Agency – to enforce, save for where there are deliberate or negligent discharges.  It would ultimately be contrary to the statutory scheme to permit private law causes of action under the circumstances.

In separate proceedings between MSCC and UU, the Court of Appeal also considered whether UU had a continued statutory right in relation to sewage outfalls which had previously been authorised under contract, notwithstanding MSCC’s termination or ostensible termination of said agreements. The Court of Appeal sided with MSCC on this issue, reversing the decision of the lower court. Accordingly, it was acknowledged that local authorities such as UU were free to enter into alternative arrangements, acquiring more limited and determinable rights in turn and at the expense of their statutory powers.

Comment

If the judgment stands at the Supreme Court level, this will make it highly unlikely for any similar actions to be brought successfully against sewerage undertakers in the future, unless initiated by an environmental regulator. However, in a witness statement submitted by the Good Law Project, it’s noted that “public bodies responsible for enforcing prohibitions on such discharges are in practice over-stretched and unable to take action in relation to many discharges.” To that end, there is an argument to be made about the importance of private law remedies acting as a potential deterrent for local authorities to keep unauthorised discharges to a minimum. With that said, given the wider policy considerations at stake, it may be that the Supreme Court ultimately looks to avoid opening the floodgates in reaching its verdict, and are concerned about it leading to a dramatic increase in litigation should the Court of Appeal’s judgment be reversed.