The Manchester Ship Canal Company sued United Utilities over repeated discharges of foul water from sewers into the canal. The Supreme Court held that the Water Industry Act 1991 does not bar common law claims in nuisance or trespass against sewerage undertakers for polluting discharges into watercourses, distinguishing the case from Marcic v Thames Water.
Background
The appellant, The Manchester Ship Canal Company Ltd (‘the Canal Company’), owns the beds and banks of the Manchester Ship Canal. The respondent, United Utilities Water Ltd (‘United Utilities’), is the statutory sewerage undertaker for the North West of England, operating a network of sewers, sewage treatment works and associated infrastructure. United Utilities’ sewerage network includes around 100 outfalls from which material is discharged into the canal. When the hydraulic capacity of the system is exceeded — whether due to excess inflow or mechanical failure — foul water is deliberately discharged into the canal through outfalls designed for that purpose. This is how the system was designed to operate. United Utilities accepted that such discharges could be avoided by investing in improved infrastructure and treatment processes.
The dispute concerned whether the Canal Company could bring actions in nuisance or trespass in respect of these polluting discharges, or whether such claims were barred by the legislative scheme of the Water Industry Act 1991 (‘the 1991 Act’). United Utilities sought and obtained in the courts below a declaration that no such common law claims could be brought absent allegations of negligence or deliberate wrongdoing.
The Issue(s)
The central question was whether the 1991 Act excluded common law claims in nuisance or trespass by owners of watercourses against sewerage undertakers in respect of discharges of foul water from sewerage infrastructure, in the absence of negligence or deliberate misconduct. The case also required the Supreme Court to consider whether the earlier House of Lords decision in Marcic v Thames Water Utilities Ltd [2003] UKHL 66 precluded such claims.
Subsidiary issues
The Court considered: (i) whether the 1991 Act authorised the discharge of foul water into watercourses; (ii) the proper interpretation of sections 117(5), 117(6), 186(3), 186(7) and 18(8) of the 1991 Act; (iii) the distinction between claims based on failure to construct new sewers and claims based on the operation of an existing sewerage system designed to discharge foul water; and (iv) the appropriate remedies, including whether damages could be awarded even where an injunction might not be appropriate.
The Parties’ Key Arguments
United Utilities’ position
United Utilities accepted that the discharges were unauthorised by the 1991 Act but contended that because such discharges could only be remedied by capital expenditure on new infrastructure, permitting private law claims would conflict with the regulatory regime. It argued that Parliament intended questions of infrastructure investment to be matters for the regulators (Ofwat and the Secretary of State) rather than the courts, relying on the decision in Marcic.
The Canal Company’s position
The Canal Company submitted that Marcic was distinguishable, particularly because it did not concern polluting discharges into watercourses and did not address the effect of sections 117(5) and 186(3). It contended that on a proper reading of the 1991 Act, including section 18(8), common law claims were preserved.
The Court’s Reasoning
General principles
The Court, in a unanimous judgment delivered by Lord Reed and Lord Hodge, began by setting out the foundational principles of private nuisance and the tortious liability of bodies exercising statutory powers. They emphasised the principle of legality:
Fundamental rights cannot be overridden by general or ambiguous words … In the absence of express language or necessary implication to the contrary, the courts therefore presume that even the most general words were intended to be subject to the basic rights of the individual.
The Court stressed the long-established principle that bodies exercising statutory powers enjoy no dispensation from the ordinary law of tort except in so far as statute confers it, and that nuisances are only authorised where they are the inevitable result of what Parliament has authorised.
Historical legislative and case law analysis
The Court undertook a comprehensive review of sewerage legislation from the mid-nineteenth century onwards and the accompanying case law, identifying a consistent parliamentary policy of protecting watercourses from sewage pollution. This included provisions prohibiting the creation of nuisances, requiring consent from persons entitled to prevent injurious affection of watercourses, and providing compensation for authorised damage. The Court summarised fifteen principles distilled from the pre-privatisation law at paragraph 50.
The 1991 Act does not authorise foul water discharges
The Court held that the 1991 Act does not authorise sewerage undertakers to discharge untreated effluent into watercourses. Section 117(5)(b) expressly provides that nothing in the relevant provisions authorises using sewers or outfalls to convey foul water into watercourses without adequate treatment. Section 186(3) provides that nothing in the relevant sewerage provisions authorises injurious affection of watercourses without consent of persons entitled at common law to prevent it.
Common law remedies are preserved
The Court held that sections 117(5), 117(6), 186(3) and 186(7) presuppose the survival of common law rights and remedies. Section 18(8) expressly preserves common law remedies where a contravention of a statutory requirement is not an essential ingredient of the cause of action:
the only remedies for, or for causing or contributing to, that contravention (apart from those available by virtue of this section) shall be those for which express provision is made by or under any enactment and those that are available in respect of that act or omission otherwise than by virtue of its constituting, or causing or contributing to, such a contravention.
The Court reasoned that a cause of action in nuisance or trespass based on the discharge of polluting effluent does not normally include as an essential ingredient a contravention of any statutory requirement, and is therefore not excluded by section 18(8).
The anomaly of United Utilities’ interpretation
The Court identified a fundamental anomaly in United Utilities’ argument: under its interpretation, Parliament would have enacted a regime where unauthorised interferences with property attracted no compensation and no common law remedy, while authorised interferences attracted statutory compensation. Lord Reed and Lord Hodge stated:
If persons who suffer such damage are also deprived of a right of action which would otherwise be available to them at common law, the result is that the victims of unauthorised interferences with their property are treated less favourably than the victims of authorised interferences. Such a result would, as Mr de la Mare submitted, be perverse.
Distinguishing Marcic
The Court held that Marcic was readily distinguishable. In Marcic, the claimant’s property was flooded by sewage escaping from an overloaded sewer — an involuntary escape from an outlet not designed to emit sewage. Thames Water had not created or adopted the nuisance. The claim depended on establishing that Thames Water had failed to construct a new sewer, which was an obligation arising only under section 94(1) of the 1991 Act. An essential ingredient of the cause of action was therefore a contravention of a statutory duty for which section 18 provided an exclusive remedy.
In the present case, by contrast, United Utilities’ sewerage system was designed to discharge foul water into the canal when hydraulic capacity was exceeded. This was a deliberate discharge, not an involuntary escape. United Utilities had caused or adopted the nuisance. The cause of action did not depend on establishing a failure to build new sewers.
United Utilities is responsible for discharges of noxious effluent into watercourses from its sewers, sewage treatment works and associated works which occur as a result of its sewerage system operating as it is designed to do when its hydraulic capacity is exceeded.
Remedies
While acknowledging that the grant of mandatory injunctions requiring infrastructure upgrades might in some cases conflict with the regulatory regime, the Court held that this did not exclude damages as a remedy. Relying on Lawrence v Fen Tigers Ltd and Fearn v Board of Trustees of the Tate Gallery, the Court held that public interest considerations are relevant to the choice of remedy, not to the existence of liability. The Court confirmed the power to award damages both at common law and in equity in lieu of an injunction under section 50 of the Senior Courts Act 1981:
The award of damages vindicates the property rights in relation to watercourses until the sewerage undertaker is in a position, with the approval of Ofwat, to invest in a long-term solution to prevent the harm to the claimant’s property. A successful claim for damages for an incident or incidents of pollution of a watercourse will impose costs on a sewerage undertaker; but the effect is merely to prevent it from externalising the costs of its operations by leaving them to be borne by the victims of its unlawful behaviour.
Practical Significance
This decision is of major importance for environmental law, property law and the regulation of the water industry. It establishes that sewerage undertakers cannot discharge foul water into privately-owned watercourses with impunity. Owners of watercourses retain their common law rights to bring claims in nuisance and trespass against sewerage undertakers in respect of polluting discharges, without needing to prove negligence or deliberate wrongdoing. The decision clarifies that Marcic has a narrow ratio confined to cases where the essential ingredient of the claim is the undertaker’s failure to construct new sewerage infrastructure. It reaffirms the principle of legality in the interpretation of statutes said to abrogate fundamental property rights. The decision also has significant financial implications for water companies, as damages claims may prevent them from externalising the costs of inadequate sewerage infrastructure onto the owners of watercourses.
Verdict: The Supreme Court unanimously allowed the Canal Company’s appeal, holding that the Water Industry Act 1991 does not bar common law claims in nuisance or trespass against sewerage undertakers in respect of the discharge of polluting foul water into watercourses, and that the decision in Marcic v Thames Water Utilities Ltd is distinguishable from the present case.
Source: The Manchester Ship Canal Company Ltd v United Utilities Water Ltd (No 2) [2024] UKSC 22
