Could Supreme Court sewage decision open the floodgates?

A judgment of the Supreme Court, handed down earlier this week, could lead to an increase in claims against sewage companies initiated by private companies and individuals.

Summary and background

In The Manchester Ship Canal Company Ltd (Appellant) v United Utilities Water Ltd (Respondent) (No 2) [2024] UKSC 22, the Supreme Court was asked to decide whether the existing statutory framework governing the supply of water and provision of sewerage prevented the owner of a waterway from taking action against a utility company responsible for discharging sewage into the water.

The judgment marks the conclusion of long-running litigation between The Manchester Ship Canal Company Ltd (“MSCC”), the owner of the Manchester Ship Canal (the “Canal”), and United Utilities Water Ltd (“United Utilities”), as the statutory sewage undertaker for the North West of England. The judgment itself was 16 months in the making, the case having been heard by the Supreme Court in March 2023.

The case has been closely followed by industry stakeholders as it has moved through the High Court and Court of Appeal to the Supreme Court. The final ruling clarifies that the legislative framework under the Water Industry Act 1991 (the “Act”) will not provide sewage undertakers with immunity from nuisance claims brought by those who own or enjoy rights over polluted watercourses. The decision continues the long line of cases dealing with the question of the extent to which a utilities provider, operating under powers prescribed to it by statute, can rely on that authorisation to protect it from claims arising from the undertaking of its function.

Importantly, the claim that was the subject of the Court’s judgment was not a claim by MSCC in nuisance and, as such, the Court was not required to consider or make any decision as to whether a claim in private nuisance could be supported. Rather, in response to a threat by MSCC to pursue a claim of that nature, United Utilities sought a declaration from the Court that any such action would be barred by the statutory scheme established by the Act.

Whilst the High Court agreed to make that declaration (as per The Manchester Ship Canal Company Ltd (Appellant) v United Utilities Water Ltd (Respondent) (No 2) [2021] EWHC 1571 (CH)), upheld by the Court of Appeal, the Supreme Court has allowed MSCC’s appeal. In a detailed judgment which carefully considers a long line of private nuisance case law, the Supreme Court unanimously held that the Act does not prevent MSCC from bringing a common law claim in private nuisance against United Utilities. That is even in circumstances where there has been no negligence or deliberate misconduct on the part the sewage company.

Detail of the decision

The common law position as to the availability of private nuisance in the context of pollution to waterways is – as recognised in the judgment – well-established. The owner of a watercourse, such as MSCC, has a right to use or enjoy it, including a right to preserve the quality of the water. If that right is interfered with because of pollution, it may give rise to an actionable nuisance. The question for the Supreme Court to determine was the extent of the application and effect of the Act on existing common law rights. 

A detailed consideration of the relevant statutory scheme is outside of the scope of this case report but, in summary, United Utilities argued that the statutory framework, in particular the duties and functions imposed by it, would prevent MSCC from pursuing a claim in private nuisance. MSCC argued that, on a proper interpretation, the Act did not ouster its common law claim.

The Court sided with MSCC and gave the following reasons:

1. Nothing in the relevant provisions of the Act authorise a sewage undertaker such as United Utilities to discharge foul water into a watercourse. A sewage undertaker is expressly required to carry out its functions so as not to create a nuisance.
    
2. Any argument that the polluting discharges could be regarded as having been impliedly authorised by Parliament, because they are an inevitable consequence of United Utilities’ performance of its statutory powers and duties under the Act, could not be supported. United Utilities could have avoided contamination of the Canal if it had invested in improved infrastructure and treatment processes.
    
3. A number of provisions of the Act indicate that Parliament’s intention, in enacting the legislation, was not to exclude the common law rights of those with property rights in watercourses:
   1. Depriving a victim of nuisance of their common law rights of action would be a substantial change to the law as it stood before the Act came into being. In the judgment, the Court considered in detail relevant case law dating back as far as the 1850s to show the existence of the common law right. The Act is a consolidation act, designed to reorganise and restate the existing law so that it is clearer and easier to understand, rather than to effect substantive changes.
       
   2. The Act is detailed and elaborate legislation. It would be surprising if Parliament had left an important change to the law to be implied rather than expressly stated. The Court also considered the principle of legality, which provides that fundamental common law rights, such as rights of action to protect private property, are not taken to be abrogated by statute unless there is express language or necessary implication to that effect.
       
   3. The Act makes express provision for statutory compensation where damage is caused by acts of sewerage undertakers that are authorised by the Act (for example, the laying of pipes across private land). However, there is no similar compensation available for damage caused by acts which are not authorised (such as discharge of pollutants). The Court held that this strongly supports the view that victims of unauthorised damage retain their common law rights of action – if the position were otherwise, those victims would be left without any remedy for damage suffered and (perversely) treated less favourably than victims of authorised damage.

Injunctive relief

Whilst confirming the availability of common law damages for owners of polluted waterways, the Court did cast doubt on the availability of an injunction as a remedy in some circumstances. United Utilities raised the potential for injunctive relief to disrupt the enforcement regime envisaged by the Act. Improvements to the sewerage system are prioritised through discussions between the relevant sewerage undertaker, the Environment Agency and Ofwat and agreement of five-year programmes of service provision (to include details as to the amount of capital expenditure on improvements and the level of that expenditure that a sewerage undertaker may seek to recoup from customers).

The Court accepted that injunctions requiring sewerage undertakers to spend significant sums on new infrastructure aimed to prevent nuisance might unhelpfully cut across that specific statutory regime (not to mention interfere with the operation of a system working to process sewage). That may militate against the granting of injunctions that required the upgrading of a sewerage system. However, the Court was careful to make clear that this does not in any way exclude a remedy in the form of damages and the Court referred its power in equity to award damages for future or repeated invasions of rights (for example, pending the upgrading of sewerage infrastructure in line with Ofwat’s approval).

Implications

The Supreme Court did not of course, for the reasons mentioned above, give any consideration as to whether or not a private nuisance could be made out on the facts. MSCC can be expected to face a number of challenges if it does decide to pursue a nuisance claim. For example, the question of causation is highly fact-specific in the context of private nuisance and demonstrating that issues with water quality in large and fast-moving watercourses are caused by the discharge of sewage from outlets that only operate periodically when conditions require it is likely to prove challenging.

There is also the question of quantum. Private nuisance is an area noticeably lacking in reported decisions on the amounts received by successful claimants and the judgment refers to previous case law on the topic where public interest has been cited as a relevant factor in relation to appropriate remedy. When quantifying damages, the Court may give consideration to factors such as the capital investment requirements on sewage companies and the potential for an increase in private claims to impact the Ofwat price-setting process that determines what consumers must pay. That could impact a claimant’s decision as to whether nuisance claims are worth pursuing.

What is more certain is that a wide range of parties will be considering the judgment with interest, including environmental groups and claimant law firms. The issue could hardly be more topical at a time when water and sewage companies are under significant pressure, both financially and in terms of scrutiny over the discharge of waste material. There is already talk of the floodgates having been opened and undertakers in the industry should expect and plan for receiving test nuisance claims on the back of the Supreme Court’s decision.

We are experienced at CMS in defending private nuisance claims including group actions brought by large numbers of individuals. Please get in touch with the authors of this article if you are affected by the issues in this case, or similar cases, and would like advice as to how to deal with claims received or potential future claims.

A copy of the judgment is available here.