Thames Water Utilities Ltd, R (on the application of) v Water Services Regulation Authority & Anor

For an inset appointment under the Water Industry Act 1991, the “unserved” criterion is not confined to whether water is flowing on the decision date. Ofwat must evaluate whether premises are in substance served by the incumbent, considering their history and the nature and duration of any disconnection. A temporary construction supply or repair disconnection does not automatically alter that assessment. The “large user” criterion may apply to a whole development site treated, in context, as one set of premises, with aggregate likely consumption and customer consent considered. Competition is permitted but remains circumscribed, and incumbent investment must be taken into account.

Thames Water Utilities Ltd challenged Ofwat’s variation of Independent Water Networks Ltd’s appointment under section 7 of the Water Industry Act 1991, enabling it to replace Thames Water as water and sewerage undertaker for a King’s Cross development site. Mitting J dismissed the judicial review claim in [2010] EWHC Admin 331. The appeal concerned the construction and application of the statutory “unserved” and “large user” criteria, including whether a previously served but permanently disconnected brownfield site was unserved, whether the site could constitute one set of premises, and whether the criteria could operate on alternative bases.

1. Disposition. Laws LJ delivered the leading judgment and dismissed the appeal. Tomlinson LJ agreed and gave additional reasons. Kitchin LJ agreed with both judgments.
2. Unserved criterion. The statutory expression “is served” in section 7(4)(b) of the Water Industry Act 1991 requires a substantive, fact-sensitive evaluation by Ofwat where there is no actual supply at the date of decision. The premises need not be premises that have never previously been served. Ofwat may consider the history, duration and circumstances of the disconnection. A temporary construction supply does not make otherwise unserved premises served, and a temporary disconnection for repairs does not make served premises unserved. A customer’s unilateral disconnection merely to change supplier will not automatically satisfy the criterion.
3. The meaning of statutory language is a question of law for the court. Whether accepted facts fall within an evaluative statutory expression is instead a matter for the appointed decision-maker where Parliament has entrusted that judgment to a specialist regulator. Ofwat’s conclusion was lawful because the relevant buildings had been demolished or gutted and the connections had been permanently disconnected for several years.
4. Large user criterion. “Premises” is an ordinary, context-dependent term and is not synonymous with buildings. Ofwat was entitled to treat the development site as one set of premises, and to assess its likely aggregate consumption. The developer, Argent, was the relevant customer in relation to those premises and its written consent satisfied section 7(5)(b). The unserved and large user routes were alternative bases and could coexist where the site was unserved for water but still received sewerage services through surface-water drainage.
5. Tomlinson LJ added that section 9(3) requires the regulator to have regard to arrangements made and expenditure incurred by the existing undertaker to enable service. The weight given to that investment is for the regulator, subject to lawful exercise of the statutory judgment.

• Court of Appeal (Civil Division) [2012] EWCA Civ 218, 25 January 2012: appeal dismissed.
• Administrative Court [2010] EWHC Admin 331, 30 November 2010: Mitting J dismissed the judicial review challenge to Ofwat’s decision.