The Manchester Ship Canal Company Ltd & Anor v United Utilities Water Plc

When one statutory framework supersedes another, the new framework is presumed to govern future activities. Clear words are required to produce retroactive effect or to interfere with vested rights. A statutory transfer scheme passes no greater rights than those held by the transferor and cannot make a statutory right immune from later amendment or repeal. Rights which are merely incidents of statutory functions do not pass as separate rights under enactments where the legislation itself confers the functions on the successor. The implied right of sewerage undertakers to discharge sewer contents had been removed by the Water Act 1989 or the Water Industry Act 1991. A transfer scheme could not preserve that right for outfalls existing before privatisation.

The Manchester Ship Canal Company Ltd and the Bridgewater Canal Company Ltd appealed from Newey J’s summary judgment decision in the Chancery Division, reported at [2012] EWHC 232 (Ch). The dispute concerned numerous sewer outfalls discharging into canals owned by the appellants.

The respondent argued that the implied right of discharge recognised under earlier public-health legislation had passed to it under a statutory transfer scheme made during water-industry privatisation in 1989. It further argued that transitional provisions preserved the right after the later statutory changes. The central questions were whether the right passed under the scheme and, if so, whether it was protected from repeal or amendment.

The appeal was allowed. Arden LJ delivered the leading judgment, with which Sullivan LJ agreed on the reasons for the result and Patten LJ agreed in both judgments.

1. Where one statutory framework supersedes another, the new framework is presumed to regulate future activities only. Clear language can displace that presumption. There is also a presumption against interference with vested rights, although it is weaker than the presumption against retroactivity. Continuing discharges occurring after the new legislation may therefore be affected prospectively.
2. The implied right of discharge did not pass under the transfer scheme. It was an incident of the sewerage undertaker’s statutory functions, and the Water Act 1989 separately vested those functions in the successor undertaker. The expressions “functions” and “property, rights and liabilities” in section 4 were separate subject-matters. The contingent compensation obligation likewise did not transfer.
3. Even if the right had been transferred, the scheme could not freeze it against later legislation. The transferor could transfer no more than it possessed, and the rights remained dependent on the enactments from which they derived. The savings and deeming provisions in the 1991 legislation preserved things done under earlier enactments; they did not preserve the implied right or give the transfer scheme a wider, retroactive effect.
4. The Court of Appeal’s decision in British Waterways Board v Severn Trent Water Ltd [2002] Ch 25 was binding. It could not be distinguished because the transfer-scheme argument had not been advanced in that litigation. Once the implied right had been removed by the Water Act 1989 or the Water Industry Act 1991, it ceased to exist in relation to pre-1989 outfalls.

Sullivan LJ added that, absent the binding authority of BWB, he would not have concluded that the 1991 legislation removed the implied right without transitional arrangements sufficient to allow undertakers to comply with their continuing drainage duty. That observation did not affect the unanimous result.

• Court of Appeal (Civil Division): Appeal allowed. The court held that the statutory transfer scheme did not preserve the implied right of discharge and that [2002] Ch 25 could not be distinguished.
• High Court of Justice (Chancery Division): Newey J held that the implied right of discharge from pre-1989 outfalls passed under the transfer scheme and was preserved from subsequent repeal: [2012] EWHC 232 (Ch).