Canal & River Trust v Thames Water Utilities Ltd

Parliament can create a permanent statutory property interest in water flowing through a natural watercourse. A later repeal of the vesting provision does not undo that completed transfer. Recurring payments under a private Act may have a composite purpose: consideration for the transferred water and contribution to maintenance and repair. The payments may relate to all surplus water, rather than only statutory abstraction limits. A later licensing regime regulates the right to abstract water, not ownership of the water. Water value may be considered when fixing a just and reasonable payment, without requiring market-price equivalence. Appellate interference with a discretionary costs order is exceptional.

These Part 8 proceedings concerned annual special payments payable under section 5 of the River Lee Water Act 1855. The parties sought declarations to assist the Secretary of State in determining the proper amount payable. The issues concerned the nature of the statutory transfer of water, the purpose and quantity covered by the payments, the effect of the later licensing regime, and alternative claims.

Asplin J made declarations in [2016] EWHC 1547 (Ch). Both parties appealed, and Thames brought a separate costs appeal. The central question was the correct legal basis for the special payments.

Floyd LJ gave the leading judgment. Henderson and McFarlane LJJ agreed.

1. Disposition. All appeals were dismissed, but the declarations were varied. The special payments were declared to cover both maintenance and repair and the once-and-for-all transfer of all water in the River Lee surplus to that required for navigation. After the 1965 Order, the right to abstract was subject to the licences of right, but the payments continued to relate to the whole surplus water.
2. Transfer of property. At common law, flowing water in a natural watercourse was not capable of private ownership, but Parliament could create a statutory property interest. Section 9 of the River Lee Water Act 1855 effected an immediate, permanent transfer. Future water became an interest in possession as it flowed into the river. Repeal of section 9 did not undo the transfer, and section 68 of the River Lee Navigation Improvement Act 1850 had no remaining subject matter on which to operate.
3. Purpose and value of payments. The statutory context, prior water-sale arrangements and recitals showed that the payments were not limited to maintenance and repair. They were also consideration for the transferred water. Section 27 reinforced that conclusion by linking deductions to the value of water lost. Water value was a factor the Secretary of State could consider under section 52(2) of the British Transport Commission Act 1949, but the payments did not have to track market price.
4. Quantity and licensing. Sections 21, 22 and 30 of the 1855 Act regulated practical abstraction and priorities; they did not limit the quantity transferred for payment. The Water Resources Act 1963 and the 1965 Order introduced a separate licensing regime. Ownership did not dispense with the need for a licence. Sections 31 of the 1963 Act, 48 and 48A of the Water Resources Act 1991 did not alter the character of a claim for unpaid special payments.
5. Costs. The judge had a wide discretion. The Court of Appeal should interfere only where the discretion fell outside the generous ambit of reasonable disagreement or involved an error of principle. The judge was entitled to treat the issues as interwoven and to make no order as to costs.

• Court of Appeal (Civil Division): In [2018] EWCA Civ 342, all appeals were dismissed, with the substantive declarations varied.
• High Court of Justice, Chancery Division: Asplin J made declarations concerning the special payments in [2016] EWHC 1547 (Ch).