The Manchester Ship Canal Company Ltd v United Utilities Water Ltd

The Court of Appeal considered two linked appeals arising from disputes about discharges by United Utilities ("UU") into the Manchester Ship Canal owned by The Manchester Ship Canal Company Ltd ("MSCC"). The central legal questions were whether MSCC could pursue private law claims (trespass or nuisance) for unauthorised discharges said to contravene the "foul water provisos" in the Water Industry Act 1991 (notably s.117(5) and s.186(3)), and whether purportedly terminable historic licences to discharge could be relied on by MSCC to terminate outfalls vested in UU.

The Court applied the House of Lords decision in Marcic v Thames Water Utilities Ltd [2003] UKHL 66 and held that where the practical remedy for contamination or discharge is to require large-scale capital works (i.e. construction or improvement of sewerage infrastructure) private law claims in nuisance or trespass are inconsistent with and impliedly ousted by the statutory enforcement scheme under the WIA 1991 (in particular s.94 read with s.18 and the Part I duties on the regulator). Accordingly MSCC may not bring tort actions for unauthorised discharges absent allegations of negligence or deliberate wrongdoing.

On the separate point concerning terminated licences granted by predecessor local authorities, the Court held that those licences could validly create limited, determinable rights to discharge; the ultra vires doctrine does not automatically convert a terminable contractual licence into a permanent, indefeasible right. Accordingly the Judge below was wrong to hold the termination provisions void; the appeal in respect of those determinations was allowed (subject to the parties' remaining defences and issues to be proceeded with). The Court therefore dismissed the 2018 appeal and allowed the 2010 appeal (i.e. allowed in part overall).

Background and parties: MSCC is the owner of the Manchester Ship Canal. UU is the sewerage undertaker for the North West of England. Disputes arose about discharges from UU outfalls into the canal. There were (i) legacy proceedings from 2010 where MSCC claimed trespass for continued discharges following termination of historic agreements (the "2010 proceedings"); and (ii) a 2018 Part 8 claim by UU asking the court whether MSCC has private law remedies in trespass or nuisance for discharges that allegedly contravene statutory "foul water provisos" in the Water Industry Act 1991 (the "2018 proceedings").

Procedural posture / appellate history: Both issues had been decided by Fancourt J in favour of UU in the High Court ([2021] EWHC 1571 (Ch)). MSCC appealed both decisions to the Court of Appeal: CA-2021-000674 (2010 appeal) and CA-2021-000675 (2018 appeal). Several environmental bodies were permitted to intervene by written submissions in the 2018 appeal.

Nature of the applications / relief sought:

• (i) In the 2018 proceedings UU sought a declaration that MSCC had no private law claim in trespass or nuisance for unauthorised discharges into the canal (absent negligence or deliberate wrongdoing), on the basis that statutory enforcement under the WIA 1991 is the proper remedy.
• (ii) In the 2010 proceedings MSCC sought to rely on termination notices to historic licences granting outfalls; UU sought a declaration that it retained entitlement to continue discharging despite termination.

Issues framed by the Court:

• Whether the statutory enforcement scheme under the Water Industry Act 1991 (notably the general duty in s.94, the enforcement procedure in s.18, and duties in Part I) impliedly ousts private law actions in nuisance or trespass in circumstances where the only effective remedy would be large-scale capital works.
• Whether the foul water provisos (s.117(5) and s.186(3)) preserve private law rights to sue in respect of polluting discharges, or whether those remedies are displaced by Marcic and the WIA 1991 scheme.
• Whether historic, terminable licences to discharge could be terminated consistently with the statutory framework or were void to the extent they required discontinuance incompatible with statutory duties.

Court's reasoning (concise):

1. The Court followed Marcic: where a sewerage undertaker's activities and the appropriate remedial response (for example, building larger sewers or other capital projects) fall within the regulatory and prioritisation scheme established by the WIA 1991, private law actions that would, in effect, require case-by-case judicial determination of priorities and capital expenditure would be inconsistent with that statutory scheme. The statutory enforcement machinery (s.18 et seq.), read with Part I duties on the regulator (s.2), demonstrates parliamentary intent that such matters be addressed by the regulator and statutory processes rather than by private tort litigation.
2. The foul water provisos (s.117(5) and s.186(3)) do not operate to re-create a free-standing right to compel capital expenditure by an undertaker in circumstances where Marcic applies; they remove any argument of implied statutory authority (the Allen defence) but do not, in the context of the overall scheme, guarantee a private tort remedy in all cases. The provisos may retain effect in situations (e.g. negligence or deliberate wrongdoing, or possibly operational matters) where Marcic does not operate, but they do not displace Marcic in cases where the practical remedy is capital works or policy decisions.
3. On the 2010 appeal the Court held that local authorities could validly acquire limited, determinable contractual licences to permit outfalls; those agreements are not rendered void in part by the ultra vires doctrine merely because they provide for termination. It would be a startling consequence to hold that a terminable licence automatically converts into an indefeasible permanent right; therefore the High Court was wrong to hold the termination provisions void. The appeal in that respect was allowed and a suitable declaration substituted, leaving outstanding factual/contention issues to be tried (including other defences and consequences if UU's other defences fail).

Subsidiary findings: The Court accepted factual evidence on water quality, regulatory prioritisation and the involuntary character of many storm-related discharges provided by UU's witnesses. The Court also noted that where negligence or deliberate wrongdoing is pleaded and proved, private law remedies may remain available.

The Court of Appeal dismissed MSCC's appeal in respect of the 2018 proceedings (holding that private tort actions for unauthorised discharges which would in practice require capital works are inconsistent with the Water Industry Act 1991 and are impliedly ousted, absent negligence or deliberate wrongdoing). The Court allowed MSCC's appeal in respect of the 2010 proceedings (holding that historic terminable licences to discharge can create valid limited, determinable rights and the judge was wrong to treat termination provisions as void); the result leaves outstanding the remaining factual issues and UU's other defences. The reasoning rested on application of Marcic, construction of ss.94 and 18 WIA 1991, and orthodox principles on ultra vires and contractual rights of local authorities.

Appeal from Fancourt J, High Court of Justice, Business and Property Courts (Chancery Division), [2021] EWHC 1571 (Ch). Two linked appeals to the Court of Appeal: CA-2021-000674 (2010 proceedings) and CA-2021-000675 (2018 proceedings), culminating in this judgment [2022] EWCA Civ 852. The court considered prior authority including the Supreme Court decision in MSCC (2014) [2014] UKSC 40 and House of Lords authority in Marcic [2003] UKHL 66 in construing the Water Industry Act 1991 and the scope of private law remedies.