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

Sewerage undertakers are bodies that have the statutory function of draining land and of maintaining and emptying public sewers. This appeal is concerned with limited but important aspects of one power of sewerage undertakers, the implied power to discharge the contents of those sewers (“sewer contents”) on to third party property without the owner’s consent (“the implied right of discharge”). This court held that that right was implied in the statutory framework governing sewerage undertakers in 1897. The central question on this appeal is this: was this right, as Newey J held, permanently saved from repeal in 1989 or 1991, as respects outfalls from sewers in place in 1989, because it was transferred under statutory transfer schemes for the transfer of property, rights and liabilities from the then sewerage undertakers to successor companies in preparation for privatisation in 1989?

In earlier litigation, this court held that the implied right of discharge was repealed by the Water Industry Act 1991 (“the WIA 1991”) or alternatively the Water Act 1989 (“the WA 1989”): British Waterways Board v Severn Trent Water Ltd[2002] Ch 25 (“BWB”), reversing a decision of my own at trial ([2001] Ch 32). In BWB, which I shall consider further below, this court distinguished the decision of this court in Durrant v BranksomeUrban District Council[1897] 2 Ch 291. In that case, this court held that sewerage undertakers had the implied right of discharge by implication into the then statutory framework, the Public Health Act 1875 (“the PHA 1875”). That Act was replaced by the Public Health Act 1936 (“the PHA 1936”), but Parliament did not then, or on any other occasion, confer an express power of discharge on sewerage undertakers, nor did it expressly repeal any implied right of discharge.

According to the decision of this court in BWB, the implied power of discharge ceased to exist either as a result of the WA 1989 or the WIA 1991. The Appellate Committee of the House of Lords refused permission to appeal against that decision. In determining this appeal, there is no question of this court coming to any different conclusion from that expressed in BWB on the points there decided. Its ratio is binding on this court. However, the respondent has reserved the right to challenge BWB before the Supreme Court should this matter go further, just as the appellants have reserved the right to consider whether to challenge Durrant in that event.

Under the WA 1989, provision was made for sewerage services to be privatised: the method chosen involved a transfer scheme taking effect on the transfer date which was simultaneously the date on which the relevant provisions of the WA 1989 came into effect. This means that, if the implied right was repealed by the WA 1989, the repeal and the transfer scheme were simultaneous. This appeal will have to consider the implications of that fact.

In this litigation, the respondent sewerage undertaker seeks to restrict the effect of BWB by arguing that, where the outfall belonged to the sewerage undertaker on the commencement date of the WA 1989, the right to discharge sewer contents from that outfall on to third party land (including land covered by water, such as rivers and canals) on and after that date was transferred to a successor company by a statutory transfer scheme under the WA 1989, and has been preserved by legislation from any repeal. The outfalls in question are into canals owned by the appellants.

Newey J, in a thoughtful judgment, concluded that, where outfalls were transferred to a sewerage undertaker under a transfer scheme entered into as part of the privatisation process implemented under the WA 1989, the sewerage undertaker acquired the implied right of discharge from that outfall that existed prior to the WA 1989. As I have said, this appeal is against that decision.

Although this appeal involves consideration of some complex statutory provisions and case law, at the end of the day the correctness of the judge’s decision must stand or fall by reference to two propositions (“the Propositions”). The first proposition (“the First Proposition”) is that the implied right of discharge passed to the successor company under the transfer scheme. The judge’s fundamental point was that the transfer scheme had by statute the effect of transferring the implied right of discharge to the successor company. The second proposition (“the Second Proposition”) is that the implied right of discharge so transferred was preserved by subsequent legislation from subsequent change. Both propositions had to be established.

Having considered the well-presented submissions of counsel, and the various authorities to which we were referred, I have concluded for the reasons set out below that this court cannot consistently with BWB uphold the Propositions:

Even if the implied right of discharge fell within the transfer scheme, the latter did no more than convey rights subject to amendment by statute.

The transfer scheme was ineffective to freeze the position as it stood immediately at the date of the transfer scheme.

Since in BWB this court held that the statutory provisions currently in force are inconsistent with the implied right of discharge formerly conferred on sewerage undertakers, it was not, in my judgment, open to the judge to hold as he did that BWB was distinguishable on the ground that the Propositions had not been argued in that case.

This judgment proceeds on the basis that both Durrant and BWB are good law as both decisions are binding on this court. That means that at some point one statutory framework was superseded by another. Whenever that happens, important questions arise as to which activities are governed by which framework, and as to the survival of the earlier legislation. I shall need to consider those points below since they shed some light on the answer to the questions of interpretation posed in this case.

There are four matters to be dealt with before I set out my own reasoning:

The relevant statutory provisions need to be outlined, and the decisions of this court in Durrant and BWB placed in context;

The factual background;

The effect in general of the supercession of one statutory framework by another; and

The judge’s reasoning on the First Proposition.

I will deal with the judge’s reasoning on the Second Proposition when I come to set out my own reasoning, as it can be more clearly explained at that stage (see paragraphs 68 to 80 of this judgment).

The application before the judge was one for summary judgment, but neither party to this appeal suggests that anything turns on that point. The question in issue is a pure point of law, and it was sensible to decide it before the costs of a substantial trial were incurred. It was decided in the same way as a preliminary issue of law.

These provisions form the background against which the statutory effect of the transfer scheme must be ascertained.

Sewerage services have been regulated by statute since at least 1875. The legislation relevant to this appeal is contained in: the PHA 1875 and the PHA 1936 (collectively “the PHAs”), the Water Act 1973 (“the WA 1973”), the WA 1989 (which facilitated privatisation of the water industry), the WIA 1991, a consolidating Act, which, so far as material, is currently in force, and the Water Consolidation (Consequential Provisions) Act 1991 (“the CPA 1991”), which dealt with transitional provisions more conveniently enacted outside the WIA 1991.

The material required to be covered in this section of my judgment is organised under the following headings:

Basic statutory framework: sewerage undertaker’s functions, together with the power to lay pipes, the prohibition against discharging foul water (“the foul water proviso”) and the obligation to pay compensation;

this court’s decision in Durrant, upholding the implied right of discharge;

this court’s decision in BWB,holding that the implied right of discharge had been repealed;

the provisions in the WA 1989 dealing with transfer schemes and the transfer of statutory rights and liabilities; and

transitional provisions and savings in the 1989 and 1991 legislation.

There will, I regret, be a lengthy narrative before I reach (at paragraphs 28 to 31 below) the transfer scheme provisions, and (at paragraphs 32 to 34) the transitional provisions and savings, which are at the heart of this appeal.

The basic statutory framework set out in the PHA 1875 can still be seen in the current legislation. In the PHA 1875, there were four principal provisions:

Functions: Section 15 imposed a duty on local authorities to keep in repair all sewers belonging to them and causing sewers to be made for draining their district.

Pipe-laying power: Section 16 conferred powers on local authorities to construct sewers. They were empowered to do so “into, through or under any lands whatsoever within their district”.

Foul water proviso: Section 17 restricted the power of a local authority so that it could not use any sewer, drain or outfall to convey any sewage or filthy water into a natural stream or watercourse until such sewage or filthy water had been freed from all excrementitious or other foul or noxious matter such as would affect or deteriorate the purity and quality of the water in such stream or watercourse.

Compensation: Section 308 of the PHA 1875 imposed an obligation on a local authority to pay compensation to any person who sustained “damage by reason of the exercise of any of the powers under this Act” unless the person sustaining damage was himself in default.

These provisions were repealed and re-enacted by the PHA 1936. Powers to adopt sewers were added for the first time. The foul water proviso and the compensation provision became sections 30 and 278 of the PHA 1936.

The provisions dealing with functions of sewerage undertakers were further repealed and re-enacted by the Water Act 1973. No amendment was made to the other relevant provisions of the PHA 1936.

Then, as I have explained, the WA 1989 was passed to prepare sewerage and water undertakers for privatisation:

Functions: The general sewerage functions were set out in section 67 of the WA 1989. Nothing of any importance turns on the definition of “functions” in section 189 of the WA 1989.

Pipe-laying power: Section 153 and Schedule 19 to the WA 1989 provided for the laying and vesting of pipes. Schedule 19, paragraph 6(3) replaced section 278 in relation to paying compensation for exercise of the pipe-laying power.

The foul water proviso and compensation provision in the PHA 1936 continued to apply.

The WIA 1991 contained similar provisions to those contained in the WA 1989 for the functions of a sewerage undertaker (section 94(1)) and the pipe-laying power (section 159). The obligation to pay compensation to persons who suffered damage as a result of the construction of pipes by a sewerage undertaker was replaced by the WA 1991, schedule 12, paragraph 2(1).

However, the foul water proviso was re-enacted in a limited form by section 117(5) and (6) of the WIA 1991 so that there was no “foul water proviso” applying to the pipe-laying power. The view that I took at first instance in BWB (at pages 50 to 52) was that this was replaced by various environmental controls.

In addition, section 278 of the PHA 1936 was disapplied insofar as it had continued to apply in relation to sewerage undertakers. It was replaced by a liability to pay compensation for damage resulting from the exercise of any of the sewerage undertaker’s powers under “the relevant sewerage provisions” (schedule 12, paragraph 4(1)), but this expression was defined in such a way as to exclude section 94(1) of the WIA 1991.

Durrant was decided under the 1875 Act. In that case the sewerage authority (the local authority) discharged surface water which it had drained from roads into a river, thus increasing the sand in the river downstream. This increased the problems for the owner of part of the bed of the river in keeping the river free-flowing. The owner claimed an injunction against the local authority to prevent it from discharging water. North J held that the power to discharge water into a river had to be implied since Parliament had specifically prohibited the discharge of foul water. The owner of the river bed argued that the statutory powers did not apply to water brought from different places. North J held that this was permitted because of the explicit statutory provision to construct pipes. The sewerage undertaker had tried to move excess sand from the water before it entered the river. The owner of the river bed appealed to this court. Lindley LJ agreed with North J. He held that the existence of a right to compensation was valuable. However, he decided the case on section 16 and section 17 of the PHA 1875. The other two members of the court, Lopes and Chitty LJJ, came to the same result for slightly different reasons. Lopes LJ gave greater emphasis to section 16 and to the explicit power in it “to carry through, into and onto any lands”. However, he also considered that the liability to pay compensation was important because it meant that the power was not harsh and unjust. Chitty LJ considered that section 16 was enough and that having regard to section 16, section 17 could not confer power by itself. He also considered that section 308 was of great value.

BWB was decided after the WIA 1991 was enacted. The issue in BWB was whether a sewerage undertaker had an implied right of discharge from an adopted sewer into a watercourse owned by a third party (British Waterways Board) (“BW”) as of 1996 when a licence to discharge granted by BW was terminated. The licence had been transferred to Severn Trent Water Ltd under a transfer scheme entered into pursuant to the WA 1989. The sewerage undertaker contended that it did not have to agree a new licence as it had the implied right of discharge.

I shall need to say more about BWB later in this judgment. At this stage it is sufficient for me to indicate the principal reasoning in the lead judgment of Peter Gibson LJ, with whom Chadwick and Keene LJJ, who also delivered concurring judgments, agreed. Peter Gibson LJ attached particular importance first to the fact that there was no foul water proviso in the WIA 1991 applying to the pipe-laying power. In my judgment at trial, I had explained that there were new environmental provisions but this court did not attach the same significance to those provisions. The second matter on which Peter Gibson LJ particularly relied was that there was no equivalent in the WIA 1991 of the liability to pay compensation. The power to pay compensation was limited to the exercise by the statutory undertaker of the power to construct pipes, not to cases where the sewerage undertaker had inherited or adopted sewerage pipes. That person might be either the owner of the land or the owner of land affected indirectly by the discharge. Peter Gibson LJ also noted that express provision was made for water undertakers to discharge water on to a third party’s land without his consent (section 165 of the WIA 1991) and that similar power was also contained in the Highways Act 1980 and the Water Resources Act 1991 for the benefit, in the latter case, of the National River Authority (“the NRA”) (later the Environment Agency). This court was impressed by the limitation on compensation for those affected by discharge of water on to their land. At trial, I had held that the function of the compensation provision was replaced by a new, much more limited system of consumer protection (see pages 48 to 49) but this court did not consider those provisions sufficient to ensure the survival of the implied right of discharge.

No reference was made in BWB or Durrant to powers to adopt drains. Durrant was decided against its specific facts but I would proceed on the basis that the same reasoning would have applied to the discharge of water from drains constructed by any predecessor or from adopted pipes.

Section 4 of the 1989 Act provides for the transfer of the water authorities’ functions to the water undertakers and sewerage undertakers respectively and for there to be schemes for the division of the property, rights and liabilities of those authorities between their successor companies and the NRA.

Section 4(1) of the WA 1989 provides :

The meaning of “property, rights and liabilities” is elucidated by schedule 2, paragraph 2(3), which provides so far as material:

This subparagraph is clearly intended to be as all-embracing a provision as it could be. Parliament has enacted that a transfer scheme can even transfer a right which is incapable of transfer in the normal way, as well as rights under an enactment.

We are particularly concerned with transitional provisions and savings in the WA 1989 and the WIA 1991.

As to the WA 1989:

Schedule 26 contained transitional provisions and savings, which section 190(2) of the WA 1989 stated were without prejudice to section 16 and 17 of the Interpretation Act 1978.

The transfer schemes were the subject of special provisions in schedule 26, paragraphs 13(1) and 41(4).

Repeals were dealt with in Schedule 27 to the WA 1989. Section 14 of the Water Act 1973 was substantially repealed.

The principal saving provision in the 1991 legislation is to be found in the CPA 1991, Schedule 2, paragraphs 1(1) and 6.

The CPA 1991, section 2(1) and schedule 1 provided for amendments to other legislation which were to be without prejudice to sections 16 and 17 of the Interpretation Act 1978.

The CPA 1991, schedule 2, paragraph 1(1) preserved the validity of things done under legislation repealed by the CPA 1991 and re-enacted by the WIA 1991. Section 219(9) of the WIA 1991 declared that this paragraph had this effect.

The CPA 1991, schedule 2, paragraph 6(1) continued the savings in schedule 26 for transfer schemes.

Repeals were effected by schedule 3 to the CPA 1991. In particular, the foul water proviso in the PHA 1936, section 30, the statutory functions of sewerage undertakers in the WA 1989, section 67 and the pipe-laying power in the WA 1989, section 153 were repealed without any saving.

There are very few facts that need to be stated for the purposes of this judgment, but it is clear from this background that the questions arising on this appeal have considerable implications in practice.

All the outfalls in the present case are into the Manchester Ship Canal or the Bridgwater Canal, both of which are owned by the appellants. There are some 113 outfalls in issue in relation to the Manchester Ship Canal, and approximately 58 in relation to the Bridgewater Canal. No data on the number of outfalls pre-dating 1989 has been put before the court in relation to the Bridgewater claim, but of the outfalls in issue in the Ship Canal claim, at least 70% are accepted as having been in place prior to 1989. There is reason to believe that this pattern is repeated in other places for which the respondent is responsible. There are also a number of other sewerage undertakers who are affected by similar issues following this court’s decision in BWB.

If this case proceeds to trial, we are told that difficulties are likely to arise over the assessment of damages for trespass and in allocating responsibility for some of the discharges for the purpose of obtaining discharge consents. Thus the implications of the issues in this appeal are very substantial.

This case, unlike BWB, is not confined to situations where there have been licences.

The transfer scheme approved by the Secretary of State in this case is dated 31 August 1989 and runs for over 150 pages. The transfer date is stated to be 1 September 1989. It records that it is made under schedule 2 of the WA 1989 for the division of the “property, rights and liabilities” as between the successor company and the NRA. There is no definition in the transfer scheme of “property, rights and liabilities”. The transfer scheme provides for the allocation to the successor company of the property, rights and liabilities which were not allocated to the NRA. Clause 5 of the scheme dealt separately with certain rights and liabilities under enactments by reference to schedule 5 to the transfer scheme. However, none of the rights and liabilities under schedule 5 resembles the implied right of discharge. Moreover, clause 5 described such rights as "rights which may arise after the Transfer Date by virtue of enactments amended or repealed by the Act and, in pursuance of provision [sic] contained in Schedule 26 to the Act". This is consistent with the interpretation of section 4 as extending only to rights and liabilities under an enactment if and to the extent that they survive amendment or repeal.

There are two tasks to perform before turning to my reasons for coming to a different conclusion from that of the judge. The first concerns the principles to be applied where one statutory framework supersedes another.

The parties rely on incidental provisions of various Acts to support their arguments on the effect of the transfer scheme. Some of these provisions are transitional provisions, that is, provisions designed to facilitate the change from one statutory regime to another.

Such provisions have to be interpreted in the light of the general rules of statutory interpretation about retroactive provisions:

Where one statutory framework supersedes another and makes different provision, it is presumed that this provision applies only to activities that are to occur in the future. One can therefore assume that Parliament would have passed legislation in a form that is consistent with this presumption. However, clear wording can displace this presumption against retroactive effect.

Likewise, there is a second presumption that Parliament does not intend to take away vested rights. Clear wording can also displace this presumption against interference with vested rights. Again, in interpreting legislation the court is entitled to proceed on the basis that Parliament intended to comply with this principle. This presumption is less strong than that against retroactivity: per Lord Rodger in Wilson v First County Trust Ltd (No 2)[2004] 1 AC 816 at [195].

However, as Lord Rodger observed in Wilson v First County Trust Ltd (No 2) at [188], not all legislation which affects existing rights is retroactive. He gives the example of West v Gwynne[1911] 2 Ch 1, where a statute was passed after the execution of a lease. The statute restricted the right of a lessor to impose a condition for the payment of a sum of money on assignment of the lease. This court held that the statute applied to the lease even though it was executed before the statute was passed. This court held that the presumption against retroactive effect was not infringed. The act in question occurred after the statute came into force. There was no presumption against interference with existing rights.

It follows that in the present case a distinction can be drawn between four different types of activity:

Activities, such as the installation of a new pipe, which are wholly completed before the new statute comes into effect. If the new statute were to affect this past activity, it would be likely to have retroactive effect.

Activities, such as the installation of a new pipe, which are wholly carried out after the new statute takes effect. In this case the presumption against retroactivity is not engaged.

Some activities, such as the discharge from a pipe constructed under the earlier Act, are continuing in nature and occur both before and after the new statute takes effect. A new statute can affect these activities occurring after the Act is passed. It follows from West v Gwynne that this can happen without offending the presumption against retroactivity.

A new statute might affect continuing activity, such as discharge from a pipe, with effect from a date before the new statute takes effect. Such a provision would in general offend the presumption against retroactivity.

A separate point arises about survival of repealed provisions. In some cases, a statute needs to make provision for certain purposes for the survival of a statutory provision after its repeal. This need not be done expressly as section 17(2) of the Interpretation Act 1978 contains a general provision designed to secure the survival of, for example, secondary legislation passed under the repealed statute where a statute is repealed and re-enacted. It provides:

The appellants rely on this provision as supporting the conclusion that, as the compensation provision was restructured in 1989, it was not repealed and re-enacted and therefore did not survive. There was on their case a contrary intention because new compensation provisions were drafted in a different way from section 278 of the PHA 1936. This is not an argument with which I need to deal since this court held in BWB that the compensation provisions did not cover the activities of a sewerage undertaker which had not itself constructed the pipe said to give rise to a liability to compensate.

For its part, the respondent relied on section 16(1)(c) of the Interpretation Act 1978 before the judge but the judge did not rule on this submission. Section 16(1)(c) also secures the survival of rights acquired under a repealed statute:

The respondent repeats its submission on this section on this appeal, and I deal with it in paragraph 64 below.

With that introduction, I will turn next to the judge’s reasoning in support of the First Proposition.

The particular privatisation process adopted by Parliament in 1989 for the water industry involved conferring legislative authority for the existing sewerage undertakers to enter into transfer schemes with the companies nominated by statutory instrument for that purpose as their successors.

In summary, under these transfer schemes, the whole of the undertaking of the sewerage undertaker was transferred from the existing sewerage undertaker (“the transferor”) to the nominated successor company (“the transferee”). In this case, the transferor was the North West Water Authority.

It was common ground before the judge that, following the WA 1989, the respondent had power to discharge water from pre-1989 outfalls. The judge noted that the appellants contended that this was the result of statutory provisions (namely section 67(1) of the WA 1989 plus sections 30 and 278 of the Public Health Act 1936) whereas the respondent contended that this was the result of the transfer scheme.

The terms of the legislative authority for the transfer scheme constitute the basis for the judge’s conclusion that the implied right of discharge passed by the transfer scheme from the transferor to the transferee.

The judge set out the material parts of the legislative authority and the terms of the transfer scheme in paragraph 22 of his judgment. From those provisions the judge drew the following conclusions:

He held that the implied right of discharge was a “right” for the purposes of paragraph 2(3) of schedule 2 to the WA 1989. He rejected the argument that it was not a right as it was in reality a provision for immunity in tort.

The judge noted that in Durrant North J, at first instance, used the word “right” to describe the implied right of discharge, and that in other cases courts had referred to the “right” of support for pipes by statutory implication.

The judge held that the right was specific: it related to particular outfalls.

The terms of paragraph 2 of schedule 2 to the WA 1989 used the expression “rights” in a wide sense. The implied right of discharge could be said to be within the expression “rights …under enactments”.

The judge rejected the argument that Parliament could not have intended sewerage undertakers to have perpetual rights of discharge. The judge also rejected the argument that the transferee was on the respondent’s interpretation placed in a better position than the transferor. The judge also rejected an objection to the implied right of discharge being included in a transfer scheme based on its imprecision.

The judge also held that the pipe work would have been vested in the transferee under the transfer scheme and rejected the contrary submission which he believed the appellants to have made. He considered that this lent support to the view that implied rights of discharge also vested under the transfer scheme.

The judge further considered that the reference to the transfer of rights and liabilities under a transfer scheme in paragraph 13 of schedule 26 to the WA 1989 provided some support for the respondent’s argument.

In summary, my reasoning involves the following steps:

In any event, the transfer scheme did not render the implied right of discharge (or any other statutory right) immune from statutory change. Therefore, when the rights ceased to exist, they ceased to be exercisable notwithstanding the transfer scheme.

In those circumstances the judge was wrong to distinguish the decision of this court in BWB.

The new arguments raised by the respondent on this appeal must be rejected.

I will take each of those points in turn.

In my judgment, in respectful disagreement with the judge, the expression “rights … under enactments” was not apt to cover the implied right of discharge on the true interpretation of section 4 of the WA 1989.

The appellants, for whom Mr Robert McCracken QC appears, submit that any right of discharge forms part of the “functions” as defined by the WA 1989 and so falls outside any transfer scheme. The appellants also contend that a contingent right to compensation in section 278 of the PHA 1936 is not a “liability” under an enactment for the purposes of the WA 1989. They submit that a right to compensation, like a right to damages, can only accrue when damage occurs. They rely on the decision of HHJ Peter Bowsher QC, Official Referee, who so held in Smith, Stone & Knight Ltd v City of Birmingham DC (1998) 13 Cons LR 118 at 126.

Mr Jonathan Karas QC, for the respondent, developed his argument on these points in the following way. First, Mr Karas submits that the “functions” referred to in section 4 of the WA 1989 do not include powers and that therefore the pipe-laying power was not within the functions vested in the successor company. He further submits that the expression “rights … under enactments” includes the implied right of discharge. Mr Karas submits that this right is in the nature of an easement or wayleave. The word “right” has a wide meaning so that it can, for example, include contractual rights. On Mr Karas’ submission, the implied right of discharge is “properly considered by analogy to be an acquired right or privilege”.

In addition, on Mr Karas’ submission, the liability to pay compensation under section 278 constitutes a liability under an enactment. He submits that this does not have to be an accrued actual liability: it is sufficient for the purposes of section 16(1)(c) of the Interpretation Act 1978 (paragraph 47 above) if it is a contingent liability. For this proposition he relies on the judgment of Simon Brown LJ, with whom Waller and Clarke LJJ agreed, in Chief Adjudication Officer v Maguire [1999] 1 WLR 1778 at 1787-8. It can therefore include a contingent liability to pay compensation. He submits that the liability to pay compensation passed to the successor company because it arose as a contingent liability at the time when the relevant pipe or outfall was constructed.

The implied right of discharge must on Mr Karas’ submission have applied not just to pipes laid by a sewerage undertaker, but also to those adopted by them. Powers to adopt sewers were (as already explained) first conferred by section 17 of the PHA 1936. These powers were repealed by the CPA 1991 and re-enacted by section 102 of the WIA 1991. The compensation provision in section 278 of the PHA 1936 would have applied to discharges from pipes which had been adopted by a sewerage undertaker as much as it did to pipes which had been constructed by it.

Mr McCracken contends that the transfer of an existing right to discharge by the transfer scheme so that it avoided repeal would be inconsistent with the WA 1989 which was apparently unqualified by its application to pre-1989 outfalls. Mr McCracken submits that section 219(1) of the WIA 1991 defines “sewer” in sufficiently wide terms to include, without distinction, sewers whether the outfalls were constructed before or after 1989. I agree that this provides some support for the conclusion which I have reached.

I accept that it is clear from section 4 of the WA 1989 that the transfer scheme was intended to apply to the whole of the transferor’s sewerage undertaking. It was clearly the purpose of the transfer scheme to ensure that all assets and rights were vested in the successor company by a single document, lock, stock and barrel. If some asset or right were omitted and the transferor was dissolved before the omission was spotted, it might well be difficult to put the matter right. The transfer scheme was therefore not limited to matters for which a written agreement was required, or to transfers of non-assignable contracts or to property-related rights and liabilities.

However, the implied right of discharge was not a right in the usual sense. It was simply an incident of the statutory functions of the sewerage undertaker, which were indeed set out in the WA 1989. It was different because at the time of the transfer scheme there was no need to transfer it. I do not consider that Parliament intended a transfer scheme to be used to vest a right which it was itself creating and vesting in the transferee by other provisions of the WA 1989. As a matter of construction, I consider that in this regard the expressions “functions” and “property, rights and liabilities” in section 4 of the 1989 Act fall to be treated as covering a separate subject-matter, and that that restriction on what ought otherwise to constitute “rights” and “liabilities” cannot therefore be extended by schedule 2 to the WA 1989. It follows that the obligation to pay compensation is also not transferred. It follows that section 16(1)(c) of the Interpretation Act 1978 cannot assist the respondent.

Finally, under this heading I must deal with certain subsidiary arguments:

Mr Karas further relies on the fact that the recommendations of the Law Commission of England and Wales for amendments to the WA 1989 in the Parliamentary process for consolidation were silent on any question of removing the implied right of discharge. He submits that it can be inferred from the Law Commission’s silence that it was not intended that the implied right of discharge should be removed. This does not add materially to the presumption against any change in the law in the case of a consolidation statute.

Mr McCracken relies on the silence of Parliament when enacting the Water Act 2003 and the Waste Management Act 2010. It took no steps after BWB was decided to reverse it. I do not consider that this point can affect the interpretation of section 4 of the WA 1989.

Mr Karas submits that the result in BWB was absurd. However, for the reasons already explained this submission cannot be made in this court.

Mr Karas took us to a large number of authorities dealing with rights that a sewerage undertaker might have, such as the implied right of access to inspect sewers (Abingdon Corporation v James [1940] Ch 287: the other cases cited were Normanton Gas Co v Pope & Pearson Ltd (1883) 52 LJ (QB) 629, Durrant, Hesketh v Birmingham Corporation[1924] 1 KB 260, Thurrock Grays and Tilbury Joint SewerageBoard v Thames Land Co Ltd(1925) 90 JP 1, Taylor v North West Water Ltd (1995) 70 P & CR 94, and Hawley v Steele(1877) 6 Ch D 521). These authorities do not concern the meaning of “rights ... under enactments” in the context of a statutory transfer scheme. Accordingly, I have found them of little assistance save for the proposition, which I would regard as not needing authority, that the implied right of discharge is naturally referred to as a right in other contexts. As the judge said, it was so referred to by North J at first instance in Durrant. By definition the implied right of discharge could belong only to the body which was the sewerage undertaker as an incident of its functions.

In any event, even if I am wrong on the last point, the argument does not get the respondent home unless it can show that once the implied right was within the transfer scheme the WIA 1991 could not alter it. That depends on the Second Proposition, which I address under the next heading.

On the basis that the expression “rights ... under enactments” includes the implied right of discharge, it seems to me that the judge was wrong to reject the submission of the appellants that Parliament could not have intended sewerage undertakers to have perpetual rights of discharge. He notes that Mr McCracken argued that under the respondent’s interpretation sewerage undertakers would be better placed than their predecessors. The judge does not, as I understand his judgment, engage with this argument: he holds that the transferee obtained the rights which the transferor enjoyed. The logical effect of this conclusion, without more, is that the rights are subject to change if the enactments from which they derive are changed.

The judge relied on the Second Proposition to meet this point. The Second Proposition rests on the WIA 1991 and the CPA 1991 (together “the 1991 Acts”). These, Mr McCracken argued, resulted in the sewerage undertakers losing the implied right of discharge.

The judge held that there were sufficient indications in the 1991 Acts that Parliament intended that the transfer schemes would continue to have effect. On that basis he held that the respondent would continue to be able to enjoy the implied right of discharge acquired under the transfer scheme.

In the process of reaching this conclusion, the judge rejected the arguments mounted by Mr McCracken. Mr McCracken relied on certain deeming provisions that were clearly designed to achieve the survival for limited purposes of repealed provisions. Thus paragraph 1(1) of schedule 2 to the CPA 1991 provides that any

As the judge went on to explain, the specified purposes referred to all related to acts done under the repealed provisions. For the purposes of Mr McCracken’s submission, the thing done was the laying of pipes from which the discharge took place. He also relied on section 219(9) of the WIA 1991, which confirmed that references to things done under that Act included references to things done under corresponding provisions of earlier legislation.

The judge took the view that this would be an oblique way of repealing the implied right of discharge with retroactive effect. I agree. In my judgment, the real answer to the submission was that the purpose of the provisions relied on was to ensure the survival of acts done under the earlier legislation, and not to remove rights that had been in force while that legislation was in force. Insofar as the wording might permit any wider meaning, the presumption against retroactivity would surely apply.

The judge also rejected Mr McCracken’s reliance on section 17(2) of the Interpretation Act 1978 in his attempt to establish that pipes laid under earlier Acts were deemed to be laid under the WIA 1991. The judge gave three reasons why section 17(2) could not apply. I agree with his third reason that the laying of the pipe under the 1989 Act could not have been done under the 1991 Act since, on the basis of Mr McCracken’s acceptance that the sewerage undertaker would have had the implied right of discharge from the pipe, section 17(2) cannot, in those circumstances, be used to deprive the sewerage undertaker of that right with effect (as Mr McCracken must establish) from 1989. Again, the presumption against retroactivity means that it should not be given this wider effect.

That means that the only provisions to which the judge refers which support the Second Proposition are the two provisions mentioned in paragraph 39 of his judgment. The first provision is paragraph 6(1) of schedule 2 to the CPA 1991. This provides that the repeal of the provisions contained in schedule 26 to the WA 1989 is:

The second provision is the definition of “public sewer” in the WIA 1991, section 219(1), which expressly includes sewers vested in a sewerage undertaker by virtue of a transfer scheme. So far as material, “public sewer” is defined in the same way in section 189 of the WA 1989.

In paragraph 30 of his judgment, the judge held:

In my judgment, none of these provisions can bear the weight the judge seeks to put on them. The first point follows from what I have said about retroactivity above (paragraphs 41 to 44). Without the presumption against retroactivity, the statutory rights transferred under a transfer scheme (if the implied right of discharge was so transferred) must be construed as the statutory rights of the transferor for so long as the provisions which create those rights are in force. The presumption against retroactivity does not apply where Parliament changes an existing right for the future. Moreover, the transferor could transfer no more than it had. It had no right that Parliament should not alter the right for the future. Therefore the transfer scheme does not take the statutory rights beyond the pale of the WIA 1991.

This conclusion is in my judgment properly to be drawn from the extremely wide provision in schedule 2, paragraph 2(3) to the WA 1989 (paragraph 30 above). The provision authorises the transfer under a transfer scheme even of a right which is incapable of transfer in the normal way, as well as rights under an enactment. However those words are importantly qualified by subparagraphs (i) and (ii). Subparagraph (i) states that the enactment may be one which is amended or repealed by the WA 1989 but it requires there to be some indication in schedule 26 that the right is capable of allocation. Subparagraph (ii) makes it clear that rights under enactments which the WA 1989 amends or repeals must be subject to a saving. These subparagraphs make it clear that the rights transferred do not have an existence under the transfer scheme which is independent of the enactment from which they derive.

In addition, as already explained, if the repeal of the implied right of discharge was effected by the WA 1989, the repeal occurred at exactly the same time as the transfer scheme took effect. On that basis, the implied right of discharge could never have been transferred under the scheme as a pure matter of timing.

The position is not in my judgment altered by the provisions cited by the judge:

Paragraph 6(1) of schedule 2 is merely a saving provision for a transfer scheme and the provisions of it, including those for the transfer of statutory rights from the effect of the repeal of some transitional provisions. That is the natural meaning of that provision, not that the rights which are the subject-matter of the provisions of the transfer scheme should be immune from the effect of the repeals. The language cannot be strained to give it that meaning since it would then be an oblique way of diluting the effect of the primary legislation.

The definition of “public sewer” set out by the judge does not bear on the question of the effect of the repeals on the implied right of discharge.

The judge referred in this part of his judgment to the statutory right of a third party to claim compensation for damage caused by discharges on to its land. This had been one of the provisions in the original statutory framework. The judge, however, did not come to a firm view as to whether this provision had survived. Mr McCracken criticises the judge's failure to identify the source of any liability to pay compensation. He relies on Hamilton v Gell[1922] KB 422 at 431-2 for the proposition that an abstract right to compensation is not a right which has been accrued. He submits that this result would be inconsistent with BWB. In the light of my conclusions thus far, I need not form a view on these points.

On this appeal, Mr Karas submits that the expression “things done” in the CPA 1991, schedule 2, paragraph 2(1) and elsewhere included the laying of a pipe in the past. However, Mr Karas later qualified this submission in his argument. Indeed at the start of the appeal it was common ground that “things done” included the laying of pipes. However by the end of the argument, Mr Karas had to resile from that suggestion. Nonetheless, he submits that the expression is in general consistent with his case. In addition, he submits that the fact that paragraphs 13 and 41(1) of schedule 26 to the WA 1989 are without prejudice to a transfer scheme supports his case that the transfer scheme transferred the implied right of discharge unaffected by any contemporaneous or subsequent amendment or repeal. Paragraph 41(1) of schedule 26 is directed to ensuring that a compulsory purchase proceeds without interruption as a result of a transfer scheme. It does not, in my judgment, assist this case on the Second Proposition.

Mr Karas further submits that schedule 19, paragraph 2 (6) shows that the pipe-laying power was without prejudice to the transfer scheme. Thus Mr Karas effectively rejects the idea that Parliament could subsequently amend the rights transferred. He submits that the implied right of discharge was frozen because of the consequences of its removal.

For the reasons given above, the judge in my judgment erred with respect to the Second Proposition.

If the Propositions cannot be upheld for the reasons given, it is in my judgment clear that BWB must apply to any discharge from pre-1989 Act outfalls once the implied right of discharge was removed.

The judge distinguished BWB essentially on the grounds that the argument about the effect of the transfer scheme had not been raised in that case. He held in effect that the licence prevented the transfer scheme argument being of any utility to the sewerage undertaker in that case as that would have been transferred and would have been terminable on six months’ notice and expressed the provisional view that the licence would have displaced the implied right of discharge.

BWB cannot be distinguished from this case. This court decided after careful consideration of various provisions of the WIA 1991 that a sewerage undertaker had no implied right of discharge. The relevant statutory change was effected by either the WIA 1991 Act or the WA 1989. Accordingly, even if the implied right of discharge from these existing outfalls had been transferred by a transfer scheme, on the view I have taken on the Second Proposition it ceased to exist when it was extinguished by statute. I would reject the judge’s reasons for distinguishing BWB. I will take this court’s judgments in turn to demonstrate the basis for this court’s reasoning in that case.

Peter Gibson LJ held that the question whether there was an implied right of discharge in the WIA 1991 had to be decided by reference to the terms of that statute. In his judgment, Durrant was of little relevance: that case was decided under the Public Health Act 1875. Sections 17 and 308 of that Act protected the landowner by respectively prohibiting the discharge of foul water and giving a right of compensation for damage to a third party on to whose land the sewer contents were emptied. Peter Gibson LJ thus disagreed with the argument which I had accepted that those provisions had been replaced by other provisions which protected the landowner against these risks. As I have explained earlier in this judgment, Peter Gibson LJ also noted that the power of discharge given to water undertakers was subject to restrictions and he concluded that there was no reason why Parliament should have conferred the implied right of discharge on a sewerage undertaker without similar restrictions. Peter Gibson LJ did not consider that the lack of the implied right of discharge would defeat the intention of Parliament. It was always open to a sewerage undertaker to discharge sewer contents into the sea or rivers (subject to pollution and environment controls) if it could not obtain the consent of the landowner on to whose land the outfall discharged the sewer contents. It could also acquire land on to which it could discharge these contents. Peter Gibson LJ held that, consistently with the presumption against interference with private rights, no right to commit a trespass in these circumstances could be implied. Peter Gibson LJ also took into account the fact that the limits of any implied right of discharge would be imprecise and uncertain.

Peter Gibson LJ held that recourse to the earlier legislation would not be justified because the implied right of discharge was inconsistent with the express provisions of the WIA 1991. He agreed with the further reasons given by Chadwick LJ.

Chadwick LJ’s further reasons were as follows. The pipe-laying powers in sections 158 and 159 of the WIA 1991, on which I had relied, did not suggest that they conferred power to discharge on to third party land and the fact that express powers of discharge were conferred on water undertakers by section 165 of the WIA 1991 reinforced the view that no implied right of discharge was conferred on sewerage undertakers. Moreover, the WIA 1991 was replete with powers to cover activities which sewerage and water undertakers might want to undertake and it was thus unlikely that Parliament would have left anything as fundamental as the right to discharge to be implied in the case of sewerage undertakers. The WIA 1991 had to provide for all the powers which sewerage undertakers might wish to exercise to override the rights of others.

Chadwick LJ noted that section 117(5) and (6) of the WIA 1991, which re-enacted the foul water proviso and forbade the sewerage undertakers from creating a nuisance did not apply to anything in section 94 of that Act, which set out the statutory powers of sewerage undertakers.

Chadwick LJ considered that it was unlikely that Parliament intended to confer the implied right of discharge without the payment of compensation. Sewerage undertakers could recover the costs of purchasing rights to discharge sewer contents on to third party land from those liable to pay their charges. Sewerage undertakers had rights of compulsory purchase of land. There was a right to compensation if the value of land was depreciated or damaged by the activities of a sewerage undertaker.

However, Chadwick LJ did not consider that that right covered the case of discharge under the implied right of discharge, still less the continued discharge of sewer contents from pre-1989 outfalls. Accordingly Chadwick LJ concluded that the implication of the implied right of discharge would be inconsistent with the statutory framework. He thought that the proposition, which I had upheld, that the implied right of discharge could be implied from section 159 of the WIA 1991 was unarguable. Chadwick LJ did not consider that the implied right of discharge could be implied from the pipe-laying power since it was not incidental to pipe-laying but to using pipes after their construction.

Chadwick LJ accepted that the implied right of discharge would readily be implied in the case of a statutory undertaking, but the position was in his judgment different post-privatisation. In the judgment of Chadwick LJ, the provisions of the WIA 1991 were clear. Accordingly there was no need to have resort to the earlier legislation. In addition, as Peter Gibson LJ had held, Durrant was of little relevance. In the judgment of Chadwick LJ the law was in fact changed by the WA 1989.

The third member of the court, Keene LJ, stated that he had reached the same conclusion but with hesitation. While the implied right of discharge was an obvious power for the sewerage undertaker to have, one would expect the power to be conferred expressly. The power would not be confined as with water undertakers to discharge into watercourses, and that made it more difficult to imply. The statutory provisions that seem to imply that the sewerage undertaker has the right to discharge in particular circumstances (sections 117(5) and 186(3) of the WIA 1991) were not inconsistent with an obligation to obtain the consent of the owner of the land first.

Mr Karas submits that the implied right of discharge was a “possession” for the purposes of the European Convention on Human Rights. He invites us to apply section 3 of the Human Rights Act 1998 to the provisions of the WIA 1991 (but not the WA 1989) so that it is interpreted, so far as possible, in a manner compatible with the respondent’s right to property under article 1 of the First Protocol to the European Convention on Human Rights. However, he gave us no concrete example as to how we could apply section 3 to the provisions of the 1991 Act with which we are concerned. It is difficult to see how it could be applied. As no particular application of section 3 has been suggested, I am unable to take up the suggestion made by Mr Karas in this regard.

In my judgment, for the reasons given above, the appeal should be allowed.

If the other members of the Court are of the same opinion, the appellants’ application for permission to appeal against the judge’s order as to costs will not arise as this court will have to consider afresh what order to make as to the costs here and below.

I agree that this appeal must be allowed. For the reasons given by Arden LJ, the judge erred in distinguishing BWB. If we had not been bound by BWB I would not have concluded that the 1991 Act swept away the implied right to discharge that existed under the previous legislation. The 1991 Act was a consolidating Act. Since it maintained a general duty on sewerage undertakers to ensure that their areas were effectively drained, I find it difficult to believe that Parliament, when enacting the 1991 Act, intended that the very many existing, lawful discharges pursuant to the implied right to discharge should on the coming into effect of the 1991 Act become unlawful, without having made any transitional provisions which would have given sufficient time to the undertakers to make alternative arrangements for discharge to enable them to comply with their continuing statutory duty.

I agree with both judgments.