The Manchester Ship Canal Company Ltd v United Utilities Water Plc

These cases concern the Manchester Ship Canal and the Bridgewater Canal. The Defendant, United Utilities Water plc (“United Utilities”), which is a sewerage undertaker, discharges water into both canals via numerous outfalls. The Claimants (“the Canal Companies”), which are respectively the owners of the canals and a lessee of the Bridgewater Canal, allege that, as regards a large number of outfalls, United Utilities has no right of discharge. They seek declarations to that effect and also damages.

By the applications now before me, United Utilities seeks summary judgment in its favour as regards outfalls constructed before 1 September 1989. It argues that, whatever may be the position in relation to the other outfalls at issue, it has a right to discharge water through pre-1989 outfalls. In essence, what is said is that United Utilities has inherited powers of discharge which its predecessors enjoyed before the Water Act 1989 came into force.

The applications before me are made pursuant to CPR Part 24. CPR 24.2 empowers the Court to give summary judgment against a claimant if it considers that the claimant has no real prospect of succeeding on a claim or issue and that there is no other compelling reason why the case or issue should be disposed of at a trial.

Mr Robert McCracken QC, who appeared with Miss Rebecca Clutten for the Canal Companies, argued that I should decline to rule on the applications. He relied in support of this submission on a passage from Lord Hope’s speech in Three Rivers DC v Bank of England (No 3) [2001] UKHL 16, [2001] 2 All ER 513. At paragraph 95, Lord Hope said this:

“The method by which issues of fact are tried in our courts is well settled. After the normal processes of discovery and interrogatories have been completed, the parties are allowed to lead their evidence so that the trial judge can determine where the truth lies in the light of that evidence. To that rule there are some well-recognised exceptions. For example, it may be clear as a matter of law at the outset that even if a party were to succeed in proving all the facts that he offers to prove he will not be entitled to the remedy that he seeks. In that event a trial of the facts would be a waste of time and money, and it is proper that the action should be taken out of court as soon as possible. In other cases it may be possible to say with confidence before trial that the factual basis for the claim is fanciful because it is entirely without substance. It may be clear beyond question that the statement of facts is contradicted by all the documents or other material on which it is based. The simpler the case the easier it is likely to be [to] take that view and resort to what is properly called summary judgment. But more complex cases are unlikely to be capable of being resolved in that way without conducting a mini-trial on the documents without discovery and without oral evidence. As Lord Woolf MR said in Swain's case [2001] 1 All ER 91 at 95, that is not the object of the rule. It is designed to deal with cases that are not fit for trial at all.”

For his part, Mr Jonathan Karas QC, who appeared with Mr Julian Greenhill and Mr James McCreath for United Utilities, referred me to ICI Chemicals & Polymers Limited v TTE Training Limited [2007] EWCA Civ 725. In that case, Moore-Bick LJ, with whom Ward and Buxton LJJ expressed agreement, said (at paragraph 12):

“It is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent's case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant's case is bad in law, the sooner that is determined, the better.”

Mr Karas argued that United Utilities’ applications raise a short point of law and that I should “grasp the nettle” and decide it.

In the course of submissions, Mr McCracken accepted that the parties had had an adequate opportunity to address the issue that United Utilities asks me to decide. Further, he did not suggest that I lacked any relevant evidence. The thrust of his submissions was rather to the effect that I should refuse to decide the “short point of law” for reasons of case management, having regard to the overriding objective. He observed that the losing party would be very likely to challenge any decision I might arrive at. This, he said, could be expected to create practical problems given that the point of law does not affect all the outfalls in dispute and so cannot render a trial unnecessary.

Against that, the point that United Utilities wishes to have determined potentially affects some 106 of the 113 outfalls at issue in the Manchester Ship Canal case. A ruling on the point could thus have a substantial bearing on the length of a trial currently listed for 44 days. The point could also, I gather, be relevant to a majority of the outfalls in dispute in the Bridgewater Ship Canal case. In any event, I have now heard argument, over two days, on the legal question. That hearing would be wasted if I refused to rule on it.

In the circumstances, I have decided that I should proceed to consider the point raised by United Utilities.

Sewerage and drainage functions have been successively fulfilled by local authorities, regional water authorities and water companies such as United Utilities.

It is convenient to consider in turn (a) the law before 1989, (b) the Water Act 1989, (c) the 1991 water legislation and (d) the decision of the Court of Appeal in British Waterways Board v Severn Trent Water Ltd [2002] Ch 25.

The duties and powers of local authorities in relation to sewerage and drainage were addressed in the Public Health Act 1875. Section 15 required every local authority to “keep in repair all sewers belonging to them” and also to “cause to be made such sewers as may be necessary for effectually draining their district for the purposes of [the] Act”. Section 16 empowered a local authority to carry any sewer “into through or under any lands whatsoever within their district”, but section 17 imposed a restriction on the discharge of contaminated water. It provided:

“Nothing in this Act shall authorise any local authority to make or use any sewer drain or outfall for the purpose of conveying sewage or filthy water into any natural stream or watercourse, or into any canal pond or lake until such sewage or filthy water is 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 or in such canal pond or lake”.

By section 308, local authorities exercising “the powers of [the] Act” were obliged to make full compensation to anyone sustaining damage as a result provided that he was not himself in default.

In the 1930s the Public Health Act 1875 was, for relevant purposes, superseded by the Public Health Act 1936. Section 15 of the 1875 Act was replaced by section 14 of the 1936 Act and section 16 of the 1875 Act by section 15 of the 1936 Act. Section 30 of the 1936 Act was equivalent to section 17 of the 1875 Act, and section 278 of the 1936 Act corresponded to section 308 of the 1875 Act.

Neither the 1875 Act nor that of 1936 expressly empowered local authorities to discharge any water. In Durrant v Branksome UDC [1897] 2 Ch 291, however, such a power was held to be implicit in the legislation. At first instance, North J (at 295) considered that section 17 of the 1875 Act:

“recognises in the clearest way that, subject to complying with the provisions of that section, the local authority have a right to empty their drains into a natural stream or canal, pond, and so on”.

His decision was upheld on appeal. Lindley LJ said (at 302) that the “inevitable inference” from sections 16 and 17 of the 1875 Act was that, but for the restriction imposed by section 17, “you might, under s.16, pour any water into any natural or artificial stream or watercourse, canal, pond, or lake”. Similarly, Lopes LJ thought (at 303) that it was to be inferred from sections 16 and 17 that “if that which is conveyed does not contain those things which are prohibited, or, in other words, if it contains water free from those things, they are authorised to discharge it into the places mentioned”. The third member of the Court, Chitty LJ, considered (at 305) that “authority is conferred by the three sections of the Act [i.e. sections 15, 16 and 17 of the 1875 Act]”. The “better reading”, he opined (at 305), is that the “power is conferred by the 16th section”.

Local authorities were in other respects, too, held to have entitlements beyond those for which the legislation provided in terms. In In re Corporation of Dudley (1881-1882) LR 8 QBD 86, it was decided that there was a right of support in respect of sewers laid pursuant to the Public Health Act 1875. Brett LJ, for example, said (at 93):

“it is impossible to conceive that the legislature can have given the local authority a power as against landowners to make sewers, and an obligation in favour of landowners to repair them, without at the same time giving the right to support. Without such right the power to construct sewers would be illusive, ridiculous, and wholly inoperative”.

In Abingdon Corporation v James [1940] Ch 287, which concerned a water main laid by a local authority in exercise of powers under the Public Health Act 1936, Simonds J accepted (at 295) that there had been infringement of “the right of access for purposes of repair which is enjoyed by the dominant tenement”.

Under the Water Act 1973, functions relating to sewerage and drainage were transferred from local authorities to regional water authorities. Section 14 of the Public Health Act 1936 was repealed, but section 14(1) of the 1973 Act required water authorities to provide sewers in much the same way as local authorities had previously had to under section 14 of the 1936 Act. By virtue of section 14(2) of the 1973 Act, the “functions” imposed on local authorities by a variety of enactments were in future to be exercisable by water authorities. The enactments in question included sections 15 and 30 of the 1936 Act and “so much of Part XII of that Act as relates to” the identified sections. Section 278 of the 1936 Act was to be found in Part XII.

It is common ground that, following the Water Act 1973, water authorities had power to discharge into watercourses from their outfalls. If, however, a water authority’s exercise of its powers caused a person to sustain damage, compensation was payable under section 278 of the Public Health Act 1936.

At the end of the 1980s, the water industry in England and Wales was privatised. The Water Act 1989 was passed to facilitate this. Among other things, the Act provided for water authorities to be dissolved and for their property, rights and liabilities to be divided between, on the one hand, a new public body, the National Rivers Authority (“the NRA”), and, on the other hand, soon-to-be-privatised water and sewerage undertakers.

Under the 1989 Act, section 14(1) of the 1973 Act and section 15 of the Public Health Act 1936 were both repealed: see section 190(3) of the 1989 Act and schedule 27 to the Act. Provisions to comparable effect were, however, included in the 1989 legislation. Section 67(1) of the 1989 Act imposed on sewerage undertakers a duty to provide sewers. Paragraphs 2 and 4 of schedule 19 to the Act, which took effect pursuant to section 153(1), gave sewerage undertakers powers to lay pipes.

Sections 30 and 278 of the Public Health Act 1936 continued to have effect. Section 69 of the 1989 Act provided for schedule 8 to the Act to:

“have effect for transferring to sewerage undertakers the functions of water authorities relating to the provision of sewerage services and for making amendments of the enactments relating to the transferred functions”.

Paragraph 1(1) of schedule 8 stated that, in the provisions to which it applied, references to water authorities were to be taken to relate to sewerage undertakers instead. The relevant provisions included section 30 of the Public Health Act 1936, and also section 278 of that Act so far as it concerned, among other things, section 30.

The provisions of the Water Act 1989 mentioned in the previous two paragraphs came into force on 1 September 1989. On the same day, the functions of water authorities were redistributed between the NRA and water and sewerage undertakers. It was also on 1 September 1989 that, pursuant to section 4 of the 1989 Act, “schemes … for the division of the property, rights and liabilities of [the water] authorities between their successor companies and the [NRA]” came into force.

One such scheme – and the relevant one in the context of the present litigation – related to the North West Water Authority. This scheme (“the Transfer Scheme”) provided for United Utilities (then called North West Water Limited) to have transferred to it “all property, rights and liabilities to which [North West Water Authority] is entitled or subject” other than those allocated to the NRA.

The “property, rights and liabilities” transferred were defined in wide terms. Paragraph 2(3) of schedule 2 to the Water Act 1989 stated that the property, rights and liabilities capable of being transferred in accordance with a transfer scheme included:

“(a)

property, rights and liabilities that would not otherwise be capable of being transferred or assigned by the water authority;

…

(c)

rights and liabilities under enactments, including–

(i)

such rights and liabilities as may arise after the transfer date by virtue of enactments amended or repealed by this Act and, in pursuance of provision contained in Schedule 26 to this Act, may be the subject of an allocation made by a scheme under this Schedule; and

(ii)

other rights and liabilities under the enactments which are amended or repealed by this Act subject to a saving …”.

In keeping with this, clause 7(1) of the Transfer Scheme provided that the property, rights and liabilities to which the scheme applied included:

“(a)

property, rights and liabilities that would not otherwise be capable of being transferred or assigned by the Water Authority;

…

(c)

rights and liabilities under enactments including those mentioned in Schedule 5, and other rights and liabilities under enactments which are amended or repealed by the Act subject to a saving …”.

It is common ground between the parties that, following the Water Act 1989, United Utilities had power to discharge from pre-1989 outfalls. However, there is an important dispute as to the basis for this. Mr Karas contended that the entitlement to discharge which the North West Water Authority had previously enjoyed was transferred to United Utilities under the Transfer Scheme. In contrast, Mr McCracken attributed the power exclusively to the continued operation of sections 30 and 278 of the Public Health Act 1936, taken in conjunction with section 67(1) of the 1989 Act. The ability to discharge was not, Mr McCracken submitted, encompassed by the Transfer Scheme.

One of Mr McCracken’s arguments was that the ability of United Utilities’ predecessors to discharge was not a “right” of a kind that the Transfer Scheme was intended to transfer. The ability to discharge represented, Mr McCracken maintained, a “power” or “immunity for actions in tort” rather than a “right”. It was no more than a function of the statutory provisions which formerly existed.

However, both powers and immunities are capable of being regarded as “rights” (as can “privileges”, another word which featured in submissions). In fact, during the hearing it was quite difficult to avoid using the word “right” when referring to the ability to discharge. Judges have also used the word “right” in relation to either the ability to discharge or comparable entitlements. In Durrant v Branksome UDC, North J, at first instance, spoke of a “right” to empty drains (paragraph 13 above). In In re Corporation of Dudley all three Judges in the Court of Appeal referred to a “right” of support, and Brett LJ spoke of the legislature giving the “rights” without which a power it was granting could not be exercised (paragraph 14 above). In Abingdon Corporation v James Simonds J decided that there was a “right” of access (paragraph 14 above). In Newcastle-under-Lyme Corporation v Wolstanton Limited [1947] Ch 427, which concerned gas pipes, Morton LJ (with whom Cohen LJ agreed) considered (at 457) that a local authority had once had (though now lost as a result of a particular piece of legislation) an “implied right [of support] arising from the exercise of the corporation’s statutory powers” (emphasis added), and Somervell LJ similarly took the view (at 466) that the corporation had had “no right of support except that which is implied, by reason of their powers and duties, under the principle in In re Dudley Corporation” (emphasis added).

Further, the entitlement to discharge was specific. United Utilities’ predecessors acquired, as I see it, the “right” to discharge from the particular outfalls they had laid. The “right” was therefore different from (say) the general “right” to smoke in buildings which existed before the Health Act 2006 was passed. It was different, too, in the sense that it derived from particular statutory provisions rather than merely the absence of a prohibition.

Moreover, far from imposing limits on the “rights” transferred, the Transfer Scheme and schedule 2 to the Water Act 1989 were, as already noted, drawn in wide terms. They both made explicit reference to “rights … under enactments”, and these words can be said to fit the “power” to discharge. In any case, paragraph 2(3) of schedule 2 and clause 7(1) of the Transfer Scheme were each evidently intended to ensure that particular categories of “right” were included rather than to be comprehensive. I agree with Mr Karas that the Transfer Scheme was clearly intended to encompass “rights” in the widest sense of that word.

Another objection which Mr McCracken advanced to the Transfer Scheme extending to the “power” of discharge was that Parliament could not have intended sewerage undertakers to have perpetual rights of discharge. Were Mr Karas correct, Mr McCracken said, sewerage undertakers would be better placed than their predecessors, and that could not be right. However, I do not accept the premise. It seems to me that, if Mr Karas’ case is well-founded, United Utilities inherited the “rights” which water authorities had previously enjoyed; the “rights” were not enhanced. Mr Karas himself submitted that the “rights” for which he contended were neither more nor less exercisable after 1989 than they had been before then.

Mr McCracken also argued that no “right” of discharge could have been transferred because the supposed “right” could not be adequately defined. Given, however, the breadth of the “rights” which were intended to be capable of transfer, it seems to me that such uncertainty as there may have been as to the precise scope of a water authority’s power to discharge cannot be a valid objection to the power being included in a transfer scheme.

Another argument put forward by Mr McCracken was to the effect that transfer schemes did not operate to transfer even pipework. While agreeing that United Utilities and other sewerage undertakers acquired rights to pipes laid by their predecessors, the parties differed as to how this happened. Mr McCracken argued that infrastructure vested in sewerage undertakers pursuant to section 153 of the Water Act 1989, not transfer schemes. However, it seems to me that rights in respect of pipes laid before 1989 will have passed under the transfer schemes rather than section 153. I agree with Mr Karas that section 153(2) is concerned with post-Water Act 1989 pipes and that section 153(3) deals with pipes laid or vested pursuant to particular statutory provisions of no relevance to the present case. This view derives support from the 1989 Act’s definition of “public sewer”. The expression is defined in section 189 of the Act to refer to a sewer for the time being vested in a sewerage undertaker, “whether vested in that undertaker by virtue of a scheme under Schedule 2 or 5 to this Act or under section 153 above or otherwise”. As Mr Karas observed, the definition assumes that sewers can have vested pursuant to transfer schemes (under schedule 2) rather than section 153. A similar point can be made with regard to the definition of “public sewer” in the Water Industry Act 1991, to which there is further reference below. Section 219 of that Act defines “public sewer” to mean:

“a sewer for the time being vested in a sewerage undertaker in its capacity as such, whether vested in that undertaker by virtue of a scheme under Schedule 2 to the Water Act 1989 or Schedule 2 to this Act or under section 179 above or otherwise” (emphasis added).

Parliament is again contemplating the vesting of sewers under transfer schemes.

The fact that pipework will have been transferred under transfer schemes seems to me to lend support to Mr Karas’ submissions. If sewerage undertakers acquired pipes under transfer schemes, it makes sense that they should also have acquired associated rights (including rights of support and access and also the “right” to discharge) under such schemes. It is not entirely clear whether water authorities will have owned the land in which sewers lay or merely had statutory rights in relation to it (compare e.g. Newcastle-under-Lyme Corporation v Wolstanton Limited with Taylor & Taylor v North West Water (1995) 70 P&CR 94), but I do not think the point is of importance in the present context.

Paragraph 13 of schedule 26 to the Water Act 1989 is also, I think, of some assistance to Mr Karas. This provides for things done by water authorities under certain statutory provisions to be deemed to have been done by sewerage undertakers, but “without prejudice to the transfer of any statutory rights or liabilities in accordance with a scheme under Schedule 2 to this Act”.

In all the circumstances, I have concluded that the preferable view is that the Transfer Scheme operated to transfer to United Utilities rights to discharge from pre-existing outfalls.

Various statutes relating to water were passed in 1991. They included the Water Industry Act 1991 and the Water Consolidation (Consequential Provisions) Act 1991 (“the Consequential Provisions Act”).

The background was explained as follows in the commentary on the Water Industry Act 1991 in Current Law Statutes:

“The Water Act 1989 by no means provided a complete picture of the legislation relating to water supply and sewerage services and reference at that time still had to be made to many other pieces of legislation. In addition, the arrangement of the Water Act 1989 necessitated a large amount of cross-referencing, plus reference to the 27 Schedules to the Act which contained not simply elaborative or supplementary provisions but in effect amounted to substantive primary law. It is perhaps no surprise therefore that within two years of the implementation of the Water Act 1989 the legislation relating to the water industry has now been consolidated. The Water Industry Act 1991 is part of the present consolidation which is designed to rationalise the legislation relating to the water industry whilst making only drafting amendments and no substantive changes, save for the technical changes introduced by the Law Commission’s ‘Report on the Consolidation of the Legislation Relating to Water’ (Cmnd. 1483, April 1991)”.

The long title to the Water Industry Act 1991 confirms that the Act was intended “to consolidate enactments relating to the supply of water and the provision of sewerage services, with amendments to give effect to recommendations of the Law Commission”. It is common ground, I think, that none of the recommendations made by the Law Commission bears on the matters I have to decide. The Law Commission’s report said nothing about powers of discharge.

It was nevertheless Mr McCracken’s submission that the 1991 legislation resulted in sewerage undertakers losing their power of discharge both for the future and as regards existing outfalls. This, he said, follows from the repeal of the provisions from which, on his case, sewerage undertakers had previously derived their ability to discharge. In particular, schedule 3 to the Consequential Provisions Act repealed section 30 of the Public Health Act 1936. Section 278 of the 1936 Act, while not repealed in its entirety, was much restricted in its application.

That there is no power to discharge from outfalls laid since 1991 is confirmed by British Waterways Board v Severn Trent Water Ltd. In that case, which is discussed further below, the Court of Appeal held that a sewerage undertaker had no implied power to discharge water into the Stourbridge Canal. Thus, Peter Gibson LJ said (at 38) that he had “conclude[d] from an examination of the [Water Industry Act 1991] as a whole that the implication of a power to discharge is inconsistent with the provisions of that Act and cannot be justified”.

Mr Karas, however, contended that the position is different as regards pre-1989 outfalls. Neither the Water Industry Act 1991 nor the Consequential Provisions Act seeks to detract, Mr Karas submitted, from transfers effected under transfer schemes pursuant to the Water Act 1989. To the contrary, paragraph 6(1) of schedule 2 to the Consequential Provisions Act specifically states that the repeal of provisions contained in schedule 26 to the 1989 Act is to be:

“without prejudice to the effect of any scheme made under Schedule 2 to that Act and, in particular, of any provision contained in such a scheme by virtue of paragraph 2(3)(c) of that Schedule 2”.

Further, as already mentioned, the definition of “public sewer” in the Water Industry Act 1991 assumes that sewers may have vested in sewerage undertakers by virtue of transfer schemes.

One of Mr McCracken’s counter-arguments was to the effect that things done under pre-1989 legislation fell to be treated as having been done pursuant to section 159 of the Water Industry Act 1991 and, hence, as carrying no power of discharge. Mr McCracken invoked several statutory provisions in support of this submission. These are in part to be found in the 1991 legislation itself: in schedule 2 to the Consequential Provisions Act and section 219 of the Water Industry Act. Paragraph 1(1) of schedule 2 to the Consequential Provisions Act provided that any “thing done under or for the purposes of any enactment repealed by [the] Act” should have effect as if done under the corresponding provisions of the “consolidation Acts” (which included the Water Industry Act) “for the purposes specified in sub-paragraph (2)”. The purposes so specified included (a) that of preserving and continuing the validity and effect of anything done under or for the purposes of any enactment repealed by the Consequential Provisions Act and (b) that of including references to things so done in references in the “consolidation Acts” to things done under or for the purposes of any provision of the “consolidation Acts”. In the same vein, section 219(9) of the Water Industry Act stipulated that paragraph 1(1) of the Consequential Provisions Act had effect so that:

“references in this Act to things done under or for the purposes of provisions of this Act … include references to things done, or treated as done, under or for the purposes of the corresponding provisions of the law in force before the commencement of this Act”.

The provision of the Water Industry Act corresponding to the provisions pursuant to which pre-1989 sewers would have been laid is section 159. Pre-1989 sewers are therefore, Mr McCracken argued, to be treated as having been laid under section 159.

Were this argument correct, the power of discharge would have been taken away in a most oblique way. I do not think, however, that the argument is correct. Section 159 of the Water Industry Act confers a power to lay pipes. It does not contain “references to things done under or for the purposes of provisions of” the Act. There are, accordingly, no such references which are to be deemed to extend to things done under earlier legislation.

The other provision on which Mr McCracken relied in support of the proposition that things done under pre-1989 legislation were to be treated as done under section 159 of the Water Industry Act 1991 is section 17(2) of the Interpretation Act 1978. So far as material, this provides as follows:

“Where an Act repeals and re-enacts, with or without modification, a previous enactment then, unless the contrary intention appears,—

…

(b)

in so far as any subordinate legislation made or other thing done under the enactment so repealed, or having effect as if so made or done, could have been made or done under the provision re-enacted, it shall have effect as if made or done under that provision”.

Mr McCracken submitted that the 1991 legislation repealed and re-enacted (albeit subject to a modification) the provisions pursuant to which pre-1989 sewers had been laid and that the sewers were thus to be deemed to have been laid under section 159 of the Water Industry Act 1991.

The argument is ingenious, but I am not persuaded by it. In the first place, the provisions pursuant to which pipes were laid up to 1989 were not “repeal[ed] and re-enact[ed]” by the Water Industry Act 1991. The pipe-laying provision current before the 1989 Act was passed was section 15 of the Public Health Act 1936. That was repealed by the 1989 Act. There can therefore be no question of its having been repealed and re-enacted by any of the 1991 legislation. Secondly, the “thing done” under the earlier legislation (viz. laying pipes with rights of discharge) could not have been done under section 159 of the Water Industry Act. Section 159 provides merely for the laying of pipes, not for the laying of pipes with rights of discharge. Thirdly, even were it the case that the laying of a pipe under (say) section 15 of the Public Health Act 1936 was to “have effect as if made or done under” section 159 of the Water Industry Act, it would not follow, in my view, that United Utilities was to be deprived of rights of discharge which had accrued to its predecessors and been transferred on to it. That would be to take the deeming too far.

More generally, Mr McCracken argued that it can be seen from the scheme of the 1991 legislation that events after 1991 were to be governed by that legislation rather than its predecessors. However, I agree with Mr Karas that, far from manifesting an intention to derogate from transfer schemes, there are indications in the 1991 legislation that Parliament envisaged that transfer schemes would continue to have effect. On that basis, United Utilities will have continued to enjoy the rights of discharge which, in my view, it acquired under the Transfer Scheme.

There was discussion during submissions as to whether, if United Utilities had inherited an ability to discharge, it would also be liable for damage caused by discharges. In the past, there would have been a liability to pay compensation under section 278 of the Public Health Act 1936 or, before that, section 308 of the Public Health Act 1875. Section 278 of the 1936 Act having, however, been much restricted by the 1991 legislation, Mr McCracken argued that Mr Karas’ submissions would mean that United Utilities could discharge water without being liable for any damage that resulted. Mr Karas himself contended that the liability was transferred with or incidental to rights of discharge. The chances are, as it seems to me, that United Utilities retained on one basis or another a liability to compensate for damage, but I do not think the point is crucial for present purposes. Mr McCracken accepted that United Utilities continued to be liable to compensate for damage after 1989. Absence of an obligation to pay compensation cannot, therefore, be deployed as a reason to conclude that “rights” of discharge were not transferred in 1989. Nor, to my mind, can the question of compensation provide a sufficient reason for interpreting the 1991 legislation in a way that would deprive sewerage undertakers of the rights of discharge which, on the view I take, had been transferred to them two years earlier.

British Waterways Board v Severn Trent Water Ltd was concerned with whether the defendant, a sewerage undertaker, had a right to discharge water into the Stourbridge Canal, which the claimant, the British Waterways Board, owned. In 1976 the British Waterways Board had granted a predecessor of the defendant a licence to discharge surface water from a housing estate into the Stourbridge Canal via a pipe. The licence was terminable on six months’ notice and provided for the licensee to remove the pipe on termination. In 1996 the British Waterways Board gave notice to terminate the licence, but the defendant claimed that it did not need the British Waterways Board’s consent to discharge water into the canal. The British Waterways Board issued proceedings seeking, among other things, a declaration to the effect that section 159 of the Water Industry Act 1991 did not operate to authorise the defendant to discharge water into any canal or waterway owned by the British Waterways Board.

The proceedings were described by both Arden J at first instance and Peter Gibson LJ in the Court of Appeal as a “test case”. Peter Gibson LJ said this about the case (in paragraph 1):

“The issue raised by this appeal is of some importance both to the sewage industry and also to owners of canals and other watercourses and, if the sewerage undertaker is right, the owners of other land in which a sewer has been laid. It is whether a sewerage undertaker has the right to discharge water from its sewers into such canals and watercourses and onto such land or whether it needs the consent of the owners to do so.”

The Court of Appeal decided that, on the true construction of the Water Industry Act 1991, the defendant had no implied power to discharge water into the Stourbridge Canal and was obliged to remove the pipe which was the subject of the 1976 licence. Peter Gibson LJ summarised his conclusion in these terms in paragraph 43:

“I therefore conclude from an examination of the 1991 Act as a whole that the implication of a power to discharge is inconsistent with the provisions of that Act and cannot be justified. There is no cause to look at the predecessor legislation to this consolidation Act. I note that in the Water Resources Act 1991, which was enacted at the same time and as part of the same group of Acts relating to water as the 1991 Act, express powers are conferred on the NRA (now the Environment Agency) as on water undertakers as to pipe-laying and discharge and that there is provision for compensation. I also note that the Highways Act 1980 conferred on highway authorities the power to lay pipes for draining surface water and an express power of discharge and provision for compensation. All this is consistent with the absence of any implied power of discharge in the 1991 Act for sewerage undertakers.”

Chadwick LJ said this in paragraph 71:

“… I cannot see how, as a matter of construction, it can be said that the express powers which are conferred by section 159 of the Act lead to the conclusion that a power to discharge must be implied. Nor can I see how it can be said that such a power must be implied in order to enable a sewerage undertaker to carry out the functions imposed by section 94 of the Act. The fallacy, as it seems to me, lies in the underlying (but unspoken) premise that Parliament must have intended that sewerage undertakers should have facilities to discharge (which, plainly, they do require in order to carry out their functions) without paying for those facilities. Whether or not that premise could have been supported in the context of a public authority charged with functions imposed in the interests of public health, it cannot be supported, as it seems to me, in the context of legislation enacted following a decision to privatise the water industry.”

The third member of the Court, Keene LJ, agreed, though (as he said) with some hesitation (see paragraph 78).

While not suggesting that the Court of Appeal’s decision in British Waterways Board v Severn Trent Water Ltd requires me, as a matter of the rules of precedent, to decide the present case in his favour, Mr McCracken argued that the decision provided support for his contentions. Although the outfall at issue in the British Waterways Board case had dated from before 1989, no one had thought it worth running an argument along the lines of that put forward by Mr Karas. Moreover, the Court of Appeal had evidently seen nothing absurd in a sewerage undertaker having no right to discharge from even a pre-1989 outfall without the owner’s consent.

In the end, however, I do not think that the British Waterways Board case should cause me to depart from the views expressed above. The simple fact is that the argument now advanced by Mr Karas was not run. While there was reference to transitional provisions, the defendant did not base its case on these but on section 159 of the Water Industry Act 1991. In fact, I doubt whether Mr Karas’ argument could have helped the defendant. The licence pursuant to which the defendant and its predecessor had been discharging could be brought to an end on six months’ notice. While the point has not been the subject of argument, my provisional view is that any “right” to discharge which the defendant or its predecessor might have derived from pre-1991 legislation will not have endured beyond the licence. If that is right, the defendant had no option but to found its case on section 159 of the 1991 Act.

I should perhaps add that Mr Karas reserved the right to challenge the correctness of the British Waterways Board decision were the present case to reach the Supreme Court.

In all the circumstances, I have concluded that the 1991 water legislation did not affect United Utilities’ entitlement to discharge water via outfalls dating from before 1 September 1989. United Utilities continued to enjoy the rights of discharge which their predecessors had had up to 1989.

This result seems to me to make sense. Were the Canal Companies’ submissions correct, United Utilities’ use of pre-existing outfalls would suddenly have become unlawful. I agree with Mr Karas that Parliament is most unlikely to have intended that. There is, furthermore, no clear indication that it did. On the Canal Companies’ case, use of the outfalls became unlawful by virtue of the 1991 legislation, but that legislation was intended to consolidate the law except as to the Law Commission’s recommendations, and no one suggests that the Law Commission recommended the removal of sewerage undertakers’ ability to discharge from pre-existing outfalls. Further, there is a sound basis for distinguishing between new and old sewers. The British Waterways Board decision means that sewerage undertakers have no right to discharge from new sewers without the consent of affected landowners. It is quite another matter to say that sewerage undertakers must stop discharging from existing outfalls unless landowners consent. Mr McCracken suggested that the successors to water authorities had effectively been given a couple of years in which to sort out the position in relation to discharges, but nothing I have been shown demonstrates that that was how matters were seen at the time. On the face of it, there was no indication that the 1991 legislation would deprive sewerage undertakers of the (doubtless very valuable) powers of discharge which they had previously enjoyed, both before and after the Water Act 1989.

Mr Karas advanced an alternative argument based on section 16(1)(c) of the Interpretation Act 1978. I did not find this all that convincing, but, in the light of the conclusions I have already arrived at, I do not need to consider it further.

Mr Karas also developed submissions based on the Human Rights Act 1998. However, I have decided that the relevant legislation falls to be construed in United Utilities’ favour without needing to resort to the Human Rights Act.

United Utilities asks me not only to grant declaratory relief reflecting the conclusions I have arrived at, but to dismiss the claim in respect of many of the outfalls into the Manchester Ship Canal. So far as the latter is concerned, United Utilities has adduced evidence that 106 of the relevant outfalls had been laid by 31 August 1989, and nothing I have seen casts any doubt on that. On the face of it, therefore, it is appropriate to dismiss the claim so far as it relates to these outfalls. Looking at the pleadings, however, it seems possible that the point on which I express a provisional view in paragraph 50 above might be argued to have a bearing on what I should do. If either party takes that view, I shall hear further submissions on that aspect.

I shall adjourn all matters arising from this judgment (including any application for permission to appeal) to the case management conference which is to take place next month.