Supreme Court confirms that privatised utilities can continue to rely on pre-privatisation discharge rights

Out-Law News | 02 Jul 2014 | 2:39 pm | 2 min. read

A company that provides statutory sewerage services can continue to rely on rights in existence before it was privatised in order to discharge water and treated sewage into private watercourses, the UK's highest court has confirmed.

Overturning an earlier decision by the Court of Appeal, the Supreme Court ruled that United Utilities (UU) had an implied right to discharge from outfalls constructed pre-privatisation (26-page / 122KB PDF). The judges said that this right could be inferred from the existing statutory restriction preventing sewerage companies discontinuing the use of existing sewers until an alternative had been constructed, as well as UU's general duties as a statutory sewerage undertaker.

Before privatisation, the Public Health Acts allowed local authorities and then regional water authorities to build sewers "into, through or under" any land within their area. This included an implied right to discharge water, as long as that water was not contaminated. The same rights were not expressly replicated in the 1991 Water Industry Act, a piece of consolidating legislation which was passed in order to "tidy up" the statute law relating to water and sewerage services.

"In my opinion, when the Water Industry Act 1991 (i) imposed on the privatised sewerage undertakers duties which it could perform only by continuing for a substantial period to discharge from existing outfalls into private watercourses, (ii) at the same time applied to them the statutory restrictions in section 116 on discontinuing the use of existing sewers, it implicitly authorised the continued use of existing sewers," said Lord Sumption in his leading judgment.

"A restriction on discontinuing the use of an existing sewer until an alternative has been constructed is not consistent with an obligation to discontinue its use forthwith under the law of tort. The inescapable inference is that although there is no provision of the Act of 1991 from which a general right of discharge into private watercourses can be implied, those rights of discharge which had already accrued in relation to existing outfalls under previous statutory regimes survived," he said.

Companies would, however, be required to negotiate new rights of discharge with the owners of private watercourses or acquire those rights by way of compulsory purchase in relation to any new outfalls or outfalls constructed after privatisation, he said. In a 2002 case involving British Waterways Board (BWB), the Court of Appeal held that the 1991 Act replaced the right of a privatised sewerage undertaker to discharge water onto land or water owned by others with a new statutory scheme, into which a right of discharge could not be implied.

However, the Supreme Court in this case made it clear that the Court of Appeal in the BWB case was correct to conclude that the power to lay pipes in section 159 of the 1991 Act did not carry with it an implied right to discharge. That right in fact derives from other provisions in the same Act which were not considered by the Court of Appeal in BWB, it said.

UU has a statutory duty to provide water and sewerage services to around seven million people in the North West of England. The dispute between UU and the company behind the Manchester Ship Canal (MSCC) involved 111 separate discharges into the canal, the vast majority of which were in use when the water industry was privatised in 1989.

Lord Sumption also considered a submission by MSCC that allowing the pre-existing discharges to continue left them "in a worse position" than they were under the previous law because of the more limited provisions for compensation for 'damage' and the more limited protections available against abuse.

However, the judge said that this would only have been a "serious" obstacle if he had been able to imply a general right to discharge into private waterways from the 1991 Act from section 159 of the Water Industry Act. It did not give rise to difficulty in relation to the more limited right to continue discharging from existing outfalls implied by the restrictions on discontinuing the use of existing sewers, he said.

Editor's note: Pinsent Masons, the law firm behind Out-Law.com, acted for United Utilities in its successful appeal to the Supreme Court.