House of Lords' key ruling on liability for sewage flooding

In a test case on the liability of sewerage undertakers for damage caused by flooding from overloaded sewers, the House of Lords has held that private remedies under nuisance law or breaches of the Human Rights Act have no part to play. In doing so, it overturned a 1992 decision of the Court of Appeal which held that both contemporary nuisance law and the Human Rights Act could provide a remedy for individuals affected.

Marcic v Thames Water Utilities Ltd (4 December 2003, UKHL 66) concerned the owner of a house in Stanmore who had suffered repeated and serious flooding from an overloaded public sewerage system since 1992, and had even resorted to constructing his own defence system at a cost of £15,000.

The sewers affecting the claimant's property did not qualify for upgrading under the system devised by Thames Water for determining priorities, although by the time the case reached the House of Lords the necessary remedial works had eventually been completed.

The statutory provisions covering the provision of sewers are contained in the Water Industry Act 1991. Under section 94, a sewerage undertaker has a general duty to provide a system of public sewers to ensure that its area is drained effectively. The Act empowers the Secretary of State and water regulator Ofwat to serve an enforcement order on undertakers who are in breach of their statutory duties, and such an order can be enforced by an injunction if necessary.

The legislation, however, expressly excludes an individual seeking damages for breach of a statutory duty. It is only where an enforcement order has been served that an individual may seek damages where breach of the order results in damage, although the undertaker may plead a due diligence defence in such cases.

In the present case, no enforcement order had been served on Thames Water, and while the claimant had made complaints to both the company and the local authority he had not complained directly to Ofwat.

In 2001, the High Court did not feel that the statutory provisions excluded the application of common law remedies, but held that the existing principles of nuisance law only applied where an undertaker had carried out a positive act which resulted in damage, and were not applicable where, as here, there was failure to do something.

Nevertheless, the court held that the damage was sufficiently serious to amount to a breach of the Human Rights Act and its provisions concerning respect for privacy and the peaceful enjoyment of possessions (ENDS Report 317, pp 43-44 ).

The Court of Appeal reviewed the old case law on nuisance, and held that a contemporary approach should permit a claim in cases of failure to act. Much of its judgment was concerned with this aspect of the case, though it also upheld the claim based on the Human Rights Act (ENDS Report 325, pp 53-54 ).

In overturning the Court of Appeal's decision, the House of Lords gave far greater emphasis to the comprehensiveness of the statutory scheme under the Water Industry Act, which now governs both the provision of sewers and their financing through charges.

It noted that, in the absence of an enforcement order, an individual could seek no statutory remedy against the undertaker, and that his only remedy was to seek judicial review proceedings against the Secretary of State or Ofwat to force them to make an order against the undertaker. As Lord Nicholls noted, in pursuing his claim under common law and the Human Rights Act, Mr Marcic was effectively seeking "to sidestep the statutory enforcement code."

Lord Nicholls considered the old common law cases concerning the liability of local authorities for sewerage overloads. The Court of Appeal had held that these could no longer stand in the light of more recent case law such as Leakey v National Trust in 1980, which had held that occupiers of land could be liable in nuisance for failing to take step to prevent potential hazards in their property from causing damage to their neighbours.

Lord Nicholls felt the Court of Appeal had been mistaken to apply principles concerning the duty of occupiers of land to their neighbours to the duties of statutory undertakers, which were now governed by the statutory scheme contained in the 1991 Act.

Under the statutory provisions, Ofwat sets limits on the amount that undertakers can charge for their services, and in doing so has to balance the need to alleviate flooding with the costs of doing so, as well as other policy priorities such as those required under EU Directives.

"The existence of a parallel common law right, whereby individual householders who suffer sewer flooding may themselves bring court proceedings when no enforcement order has been made, would set at nought the statutory scheme. It would effectively supplant the regulatory role the Director [of Ofwat] was intended to discharge when questions of sewer flooding arise."

In dealing with the claim under the Human Rights Act, their Lordships were clearly strongly influenced by the decision of the Grand Chamber of the European Court of Human Rights earlier this year in the Hatton case concerning night flights at Heathrow (ENDS Report 342, pp 50-51 ).

There, the Grand Chamber emphasised that the Convention rights did not grant absolute protection of privacy or property, and that in areas involving complex policy issues a large margin of discretion should be granted to governments in determining the appropriate balances that had to be made between private and public interests.

As Lord Hoffman noted: "National institutions, and particularly the national legislature, are accorded a broad discretion in choosing the solution appropriate to their own society or creating the machinery for doing so." Although the claimant had clearly suffered, there was nothing to suggest, according to their Lordships, that the statutory scheme as a whole did not comply with the Convention.

The decision reflects a general concern of the courts becoming involved in making decisions about the allocation of public resources for which they consider themselves ill-equipped, especially where, in the nature of litigation, they are normally faced with resolving a discrete dispute between an individual and a public authority rather than considering the wider policy context.

Nevertheless, although Mr Marcic lost at the last round, the litigation has clearly had some positive impact. In March last year, Ofwat issued a consultation paper which acknowledged the seriousness of the problem of flooding from sewers, and made proposals for undertakers to deal more speedily with severe external flooding cases which should in future be included in their investment programmes.

Lord Nicholls also noted that existing regulations provided for modest compensation in respect of internal flooding for those who suffered while awaiting remediation schemes. But the regulations made no provision for compensation for the type of external flooding which had occurred in the present case, with some undertakers voluntarily providing compensation, but others not.

Lord Nicholls felt this was unacceptable: "The minority who suffer damage and disturbance as a consequence of the inadequacy of the sewerage system ought not to be required to bear an unreasonable burden." Such compensation would eventually be funded through increased charges, but it was perfectly fair that the majority who benefited from an adequate system should compensate the minority who did not. He called on Ofwat and others to reconsider the provision of compensation for external flooding.

Although the general scheme concerning the provision of sewers might be fair, Thames Water did not escape censure for its handling of Mr Marcic's repeated complaints.

According to Lord Nicholls: "It cannot be acceptable that in 2001, several years after Thames Water knew of Mr Marcic's serious problems, there was still no prospect of the necessary work being carried out for the foreseeable future. At times Thames Water handled Mr Marcic's complaint in a tardy and insensitive fashion."

As a result of the House of Lords decision, future complaints concerning the inadequacy of sewers must be directed to Ofwat, and it is equally clear that the robustness with which it deals with the problem will now be under increasing scrutiny.

Richard Macrory, Professor of Environmental Law, University College, London

Richard Macrory is a board member of the Agency but the views expressed here are personal

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