Welsh Water v Barratt Homes Ltd [2013] EWCA Civ 233

Barratt obtained planning permission for a housing development and had a statutory right under section 106 Water Industry Act 1991 to connect its drains to Welsh Water’s sewer. Welsh Water blocked the connection with concrete. The Court of Appeal held Barratt could not recover damages in nuisance, trespass or negligence for economic loss, leaving only a limited claim for physical pipe damage.

Facts

Barratt Homes Limited obtained planning permission from Monmouthshire County Council on 14 May 2007 to construct a school and 98 houses at Llanfoist. On 29 May 2007 it served notice under section 106 of the Water Industry Act 1991 on Dwr Cymru Cyfyngedig (Welsh Water) (“DCC”), the sewerage undertaker, of its intention to connect its development drains to a public sewer at a specified connection point in the public highway.

Section 106(4) allowed DCC 21 days to serve a notice refusing the communication on limited grounds. No refusal was served within time, so Barratt asserted an entitlement to connect at the chosen point. DCC later purported to insist on connection at a more distant “point of adequacy” approximately 300 metres away, which Barratt disputed. OFWAT twice indicated to DCC that it had no right to prevent connection at the notified point and, in any event, had failed to serve a counter-notice in time.

Barratt constructed on‑site sewers for the development and instructed its contractor, Macob, to lay a sewer spur to a manhole at the connection point. A pipe was inserted through the manhole wall and benching altered to form an open channel ready to receive flows into DCC’s sewer. At that stage, Barratt’s on‑site network was not yet physically connected to the spur and thus there was no communication with the public sewer.

On 25 June 2008 DCC served a notice purporting to act under section 109, alleging an unlawful communication and stating its intention to disconnect. That evening DCC’s contractors entered the manhole and blocked the spur by inserting a stopper and placing concrete behind it within the manhole chamber, reforming the benching. Barratt’s evidence was that the concrete plug extended into and up the spur and had to be removed and the spur rebuilt at its expense.

Because connection was not allowed, Barratt had to install a temporary storage tank on its land to collect foul sewage from occupied houses and the school and have it pumped out and removed by tanker until December 2008. Barratt had already successfully obtained declaratory and injunctive relief in earlier proceedings, culminating in the Supreme Court’s confirmation that it had a right to connect at the connection point and that DCC had no authority to act under section 109(2).

Procedural history

In July 2008 Barratt commenced Part 8 proceedings seeking a declaration of its right to connect and an injunction requiring removal of the concrete and restraining DCC from interference. The Court of Appeal allowed Barratt’s appeal and granted injunctive relief; DCC’s further appeal to the Supreme Court failed.

The present action for damages was begun on 27 April 2010. Barratt pleaded breach of statutory duty under the 1991 Act, nuisance, trespass to/wrongful interference with its pipes, and negligence. In an earlier interlocutory judgment in September 2011, Judge Seys Llewellyn QC rejected DCC’s contention that the claim was barred by unlawfulness in the discharge of a planning condition.

After discovering Bowden v South West Water Services Ltd, DCC applied to strike out and/or obtain summary judgment against the claims for breach of statutory duty, negligence, nuisance and trespass to goods. At that hearing Barratt did not pursue its breach of statutory duty claim. The judge held that there was no cause of action for breach of statutory duty or (save for physical damage to and reinstatement of the pipe) negligence, but allowed the nuisance and trespass claims to proceed. DCC appealed that part of the decision; Barratt cross‑appealed on the negligence ruling, contending that economic loss was recoverable as consequential on negligent damage to the pipe.

Issues

1. Whether section 106 Water Industry Act 1991 supports a private law claim for damages

The Court had to consider whether section 106, which grants owners and occupiers an entitlement to connect to public sewers, gives rise to:

• a cause of action for damages for breach of statutory duty; and/or
• a common law duty of care in negligence or a basis for a nuisance claim.

This required examination of the scheme and policy of the 1991 Act, in particular the distinction drawn in cases such as Marcic v Thames Water Utilities Ltd and Dobson v Thames Water Utilities Ltd between statutory duties enforceable solely through regulatory mechanisms and those capable of supporting private law claims.

2. Compatibility of nuisance and trespass claims with the statutory scheme

Barratt’s nuisance claim had two limbs:

• that DCC’s refusal to permit connection unlawfully interfered with its use and enjoyment of land; and
• that DCC’s positive act of blocking the spur with concrete constituted an actionable nuisance.

The Court had to determine whether such claims were compatible with Parliament’s decision not to confer a damages remedy for breach of section 106, and whether the statutory right to connect could be used as the foundation for common law nuisance or trespass.

3. Causation

Even if a cause of action were otherwise available, the Court had to decide whether the concrete plug was an operative cause of Barratt’s losses (the costs of tankering and related economic loss), or whether the true cause was DCC’s refusal to permit connection, for which no damages remedy lay.

4. Elements of nuisance

DCC also argued that, on the pleaded facts, nuisance was not made out because:

• there was no injury to Barratt’s land, only economic loss;
• DCC had not “used” land in a manner injuriously affecting Barratt’s enjoyment;
• there was no emanation from DCC’s land onto Barratt’s land; and
• its conduct could not be characterised as unreasonable use.

Judgment

Breach of statutory duty and negligence

Judge Seys Llewellyn had already held that section 106 does not create a cause of action for damages for breach of statutory duty. The Court of Appeal (Lloyd Jones and Pill LJJ, Arden LJ agreeing) proceeded on the basis that this conclusion was correct.

Lloyd Jones LJ endorsed the judge’s reasoning, noting in particular that:

• other provisions of the 1991 Act (such as section 41(4) and section 209) expressly create civil liability, whereas section 106 does not;
• the Act provides a detailed regulatory code, with a specific procedure under section 106(3)–(6) for dealing with counter‑notices and OFWAT determinations; and
• Bowden strongly supported treating the scheme as enforceable in public, not private, law.

Applying the approach in Stovin v Wise and X (Minors) v Bedfordshire County Council, Lloyd Jones LJ held that the absence of a statutory damages remedy for breach of section 106 militated strongly against recognising a parallel duty of care at common law. He agreed with the judge that there was no cause of action in negligence for economic loss resulting from failure to permit connection. There was no appeal against that aspect of the ruling.

The only negligence claim left standing was for physical damage to the pipe itself and the cost of its repair or reinstatement, which the judge had allowed and which the Court of Appeal did not disturb.

Nuisance based on failure to permit connection

Lloyd Jones LJ considered whether section 106 could be relied on as the foundation for a nuisance claim. He distinguished cases such as Lingke v Mayor of Christchurch, where nuisance was a freestanding common law cause of action unconnected with statutory obligations. In contrast, here the alleged nuisance was inseparable from Barratt’s statutory right to connect and discharge into the public sewer:

“The nub of the action in nuisance is that the Claimant had the means of connection via its pipe and … an entitlement to connect to and have sewage pass into the public sewer, but the Defendants have by positive action thereby unlawfully interfered with exercise by the Claimant of enjoyment of ownership and occupation of their development site.”

He held that there was no cause of action in nuisance independent of section 106. Section 106 was the necessary basis for asserting that DCC’s refusal was an unlawful interference with Barratt’s enjoyment of land. Given the clear conclusion that section 106 was not intended to confer a right to compensation for breach, it could not be used indirectly to found a damages claim in nuisance.

Lloyd Jones LJ also observed that, if such a nuisance action were possible, it would arise in every case of breach of section 106 by an undertaker, which was inconsistent with the statutory policy.

He therefore concluded:

“I conclude therefore that Barratt has no cause of action in nuisance to the extent that such claim is founded on its rights under section 106.”

Nuisance and trespass based on the concrete plug: causation

The Court then considered the alternative limb of the nuisance and trespass claims, based on the positive act of blocking the spur with concrete. The judge below had treated this as the “nub” of the nuisance claim and considered that it could, in principle, cause Barratt to incur expense in mitigating interference with its land.

On appeal, DCC argued that the plugging was causally irrelevant to Barratt’s losses: DCC had already made clear that it would not permit connection and that making a connection risked committing a criminal offence under section 109(1); the concrete merely implemented that stance. Barratt contended that the physical blockage prevented it from exercising its right to connect and was the immediate cause of the need to tanker sewage.

Lloyd Jones LJ held that the claim failed on causation. The concrete plug was not, in law or fact, the operative cause of the economic loss. The true cause was DCC’s refusal to permit connection and discharge:

“The concrete was not a physical cause of the inability to discharge sewage into the defendant’s sewer. It merely blocked a connection which Barratt had inserted in order to receive its drain, a drain which in the event was never connected. The concrete did not prevent the discharge.”

He concluded that the pouring of concrete into the pipe, viewed in the context of the parties’ dispute under the statutory scheme, was incidental. The operative and effective cause of the loss was the refusal to permit connection, for which no damages remedy existed. Consequently, the nuisance claim based on the plug, and the corresponding trespass to goods and negligence claims for economic loss, could not succeed and should be struck out.

Further nuisance arguments

Although not determinative of the outcome, the Court dealt briefly with DCC’s additional objections to the nuisance claim:

(1) Injury to land

DCC argued that the losses were purely economic, relating to tankering sewage from properties no longer owned by Barratt and making unsold properties marketable. Lloyd Jones LJ accepted the judge’s view that the enjoyment of Barratt’s retained land was affected because the ability to connect to sewerage services was an essential adjunct of its development use. If a nuisance claim were otherwise maintainable, it would be arguable that there was wrongful interference with the use of land.

(2) Use of land by the defendant

DCC argued that plugging the spur did not amount to “use” of its land. The Court held that it was at least arguable that DCC’s conduct involved use of its sewer. Lloyd Jones LJ also noted that nuisance does not invariably require use of the defendant’s own land.

(3) Emanation

DCC relied on the absence of any physical emanation from its land onto Barratt’s land. The Court accepted that, in principle, nuisance often involves an emanation, but agreed that there is no invariable rule and that, if the claim had otherwise been sustainable, lack of emanation would not necessarily have been fatal.

(4) Reasonableness of user

DCC submitted that its actions were, at the time, reasonably based on its understanding of its powers and environmental and safety concerns. The Court considered this argument undermined by the earlier decisions holding that DCC’s conduct was unlawful; questions about balancing reasonable uses of land did not arise where the defendant’s acts were ultra vires.

Concurring opinions

Arden LJ

Arden LJ agreed with the order proposed by Lloyd Jones LJ but expressed a reservation as to whether, in a different procedural context, a nuisance claim could ever arise independently of breach of statutory duty. She stressed that, in this case, Barratt was using nuisance to circumvent an accepted proposition of law that no damages claim lay for breach of section 106:

“Thus Barratt is using its claimed cause of action in nuisance to circumvent the proposition of law (for the purposes of these proceedings) that no cause of action lies for breach of statutory duty. If, as we must assume, the proposition of law reflects the true interpretation of section 106 of the Water Act 1991 (“the 1991 Act”), such a cause of action must be impliedly be excluded.”

She accepted that the underlying ingredients of nuisance (interference with enjoyment of land, use of land by the defendant, no need for emanation) were in principle arguable, but held that, given the accepted absence of a statutory damages remedy, allowing a nuisance claim would undermine the statutory scheme.

Pill LJ

Pill LJ also agreed with Lloyd Jones LJ’s reasoning and conclusions, while addressing in more detail whether section 106 was intended to confer a private right of action for damages. Applying the principles from X (Minors), Stovin v Wise and Bowden, and examining related provisions such as sections 41, 94, 180 and 209 and Schedule 12, he concluded that:

“I am not able to conclude that the policy of the 1991 Act intended to confer a right to compensation for breach of section 106.”

He regarded the nuisance claim as inextricably linked to the breach of statutory duty and not independently grounded. While recognising that section 106 created a specific entitlement in favour of a limited class of persons, he considered the absence of an express damages remedy and the overall regulatory structure decisive against implying a private law right of action.

Implications

The decision establishes that the statutory entitlement to connect to public sewers under section 106 of the Water Industry Act 1991 does not carry with it a right to damages for breach, whether framed as breach of statutory duty, negligence (for economic loss) or nuisance. The Court treated the 1991 Act as a carefully constructed regulatory code in which Parliament has selectively provided for compensatory remedies (e.g. sections 41, 209, and Schedule 12) and, by omission, signalled that other duties, such as section 106, are not intended to be privately enforceable by way of damages.

Developers and landowners may obtain declaratory and injunctive relief to vindicate section 106 rights, as confirmed by the earlier litigation in this dispute, but cannot generally recover consequential economic loss where an undertaker unlawfully refuses connection. Claims may, however, still lie in negligence for direct physical damage (such as damage to a pipe) caused by an undertaker’s wrongful acts.

The case also illustrates the courts’ reluctance to allow common law causes of action to be used indirectly to achieve what Parliament has declined to authorise directly in respect of statutory duties, and the importance of causation analysis where both statutory and common law elements are intertwined.

Verdict: The Court of Appeal allowed Welsh Water’s appeal and struck out Barratt’s claims in nuisance, trespass to goods and negligence insofar as they sought economic loss, and dismissed Barratt’s cross‑appeal, leaving only a limited negligence claim for the cost of repairing or reinstating the damaged pipe.

Source: Welsh Water v Barratt Homes Ltd [2013] EWCA Civ 233