Marcic (Respondent) v. Thames Water Utilities Limited (Appellants)
65. The enforcement procedure under the 1991 Act is much more elaborate. The Director has a duty under section 30(4) to consider a complaint and take such steps as he considers appropriate. He has a prima facie duty under section 18(1) to make an enforcement order if he is satisfied that the company is contravening its statutory duty. But that duty is qualified by section 19(1), which provides that he is not required to make an order if satisfied, among other things, that the company is willing to give suitable undertakings or that the duties imposed upon him by Part I of the Act preclude the making of such an order. His duties under Part I require him to exercise his powers in the manner best calculated to achieve certain objectives. The overriding objectives (section 2(2)) are to secure that the functions of a sewerage undertaker are properly carried out and that the undertakers are able "(in particular, by securing reasonable returns on their capital)" to finance the proper carrying out of their functions. More particular objectives are to protect the interests of customers liable to pay charges and promote economy and efficiency on the part of the company.
66. Pursuant to these duties, the Director has addressed himself to the question of flooding and formulated policies which the statutory undertakers should follow. Undertakers are required to submit a quinquennial strategic business plan which includes a statement of the capital expenditure required to achieve a reasonable level of alleviation of flooding. If the Director accepts such expenditure as reasonable, it is taken into account in assessing the charges which will give the undertaker a reasonable return on capital. Otherwise it is not. During the three quinquennia starting in 1990, the Director was willing to allow expenditure on work in relation to properties classified as at risk of internal flooding. But no allowance was made for properties, like that of Mr Marcic, which were only at risk of external flooding.
67. After the widespread floods of October 2000, the Director commissioned further studies of the flooding problem. In March 2002 he issued a consultation paper proposing a policy revision for the 2005-2010 quinquennium by which remedial work for properties only at risk of external flooding should also be included. He also made an interim agreement with Thames Water by which he approved additional investment before 2005 to free 250 properties (including that of Mr Marcic) from risk of external flooding. Your Lordships were told that this work has been done.
68. It is plain that the Court of Appeal, in deciding that better sewers should have been laid to serve Mr Marcic's property, was in no position to take into account the wider issues which Parliament requires the Director to consider. The judge, who heard fairly detailed evidence about what the cost of such improvements would be, confessed himself unable to decide whether the priorities laid down by the Director were fair or not:
69. As a result, the judge had to resort to deciding the matter upon the burden of proof: he said that the burden was upon Thames Water to satisfy him that it had done what was reasonable and that it had not done so. The judge said this in the context of whether Thames Water was in breach of its duty under section 6 of the Human Rights Act 1998, having previously decided that there was no cause of action in nuisance. But the Court of Appeal treated it, at p 995, para 87, as a finding that Thames Water had not taken reasonable steps to abate the nuisance emanating from its sewers: "Thames failed to persuade the judge that their system of priorities was a fair one."
70. My Lords, I think that this remark, together with the judge's frank admission that the fairness of the priorities adopted by Thames Water was not justiciable, provides the most powerful argument for rejecting the existence of a common law duty to build new sewers. The 1991 Act makes it even clearer than the earlier legislation that Parliament did not intend the fairness of priorities to be decided by a judge. It intended the decision to rest with the Director, subject only to judicial review. It would subvert the scheme of the 1991 Act if the courts were to impose upon the sewerage undertakers, on a case by case basis, a system of priorities which is different from that which the Director considers appropriate.
71. That leaves only the question of whether the remedies provided under the 1991 Act do not adequately safeguard Mr Marcic's Convention rights to the privacy of his home and the protection of his property. The judge, who found for Mr Marcic on this ground, did not have the benefit of the decision of the Grand Chamber of the European Court of Human Rights in Hatton v United Kingdom Application No 36022/97, (unreported) 8 July 2003. That decision makes it clear that the Convention does not accord absolute protection to property or even to residential premises. It requires a fair balance to be struck between the interests of persons whose homes and property are affected and the interests of other people, such as customers and the general public. 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. There is no reason why Parliament should not entrust such decisions to an independent regulator such as the Director. He is a public authority within the meaning of the 1998 Act and has a duty to act in accordance with Convention rights. If (which there is no reason to suppose) he has exceeded the broad margin of discretion allowed by the Convention, Mr Marcic will have a remedy under section 6 of the 1998 Act. But that question is not before your Lordships. His case is that he has a Convention right to have the decision as to whether new sewers should be constructed made by a court in a private action for nuisance rather than by the Director in the exercise of his powers under the 1991 Act. In my opinion there is no such right.
72. I would therefore allow the appeal and dismiss the action.
LORD HOPE OF CRAIGHEAD
73. I have had the advantage of reading in draft the speech of my noble and learned friend Lord Nicholls of Birkenhead. I agree with it, and for the reasons that he has given I too would allow the appeal.
74. I should like to add a few words of my own on the question whether the flooding of Mr Marcic's property constituted an infringement of his rights under article 8 of the European Convention for the Protection of Human Rights and Fundamental Freedoms and article 1 of the First Protocol.
75. Judge Richard Havery QC recognised that the rights which are embodied in article 8 of the Convention and in article 1 of the First Protocol are qualified rights:  QB 929, 955-956, para 67. He said that the fact that nothing had been done about the increasingly frequent flooding for nine years other than the works that Mr Marcic himself had carried out constituted an infringement by Thames Water of Mr Marcic's human rights which required justification. So the court had to decide whether a fair balance had been struck between the competing interests of Mr Marcic and the other customers. He was prepared to accept that the system of priorities used by Thames Water might have been entirely fair, and he said that he had no reason to doubt that it was intended to be. He was prepared to accept, too, that if the exercise of assessing the fairness of the system were to be carried out it might lead to the conclusion that, for all its apparent faults, the system did fall within the wide margin of discretion which was open to it and the Director General of Water Services. But he held that, on the limited information available to him, it was not possible to carry out that exercise, that the burden lay on Thames Water to establish that the infringement was justified and that it had failed to do so: p 964, paras 102-103.
76. As the Court of Appeal held that Mr Marcic had a valid claim in nuisance under the common law, Thames Water's appeal against the judge's finding that it had infringed his Convention rights had become academic and this part of the argument was dealt with only briefly. It was submitted that it was for Parliament to decide how to secure a fair balance, and that the statutory scheme currently embodied in the Water Act 1991 had incorporated a mechanism to achieve that balance which satisfied the requirements of the Convention, but the court did not find this to be in point:  QB 929, 999-1000, paras 108-109. It was not persuaded that the judge was wrong to hold that Thames Water had infringed Mr Marcic's Convention rights. The crucial point, so far as it was concerned, was that Mr Marcic's claim was not just for breach of statutory duty. It was for interference with his human rights as an incident of the performance by Thames Water of their statutory duty, and the statutory scheme did not purport to cater for such an eventuality. The court summed the matter up, at p 1000, para 109:
77. In my opinion this approach does not give sufficient weight to the fact that Parliament has decided that the most appropriate method of achieving a fair balance between the competing interests of the individual and the community is by means of a statutory scheme administered by an independent expert regulator, whose decisions are subject to judicial review if there is a doubt as to whether the necessary balance has been struck in the right place. The role of the director on the one hand, and that of the court in judicial review on the other, form an important part of the scheme which has been laid down by the statute. The opportunity to test how effective this scheme might prove to be in Mr Marcic's case was not taken. The judge found that no approach was made by Mr Marcic or on his behalf to bring his problem to the attention of the Office of Water Services, although his solicitors were informed by the Department of the Environment, Transport and the Regions that customer service committees had been set up by the director to assist him in his role of protecting customers' interests and investigating complaints:  QB 929, 938, para 15. So the effectiveness of the scheme must be considered by examining its content.
78. The general duty which is laid on every sewerage undertaker by section 94(1) of the 1991 Act requires it to ensure by its system of public sewers that the area is and continues to be drained effectually. Everyone in its area has the right to discharge effluent into the public sewer, subject to consent under section 118 in the case of trade effluent. Provision is made in section 95 for standards of performance to be prescribed by regulations. Environmental protection, in the general public interest, is an important aspect of the services which the undertaker must provide. The provision and operation of a composite system of public sewers available to all for the drainage of foul water as well as surface water from their premises has been attributed to the introduction of the water closet in the nineteenth century: Chambers Encyclopaedia, vol 8, Sewage, p 642. In modern circumstances this is a complex and expensive exercise.
79. The mechanism which has been laid down in the 1991 Act to secure the compliance of undertakers with their statutory duties is set out in sections 18 to 22. The director presides over this system. The general duties that are imposed on him by section 2 of the Act include the duty of exercising and performing his powers and duties in the manner that he considers best calculated to secure that the functions of the undertaker are properly carried out. Section 3 provides that environmental requirements must be taken into account when he is formulating any proposals relating to any of the functions of the undertaker.
80. Under section 18(1) of the 1991 Act the director has power by a final enforcement order to make such provision as he considers necessary to secure compliance by an undertaker with any condition of its appointment under the Act or any statutory or other requirement which is enforceable against it. Section 22(1) declares that the obligation to comply with an enforcement order shall be a duty owed to any person who may be affected by a contravention of the order, and any breach of that duty is actionable at the suit of that person under section 22(2). Section 18(8) provides:
81. There is, as section 18(8) of the 1991 Act indicates, an area of possible complaint against the activities of an undertaker that lies outside the scheme of the statute. The reference to remedies that are available in respect of an act or omission "otherwise than by virtue of its constituting such a contravention" preserves the possibility of making use of another route in order to preserve or protect the interests of the individual. It is that possibility that seems to have indicated to the Court of Appeal that the statutory scheme provides no answer to Mr Marcic's claim. There lay its error, in my opinion. Mr Marcic's complaint that Thames Water has acted in breach of his Convention rights cannot be considered in isolation from the scheme which the Act has provided for the compliance by Thames Water with the duties that are laid on it as a sewerage undertaker.
82. There is no doubt that the situation in which Mr Marcic found himself was provided for expressly by the statute. The flooding on his land was due to a failure by the undertaker to provide effectual drainage in his area. The duty to ensure that the area is effectually drained is enforceable under section 18. But it is not an absolute duty. Parliament appreciated that, as the undertaker has no power to control the volume of effluent that is drained into the system, this would not have been practicable. The only solution, in the event of overload into a public sewer of inadequate capacity, is to improve or extend the system so that there is no overload.
83. The question which Parliament had to address was how best to deal with this problem in the public interest, while respecting the interests of the affected individual. It did so by means of the statutory scheme, in which the director has a central role. The fact that decisions of the director are subject to judicial review provides a further important safeguard. The European Court of Human Rights has repeatedly recognised the value which is to be attached to the process of review by a judicial body that has full jurisdiction and provides the guarantees which article 6(1) of the Convention sets out: Bryan v United Kingdom (1995) 21 EHRR 342, 360-361, paras 44 and 46; Kingsley v United Kingdom (2000) 33 EHRR 288, para 58; R v Shayler  1 AC 247, 284, para 72.
84. In Hatton v United Kingdom Application No 36022/97, 8 July 2003, paragraph 97, in the context of a complaint under article 8 about environmental pollution by aircraft noise resulting from night flights at Heathrow Airport, the Grand Chamber took the opportunity once again to stress the subsidiary role of the Convention:
85. In Buckley v United Kingdom (1996) 23 EHRR 101, 129, para 74 the court acknowledged that the scope of the margin of appreciation will vary according to the context, and that relevant factors include the nature of the Convention right, its importance for the individual and the nature of the activities concerned. In Hatton's case, at paragraph 123, the court said that, whilst the state is required to give due consideration to the particular interests the respect for which it is obliged to secure by virtue of article 8, it must in principle be left a choice between different ways and means of meeting this obligation:
86. In his written submission the director has explained how account is taken of the liability of water and sewerage companies to make payments to the victims of flooding when price limits are set by him for each company in his capacity as economic regulator. He seeks to strike a balance between the interests of victims of flooding and those of the company's customers who have to pay for the additional costs incurred by the company. His current practice is to take account of the fact that in the case of internal sewer flooding, unless exceptional weather was the cause, victims are paid compensation by the company. Where properties are affected by external flooding a free clean up service is provided. Some additional payments may be made, depending on the circumstances, but there is no general practice of paying compensation. The emphasis instead is on remedial measures to prevent further flooding in the area so far as practicable.
87. The Court of Appeal said that the system provided no answer to a claim such as Mr Marcic's. That observation implies that it is open to the victim to ignore the statutory system and, instead of complaining to the regulator, to ask the court to rule on the question whether compensation is payable. But the context shows that the case of the victim cannot be separated from the ability of the company to serve the needs of its customers generally. These are public sewers, required by law to serve the needs of the public as a whole within the area. The cost of this provision must be borne by the company's customers. They have no alternative but to use the services of the company. Due consideration must be given to victims. But a balance has to be struck if the system is to be provided at reasonable cost. Parliament's choice was that it was for the director to deal with these matters within the statutory scheme which he administers. The margin of appreciation that, according to the jurisprudence of the European Court, must be given in a democratic system to the legislature allows for this. I would hold that, in the result, the scheme is compatible with Mr Marcic's Convention rights.
LORD SCOTT OF FOSCOTE
88. I have had the advantage of reading in advance the opinions of my noble and learned friends Lord Nicholls of Birkenhead and Lord Hoffmann. For the reasons they have given with which I am in full agreement, I too would allow this appeal and dismiss the action.
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