No Discharge Proviso Required: Adequate Protection of Property Rights under Section 155 Water Industry Act

Introduction

This case concerns an appeal by the Manchester Ship Canal Company Ltd (“MSC”) against the Court of Appeal’s dismissal of its challenge to a Compulsory Purchase Order (“CPO”) confirmed by the Secretary of State for Environment, Food and Rural Affairs. MSC sought to compel United Utilities Water Ltd to accept a “discharge proviso” mirroring protective statutory provisions in the Water Industry Act 1991. MSC argued that without the proviso its property rights in the Manchester Ship Canal would be breached, contrary to Article 1 of Protocol 1 (“A1P1”) of the European Convention on Human Rights. United Utilities and the Secretary of State maintained that the rigorous public inquiry, environmental permitting by the Environment Agency, and a statutory compensation regime adequately protected MSC’s interests.

Summary of the Judgment

The Court of Appeal, with Lady Justice Laing giving the lead judgment, dismissed MSC’s appeal. The Court held that:

The judge below had not misunderstood MSC’s case before the inquiry or on appeal.
There was no requirement to add the discharge proviso to the CPO. The public inquiry, environmental permit regime and once-and-for-all compensation under the compulsory acquisition legislation provided sufficient safeguards.
Confirming the CPO without the discharge proviso did not infringe MSC’s rights under A1P1. The interference was lawful, pursued a legitimate public interest in improving water quality, and was proportionate.

Analysis

Precedents Cited

The Judgment examines key authorities:

MSC (No. 1) [2014] UKSC 40: Supreme Court held that pre-1991 outfalls enjoyed an implied right to discharge under the Water Industry Act.
Marcic v Thames Water [2003] UKHL 66: House of Lords on nuisance by sewerage undertakers, distinguished here as dealing with escape rather than discharge.
MSC (No. 2) [2024] UKSC 22: Supreme Court clarified that the Water Industry Act preserved but did not oust common law tort remedies; distinguished Marcic and confirmed that pre-1991 implied rights carried over, but did not affect statutory new-outfall regime.
Bank Mellat v HMT (No. 2) [2013] UKSC 39: established the four-stage proportionality test under A1P1.
Dalston Projects v SSH (2024) EWCA Civ 172: reaffirmed margin of appreciation in public-interest decisions subject to proportionality review.

Legal Reasoning

The Court’s reasoning unfolded in three stages:

Necessity of the Discharge Proviso: MSC had not advanced before the inspector any detailed case on how the proviso would operate or what additional protections it conferred. The inspector and Secretary of State concluded it was unnecessary given environmental permitting, public‐inquiry scrutiny, and compensation.
Article 1 Protocol 1 Compliance: The CPO was made under clear statutory powers (section 155 WIA and the Acquisition of Land Act 1981), pursuing legitimate aims—improved water quality and flood risk reduction. Applying Bank Mellat, the measure was rationally connected, no less intrusive alternative existed beyond the proviso, and a fair balance was struck.
Impact of MSC (No. 2): Although the judge below stated incorrectly that nuisance claims were ousted, this did not affect the proportionality analysis. The Court reaffirmed that the statutory framework for new outfalls, coupled with regulatory oversight and compensation, was enacted by Parliament as an adequate protection of A1P1 rights.

Impact

This decision has several important implications:

It confirms that CPOs under section 155 WIA, validated through public inquiry and environmental permitting, can validly grant new discharge rights without replicating every protective statutory provision applicable to pre-1991 outfalls.
It underscores the role of statutory compensation schemes as sufficient redress for property-right interferences, without the need to equate compensation with common law damages.
It clarifies that environmental permits enforced by the Environment Agency provide a robust regulatory backstop; breaches carry criminal liability.
The judgment reinforces the high threshold for seeking additional provisos in CPOs once a thorough public‐inquiry process has been completed.

Complex Concepts Simplified

Compulsory Purchase Order (CPO): A statutory instrument that compels acquisition of property or rights for public purposes; here used by a sewerage undertaker to obtain an easement to discharge into a canal.
Section 155 WIA: Empowers the Secretary of State to authorize compulsory acquisition, including new rights, for water undertakers.
Discharge Proviso: A rider proposed by MSC to replicate statutory environmental protections (sections 117 & 186 WIA) as conditions on the discharge right.
A1P1 ECHR: Protects peaceful enjoyment of possessions; interference must be lawful, pursue legitimate aim, and be proportionate.
Environmental Permits: Licenses issued by the Environment Agency regulating discharges; non-compliance is a criminal offence.

Conclusion

The Court of Appeal’s decision establishes that, for new outfalls created under section 155 of the Water Industry Act, the combination of a detailed public inquiry, strict environmental permitting and a statutory compensation regime suffices to protect landowners’ A1P1 rights. There is no requirement to import the protective provisions that apply to pre-1991 discharges. The judgment reaffirms the primacy of the statutory CPO process and the robustness of regulatory oversight, providing certainty for future cases involving compulsory acquisition for environmental infrastructure.