Marcic v Thames Water Utilities Ltd 2002: OFWAT advise water companies to spend more on tackling sewer flooding problems
On 7 February 2002, the Court of Appeal handed down the landmark judgment of Marcic v. Thames Water Utilities Ltd, which reversed a long line of unsuccessful claims brought against sewerage undertakers for damage caused by discharge from overloaded sewers. The case has been granted Leave to Appeal to the House of Lords. However, after such a well-reasoned judgement in the Court of Appeal, it is likely to have an uphill struggle.
There is some concern that if the law lords do uphold the decision, it could end up costing the water industry millions of pounds. For not only has the common law of nuisance developed in favour of the consumer, the incorporation of the Human Rights Act 1998 has meant that it is no longer acceptable to impose burdens on individuals in order to secure reduced costs for the majority.
Water companies are already reporting to be experiencing considerable pressure from property owners who have suffered internal and/or external flooding to compensate them for loss of property value where alleviation schemes were unlikely to materialise in a realistic timescale. In order to avoid costly litigation the water companies are currently seeking guidance on how much additional work they should undertake to alleviate the risks of flooding, when compensation should be payable, and how that compensation should be calculated.
In an attempt to answer some of their questions OFWAT published a consultation paper 'Flooding from sewers – A way forward'. It proposed that water companies be allowed to spend more money on tackling sewer-flooding problems before the next price review is completed in November 2004. OFWAT will then set prices for the next period accordingly.
OFWAT will continue to follow the case closely and issue guidance where it can.
Set out below is a brief reminder of the case:
Mr Marcic brought the action against Thames Water after his property was repeatedly flooded over a period of 9 years by sewage and surface water, overflowing from a drainage system owned and operated by Thames that was no longer adequate for the demands of the area. The flooding rendered Mr Marcic's house virtually unsaleable and he spent nearly £16,000 in an attempt to prevent the floodwater from getting into his home.
The High Court Decision
The High Court dismissed Marcic's claim for damages in nuisance on the grounds that Thames, as a statutory drainage undertaker, was not obliged to take positive action to remedy the inadequacy. Marcic however, also raised a claim under article 6(1) of the Human Rights Act 1998 (HRA), which provides that it is unlawful for a public authority to act in a way that is incompatible with the European Convention on Human Rights (ECHR). In particular he argued that the flooding interfered with his right to respect for his home under article 8, and his right to enjoyment of his possessions under article 1 of the First Protocol. The judge upheld Marcic's human rights claim and awarded him damages for the period during which the HRA had been in force (since October 2000).
Both parties appealed, Thames against the judge's decision on the HRA claim and Marcic against the judge's failure to find the defendant liable in nuisance, the case went up to the Court of Appeal.
The Court of Appeal Decision
The Court of Appeal dealt a double blow to Thames. Not only was the claim against Thames based on the Human Rights Act upheld, but the claim in nuisance also succeeded. The main findings were as follows:
- The High court was right to hold that no action could be brought based on breach of statutory duty – No enforcement order was made by the Secretary of State under s.18 Water Industry Act 1991, to compel Thames to carry out their duties under s.94 of the Act. S.22 therefore prohibits any claim;
- In relation to the nuisance point, this area of law has developed significantly in recent times. After a consideration of recent case law, the court concluded that the sewers owned and operated by Thames were causing a nuisance to Mr Marcic and Thames would be liable to him unless they took reasonable steps in all circumstances to abate the nuisance.
Thames did not try to prove that it had taken all such reasonable steps. Instead, it argued that its system of prioritising properties at greatest risk of flooding was a fair way of devoting limited resources to the problem of nuisances emanating from Thames's sewers. The judge rejected this argument. He criticised their system of prioritising on four grounds:
- Insufficient weight is given to the frequency of flooding incidents;
- No account is taken of the length of time a customer has been waiting for his problem to be remedied;
- No account is taken of the value of the property flooded and the diminution in the value due to flooding; and
- Expense undertaken by the customer to minimise flood damage to his property is not considered.
He stated that given their financial position this was unacceptable.
- Because the court found Thames liable under the common law of nuisance, this displaced any claim that Marcic had under the HRA. However, the Court's comments are important, as they upheld the High Court's findings on Convention.
They agreed that Thames' failure to carry out works to prevent the flooding from recurring did constitute an interference with Marcic's right to respect for his home and his entitlement to peaceful enjoyment of his possessions. Even though the interference did not result from an active interference, but from a failure to act, it did not absolve Thames from liability.
In this case the Court of Appeal has effectively shifted the goalposts on how costs are allocated between those who suffer loss as a consequence of statutory duties carried out for the common good and the wider community that benefits from the discharge of those duties. It is yet to be seen what the House of Lords will make of this.
The OFWAT consultation paper 'Flooding from sewers – A way forward' can be viewed via the following link: http://www.ofwat.gov.uk/aptrix/ofwat/publish.nsf/ AttachmentsByTitle/sewer_flooding_march02.pdf/$FILE/sewer_flooding_march02.pdf
For further information, please contact Richard Temple at richard.temple@cms-cmck.com or on + 44 (0) 20 7367 3738
