Marcic v. Thames Water Utilities Ltd [2003] UKHL 66 (04 December 2003)

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Cite as: [2004] 2 AC 42, [2004] UKHRR 253, [2003] UKHL 66, [2003] NPC 150, [2004] HRLR 10, [2004] BLR 1, 91 Con LR 1, [2003] 50 EGCS 95, [2004] Env LR 25, [2004] 1 All ER 135, [2003] 3 WLR 1603

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JISCBAILII_CASE_TORT

Judgments - Marcic (Respondent) v. Thames Water Utilities Limited (Appellants)

HOUSE OF LORDS

SESSION 2003-04
[2003] UKHL 66
on appeal from: [2002] EWCA Civ 64

OPINIONS

OF THE LORDS OF APPEAL

FOR JUDGMENT IN THE CAUSE

Marcic (Respondent)

v.

Thames Water Utilities Limited (Appellants)

ON

THURSDAY 4 DECEMBER 2003

The Appellate Committee comprised:

Lord Nicholls of Birkenhead

Lord Steyn

Lord Hoffmann

Lord Hope of Craighead

Lord Scott of Foscote


HOUSE OF LORDS

OPINIONS OF THE LORDS OF APPEAL FOR JUDGMENT

IN THE CAUSE

Marcic (Respondent) v. Thames Water Utilities Limited (Appellants)

[2003] UKHL 66

    LORD NICHOLLS OF BIRKENHEAD

My Lords,

  1.   This appeal concerns flooding of a particularly unpleasant kind: from foul water sewers as well as surface water sewers. Sewer flooding is a nationwide environmental problem, arising largely from the building of ever more houses to meet the housing demand. Sewers and drains, sufficient when laid in the 19th century or later, are no longer adequate to cope with the volume of surface water entering the public drainage system in times of heavy rainfall. Overloaded surface water sewers spill into the foul water sewers. As a result, all too often water and untreated sewage overflow at the lower levels of the drainage system, causing misery for the people living there.
  2.   The risk of this happening has been reduced over the last ten years, but many thousands of people, with varying degrees of frequency, still suffer in this way. Currently 6,000 properties in England and Wales suffer internal sewer flooding each year. The water floods into the houses and buildings. Half these incidents arise from 'one-off' causes such as blocked or collapsed sewers or pumping station failures. The other half arise from overloaded sewers. The flow of water is greater than the sewer's hydraulic capacity. But the number of properties affected by this problem is not confined to 6,000. The properties flooded are not the same every year. Currently about 15,000 properties are at risk of internal sewer flooding at least once every ten years. Many properties are at risk in this way twice or more in ten years.
  3.   Additionally, the limited information available suggests that between 15,000 and 20,000 properties are affected by external sewer flooding. External flooding affects gardens, driveways and yards, but does not permeate into the houses or buildings themselves.
  4. The flooding in Old Church Lane

  5.   Mr Peter Marcic is one person who has endured serious and repeated external sewer flooding arising from overloaded sewers. He lives at Stanmore. He owns and occupies 92 Old Church Lane as his home. This is a substantial family house with front and rear gardens. Mr Marcic has lived there for over twenty years and is now in his mid-sixties.
  6.   The house is served by two public sewers passing under Old Church Lane, one for surface water, the other for foul water. They are part of the public sewerage system for draining the London Borough of Harrow. When laid, probably in the 1930s, the surface water sewer was constructed to the standard then generally accepted and its capacity was sufficient to meet any usage which could reasonably be anticipated. Because of subsequent housing development in the area, for some years now whenever there is heavy rain the surface water sewer in Old Church Lane becomes overloaded as a result of the volume of water entering surface water sewers higher up the catchment area.
  7.   When this occurs Mr Marcic's house, which is at the low point of the drainage system, suffers badly. From June 1992 his property has been regularly and seriously affected by flooding of surface water and also by back flow of foul water from the two sewers in Old Church Lane. There were two such incidents in 1992, one in each year from 1993 to 1996, two in 1997, none in 1998, four in 1999 and four or five in 2000. When these incidents occur the surface water sewer in Old Church Lane becomes so full that effluent overflows through gullies and onto Mr Marcic's property. Surface water also enters the public foul water sewer under Old Church Lane. So it too becomes overloaded, causing effluent to flow back into Mr Marcic's property through the drain connecting his house to the public sewer in the lane. Initially, in 1992, it took half an hour of heavy rainfall to bring about one of these flooding incidents. But the position deteriorated. By 2001 fifteen minutes of heavy rain or some hours of steady drizzle were sufficient.
  8.   When these flooding incidents occur the water reaches the brick walls of Mr Marcic's house, above as well as below the level of the damp course, often rising to within an inch of the level of the front door threshold. The house is affected by damp and subsidence and may have been damaged structurally. Mr Marcic constructed his own flood defence system in his front garden, at a cost of £16,000. To an extent this alleviated the damage. It is these works alone which prevented floodwater from entering his home. But the only effective solution is enlarging or extending the existing public sewerage system. New public surface water sewers are needed to provide additional capacity to cope with heavy rainfall.
  9.   Mr Marcic complained to his local authority in June 1992. Thereafter, despite repeated efforts by him to get something done, no steps were taken to remedy the underlying cause. The history is summarised by His Honour Judge Richard Havery QC: [2002] EWCA Civ 64, [2002] QB 929, 937-939, paras 12-16. Mr Marcic started these court proceedings in May 1998. The defendant, Thames Water Utilities Ltd, is the statutory sewerage undertaker for the area which includes Old Church Lane. Mr Marcic sought an injunction restraining Thames Water from permitting the use of its sewerage system in such a way as to cause flooding to 92 Old Church Lane, a mandatory order compelling Thames Water to improve the sewerage system, and damages.
  10.   Thames Water operates its sewerage system under statutory powers and subject to statutory duties. In these proceedings, for a reason which will become apparent, Mr Marcic has not sought to rely directly on any alleged contraventions by Thames Water of its statutory obligations. Instead Mr Marcic asserts (1) a common law claim in nuisance and (2) a claim under the Human Rights Act 1998 that Thames Water as a public authority has acted incompatibly with his Convention rights under article 8 (respect for family life and home) and article 1 of the First Protocol (protection of property). At a trial of preliminary issues Judge Richard Havery, sitting in the Technology and Construction Court, rejected the former claim and others (not now pursued) but upheld the latter. On appeal the Court of Appeal, comprising Lord Phillips of Worth Matravers MR, Aldous and Ward LJJ, found in favour of Mr Marcic on both claims (1) and (2): [2002] QB 929. Thames Water has appealed against that decision.
  11. The statutory scheme

  12.   The starting point for any consideration of Thames Water's obligations and liabilities must be the statutory scheme under which it operates the sewers in question. Sewage disposal and drainage have been the subject of statutory regulation for 500 years. The first public general Act was the Statute of Sewers 1531. But the systematic construction of extensive networks of public sewers dates largely from the middle of the 19th century and was the responsibility of public water undertakers. Until comparatively recently public water undertakers were usually local authorities. The Water Act 1989 provided for the transfer of most of the statutory functions of the existing public water authorities to privatised water and sewage undertakers. These were regulated commercial companies, having broadly the same statutory powers and duties as the authorities they replaced.
  13.   The current legislation comprises the Water Industry Act 1991. This statute consolidated the relevant provisions of the Water Act 1989. The 1991 Act sets out the powers and duties of both water undertakers and sewerage undertakers. The exercise of these functions is subject to supervision and control by the Director General of Water Services. Thames Water is a commercial company carrying on business as a public sewerage undertaker within this statutory framework. It is one of ten appointed sewerage undertakers. Its appointed area is huge, extending from Cirencester to Brentwood and from Banbury to Crawley. It is responsible for 80,000 km of public sewers of varying sizes, serving 5.4 million connected properties and a population of 12 million.
  14.   The 1991 Act is extensive and I shall mention only the provisions of direct relevance to the issues arising in these proceedings. Part I of the Act makes provision for the office of Director General of Water Services. He is appointed by the Secretary of State. Section 2 imposes on the Secretary of State and on the Director, to use the statutory abbreviation of his title, wide ranging duties of a general character regarding the water industry. In short, the Director is the regulator of the water industry in England and Wales. He is required to exercise and perform his statutory powers and duties in the manner he considers best calculated to secure that the functions of a water undertaker and a sewerage undertaker are properly carried out. This duty includes ensuring that companies appointed as sewerage undertakers are able, by securing reasonable returns on their capital, to finance the proper carrying out of their functions. Commercial companies cannot be expected to take up appointments as sewerage undertakers unless there is a prospect of obtaining a reasonable rate of return on their invested capital. The Director is also required to protect the interests of customers of sewerage undertakers in respect of sewerage undertakers' drainage charges and in other respects.
  15.   Sections 18 to 22 of the Act make provision for enforcement orders. Enforcement orders are a means by which the Secretary of State and the Director enforce the obligations of a sewerage undertaker. These provisions are of central importance in the present case. So far as the present case is concerned their effect is as follows. Where the Director is satisfied that a sewerage undertaker is contravening a statutory requirement enforceable under section 18 he 'shall' by a final enforcement order make requisite provision for the purpose of securing compliance with that requirement: section 18(1). In certain circumstances, instead of taking steps towards making a final enforcement order, the Director has power to make a provisional enforcement order: section 18(2) and (3). A company is required to comply with an enforcement order, whether final or provisional: section 18(5).
  16.   Where contravention of a statutory requirement is enforceable under section 18, section 18(8) limits the availability of other remedies:
    • '(8) Where any act or omission constitutes a contravention of … a statutory or other requirement enforceable under this section, the only remedies for that contravention, apart from those available by virtue of this section, shall be those for which express provision is made by or under any enactment and those that are available in respect of that act or omission otherwise than by virtue of its constituting such a contravention.'

  17.   The Director is not required to make an enforcement order if satisfied that the contravention is trivial, or that the company has given and is complying with an appropriate undertaking, or that the duties imposed on him by Part I of the Act preclude the making of the order: section 19. This last exception would cover a case where the Director considers that making an order would be incompatible with the policy objectives mentioned in section 2, such as securing that an undertaker is able, by securing a reasonable return on its capital, to finance the proper discharge of its functions. The Director is required to give notice if he proposes to make a final enforcement order or confirm a provisional enforcement order: section 20. The notice must be served on the company and also published. The Director must consider any representations or objections made to him.
  18.   Thus, a contravention of a statutory requirement to which section 18 applies does not necessarily result in an enforcement order. The sewerage undertaker may put matters right pursuant to an undertaking. Or other considerations, to which the Director is obliged to have regard, may be inconsistent with him making an enforcement order and thereby compelling the undertaker to rectify the breach.
  19.   Section 22 contains important provisions regarding the effect of an enforcement order. A company's obligation to comply with an enforcement order, whether final or provisional, is 'a duty owed to any person who may be affected by a contravention of the order'. A breach of this duty causing loss or damage to the person to whom the duty is owed is actionable at the suit of that person. In any ensuing court proceedings the company has a 'due diligence' defence. An enforcement order is also enforceable by civil proceedings brought by the Director for an injunction or other appropriate relief.
  20.   Part IV of the Act is concerned with sewerage services. Section 94 sets out the principal general duty of every sewerage undertaker: to ensure its area is properly drained. To this end the undertaker must provide an appropriate system of sewers:
    • '(1) It shall be the duty of every sewerage undertaker -

      (a)  to provide, improve and extend such a system of public sewers (whether inside its area or elsewhere) and so to cleanse and maintain those sewers as to ensure that that area is and continues to be effectually drained;'

  21.   On its face this duty is of an absolute character. This is not to say that 'effectually drained' sets an absolute standard. Flood water lying on a water meadow, for instance, is not of itself an indication that an area is not being properly drained. Effectual drainage is a question of degree. There will always be flooding caused by exceptional weather. Current sewerage systems are generally designed to cope with storms which may be expected to occur once in thirty years. The cost of improving systems beyond this, so as to cope with rarer events, would be excessive.
  22.   A freak event of this sort is not the explanation for the flooding in the present case. No one could suppose that external sewer flooding of residential property of the character and frequency suffered by Mr Marcic in recent years is compatible with Old Church Lane being effectually drained. Mr Marcic's difficulty on this point lies elsewhere.
  23.   Mr Marcic's difficulty is this. Section 94(3) provides, so far as relevant, that a sewerage undertaker's duty to provide an adequate system of public sewers under section 94(1) is enforceable by the Director under section 18, in accordance with a general authorisation given by the Secretary of State. Hence, as provided in section 18, the remedy in respect of a contravention of the sewerage undertaker's general drainage obligation lies solely in the enforcement procedure set out in section 18. Thus, a person who sustains loss or damage as a result of a sewerage undertaker's contravention of his general duty under section 94 has no direct remedy in respect of the contravention. A person in the position of Mr Marcic can bring proceedings against a sewerage undertaker in respect of its failure to comply with an enforcement order if such an order has been made. In the absence of an enforcement order his only legal remedy is, where appropriate, to pursue judicial review proceedings against the Director or the Secretary of State, who has similar enforcement functions regarding section 94, in respect of any alleged failure by the Director or the Secretary of State to make an enforcement order as required by section 18(1).
  24.   In the present case no enforcement order has been made against Thames Water in respect of the inadequate drainage of Mr Marcic's property. Nor has Mr Marcic advanced a complaint that by not making such an order the Director is in dereliction of his duty under section 18. Indeed, Mr Marcic seems to have made no complaint of any sort to the Director, although his opportunities in this regard were drawn to his solicitors' attention early in 1998. Rather, in advancing claims based on common law nuisance and under the Human Rights Act 1998, Mr Marcic seeks to sidestep the statutory enforcement code. He asserts claims not derived from section 94 of the 1991 Act. Since the claims asserted by him do not derive from a statutory requirement, section 18(8) does not rule them out even though the impugned conduct, namely, failure to drain the district properly, is on its face a contravention of Thames Water's general statutory duty under section 94. The closing words of section 18(8) expressly preserve remedies for any causes of action which are available in respect of an act or omission otherwise than by virtue of its being a contravention of a statutory requirement enforceable under section 18.
  25. Providing more sewers

  26.   The House has had the advantage of receiving written submissions from the Director on the financial implications of carrying out remedial work. The cost per property of removing the risk of sewer flooding varies widely, from as little as £5,000 to more than £200,000, depending on the scale and nature of the necessary work. On average the cost per property is between £50,000 and £70,000. The trial judge found that the cost of alleviating the flooding problems of all customers in Thames Water's area who are in a similar position to Mr Marcic or whose properties are at risk of internal sewer flooding at least once every ten years would be £1bn. That estimate takes no account of future house building. The trial judge also found that under the prevailing system of priorities there was no prospect of any work being carried out in the foreseeable future to prevent flooding of Mr Marcic's property.
  27.   Sewerage undertakers receive no subsidy from public funds for works of this nature. The cost has to be met out of money received from customers by way of sewerage charges. But sewerage undertakers are not at liberty to fix the amount of sewerage charges at whatever amount they wish. The Director sets limits on these charges. Sewerage charges in respect of dwellings are the subject of charges schemes which require the approval of the Director: sections 142 and 143(6). In setting the limits on charges the Director proceeds on the basis that companies are expected to maintain current service levels. They are expected to ensure that, subject to annual variations in the weather, there is no increase in the number of properties at risk of internal sewer flooding and no increase in the number of actual incidents. Additionally the Director makes allowance for the cost of defined improvements. The current price limits, for the five year period commencing 1 April 2000, included provision for reducing within that period the number of properties at risk of internal sewer flooding from overloaded sewers. The planned reduction for the industry as a whole was 3,500 properties and for Thames Water 1,500 properties. No separate allowance was made for reducing the number of properties at risk of external sewer flooding.
  28.   In fixing charging limits the Director balances the need to alleviate sewer flooding, the cost of doing so and the consequent increase in sewerage charges. He also has to take into account further needs such as the need for investment to meet other environmental standards set by the government, often pursuant to EU Directives, and the need to maintain the sewerage infrastructure as a whole. It seems that in the past a cautious approach has been adopted by the Director, partly because of the lack of reliable information about the scale of the sewer flooding problem and the cost of dealing with it.
  29.   Prompted by the widespread floods of October 2000 the Director carried out further studies. For some time Thames Water and other sewerage undertakers, together with customer representatives, had been anxious to speed up the sewer flooding relief programme. Customer representatives were concerned that some customers faced repeated flooding. The sewerage undertakers said that current price limits prevented them from meeting customers' expectations. In March 2002 the Director issued a consultation paper 'Flooding from Sewers - a Way Forward' proposing that sewerage companies should deal more speedily with the more serious sewer flooding problems. In future they should include severe external flooding cases in their investment programmes. By March 2002 the Court of Appeal had given judgment in the present case. The consultation paper commented, at paragraph 2.9:
    • 'Mr Marcic did not bring his case to Ofwat [the Office of Water Services]. Although the flooding was solely external, it was repeated and extreme. To this extent, the Court of Appeal's judgement that Thames Water could have done more to resolve the problem is consistent with the approach to priorities proposed in this paper.'

    The work is done

  30.   In March 2002 Thames Water agreed with the Director that it would carry out further works at once. These works would free an additional 250 properties from the risk of internal sewer flooding and 250 other properties from frequent external flooding. For his part the Director would take into account the cost of these works, totalling £27 million, when fixing sewerage charges for the period 2005-2010. Thames Water then selected the schemes to which to apply this additional funding. The company used criteria, approved by the Director, based on the severity and frequency of the risk of flooding. One of the selected schemes related to Old Church Lane, Stanmore. This scheme would alleviate sewer flooding to ten properties, seven suffering from the risk of internal sewer flooding and three from the risk of external flooding. Mr Marcic's property was one of these. Work on this scheme began in April 2003 and was completed in late June 2003 at a cost of £731,000.
  31.   So, five years after Mr Marcic initiated his court proceedings the necessary work was done. As the Director noted in his consultation paper, Mr Marcic's case 'has highlighted the importance of robust and rational prioritisation schemes': paragraph 5.25. There remains the question whether Mr Marcic can recover damages.
  32. The claim in nuisance

  33.   Problems arising from failure to carry out statutory drainage obligations are not new. Section 15 of the Public Health Act 1875 obliged local authorities to make 'such sewers as may be necessary for effectually draining their district'. On several occasions the courts considered what remedies were available for breach of this obligation.
  34.   One such case is Robinson v Workington Corpn [1897] 1 QB 619, where the facts were strikingly similar to the present case. Mr Robinson's houses were damaged by water overflowing from the council's public sewers. The sewers were adequate for the district until new houses were built. Mr Robinson claimed damages in respect of the council's failure to build a new sewer of sufficient dimensions to carry off the increased volume of sewage. The Court of Appeal dismissed the claim, following earlier cases such as Glossop v Heston and Isleworth Local Board (1878) 12 ChD 102. The Public Health Act 1875 expressly provided a mechanism for enforcing performance of the statutory drainage obligation. Thus the question of what remedy was available for breach of the drainage obligation was a question of interpretation of the statute. Section 299 of the 1875 Act provided that in cases of default the Local Government Board should make an appropriate order which, if not complied with, was enforceable by a writ of mandamus. Was this intended by Parliament to be the only remedy for breach of the drainage obligation? Lord Esher MR said, at p 621:
    • 'It has been laid down for many years that, if a duty is imposed by statute which but for the statute would not exist, and a remedy for default or breach of that duty is provided by the statute that creates the duty, that is the only remedy. The remedy in this case is under section 299, which points directly to section 15, and shews what is to be done for default of the duty imposed by that section. That is not the remedy sought for in this action, which is brought to recover damages.'

  35.   The existence of this general principle of statutory interpretation, and the correctness of this application of the principle to the Public Health Act 1875, were confirmed by your Lordships' House in Pasmore v Oswaldtwistle Urban District Council [1898] AC 387. The courts have consistently followed this view of the law in relation to the Public Health Act 1875 and in relation to the Public Health Act 1936: see, for instance, Hesketh v Birmingham Corpn [1924] 1 KB 260 and Smeaton v Ilford Corpn [1954] 1 Ch 450. In both these cases the court expressly rejected a claim for nuisance: see Scrutton LJ in the Birmingham case, at pp 271-272, and Upjohn J in the Ilford case, at p 463.
  36.   In the present case the Court of Appeal felt able to reach a different conclusion on the scope of the remedies available to Mr Marcic. They held that the Glossop line of cases, if and in so far as they dealt with claims in nuisance, cannot survive recent developments in the common law of nuisance. The old distinction between misfeasance and non-feasance no longer rules the day. Goldman v Hargrave [1967] 1 AC 645 and Leakey v National Trust for Places of Historic Interest or Natural Beauty [1980] QB 485, building on the decision in the leading case of Sedleigh-Denfield v O'Callaghan [1940] AC 880, establish that occupation of land carries with it a duty to one's neighbour. An occupier must do whatever is reasonable in all the circumstances to prevent hazards on his land, however they may arise, from causing damage to a neighbour. In Goldman's case a redgum tree in Western Australia was struck by lightning and set on fire. The fire spread to neighbouring property. In Leakey's case natural causes were responsible for soil collapsing onto neighbouring houses in Bridgwater, Somerset. In both cases the landowners were held liable to their neighbours for the damage caused. A similar approach was adopted regarding loss of support due to a land slip in Holbeck Hall Hotel Ltd v Scarborough Borough Council [2000] QB 836 and incursion of tree roots in Delaware Mansions Ltd v Westminster City Council [2001] UKHL 55; [2002] 1 AC 321. In the present case the Court of Appeal said, at p 994, para 83:
    • 'The sewers form part of a system which Thames are operating as a commercial venture in order to make profits for their shareholders. Thames are in no more favourable position than a landowner on whose property a hazard accumulates by the act of a trespasser or of nature. At all material times Thames have had, or should have had, knowledge of the hazard. If the principles identified in the Goldman [1967] 1 AC 645 and Leakey [1980] QB 485 cases are applied, these facts placed Thames under a duty to Mr Marcic to take such steps as, in all the circumstances, were reasonable to prevent the discharge of surface and foul water onto Mr Marcic's property.'

  37.   I must respectfully part company with the Court of Appeal. The Goldman and Leakey cases exemplify the standard of conduct expected today of an occupier of land towards his neighbour. But Thames Water is no ordinary occupier of land. The public sewers under Old Church Lane are vested in Thames Water pursuant to the provisions of the 1991 Act, section 179, as a sewerage undertaker. Thames Water's obligations regarding these sewers cannot sensibly be considered without regard to the elaborate statutory scheme of which section 179 is only one part. The common law of nuisance should not impose on Thames Water obligations inconsistent with the statutory scheme. To do so would run counter to the intention of Parliament as expressed in the Water Industry Act 1991.
  38.   In my view the cause of action in nuisance asserted by Mr Marcic is inconsistent with the statutory scheme. Mr Marcic's claim is expressed in various ways but in practical terms it always comes down to this: Thames Water ought to build more sewers. This is the only way Thames Water can prevent sewer flooding of Mr Marcic's property. This is the only way because it is not suggested that Thames Water failed to operate its existing sewage system properly by not cleaning or maintaining it. Nor can Thames Water control the volume of water entering the sewers under Old Church Lane. Every new house built has an absolute right to connect. Thames Water is obliged to accept these connections: section 106 of the 1991 Act. A sewerage undertaker is unable to prevent connections being made to the existing system, and the ingress of water through these connections, even if this risks overloading the existing sewers. But, so Mr Marcic's claim runs, although Thames Water was operating its existing system properly, and although Thames Water had no control over the volume of water entering the system, it was within Thames Water's power to build more sewers, as the company now has done, to cope with the increased volume of water entering the system. Mr Marcic, it is said, has a cause of action at law in respect of Thames Water's failure to construct more sewers before it eventually did in June 2003.
  39.   The difficulty I have with this line of argument is that it ignores the statutory limitations on the enforcement of sewerage undertakers' drainage obligations. Since sewerage undertakers have no control over the volume of water entering their sewerage systems it would be surprising if Parliament intended that whenever sewer flooding occurs, every householder whose property has been affected can sue the appointed sewerage undertaker for an order that the company build more sewers or pay damages. On the contrary, it is abundantly clear that one important purpose of the enforcement scheme in the 1991 Act is that individual householders should not be able to launch proceedings in respect of failure to build sufficient sewers. When flooding occurs the first enforcement step under the statute is that the Director, as the regulator of the industry, will consider whether to make an enforcement order. He will look at the position of an individual householder but in the context of the wider considerations spelled out in the statute. Individual householders may bring proceedings in respect of inadequate drainage only when the undertaker has failed to comply with an enforcement order made by the Secretary of State or the Director. 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 was intended to discharge when questions of sewer flooding arise.
  40.   For this reason I consider there is no room in this case for a common law cause of action in nuisance as submitted by Mr Marcic and held by the Court of Appeal. On this point I agree with the decision of Judge Richard Havery.
  41.     The claim under the Human Rights Act 1998

  42.   I turn to Mr Marcic's claim under the Human Rights Act 1998. His claim is that as a public authority within the meaning of section 6 of the Human Rights Act 1998 Thames Water has acted unlawfully. Thames Water has conducted itself in a way which is incompatible with Mr Marcic's Convention rights under article 8 of the Convention and article 1 of the First Protocol to the Convention. His submission was to the following effect. The flooding of Mr Marcic's property falls within the first paragraph of article 8 and also within article 1 of the First Protocol. That was common ground between the parties. Direct and serious interference of this nature with a person's home is prima facie a violation of a person's right to respect for his private and family life (article 8) and of his entitlement to the peaceful enjoyment of his possessions (article 1 of the First Protocol). The burden of justifying this interference rests on Thames Water. At the trial of the preliminary issues Thames Water failed to discharge this burden. The trial judge found that the system of priorities used by Thames Water in deciding whether to carry out flood alleviation works might be entirely fair. The judge also said that on the limited evidence before him it was not possible to decide this issue, or to decide whether for all its apparent faults the system fell within the wide margin of discretion open to Thames Water and the Director: [2002] QB 929, 964, para 102.
  43.   To my mind the fatal weakness in this submission is the same as that afflicting Mr Marcic's claim in nuisance: it does not take sufficient account of the statutory scheme under which Thames Water is operating the offending sewers. The need to adopt some system of priorities for building more sewers is self-evident. So is the need for the system to be fair. A fair system of priorities necessarily involves balancing many intangible factors. Whether the system adopted by a sewerage undertaker is fair is a matter inherently more suited for decision by the industry regulator than by a court. And the statutory scheme so provides. Moreover, the statutory scheme provides a remedy where a system of priorities is not fair. An unfair system of priorities means that a sewerage undertaker is not properly discharging its statutory drainage obligation so far as those who are being treated unfairly are concerned. The statute provides what should happen in these circumstances. The Director is charged with deciding whether to make an enforcement order in respect of a sewerage undertaker's failure to drain property properly. Parliament entrusted this decision to the Director, not the courts.
  44.   What happens in practice accords with this statutory scheme. When people affected by sewer flooding complain to the Director he considers whether he should require the sewerage undertaker to take remedial action. Before doing so he considers, among other matters, the severity and history of the problem in the context of that undertaker's sewer flooding relief programme, as allowed for in its current price limits. In many cases the company agrees to take action, but sometimes he accepts that a solution is not possible in the short term.
  45.   So the claim based on the Human Rights Act 1998 raises a broader issue: is the statutory scheme as a whole, of which this enforcement procedure is part, Convention-compliant? Stated more specifically and at the risk of over-simplification, is the statutory scheme unreasonable in its impact on Mr Marcic and other householders whose properties are periodically subjected to sewer flooding?
  46.   The recent decision of the European Court of Human Rights, sitting as a Grand Chamber, in Hatton v United Kingdom Application No 36022/97, (unreported) 8 July 2003 confirms how courts should approach questions such as these. In Hatton's case the applicants lived near Heathrow airport. They claimed that the government's policy on night flights at Heathrow violated their rights under article 8. The court emphasised 'the fundamentally subsidiary nature' of the Convention. National authorities have 'direct democratic legitimation' and are in principle better placed than an international court to evaluate local needs and conditions. In matters of general policy, on which opinions within a democratic society may reasonably differ widely, 'the role of the domestic policy maker should be given special weight': see paragraph 97. A fair balance must be struck between the interests of the individual and of the community as a whole.
  47.   In the present case the interests Parliament had to balance included, on the one hand, the interests of customers of a company whose properties are prone to sewer flooding and, on the other hand, all the other customers of the company whose properties are drained through the company's sewers. The interests of the first group conflict with the interests of the company's customers as a whole in that only a minority of customers suffer sewer flooding but the company's customers as a whole meet the cost of building more sewers. As already noted, the balance struck by the statutory scheme is to impose a general drainage obligation on a sewerage undertaker but to entrust enforcement of this obligation to an independent regulator who has regard to all the different interests involved. Decisions of the Director are of course subject to an appropriately penetrating degree of judicial review by the courts.
  48.   In principle this scheme seems to me to strike a reasonable balance. Parliament acted well within its bounds as policy maker. In Mr Marcic's case matters plainly went awry. 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. But the malfunctioning of the statutory scheme on this occasion does not cast doubt on its overall fairness as a scheme. A complaint by an individual about his particular case can, and should, be pursued with the Director pursuant to the statutory scheme, with the long stop availability of judicial review. That remedial avenue was not taken in this case.
  49.   I must add that one aspect of the statutory scheme as presently administered does cause concern. This is the uncertain position regarding payment of compensation to those who suffer flooding while waiting for flood alleviation works to be carried out. A modest statutory compensation scheme exists regarding internal flooding: see paragraph 7B of the Water Supply and Sewerage Services (Customer Service Standards) Regulations 1989, SI 1989/1159, as amended by SI 1993/500 and SI 2000/2301. There seems to be no statutory provision regarding external sewer flooding. Some sewerage undertakers make payments, others do not. They all provide a free clean up and disinfecting service, including removal of residual effluent.
  50.   It seems to me that, in principle, if it is not practicable for reasons of expense to carry out remedial works for the time being, those who enjoy the benefit of effective drainage should bear the cost of paying some compensation to those whose properties are situated lower down in the catchment area and who, in consequence, have to endure intolerable sewer flooding, whether internal or external.. As the Court of Appeal noted, the flooding is the consequence of the benefit provided to those making use of the system: [2002] QB 929, 1001, para 113. 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. This is a matter the Director and others should reconsider in the light of the facts in the present case.
  51.   For these reasons I consider the claim under the Human Rights Act 1998 is ill-founded. The scheme set up by the 1991 Act is Convention-compliant. The scheme provides a remedy for persons in Mr Marcic's unhappy position, but Mr Marcic chose not to avail himself of this remedy.
  52.   Accordingly this appeal should be allowed. Save as to costs, the order of the Court of Appeal should be set aside and the order of the trial judge varied so as to answer all the preliminary issues in the negative. As to costs, the House gave leave to Thames Water to appeal on terms that the existing costs orders in the courts below remain undisturbed and that Thames Water pay Mr Marcic's costs in the House in any event.
  53. LORD STEYN

    My Lords,

  54.   I have read the opinions of my noble and learned friends, Lord Nicholls of Birkenhead and Lord Hoffmann. For the reasons they have given I too would allow this appeal.
  55. LORD HOFFMANN

    My Lords,

  56.   Thames Water Utilities Ltd ("Thames Water") is a statutory sewerage undertaker. Mr Marcic has a house in Stanmore, within the area for which Thames Water is responsible. Since 1992 Mr Marcic's garden has suffered periodic flooding. The reason for the flooding is that the sewers in his street are overloaded. At the time they were laid, the surface and foul water sewers were adequate. But many more houses have since been built. Each has the right to connect itself to the existing sewers: section 106 of the Water Industry Act 1991. The result of the overload is that in heavy rain the surface water sewer becomes so full that the water overflows through the gullies into Mr Marcic's low lying garden. Still worse, the surface water enters the foul sewer and causes sewage to flow back onto his property through his foul drain. Since 1992 the garden has been regularly flooded. Only Mr Marcic's private flood defence system, constructed at a cost of some £16,000, has prevented the water from entering the house.
  57.   Thames Water has a statutory duty, under section 94(1) of the 1991 Act:
    • "(a)  to provide, improve and extend such a system of public sewers (whether inside its area or elsewhere) and so to cleanse and maintain those sewers as to ensure that that area is and continues to be effectually drained; and

      (b)  to make provision for the emptying of those sewers and such further provision (whether inside its area or elsewhere) as is necessary from time to time for effectually dealing, by means of sewage disposal works or otherwise, with the contents of those sewers."

  58.   Mr Marcic, however, has not attempted to enforce this duty. The reason is that Chapter II of Part II of the 1991 Act contains an exclusive code for the enforcement of, among others, the duty under section 94(1). Putting it shortly, the only person who can in the first instance enforce the duty is the Director General of Water Services: section 18. He may make an "enforcement order", provisional or final, for the purpose of securing compliance. If an enforcement order is made, a failure to comply with the order is actionable at the suit of members of the public who thereby sustain loss or damage: section 22(1) and (2). Section 18(8) makes it clear that the statutory remedies are the only remedies available for an act or omission which constitutes a contravention of duties enforceable under section 18. So all that Mr Marcic could do by way of enforcement of the section 94(1) duty was to make a complaint to the Director, in which case it would be the duty of the Director to consider the complaint and take such steps, if any, as he thought appropriate: see section 30.
  59.   Mr Marcic chose not the avail himself of this route. Instead, he issued a writ claiming an injunction and damages for nuisance. Section 18(8) does not exclude any remedies "available in respect of [an] act or omission otherwise than by virtue of its constituting … a contravention [of a duty enforceable under section 18]." It follows that if the failure to improve the sewers to meet the increased demand gives rise to a cause of action at common law, it is not excluded by the statute. The question is whether there is such a cause of action.
  60.   The flooding has not been due to any failure on the part of Thames Water to clean and maintain the existing sewers. Nor are they responsible for the increased use. They have, as I have said, a statutory duty to accept whatever water and sewage the owners of property in their area choose to discharge. The omission relied upon by Mr Marcic as giving rise to an actionable nuisance is their failure to construct new sewers with a greater capacity.
  61.   Until the decision of the Court of Appeal in this case, there was a line of authority which laid down that the failure of a sewage authority to construct new sewers did not constitute an actionable nuisance. The only remedy was by way of enforcement of the statutory duty now contained in section 94(1) of the 1991 Act, previously contained in section 14 of the Public Health Act 1936 and before that in section 15 of the Public Health Act 1875. The earlier acts also had a special procedure for enforcement which the courts held to be exhaustive: see Robinson v Workington Corpn [1897] 1 QB 619. The existence of this procedure for the enforcement of statutory duties did not (any more than section 18(8) of the 1991 Act) exclude common law remedies for common law torts, such as a nuisance arising from failure to keep a sewer properly cleaned: Baron v Portslade Urban District Council [1900] 2 QB 588. But the courts consistently held that failure to construct new sewers was not such a nuisance.
  62.   The principal authorities for this last proposition were three cases in the late nineteenth century: Glossop v Heston and Isleworth Local Board (1879) 12 Ch D 102; Attorney General v Dorking Union Guardians (1882) 20 Ch D 595 and Robinson's case [1897] 1 QB 619, to which I have already referred, to which may be added Hesketh v Birmingham Corpn [1924] 1 KB 260 which followed Robinson's case. It is not necessary to examine them in detail because their effect was summed up with customary lucidity by Denning LJ in Pride of Derby and Derbyshire Angling Association Ltd v British Celanese Ltd [1953] Ch 149. This was an action for nuisance against a local authority for discharging insufficiently treated effluent into the river Derwent. Denning LJ said, at p 190, that the plaintiffs:
    • "have a perfectly good cause of action for nuisance, if they can show that the defendants created or continued the cause of the trouble; and it must be remembered that a person may 'continue' a nuisance by adopting it, or in some circumstances by omitting to remedy it: see Sedleigh-Denfield v O'Callaghan [1940] AC 880.

      This liability for nuisance has been applied in the past to sewage and drainage cases in this way: when a local authority take over or construct a sewage and drainage system which is adequate at the time to dispose of the sewage and surface water for their district, but which subsequently becomes inadequate owing to increased building which they cannot control, and for which they have no responsibility, they are not guilty of the ensuing nuisance. They obviously do not create it, nor do they continue it merely by doing nothing to enlarge or improve the system. The only remedy of the injured party is to complain to the Minister [of Health, under the 1936 Act enforcement procedure]."

  63.   This statement of law was followed a year later by Upjohn J in Smeaton v Ilford Corpn [1954] Ch 450, in which overloading caused the corporation's foul sewer to erupt through a manhole and discharge "deleterious and malodorous matter" into Mr Smeaton's garden. Upjohn J said, at pp 464-465:
    • "No doubt the defendant corporation are bound to provide and maintain the sewers (see section 14 of the Public Health Act 1936), but they are not thereby causing or adopting the nuisance. It is not the sewers that constitute the nuisance; it is the fact that they are overloaded. That overloading, however, arises not from any act of the defendant corporation but because, under section 34 of the Public Health Act 1936…they are bound to permit occupiers of premises to make connexions to the sewer and to discharge their sewage therein…Nor, in my judgment, can the defendant corporation be said to continue the nuisance, for they have no power to prevent the ingress of sewage into the sewer."

  64.   Mr Marcic can therefore have a cause of action in nuisance only if these authorities are no longer good law. The Court of Appeal decided that they should no longer be followed. They said that the earlier cases had been overtaken by developments in the concept of "adopting" or "continuing" a nuisance which enabled one to say, in appropriate circumstances, that a sewerage undertaker had a common law duty to lay new sewers in order to prevent overloaded old ones from flooding neighbouring properties.
  65.   The cases relied upon by the Court of Appeal are those in which it has been held that a land owner may have a duty to take positive steps to remove a source of nuisance which he did not himself create. The leading case is of course Sedleigh-Denfield v O'Callaghan [1940] AC 880, in which the potential source of the nuisance was created by a trespasser. Attempts to distinguish cases in which the damage arose from natural causes (lightning or natural weathering of rocks and soil) failed in Goldman v Hargrave [1967] 1 AC 645 and Leakey v National Trust for Places of Historic Interest or Natural Beauty [1980] QB 485. The present law is that, as Denning LJ said in the Pride of Derby case [1953] Ch 149, 190 by reference to the Sedleigh-Denfield case [1940] AC 880, "a person may 'continue' a nuisance by adopting it, or in some circumstances by omitting to remedy it".
  66.   The Court of Appeal in the present case took the view, at [2002] QB 929, 997, para 97, that the four cases upon which Denning LJ based his summary of the law were decided when "the law of nuisance drew a clear distinction between misfeasance and non-feasance". I find this statement surprising when one considers that Denning LJ went to considerable lengths in the Pride of Derby case [1953] Ch 149 to point out that there was no such distinction, citing (among other cases) Baron v Portslade Urban District Council [1900] 2 QB 588, in which a local authority had been held liable for omitting to clean a sewer. The much narrower proposition which, at p 190, Denning LJ thought was supported by the four cases was that a local authority does not continue a nuisance emanating from a sewer "merely by doing nothing to enlarge and improve the system". In other words, the four cases are not about general principles of the law of nuisance. They are cases about sewers.
  67.   The Court of Appeal said that since the four cases were decided, the law of nuisance had been "radically extended" by the Sedleigh-Denfield case [1940] AC 880. This case was of course cited by Denning LJ, but he does not seem to have thought that it undermined his statement of the law about the obligations of local authorities in respect of sewers. The Goldman case [1967] 1 AC 645 and the Leakey case [1980] QB 485 were said to have made a "significant extension" to the law. It is true that they rejected a distinction between acts of third parties and natural events which Lord Wilberforce said, in the Goldman case at p 661, was "well designed to introduce confusion into the law" and lacked "any logical foundation." Both cases also discussed in greater detail the extent of the duty to remedy a potential nuisance. Otherwise, however, they were applications of the Sedleigh-Denfield principle.
  68.   Why should sewers be different? If the Sedleigh-Denfield case [1940] AC 880 lays down a general principle that an owner of land has a duty to take reasonable steps to prevent a nuisance arising from a known source of hazard, even though he did not himself create it, why should that not require him to construct new sewers if the court thinks it would have been reasonable to do so?
  69.   The difference in my opinion is that the Sedleigh-Denfield, Goldman and Leakey cases were dealing with disputes between neighbouring land owners simply in their capacity as individual land owners. In such cases it is fair and efficient to impose reciprocal duties upon each landowner to take whatever steps are reasonable to prevent his land becoming a source of injury to his neighbour. Even then, the question of what measures should reasonably have been taken may not be uncomplicated. As Lord Wilberforce said in Goldman's case [1967] 1 AC 645, 663, the court must (unusually) have regard to the individual circumstances of the defendant. In Leakey's case [1980] QB 485, 526 Megaw LJ recoiled from the prospect of a detailed examination of the defendant's financial resources and said it should be done on a broad basis.
  70.   Nevertheless, whatever the difficulties, the court in such cases is performing its usual function of deciding what is reasonable as between the two parties to the action. But the exercise becomes very different when one is dealing with the capital expenditure of a statutory undertaking providing public utilities on a large scale. The matter is no longer confined to the parties to the action. If one customer is given a certain level of services, everyone in the same circumstances should receive the same level of services. So the effect of a decision about what it would be reasonable to expect a sewerage undertaker to do for the plaintiff is extrapolated across the country. This in turn raises questions of public interest. Capital expenditure on new sewers has to be financed; interest must be paid on borrowings and privatised undertakers must earn a reasonable return. This expenditure can be met only be charges paid by consumers. Is it in the public interest that they should have to pay more? And does expenditure on the particular improvements with which the plaintiff is concerned represent the best order of priorities?
  71.   These are decisions which courts are not equipped to make in ordinary litigation. It is therefore not surprising that for more than a century the question of whether more or better sewers should be constructed has been entrusted by Parliament to administrators rather than judges. Under the 1875 Act, the procedure for enforcement of the statutory duty, pursuant to section 15, to "cause to be made such sewers as may be necessary for effectually draining their district" was not very sophisticated. An aggrieved member of the public could complain to the Local Government Board which, if satisfied there had been a default, was required to make an order limiting the time for performance of the duty. If there was still default, the order could be enforced by mandamus or the Board could do the work itself and charge the local authority with the cost. Under section 322 of the Public Health Act 1936 the complaint was made to the Minister of Health who had a discretion whether to order a local inquiry and a power, if satisfied there had been a default, to make an order requiring the work to be done.
  72.   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.
  73.   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.
  74.   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.
  75.   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:
    • "The system of priorities used by the defendant may be entirely fair, and I have no reason to doubt that it is intended to be. But its fairness in balancing the competing interests of the defendant's various customers must depend in part on the numbers in each class, the total costs involved in relation to each class, and the resources of the defendant. The answers to the questions raised above as matters for consideration might depend on the figures. If the exercise of assessing the fairness of the system were carried out, it might lead to the conclusion that for all its apparent faults, the system fell within the wide margin of discretion open to the defendant and the director. But on the limited evidence available to me, it is not possible to carry out such an exercise." ([2002] QB 929, 964, para 102)

  76.   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."
  77.   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.
  78.   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.
  79.   I would therefore allow the appeal and dismiss the action.
  80. LORD HOPE OF CRAIGHEAD

    My Lords,

  81.   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.
  82.   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.
  83.   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: [2002] 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.
  84.   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: [2002] 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:
    • "The reality is that the provisions of section 18 provide a procedure for striking the necessary balance in the case of those who claim that they are being denied the benefits that Thames is required to provide to them under the statute. They provide no answer to a claim such as Mr Marcic's."

  85.   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: [2002] QB 929, 938, para 15. So the effectiveness of the scheme must be considered by examining its content.
  86.   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.
  87.   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.
  88.   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:
    • "Where any act or omission constitutes a contravention of a condition of an appointment under Chapter I of this Part or of a statutory or other requirement enforceable under this section, the only remedies for that contravention, apart from those available by virtue of this section, shall be those for which express provision is made by or under any enactment and those that are available in respect of that act or omission otherwise than by virtue of its constituting such a contravention."

  89.   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.
  90.   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.
  91.   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 [2003] 1 AC 247, 284, para 72.
  92.   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:
    • "The national authorities have direct democratic legitimation and are, as the court has held on many occasions, in principle better placed than an international court to evaluate local needs and conditions (see, for example, the Handyside v the United Kingdom judgment of 7 December 1976, Series A no 24, para 48). In matters of general policy, on which opinions within a democratic society may reasonably differ widely, the role of the domestic policy maker should be given special weight (see James and Others v the United Kingdom, judgment of 21 February 1986, Series A no 98, p 32, para 46, where the court found it natural that the margin of appreciation 'available to the legislature in implementing social and economic policies should be a wide one')."

  93.   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:
    • "The court's supervisory function being of a subsidiary nature, it is limited to reviewing whether or not the particular solution adopted can be regarded as striking a fair balance."

  94.   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.
  95.   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.
  96. LORD SCOTT OF FOSCOTE

    My Lords,

  97.   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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