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Cite as: [2016] EWHC 1547 (Ch)

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		Neutral Citation Number: [2016] EWHC 1547 (Ch)
		Case No: HC-2015-003149

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION

Royal Courts of Justice
Rolls Building, Fetter Lane,
London EC4A 1NL

29 June 2016

B e f o r e :

THE HON MRS JUSTICE ASPLIN DBE
____________________

Between:

	Canal & River Trust	Claimant
	- and -
	Thames Water Utilities Limited	Defendant

____________________

Stephen Tromans QC and Catherine Dobson (instructed by Eversheds LLP)
for the Claimant
Mark Hapgood QC and Sarah Abram (instructed by BLP) for the Defendant
Hearing dates: 10-12 May 2016
____________________

HTML VERSION OF JUDGMENT
____________________

Mrs Justice Asplin :

This is a Part 8 claim arising from a long standing dispute between the Claimant, the Canal and River Trust, ("CRT") and the Defendant, Thames Water Utilities Ltd, ("Thames Water") in relation to the abstraction of water from the River Lee.

CRT is the immediate successor to the British Waterways Board which in turn is the successor of the British Transport Commission, the Lee Conservancy Board, the Trustees of the River Lee and before them the "Trustees". CRT is a company limited by guarantee which has charitable status. As a result of clause 2 of the British Waterways Board (Transfer of Functions) Order 2012 and section 105 of the Transport Act 1968 CRT (as successor to the British Waterways Board) is under a statutory duty amongst other things to maintain commercial and cruising waterways. It is concerned with the management of approximately 2000 miles of waterways in England and Wales including the River Lee which rises near Luton and flows into the River Thames near Canning Town in East London. CRT's income is derived from a funding agreement with the Government, licensing of boats and moorings, marinas, utilities including the sale of water, investments, joint ventures and contributions and donations. All of its income is used to meet its statutory obligations.

Thames Water is a private utilities company which is ultimately owned by international institutional investors. It is responsible for the public water supply and treatment of waste water in large parts of the south of England and elsewhere. Over the last five years, Thames Water has extracted approximately a sixth of its annual water supply requirement for London from the River Lee. Thames Water is also the successor to a number of other bodies relevant for this purpose, being the Thames Water Authority, the Metropolitan Water Board, and the New River Company and the East London Waterworks Company, together referred to as the "Two Companies" or the "Metropolitan Water Companies". Thames Water holds two licences to extract water from the River Lee, both of which were granted in September 1966, to which I shall refer in more detail below.

The dispute concerns the amount of the payments which Thames Water is obliged to make to CRT in respect of water it abstracts from the River Lee. Although the statutory regime is complex and the issues numerous, in essence, the Court is required to determine whether: (a) Thames Water is required to make payments by way of either (i) contribution to the cost of management of the River Lee as a waterway, or (ii) consideration at the market value for the water extracted from the River Lee, which it is alleged that CRT would otherwise be able to sell to others; and (b) to determine whether there is any basis other than under the River Lee Water Act 1855 (the "1855 Act") upon which Thames Water is obliged to make the payments. As the issues turn for the most part upon statutory construction and are dependent upon the historical statutory context, I will set out the relevant legal background and statutory framework first.

Common Law and Statutory Background

Regime prior to 1963

It is common ground between the parties that although it is possible to own water contained, for example, in a reservoir, there is no right under the common law to the water from time to time flowing in a natural watercourse. Such rights can only be created by statute. The statutory history of the abstraction of water from the River Lee is long and somewhat convoluted. Whilst relevant legislation dates back to at least the seventeenth century, the first statutory provisions with which the present dispute is directly concerned are contained in the Lee Navigation Improvement Act (the "1850 Act"). By section 3 of that Act, the Trustees of the River Lee were incorporated.

Prior to the 1850 Act the Two Companies had certain rights to take water from the River Lee in exchange for payment to the Trustees. The Preamble to the 1850 Act provides amongst other things that the Trustees from time to time had effected improvements to the navigation of the River Lee and that it would be of public advantage if they were authorized further to improve the same, and to sell and dispose of the surplus water. The 1850 Act itself contained detailed provisions and powers concerning the improvement of navigation, construction of locks and the like and other necessary works. Section 68 of the 1850 Act provided that:

"... it shall be lawful for the Trustees from Time to Time to contract and agree, either permanently or for a stated period, with any waterworks company... to supply with water the cities of London and Westminster [or various other areas]. . . for the purchase and taking by such waterworks company... of so much of the water flowing into or down the River Lee as such waterworks company... may agree to purchase and take. . ."

Although there was further legislation relating to the Two Companies in the meantime, the next relevant statute is the 1855 Act. The 1855 Act was described in its title as: "An Act for transferring Part of the Property and Powers of the Trustees of the River Lee . . ." It was recorded in the lengthy Preamble amongst other things that: the Two Companies derived large quantities of water from the River Lee for their respective waterworks and were executing extensive and important works to prevent fouling of the water and expending large sums on the same; the Trustees of the River Lee had the power under the 1850 Act to supply water in bulk to water companies authorized to supply water to London; it was of great importance that the water supplied was of good quality; under the Metropolis Water Act 1852 obligations involving a large outlay for the purpose of increasing the quantity of water available, had been imposed upon the Two Companies; there was a dispute between the New River Company and the Trustees as to whether it had a right to take from the River Lee the water passing through the Gauge as defined in the 1850 Act; and that the New River Company had agreed to compromise its claim by agreeing to take 2,500 cubic feet a minute from the Gauge.

The thirteenth, fourteenth and fifteenth recitals are in the following form:

"Thirteenth Recital

And whereas it would conduce to the Advantage of the Inhabitants of the Metropolis who derive their Water Supply from the Two Companies respectively if the Quantity of the Water of the River Lee to which the Trustees and the Two Companies respectively are to be hereafter entitled were defined, and if the whole of the Water from Time to Time flowing into and down the River, except such Quantities thereof as are by this Act reserved to the Trustees for the Purposes of the Navigation, and such of the Powers of the Trustees with respect to such Water as in this Act expressed, were transferred to and vested in the Two Companies respectively, and if Provision were made for the Improvement of the Navigation of the River, and for the Repair of the River, and for husbanding the Water and preserving it from Pollution, and for enabling such further Improvements of the River and the Navigation to be from Time to Time made as may better enable the Two Companies respectively to comply with the Provisions of the "Metropolis Water Act, 1852";

Fourteenth Recital

And whereas the New River Company now pay to the Trustees for a Supply of Water the yearly sum of One thousand eight hundred and fifty Pounds, and the East London Company now pay to the Trustees for a Supply of Water the yearly Sum of Two hundred and fifty Pounds, and the last-named yearly Sum is liable to be increased, under the Provisions of the Trustees Act of 1850;

Fifteenth Recital

And whereas the Two Companies respectively are willing, in return for such Transfer to them, to pay to the Trustees, as by this Act provided, in lieu of those yearly Sums of One thousand eight hundred and fifty Pounds and Two hundred and fifty Pounds respectively, and any Sums by way of Increase thereof, the aggregate yearly Sum of Three thousand five hundred Pounds and the Principal Sum of Forty-two thousand Pounds, and the Trustees are willing to accept Payment thereof accordingly, and that such Transfer should be made accordingly; and it is expedient that the Provisions in that Behalf of this Act be made;"

By section 4 of the 1855 Act the liability to pay the sums previously paid to the Trustees by each of the Two Companies ceased absolutely. Section 5 provided for the payment of an aggregate yearly sum of £3,500 and a single capital sum of £42,000 to be paid to the Trustees. Its terms are central to the present dispute and is in the following form:

"The Two Companies shall pay to the Trustees, as by this Act provided, the aggregate yearly Sum of Three thousand five hundred Pounds, and the New River Company shall pay to the Trustees, as by this Act provided, the gross Sum of Forty-two thousand Pounds: Provided always, that as between the Trustees on the one hand and the Two Companies on the other hand, that aggregate yearly Sum shall be paid to the Trustees, as to the yearly Sum of One thousand five hundred Pounds, Part thereof, only by the New River Company, and as to the yearly Sum of Two thousand Pounds, Residue thereof, only by the East London Company: Provided also, that as between the Two Companies that aggregate yearly Sum shall be paid by them in such Proportions as from Time to Time they shall have mutually agreed on."

Section 7 provided that the Trustees were to have the same remedies against the Two Companies respectively for payment of the yearly sums of £1,500 and £2,000 as they had immediately before the passing of the 1855 Act in relation to the sums which were previously payable. The transfer referred to in the 13^th and 15^th Recitals is contained in section 9 in the following form:

"Subject to the Provisions of this Act, all the Water from Time to Time flowing into or down the River Lee and the Navigation thereof, which the Trustees have now Power to sell under the Trustees Act of 1850, except such Quantities thereof as are by this Act reserved to the Trustees for the Purposes of the Navigation, is by this Act transferred to and shall be absolutely vested in the Two Companies for ever: Provided always, that nothing herein contained shall be held to give to the Two Companies or either of them any Right to such Water which does not now belong to the Trustees, or which they have not now the Power to sell."

Section 21 provided that after the passing of the 1855 Act, an Act of 1738 concerning water from the River Lee should be read as authorizing the New River Company from time to time to take 2,500 cubic feet per minute and no more through the Gauge specified in that Act or any gauge in substitution for it. Section 22 provided that the East London Company might take 2,500 cubic feet per minute from any of the points from which they were already authorized to take water under "their said Acts" "or could before the passing of this Act have purchased of the Trustees, under the [1850] Act, the right of taking such water." Section 23 provided for further quantities of water to be taken beyond the quantities mentioned in section 21 and 22 provided that it did not exceed an additional 500 cubic feet per minute without having given two days' prior notice to the other company.

Quantities of water were reserved to the Trustees for the purposes of navigation. Section 27 was concerned with the water levels for the purposes of navigation and provided that the Two Companies should not draw water so as to reduce the depth of water at certain points below the customary "head level" without the consent of the Trustees. It went on to provide that if it were found necessary in order to maintain such "head levels" for the Two Companies to allow more water to pass down "the Navigation" than what had been specified:

"… a Deduction shall be made from the said annual Sums to be paid by the said Companies to the said Trustees under this Act of such an Amount as shall be equal to the Value of the extra Water so required, such Amount, in case of no special Agreement, to be estimated at the Rate of Threepence per One thousand Gallons."

Section 30 set out the priorities of the Trustees and the Two Companies respectively to the water flowing down the River Lee from time to time as follows:

"The several Rights of the Trustees and of the Two Companies respectively with respect to the Water from Time to Time flowing into or down the River Lee and the Navigation thereof shall have the following Priorities; to wit,

First, the right of the Trustees to the upper daily Quantity, the middle daily Quantity, and the lower daily Quantity respectively within the Limits of the Upper Reach, the Middle Reach, and the Lower Reach respectively, and such further Quantity, subject as aforesaid, as shall be necessary to maintain the Water of the Navigation on a Level with the Head Levels aforesaid;

Secondly, the Right of the New River Company to take Two thousand five hundred Cubic Feet a Minute;

Thirdly, the Right of the East London Company to take Two thousand five hundred Cubic Feet a Minute;

Fourthly, the Right of the Two Companies to take, pari passu, Five Hundred Cubic Feet each a Minute;

Fifthly, the Right of each of the Two Companies, after such Notice in that Behalf as by this Act provided, to take, pari passu, any additional Quantity of Water;

Sixthly, the Right of the Trustees to surplus Water below Tottenham Mill."

The amount of the annual payments created by section 5 of the 1855 Act (the "Special Payments") has been revised from time to time, initially pursuant to Acts of Parliament and have shown a gradual increase. However, under section 52 of the British Transport Commission Act 1949 (the "1949 Act"), as later amended by section 21 of the British Transport Commission Act 1962, (the "1962 Act") the amount of the Special Payments was fixed for five year periods, and the Minister for Transport and the Minister of Health acting jointly were empowered to alter the amount of the Special Payments by order: "in such manner and subject to such conditions as appear to him to be just and reasonable." That function is now performed by the Secretary of State for the Environment, Food and Rural Affairs (the "Secretary of State"). The side note to section 52(1) of the 1949 Act by which the Special Payments were increased to £25,000 read: "Payments by Metropolitan Water Board in respect of water supply from River Lee" and the same wording was used in parenthesis in section 21 of the 1962 Act to describe section 52.

The British Waterways Board was established by section 1 of the Transport Act 1962 (the "Transport Act"). Further, by section 10(3)(d) of the Transport Act, the British Waterways Board was given power amongst other things: "to abstract and sell untreated water from any inland waterway owned or managed by the Board for any purpose." However, that power was expressly excluded from the functions transferred to CRT by virtue of the British Waterways Board (Transfer of Functions) Order 2012 (SI 2012/1659). It is not in dispute however, that CRT has a general power of sale in its capacity as a company limited by guarantee and is the successor to the Trustees to whom the powers in section 68 of the 1850 Act related. Whether section 68 of the 1850 Act continues to have effect is in issue.

1963 - Licensing Regime

A national framework for the abstraction of water was introduced with the enactment of the Water Resources Act 1963 (the "1963 Act"). That Act established a system of licensing for the abstraction of water, to be administered by newly created "river authorities" (now managed by the Environment Agency). The 1963 Act did not apply to the River Lee but it provided for corresponding provisions to be made in relation to the Thames and Lee Catchment areas. The corresponding provisions were contained in the Lee Conservancy Catchment Board (New Functions of River Authorities) Order 1965 (the "1965 Order"). The duties of a river authority were set out in section 4 of the 1963 Act and included all action "necessary or expedient . . . for the purpose of conserving, re-distributing or otherwise augmenting water resources in their area . . ." Section 23 of the 1963 Act provided that:

"... no person shall abstract water from any source of supply in a river authority area, or cause or permit any other person so to abstract any water, except in pursuance of a licence ... granted by the river authority and in accordance with the provisions of that licence."

Further, it was provided under section 26(1) of the 1963 Act, that a person who has an abstraction licence:

"shall be taken to have a right to abstract water to the extent authorised by the licence and in accordance with the provisions contained in it"

and that such a right amounted to a "protected right under this Act." Licences granted under the 1963 Act make provision as to the quantity of water that may be abstracted, the source of the supply, the period or periods to which it applies, the way in which the quantity is to be measured or assessed and whether it is to remain in force until revoked or the date of expiry: section 30. In addition, sub-sections 33(1)(a) and (7) provided that a person entitled to abstract water from a source of supply by virtue of a statutory provision in force (on the second appointed day) on application within a specified period was entitled to a licence as of right. (Where a person had abstracted water, other than by virtue of a statutory provision, within the period of five years ending with the second appointed day, they too were entitled to a licence of right if the application was made within the prescribed period: section 30(1)(b).) The quantity of water to which such a licence applied was dealt with in the following way:

"s34 (2) Subject to the following provisions of this section, the provisions of the licence, including those relating to the quantity of water authorised to be abstracted, shall be such as appear to the river authority to correspond as nearly as may be to those of the relevant statutory provision, and may, if the river authority think fit, be expressed by reference to that statutory provision.

(3) If the relevant statutory provision does not specify or otherwise limit the quantity of water authorised to be abstracted, any quantity specified in the licence as a quantity of water authorised to be abstracted in pursuance of the licence during a period or periods so specified shall, subject to the following provisions of this section, be determined by reference to the requirements of the applicant, as indicated by (and not, except by virtue of the next following subsection, to be taken to exceed) the quantities of water proved to the reasonable satisfaction of the river authority to have been abstracted from the source of supply in question by the applicant or his predecessors from time to time during the relevant period by virtue of the relevant statutory provisions."

Section 131 is concerned with licences other than licences of right. It was modified by article 3(1)(t) of the 1965 Order for the purposes of the River Lee to include reference to the MWB in section 131(2)(a). It provides where relevant:

"(2) In respect of abstraction from an inland water to which this section applies-

(a) no person other than the [British Waterways] Board shall be entitled to apply for a licence under this Act, other than a licence of right;"

"Abstraction" is defined in section 135 of the 1963 Act as:

""… in relation to water contained in any source of supply in a river authority area, means the doing of anything whereby any of that water is removed from that source of supply and either-

(a) ceases (either permanently or temporarily) to be comprised in the water resources of that area, or

(b) is transferred to another source of supply in that area, and "abstract" shall be construed accordingly."

The 1963 Act also introduced a system of fees and charges for licences: sections 57 and 58. The charges under section 58 were to be levied under charging schemes prepared by the relevant river authority and submitted to the Minister. Charges were to be calculated by reference to the quantity of water authorized to be abstracted under the licence: section 58(2). Sub-section 58(3) provided that subject to the preceding sub-section, charges could be levied at different rates in respect of water authorized to be abstracted in different relevant circumstances. The relevant circumstances were set out in sub-section 58(4) and included at (c) "the purposes for which, in accordance with the provisions of the licence, the water is authorized to be used." Subject to those provisions, sub-sections 58(5) and (6) applied which are as follows:

"(5) Subject to the preceding provisions of this section –

(a) the rates of charges specified in a charging scheme shall be maximum rates, and shall be calculated with a view to their remaining in force without variation (save in exceptional circumstances) over a period of five years from the time when the scheme was prepared, and

(b) the charges levied under the scheme in any financial year of the river authority shall be levied at such rates (not exceeding the maximum rates specified in the scheme) as appear to the river authority to be requisite for balancing their water resources account.

(6) In the last preceding subsection the reference to balancing the water resources account of a river authority is a reference to securing that, taking one year with another, the receipts of the river authority which, in accordance with the provisions of Part VIII of this Act, are credited to their water resources account are, as nearly as may be, equal to (but not greater than) the expenses and other amounts which, in accordance with those provisions, are debited to that account."

By article 3 of the 1965 Order, the Lee Conservancy Board was required to exercise the functions of a river authority under the provisions of the 1963 Act specified in schedule 1 to the 1965 Order subject to a number of amendments, adaptations and modifications set out in article 3. As I have already mentioned, section 131(2)(a) of the 1963 Act was modified in order to enable the MWB to apply for licences other than licences of right in relation to abstraction from the River Lee. By article 9(3) the provisions of the 1855 Act referred to in Part III of Schedule 2 of the 1965 Order were repealed as from the end of the "initial period" which was defined as three months from the second appointed day, which itself was defined as the day upon which the river authority or in the case of the River Lee, the Conservancy Board began to perform the functions assigned to it by the 1963 Act and the 1965 Order: article 3(1)(t). The provisions which were repealed which are relevant for this purpose are: sections 9 and 23 and part of section 30 of the 1855 Act. However, sections 5, 21 and 22 of the 1855 Act were unaffected.

The 1963 Act has been replaced by the Water Resources Act 1991 (the "1991 Act") which continues the regime for the licensing of water abstraction. Section 48 of the 1991 Act, the provisions of which were previously contained in section 31 of the 1963 Act, provides a person who holds a licence to abstract water with a defence to a claim based on the abstraction of that water. Section 48 which was amended as a result of the introduction of section 48A by the Water Act 2003, now states, so far as is material, as follows:

"48. - General effect of licence.

(1) For the purposes of this Chapter a person who is for the time being the holder of a licence under this Chapter to abstract water shall be taken to have a right to abstract water to the extent authorised by the licence and in accordance with the provisions contained in it.

(2) In any action brought against a person in respect of the abstraction of water from a source of supply (other than an abstraction in respect of which a claim could be brought under section 48A below, in which case that section shall apply), it shall be a defence.... for him to prove –

(a) that the water was abstracted in pursuance of a licence under this Chapter; and

(b) that the provisions of the licence were complied with.

...

(4) Nothing in subsection (2) . . . above shall exonerate a person from any action for negligence or breach of contract."

Section 48A, where relevant, provides as follows:

"48A Civil remedies for loss or damage due to water abstraction

(1) ... a person who abstracts water from any inland water. . . (an "abstractor") shall not by that abstraction cause loss or damage to another person.

(2) A person who suffers such loss or damage (a "relevant person") may bring a claim against the abstractor.

(3) Such a claim shall be treated as one in tort for breach of statutory duty.

(4) In proceedings in respect of a claim under this section, the court may not grant an injunction against the abstractor if that would risk interrupting the supply of water to the public, or would put public health or safety at risk.

(5) Except as provided in this section, no claim may be made in civil proceedings by a person (whether or not a relevant person) against an abstractor in respect of loss or damage caused by his abstraction of water.

(6) Nothing in this section prevents or affects a claim for negligence or breach of contract."

Factual background to the proceedings

It is not in dispute that the obligation to make payments under section 5 of the 1855 Act, survived the 1965 Order, the mechanism has been amended by subsequent statute and that regular payments have been made by Thames Water and its predecessors over the years. The most recent order made under section 52 of the 1949 Act as amended, was the River Lee (Revision of Payments) Order 1996 which set the Special Payment at £368,000 per annum for the period 12 December 1995 to 11 December 2000. On 12 December 2000, CRT sought an increase in the Special Payments from Thames Water to £422,000 per annum in line with inflation. On 26 January 2006 Thames Water applied to the Secretary of State to reduce the Special Payments for the period from 2000 to 2005 and 2005 to 2010 to a peppercorn, or alternatively £42,500 per annum. In July 2006, CRT in its Statement of Case claimed that Thames Water should pay the market value of the water extracted pursuant to the 1855 Act. Submissions regarding the amount of the Special Payments have been made by both parties to the Secretary of State. An official from the Department of the Environment, Food and Rural Affairs ("DEFRA") wrote to the parties in October 2010 indicating that the Secretary of State was giving further consideration to the process through which the dispute might be resolved. No resolution has been arrived at whether by agreement or by a decision of the Secretary of State.

These proceedings were commenced in October 2014 and in part, are designed to clarify the legal framework against which any decision by the Secretary of State should be made. In fact, Mr Hapgood QC on behalf of Thames Water described the proceedings as a reverse judicial review. DEFRA has been kept informed and the Secretary of State has indicated that no decision on the Special Payments will be made until the present proceedings have concluded.

It is also relevant to note that Thames Water holds two licences in relation to the abstraction of water from the River Lee both of which were granted in September 1966 pursuant to the 1965 Order. They are described as licences of right and are for an indefinite duration. The water abstracted pursuant to the licences is to be used for "water undertaking". One licence, known as the "New Gauge Licence", authorises Thames Water to abstract up to 8,180,000,000 gallons a year, equal to 37,186 megalitres. The other, the "Lower Lee Licence", authorises it to abstract up to 44,200,000,000 gallons a year, equal to 200,933 megalitres. Thames Water currently pays total charges for both licences in the region of £2 million per year. It is not in dispute that the quantities specified in the licences are in excess of those set out in sections 21 and 22 of the 1855 Act and that consistently both before and after the grant of the licences in 1966, more than the quantities mentioned in those sections had and has been taken.

Canons of statutory construction

As all of the issues in this matter turn upon the construction of the relevant statutes, before turning to the issues themselves, I should set out the basis upon which such an exercise should be conducted. Those principles are not in dispute. They were considered recently in the Supreme Court in Mitsui Sumitomo Insurance Co (Europe) Ltd v Mayor's Office for Policing and Crime [2016] 2 WLR 1148 at [13], where Lord Hodge JSC, giving the judgment of the Court, stated:

"The appeal, as I have said, raises a question of statutory construction. While the arguments have been wide-ranging, the resolution of the dispute is to be found in the words of the 1886 Act, interpreted against the backdrop of the prior legislative history. In my view this is a case in which history rather than legal theory casts light, revealing the correct answer."

The process of statutory construction and the nature of the relevant context was also helpfully considered by Arden LJ in 9 Cornwall Crescent London Ltd v Mayor & Burgesses of the Royal Borough of Kensington & Chelsea [2006] 1 WLR 1186 at [50] and [52], where she stated:

"50 Where the true meaning of a statute is in doubt, and in dispute between the parties, it is the court's function to decide that meaning. In modern theory, the court primarily finds the interpretation of a phrase by examining the words used by Parliament in their particular context. Courts have moved away from a purely literal approach to statutory interpretation. As Lord Steyn held in R (Quintavalle) v Secretary of State for Health [2003] 2 AC 687 , 700:

"The pendulum has swung towards purposive methods of construction. This change was not initiated by the teleological approach of European Community jurisprudence, and the influence of European legal culture generally, but it has been accelerated by European ideas: see, however, a classic early statement of the purposive approach by Lord Blackburn in River Wear Comrs v Adamson (1877) 2 App Cas 743 , 763. In any event, nowadays the shift towards purposive interpretation is not in doubt. The qualification is that the degree of liberality permitted is influenced by the context, eg social welfare legislation and tax statutes may have to be approached somewhat differently."

…

52 By "context", I mean the legislative context, and the policy context, as shown by any admissible material, such as Law Commission reports, explanatory notes accompanying legislation, travaux préparatoires and (in certain cases) Hansard. Courts will not speculate as to Parliament's purpose, though they may infer it from (for example) the indications provided in the legislation itself. In this particular case, we have not been taken to any material outside the 1993 Act."

I should add that it is not suggested that different principles apply in relation to the proper construction of secondary legislation such as the 1965 Order and I am satisfied that the same principles apply. It is obvious that the primary guide to the meaning of the 1965 Order is the enabling Act which in this case, is the 1963 Act and the extent of the power to make the 1965 Order itself. Of course, the legislative background to the management of the River Lee is also relevant.

Issues to be determined

The parties have agreed a list of nine issues. However, given the way in which matters were dealt with at the hearing, rather than deal with each in turn, it is more convenient to approach matters under three main headings. In broad terms, they are: what was the effect of the 1855 Act; what was the effect of the 1963 Act and 1965 Order; and are there any additional claims in relation to the supply of flowing water over and above the Special Payments under section 5 of the 1855 Act and the licensing regime and if there are, what is the basis for them?

(i) What was the effect of the 1855 Act?

In order to be able to construe the 1855 Act and therefore, to determine its effect, it is necessary to consider the particular sections in question in the light of the Act as a whole, in its proper context. It is not in dispute that that context includes section 53 of the East London Waterworks Act 1829 which provided for payments to be made by the East London Waterworks Company to the Trustees to compensate them in relation to the considerable quantity of water to be taken from the River Lee and that the payments were to be "applicable and be applied to the general Purposes of the said Navigation." There is no dispute that at that stage, the relationship was one of vendor and purchaser.

It is also agreed that the 1850 Act is part of the relevant context when construing the 1855 Act. There is no dispute that the arrangements for the supply of water under the 1850 Act were contractual, that there were provisions to be included in contracts in relation to navigation and improvements and that the Trustees were required to maintain the river and keep it navigable. Mr Tromans QC on behalf of CRT also places particular emphasis upon section 68. He relies upon the provision for the proposition that to the extent that Thames Water is not liable to pay for water by way of the Special Payments under section 5 of the 1855 Act, it nevertheless remains liable to pay CRT for the water which it abstracts. He characterises it as a power of sale and submits that too much emphasis should not be placed upon the reference to "taking" in addition to purchase in that section.

He also referred me to the reference in the Preamble to the 1855 Act to section 68 of the 1850 Act, which itself makes reference to the purchase and taking of water, to supply of water in bulk and the fact that the Two Companies were taking water from the River Lee and the dispute as to the quantity which the New River Company allegedly had a right to take. He submits that section 5 should be construed in this context and in the light of section 4 which extinguishes the liability to make payments for water under previous arrangements and section 7 which provides for the same remedies to be available in relation to the recovery of sums under section 5 as were available in relation to the sums previously due. He also drew my attention to the proviso to section 27 which allows for a deduction from the sums due under section 5 if further quantities of water are necessary to maintain levels for the purposes of navigation, based on the "value" of the water. Mr Tromans submits that this is a clear indication that the payments under section 5 were in relation to the supply of water and not a levy for continued maintenance of the river and consequential works. He says that although the Trustees were placed under a duty to carry out certain repairs, for example, as a result of section 40 of the 1855 Act, there is no reason to construe section 5 to mean that those payments are for repair as opposed to the supply of water.

Mr Tromans also emphasised that the context of the 1855 Act was a dispute and litigation between the Trustees and the New River Company as to the quantity and terms on which it could abstract water, to which reference was made in the Preamble. He says therefore, that the 1855 Act embodied a commercial agreement between the Trustees and the Two Companies. In particular, he referred to the minutes of a Special Meeting of the Trustees of 28 April 1855 stated to be "for the sale of the surplus waters of the Lee" in which it was recorded as follows:

"Resolved that the Parliamentary Committee be authorised to conclude an Agreement with the New River and East London Water Companies for the sale to them of the Water of the River and cancelling the existing Annuities, for the Annuity of £5,500 payable Quarterly from Lady-day 1855 of which £2000 a year is to be reduced by the immediate payment of £42,000 with interest at five per cent from Lady-day it being understood that £30,000 part thereof shall be expended on works for the improvement of the Navigation of which a Schedule has been agreed … by the Engineers of the Companies and the Surveyor of the Trustees …"

The minutes of a further meeting of the Trustees on 18 August 1855 record at Article 1 that it was agreed that the parties would observe and perform the provisions of the Bill which became the 1855 Act as if they were articles of the Agreement. Mr Tromans says that in making the contract there was no reason why the Trustees should have agreed a sum which was less than the market value of the water which was theirs to sell. In this regard, he reminded me that the previous payments "for a Supply of Water" are referred to in the Preamble to the 1855 Act, and to the references in the 14^th and 15^th recitals to payments in return for the "Transfer" being "in lieu" of the previous yearly sums.

Mr Hapgood QC on behalf of Thames Water on the other hand characterises the context of the 1855 Act as a failed contractual regime for the supply of water. He emphasises that under section 9 of the 1855 Act, the whole of the water flowing in the River Lee from time to time and the Trustees' powers in relation to it were transferred to the Two Companies, except for whatever was necessary for navigation, forever and that the payments to be made under section 5 were fixed regardless of the volume of water taken. He also submits that the rebate envisaged under section 27 was at a fixed rate which had nothing to do with the market value of the water. He submits therefore, that as a result of section 9: the Trustees no longer had anything to sell or any powers with regard to the water; the old contracts and liabilities ceased; and the new payments both annual and by way of substantial capital payment were the beginning of a new regime, under which responsibility for maintenance of the River fell upon the Trustees and the water was vested for all purposes in the Two Companies, which in turn were under statutory duties as to the supply of water to the Capital. He says that this was also clear from the terms of the 1829 Act, from the 14^th and 15^th recitals and sections 4, 5 and 9 of the 1855 Act and that references in the Preamble to the "supply of water" do not assist in relation to the purpose of the payments under section 5. In addition, he says that the Minutes of the Trustees' meeting in 1855 is of no relevance, the issue being the intention of Parliament and not the Trustees.

As a result, Mr Hapgood says that after the 1855 Act the Trustees no longer had anything to sell nor would they henceforth and therefore, section 68 of the 1850 Act was otiose and had been superseded by the 1855 Act. He also drew attention both to section 40 of the 1855 Act which imposes a duty upon the Trustees to keep the river in good repair and to sections 39 and 45 which provide that various disputes should be referred to arbitration. Mr Hapgood says that if it had been intended that the payments under section 5 related to the market value of the water, rather than the cost of maintenance, they too would have been subject to express arbitration provision and in any event, no one has ever suggested that the extent of those payments be the subject of arbitration. In fact, as Mr Tromans observed, section 65 of the 1855 Act appears to contain a widely worded arbitration provision which might have been applied.

Conclusion:

It is clear from the authorities as to statutory construction to which I have referred that it is necessary to construe the specific provisions of the 1855 Act with which this dispute is concerned in the light of the Act as a whole, in its legislative and policy context. It is not clear to me, however, that the minutes of the meetings of the Trustees to which I was referred are necessarily admissible context as they reflect only the intentions of the Trustees. In any event, it does not seem to me that they are of particular assistance and I place no weight upon them.

In my judgment, it is clear from the admissible context, which includes the 1829 Act, the 1850 Act and the Preamble to the 1855 Act that the supply of water from the River Lee had been the subject of contractual agreements prior to the 1855 Act and that there had been a dispute about the rights of the New River Company in relation to water extracted at the New Gauge. It is also clear that one of the purposes of the provisions of the Act was to allow the Two Companies upon which statutory duties had been placed to provide clean water to the Capital, to secure control of the full supply of water from the River Lee (but for that required for navigation) and the means of assuring its quality. Further, if one reads the 1855 Act as a whole in the light of its predecessors, it is also clear that the Trustees were responsible for the proper maintenance and repair of the watercourse. In my judgment, therefore, there were a number of purposes or objectives of the 1855 Act and it is wrong to seek to place too much emphasis upon the resolution of the dispute which had arisen under the previous contractual arrangements and to elevate the compromise reached between the Trustees and only one of the Two Companies, being the New River Company, into its only or primary purpose.

It seems to me that properly construed and when read in its context, the 1855 Act in essence encapsulated a bargain whereby the Trustees gave up once and for all and in perpetuity all rights in relation to the waters flowing in the River Lee from time to time, which vested in the Two Companies (and not merely in the New River Company in relation to which the compromise had been reached) subject to a proviso as to the maintenance of water levels necessary for navigation and remained responsible for maintenance and repair of the waterway, and in return, received what was a very considerable one off payment of £42,000 and an annual sum.

Neither the capital payment nor the annual Special Payments in section 5 are expressed to be tied to any particular quantity of water taken or to its value. I do not find that surprising given that section 9 is concerned with the transfer once and for all of the totality of the water available from time to time (but for the amount necessary for navigation) and the rights over it and that section 40 imposes upon the Trustees the obligation to keep the waterway in good repair in order that the Two Companies might have full and proper use and enjoyment of the water and the rights to it vested in them. In my judgment, in the light of the combination of sections 5 and 9 construed in the light of the 1855 Act as a whole, the Preamble (and in particular, the 13^th – 15^th Recitals) and the legislative context, the Special Payments under section 5 should not be construed as payment for a precise quantity of water transferred or for that matter, solely for water. They were consideration for the whole bargain being both the transfer of the right to all of the flowing water in the River Lee from time to time (but for that required for navigation) which vested in the Two Companies once and for all and for the maintenance and repair obligations placed upon the Trustees.

In particular, such a construction is consistent with the title to the 1855 Act itself and the 13^th and 15^th Recitals, the former of which refers to maintenance and repair and the latter to the Special Payments being made in return for the transfer of the rights to all of the flowing water, albeit in lieu of previous payments. I agree with Mr Hapgood therefore, that the 1855 Act heralded a new regime under which (but for the potential for deductions under section 27 to which I shall refer) the Special Payments were fixed without regard to the precise extent of the water transferred or taken. I disagree with him, however, that the payments were solely in respect of maintenance and repair of the waterway.

I come to this conclusion as to the nature of the Special Payments under section 5 despite sections 21 - 23 and 30 and the reference in section 27 to a rebate in particular circumstances in relation to which sections 5 and 9 are to be construed. In my judgment, sections 21 and 22 should be construed in the light of the 13^th Recital as matters of practicality and are not tied directly to the section 5 Special Payments. Given that the flow of water from time to time was and is an unknown, sections 21 and 22 should be interpreted as a means of creating clarity and a minimum below which the water to which the Two Companies was entitled was not expected to drop. There is no suggestion, for example, that the notice provisions in section 23, which applied if further quantities of water were taken, led to an increase in the Special Payments in any way or were otherwise linked to them. It does not seem to me that the provision of a minimum together with a rate at which extraction was intended to take place affect the meaning of sections 5 and 9 in such a way that they should be read as being limited to those quantities, or that section 5 should be read as relating solely to the supply of water or a particular quantity of such a supply. Such a construction is also consistent with section 30 which in my judgment should also be construed as a matter of practicality. It set out the priorities to the various quantities of water in order to maintain both abstraction for the proper provision of the water supply to the Capital and the navigability of the River Lee on day to day basis.

Further, in my judgment, the fact that section 27 which is concerned with the maintenance of water levels for the purposes of navigation, allowed for a deduction in the annual sums to be paid if more water were needed for navigation than had been specified, does not affect my conclusion despite the fact that the deduction is referred to as "such an Amount as shall be equal to the Value of the extra Water so required. . .". The section goes on to provide that in the absence of agreement, the amount was to be calculated by reference to threepence per thousand gallons. As Mr Hapgood pointed out, despite the reference to value, the calculation was by reference to a fixed price, albeit that there were general arbitration provisions in the 1855 Act. In fact, it seems to me that the deduction is consistent with sections 21 and 22 providing a minimum which the Two Companies were expected to extract.

As I have already mentioned, I do not consider that the existence of such a minimum leads to the conclusion that the Special Payments under section 5 relate solely either to the supply of water or to the specified quantities in section 21 and 22 or to the conclusion that section 9 should not be construed to mean what it says on its face. I am unable therefore, to accept Mr Tromans' submissions that the Special Payments relate purely to the supply of water in the quantities set out in sections 21 and 22 or Mr Hapgood's submission that they do not relate to the supply of water at all.

Although they are of little or no assistance in the process of construction, given that they post-date the 1855 Act, I also take some comfort from the fact that such a construction is not inconsistent with the side notes to section 52 of the 1949 Act and the reference in parenthesis in section 21 of the 1962 Act both of which refer to the "water supply from the River Lee."

(ii) What was the effect of the 1963 Act and 1965 Order where relevant?

First, in this regard, Mr Tromans referred me to a number of documents which he relies upon as admissible context for the 1965 Order. The first two were letters passing between the General Manager of the British Waterways Board and the officials from the Ministry of Housing and Local Government dated 17 and 22 February 1965 respectively, concerning the intention to permit the MWB to apply for licences to abstract water over and above their licences of right. The British Waterways Board stated that it did not oppose such a course, the officials at the Ministry having stated that such a course would not affect the position of the BWB materially. Mr Tromans says that if Mr Hapgood is right and the existence of a licence is a complete defence/a substitute for any obligation to pay for the water, then the Ministry's assurance that the BWB would not be affected materially was incorrect and it applied both to future licences in relation to further surplus water and the quantities covered by the licences of right as well.

I have to say that I do not consider correspondence, even between officials at the relevant Ministry and the statutory authority affected, comes within the strict ambit of admissible material as to statutory context, even in a case of secondary legislation such as the 1965 Order. The view of the correspondents is not necessarily synonymous with that of Parliament and should not be taken to be so. In any event, it is not clear to me that the content of the correspondence is sufficiently clear to have been of particular assistance.

Secondly, Mr Tromans referred me to a briefing note for the relevant Minister which is headed "Deputation from Metropolitan Water Board" and was dated 23 February 1965, which was some weeks before the 1965 Order was laid before Parliament. At paragraph 8 it states that the British Waterways Board has come to rely "more and more on its revenue from the sale of water". A further explanation of the licensing system is provided at paragraph 9B where it is stated that: "For any new abstraction of water only the Waterways Board may apply to the river authority for a licence. Having got a licence, the Waterways Board contract with the abstractor and pay them for what he takes." At paragraph 15 it was explained that the approach under the 1963 Act was that those entitled to take water would continue to be so entitled but that water which "no one is now taking ought to be at the disposal of the river authority to allocate as the public interest requires." It went on to point out the MWB was already taking all that it was entitled to from the River Lee, in the sense of all the water above that which was required for navigation and that therefore, the question would only arise if more water became available. Lastly, it was noted that there was no risk that the British Waterways Board would refuse to allow more water to be taken because it relied increasingly on revenue from the sale of water and that the MWB would have to pay as it had in the past.

Mr Tromans says that the Briefing Note is premised on the basis that the MWB was paying for the water it abstracted under section 5 of the 1855 Act and would continue to do so in addition to paying for its licences of right and that it would have to pay for any additional water as well as having to obtain and pay for a further licence in relation to that water.

Once again, although the connection with the intention of Parliament might at first sight seem closer than in the case of departmental correspondence, I have to say that I do not consider that the briefing note in relation to what was described in the title as a "Deputation" comes within the ambit of admissible context for the purposes of statutory construction. It merely reflects the thinking of civil servants within the relevant Government department set out for the purposes of a meeting with an interested party prior to the laying of the 1965 Order before Parliament.

In any event, Mr Tromans submitted that the new licensing regime and the charge for licences did not replace or duplicate the Special Payments under the 1963 Act and the 1965 Order. Although amongst others sections 9, 23, 24 and the fourth to sixth priorities in section 30 of the 1855 Act were repealed by the 1965 Order, sections 5, 21, 22 and the first three priorities in section 30 were preserved. It is accepted that as a result of its statutory right under section 9, the MWB, Thames Water's predecessor became entitled to apply for licences as of right and it did so. There is a marked difference of opinion however, as to the other effects of the repeal of section 9, the licensing regime and the relationship of the continued obligation to make the Special Payments under section 5 and the licensing charges.

First, Mr Tromans submits that the licensing regime and the way in which the fees and charges in respect of licences operate is entirely different from payment for the water itself and that the payment of a licence fee and/or charge does not preclude payment for the water itself which was dealt with in relation to the River Lee by the retention of section 5 of the 1855 Act. In this regard, he relies upon sections 58 and 59 of the 1963 Act which refer to a nominal fee and charging schemes for licences relating to the expenses of CRT and its predecessor and the need to balance the books.

Secondly, Mr Tromans put forward three alternatives as to the quantity of water to which the Special Payments under section 5 relate after the 1965 Order came into effect. He says they are: (i) only the water authorised to be taken through the New Gauge under section 21 of the 1855 Act (which was not repealed); (ii) the quantity taken under the 1855 Act as amended under sections 21, 22 and 30 being 74,468 megalitres per annum; and (iii) the quantity taken under the licences if greater than that permitted under sections 21, 22 and 30. In his written submissions at least, he prefers the third alternative.

Thirdly, he submits that the repeal of section 9 allowed the powers in section 68 of the 1850 Act which had not been expressly repealed whether by the 1855 Act (section 79 of which provided that unless "specially altered" the Act did not "take away, alter, abridge, lessen or prejudicially affect any Property, Right … Power … vested in or now enjoyed or exercised by the Trustees . . .") or subsequent legislation, to revive with the effect that after 1965 the British Waterways Board once again had the right under statute to supply water flowing down the River Lee to waterworks companies and to sell the same.

On the other hand, Mr Hapgood submits that after the 1965 Order which repealed section 9, no one and certainly not the British Waterways Board had any proprietary right to the water flowing in the River Lee and the position reverted to how it had been under the common law, namely that there is no property in water flowing in a natural watercourse. In any event, he says that the repeal of section 9 did not have the effect of re-vesting a statutory right to running water and a right to sell it in the British Waterways Board. Alternatively, he submits that since section 9 had the effect of transferring the right to the flowing water in the River Lee from time to time to the Two Companies once and for all, article 9(3) of the 1965 Order by which section 9 was repealed could not have had any effect in relation to an existing proprietary right. He submits that the 1965 Order would have been ultra vires if it purported to reverse a once and for all transfer of proprietary rights to the Two Companies and would have amounted to a deprivation of MWB and therefore, Thames Water's property on a huge scale without compensation.

In this regard he referred me to an extract from Attorney General v Horner (1884) 14 QBD 245 at 257 per Brett MR, a case concerning the right to hold a market, at which it was held that it is a principle of statutory construction that an Act of Parliament should not be construed as interfering with a person's rights without compensation unless one was obliged to do so.

Further, Mr Hapgood says that the suggestion that section 68 of the 1850 Act which he says had been superseded by the provisions of the 1855 Act revives is untenable and there is no authority for such a provision. He says that the repeal of section 9 may have been with an eye to the possibility of further water becoming available to which the MWB would not have a right but could not affect the bulk of water the rights to which were already vested. However, he submits that section 9 of the 1855 Act deprived section 68 of all effect and there was nothing in the 1965 Order to render it effective again.

I should add that Mr Hapgood referred me to a number of documents as context for the 1965 Order, despite describing them as peripheral. He referred to an "Outline of matters to be included in an order under section 125 and 133 of the Act of 1963" which was a draft proposal circulated in April 1964 (the "Outline"), a letter from the British Waterways Board to the Ministry of Transport of 17 August 1964, (the "August 1964 Letter"), Minutes of a meeting between the Ministry of Housing and Local Government and the MWB of 11 September 1964 (the "September 1964 Minutes") and a letter of 30 December 1964 from the MWB to the Ministry (the "December 1964 Letter".)

In particular, he referred to references at paragraphs 4 and 5 of the Outline referring amongst other things to the comments of the Chairman of the Private Bills Committee in relation to the 1925 Thames Conservancy Bill that the payments were considered to be the contribution of the London County Council for the great benefits they received from the working of the Thames Conservancy and that the question arose as to whether it should be met by the MWB, or shared between the MWB, the London County Council and the City of London. In the August 1964 Letter the General Manager refers to payments under section 5 and the intention to seek an increase in the light of the rise in maintenance and other costs. In the September 1964 Minutes it was stated that the draft Order would protect existing abstractions, and that the MWB was already abstracting all the water which could be obtained and that the MWB asserted that the payments made should reflect the benefit obtained from the British Waterways Board's works in preserving the water vested in the MWB and that a contribution to the actual cost of works and maintenance had always been sought. In the December 1964 Letter he referred me to the exposition of the MWB's position that the payments under section 5 related to the obligation upon the British Waterways Board to maintain the waterway in good repair for the purposes of the full and proper use and enjoyment of the water vested in the Two Companies.

Conclusion:

The intended effect of the 1963 Act as varied by the 1965 Order for the purposes of the Lee Catchment is not in dispute. It was described in the Explanatory Note to the 1965 Order. It is stated that it was intended to confer upon the Lee Conservancy Catchment Board "the new, water resources, functions of a river authority" by applying the 1963 Act as modified to the Lee Catchment area and to "alter the constitution of the Catchment Board to take account of their extended range of functions." Such a description is entirely consistent with the effect of the 1965 Order read as a whole.

First, it is of particular note that section 5 of the 1855 Act as amended by the 1949 Act and the 1963 Act was not repealed by article 9 of the 1965 Order. It remained unaffected. Had it been intended that the nature of the payment under that section was to change, for example, as a result of the express repeal of section 23, the fourth to sixth priorities in section 30, or for that matter, section 9 of the 1855 Act, (which all related to volumes of water) which was effected by Article 9 of the 1965 Order, it seems to me that the legislature would have said so. It seems to me that it was natural that they should be repealed because but for the last priority under section 30, they regulated matters between the Two Companies and therefore, had become otiose. The last priority on the other hand, referred to a right of the Trustees to surplus water below Tottenham Mill, which it seems to me was contrary to the new licensing regime imposed by a combination of the 1963 Act and the 1965 Order.

I agree therefore, with Mr Tromans' third and preferred option as to the water to which the section 5 Special Payments related after the 1965 Order. In my judgment, there had been no change other than the need to specify a quantity of water for the purposes of the new licences of right which came into effect under the 1963 Act. In that regard, it is relevant to note that the quantities of water specified in the licences as of right, granted as a result of the statutory right to water in section 9 of the 1855 Act, amounted to the entirety of the water available but for quantities for navigation and exceeded the quantities specified in sections 21 and 22 of the 1855 Act.

It also seems to me that there is no reason to construe section 5 and the Special Payments made under it differently as a result of the introduction of charges and fees for licences. I agree with Mr Hapgood and Mr Tromans in this regard. The regime in relation to fees and charges for licences put in place by sections 57 and 58 of the 1963 Act is not apt to include a charge for the value of the water itself. Sub-sections 58(5) and (6) make clear that charges are to be levied at the rate necessary for balancing the water resources account which itself is defined in a way which does not relate directly to the value of the water itself.

What of the repeal of section 9 and the entitlement to apply for licences both as of right and otherwise? As I have already mentioned, in the case of MWB, the right to apply for a licence as of right was itself based upon the statutory right to the water contained in section 9: see section 33(1)(a) 1963 Act. In this regard, it is significant to note the sequence of events. The period during which an application for licences of right could be made, preceded the repeal of section 9. Therefore, it seems to me that the licences of right and the statutory right under section 9 were intended to dovetail. They were intended to cover what the MWB had been entitled to abstract as a result of section 9 and, in fact, the licences which were granted covered the entirety of the water which is available for abstraction from the River Lee but for that which is necessary for navigation. That was consistent with section 34(3) of the 1963 Act. It is only if a further source of water were to increase the flow, that there would be a right to apply for a further licence. In that case, provision was made by the amendment to section 131(2)(a) of the 1963 Act which took effect by virtue of article 3(1)(t) of the 1965 Order, to enable either the MWB or the Catchment Board to apply for such a licence. It seems to me therefore, that care was taken to adapt the regime under the 1963 Act in order properly to accommodate the full extent of the rights under section 9 of the 1855 Act to which the MWB had become entitled and which were replaced by the breadth of the licences to which the MWB became entitled.

As Mr Hapgood points out, such a construction is consistent with the terms of sections 23, 26 and what was 31 and became 48 of the 1963 Act. They provided that the person with a licence should be taken to have a right to abstract water to the extent referred to in the licence, that no other person shall abstract water other than in accordance with the licence in question and that a licence holder should be taken to have a right to abstract the water to which the licence related and in certain circumstances had a defence to claims. MWB was the body entitled to licences in relation to all of the present water flow in the River Lee. Furthermore, immediately prior to the granting of the licences of right, as a result of section 9 the Catchment Board had no right to the water itself.

It seems to me therefore, that in the light of the preservation of section 5 and the obligation to make Special Payments as before, but for the imposition of the licensing regime and the payment for licences which governed abstraction, nothing had changed. Despite the repeal of section 9 to make way for the licensing regime, the MWB remained entitled for practical purposes to abstract all the water from the River Lee under the licences of right combined with the right to apply for further licences made possible by the adaptation of section 131(2) by article 3(1)(t) of the 1965 Order. As a result, it had control over the supply of water for the purpose of meeting its statutory obligations as before and the Catchment Board had the right to apply for further licences in relation to any new water supply or in relation to any water in respect of which the MWB declined to take up its licences of right. Secondly, as I have already mentioned, the Special Payment regime remained in place under section 5 as amended. It seems to me therefore, that just as the Briefing Note suggested, neither the MWB nor the Catchment Board were detrimentally affected by the changes brought about by the 1963 Act and 1965 Order and no question of a construction which would result in expropriation or questions of ultra vires arises. Such a construction is also consistent with the letters of February 1965 to which Mr Tromans referred because the position of the British Waterways Board/the Catchment Board was not affected materially by the new regime, the right to all the flowing water in the River Lee having been vested in the Two Companies in 1855 and been replaced by licences of right, so that any question would only arise if a new source of water became available, coupled with the continued requirement to make the section 5 Special Payments.

Further, it seems to me that had it been the intention of the 1963 Act and the 1965 Order that the right to the flowing water or the right to sell it should re-vest in the Catchment Board which would be entitled to exercise the rights under section 68 of the 1850 Act, the legislation would have said so expressly, all the more so because such a re-vesting would have amounted to an expropriation of MWB's rights.

In my judgment, therefore, even if I am wrong and the section 5 Special Payments related solely to the annual supply of the quantities of water referred to in section 21 and 22 of the 1855 Act both before and after the 1965 Order, there is nothing to suggest that the repeal of section 9 had the effect of creating or reviving a statutory right to the flowing water in the River Lee and to supply and sell water in favour of the British Waterways Board or the Lee Catchment Board. I agree with Mr Hapgood that section 68 was superseded by the 1855 Act. The right to all of the flowing water was vested expressly in the Two Companies by section 9 and as a result, the power/right as a result of section 68 of the 1850 Act was exhausted. Thereafter, the Board had no right to the flowing water which could be preserved or which could revive. Even if that is not correct, it seems to me that given the sequence of events in relation to the granting of licences on the basis of existing section 9 rights, coupled with the terms of the new regime and in particular, sections 23, 26 and 48 (previously 31), section 68 of the 1850 Act was superseded in 1965 as a result of the 1965 Order and 1963 Act. In the further alternative, if that is not correct, I agree with Mr Hapgood's alternative analysis, namely that as a result of the 1965 Order and the express repeal of section 9, the position reverted to what it had been at common law. No one had a right to the running water itself and therefore, it could not be sold by the Catchment Board. This was all the more so because it had no licence to extract, all the water having been the subject of the licences of right granted to the MWB.

In their written submissions, CRT stated that the power to sell contained in section 10(3)(d) Transport Act in respect of the British Waterways Board was not continued in respect of CRT as a result of the British Waterways Board (Transfer of Functions) Order 2012. It is explained that this was because CRT as a company limited by guarantee is able to carry out the functions specified in that sub-section without the need for statutory powers and the section was designed to establish the British Waterways Board as one of the new boards created by the Transport Act. It goes on to state that therefore, section 10(3)(d) did not render section 68 redundant. In further written submissions in relation to the relationship between section 68 and section 10(3)(d) submitted after the hearing, Mr Tromans suggests that section 10(3)(d) was necessary to give the British Waterways Board the vires to sell water but that it would still need to have title to the water conferred in the case of flowing water by a statutory right to sell under section 68. I have to say that given the terms of section 10(3)(d), it is not clear to me that it is solely concerned with vires in a way which would give scope and space for the continuation of a separate statutory right to sell the water, akin to a continuing proprietary right under section 68 of the 1850 Act. In any event, it is unnecessary to decide upon the effect of section 10 in the light of the conclusions which I have already reached.

In my judgment therefore, the nature of the Special Payments remained as before. They related both to the maintenance and repair of the River Lee and to the once and for all transfer of the rights to all of the water in the River which the Trustees had had a right to sell in 1855 (but for that which was necessary for navigation). The Special Payments therefore, were in part, consideration for the transfer of the right to water made in 1855 and not to the supply of water on an ongoing or annual basis, despite the fact that the Two Companies and their successors were required to make annual payments. In the light of this conclusion, it may be necessary for the parties to make further submissions as to the factors relevant to the decision to be made by the Secretary of State when determining any increase or decrease in the yearly sum pursuant to section 52 British Transport Commission Act 1949 as amended, given the historic nature of the transfer to which the Special Payments relate in part.

(iii) Are there additional rights and if so, what is the basis for them?

Mr Tromans says that to the extent that the amounts of water abstracted under the licences exceed those to which the MWB was entitled under the 1855 Act, (if, in fact, that was restricted either to that passing through the New Gauge or the quantities referred to in sections 21, 22 and 30) CRT can rely upon the power of sale contained in section 68 of the 1850 Act in order to sell the excess water being abstracted under the licences of right to Thames Water and require it to pay for the purchase.

It will be apparent from what I have already decided that in my judgment, this situation does not arise, or alternatively, would only arise were there further water flowing in the River Lee or the licences of right were revoked in part or in whole. In those circumstances, despite the fact that I have decided that section 68 did not revive in 1965, in my judgment, it would be possible for CRT to obtain new licences pursuant to the 1963 Act and thereafter, to abstract, retain and thereby obtain a proprietary right to and supply the water abstracted under those licences under contracts entered into pursuant to its powers as a company limited by guarantee.

However, in case I am wrong about the construction of the 1855 Act and the 1965 Order, and for the sake of completeness, I will set out the submissions in relation to alleged additional bases for charging for the supply of water and my conclusions. Mr Tromans submitted that in the absence of an express contract for sale, for water in excess of the quantities referred to in section 21 and 22, taken by Thames Water, there are three alternative bases upon which CRT can rely. They are an implied contract for sale of the water, restitution and unjust enrichment.

Implied contract

In relation to an implied contract, Mr Tromans referred me to RTS Flexible Systems Ltd v Molkerei Alios Muller GMbH & Co KG (UK Production) [2010] 1 WLR 753 per Lord Clarke at [45] and [50]. At [45] the learned judge noted that whether there is a binding contract and if so, upon what terms, depends upon what has been agreed and upon the consideration of the words or conduct of the parties and whether that leads objectively to the conclusion that they intended to create legal relations and had agreed the terms essential for the formation of legally binding relations. He went on at [50]:

"Before the judge much attention was paid to the Percy Trentham case [1993] 1 Lloyd's Rep 25, where, as Steyn LJ put it at p 26, the case for Trentham (the main contractor) was that the sub-contracts came into existence, not simply from an exchange of contracts, but partly by reason of written exchanges, partly by oral discussions and partly by performance of the transactions. In the passage from the judgment of Steyn LJ, at p 2.7, quoted by the judge at para 66, he identified these four particular matters which he regarded as of Importance. (1) English law generally adopts an objective theory of contract formation, ignoring the subjective expectations and the unexpressed mental reservations of the parties. Instead the governing criterion is the reasonable expectations of honest sensible businessmen. (2) Contracts may come into existence, not as a result of offer and acceptance, but during and as a result of performance. (3) The fact that the transaction is executed rather than executory can be very relevant. The fact that the transaction was performed on both sides will often make it unrealistic to argue that there was no intention to enter into legal relations and difficult to submit that the contract is void for vagueness or uncertainty. Specifically, the fact that the transaction is executed makes it easier to imply a term resolving any uncertainty, or, alternatively, it may make it possible to treat a matter not finalised in negotiations as inessential. This may be so in both fully executed and partly executed transactions. (4) If a contract only comes into existence during and as a result of performance it will frequently be possible to hold that the contract impliedly and retrospectively covers pre-contractual performance."

Mr Tromans also referred me to Modahl v British Athletic Federation Ltd [2002] 1 WLR 1192. Latham LJ stated at [49] that a court should not merely assume a contract to exist but consider all the surrounding circumstances to determine whether it can properly be implied. Mance LJ (as he then was) stated at [102] that one distinction exists between the ease with which an express or implied contract can be established. In the case of express agreement of essentials of sufficient certainty to be enforceable, an intention to create legal relations is commonly assumed whereas it is otherwise when the contract is to be implied from conduct. In such a case it is "for the party asserting a contract to show the necessity for implying it . . ."

Mr Tromans submits that the position before the 1855 Act was one of contract, that the 1855 Act itself was the result of contractual negotiations and embodied a contract leading to the section 5 Special Payments and that the grant of licences of right merely continued the status quo. Therefore, by conduct the parties had agreed to pay a fair price for the water or what had previously been payable under the 1855 Act and the grant of the licences did not replace the agreement.

Mr Hapgood on the other hand, says that contractual relations were superseded by the 1855 Act, the entire area is governed by statute of considerable complexity, there is no evidence of any contract since before 1855 and there is no basis whatsoever upon which it could be implied. He also reminded me that Mance LJ in the Modahl case referred to the need for the party asserting the contact to show the necessity for implying it. He also points out that the circumstances under consideration in the RTS case, namely when a contract will be found to have been concluded where the parties have discussed terms without reaching a final signed written agreement, was expressly distinguished from the formation of an implied contract by Mance LJ in the Modahl case at [102]. Mr Hapgood says that there is no such necessity arising from the circumstances of this case

Restitutionary Damages

In the alternative, Mr Tromans seeks to rely upon restitutionary damages for interference with CRT's rights or the principle of unjust enrichment as a basis for the payment for the water. He accepts that the jurisprudence in this area was sketchy in 1965. Nevertheless, in relation to restitutionary damages he referred me to Bocardo SA v Star Energy UK Onshore Ltd & Anr [2011] 1 AC 380, a case concerning the extraction of oil under petroleum production licences. The reservoir of oil and natural gas extended under the claimant's land and pipelines had been bored under that land in order to reach the oil deposits and enable its extraction on neighbouring land. The Claimant sought damages in trespass despite the fact that the pipelines had caused no damage to nor had they affected the enjoyment of the Claimant's land. Peter Smith J held that pursuant to section 8(2) of the Mines (Working Facilities and Support) Act 1966 the court should assess damages on the basis of what would be fair and reasonable between a willing grantor and a willing grantee of a right of wayleave. The Court of Appeal on the other hand decided that section 8(2) should be construed in a manner consistent with the principles established in relation to compulsory acquisition of land and awarded damages of £1,000. The Supreme Court, having held that a trespass had been committed, held by majority that the principles of compulsory acquisition were applicable to the assessment of the damages for trespass and as result it did not include any element for the increase in the value of land due to the scheme which lay behind the acquisition. The decision of the Court of Appeal was upheld. In particular Mr Tromans referred me to passages in the dissenting judgment of Lord Clarke at [126], [127], [140] and [141] at which he referred to the assessment of damages on the basis of a hypothetical negotiation between a willing buyer and a willing seller in which both parties are assumed to act reasonably. Mr Tromans submits this is the way in which restitutionary damages would be assessed.

Unjust enrichment

Lastly, Mr Tromans says that Thames Water and its predecessors have been unjustly enriched. In relation to unjust enrichment I was referred to Benedetti & Anr v Sawiris & Ors [2014] AC 938. Mr Tromans referred me to what were described by Lord Clarke at [10] as the four questions the court must ask itself when faced with a claim of unjust enrichment. They are: (i) has the claimant been enriched? (ii) was the enrichment at the Claimant's expense? (iii) was the enrichment unjust? (iv) are there any defences available to the defendant? I was also referred to [17] at which having stated at [15] and [16] that the starting point when valuing the enrichment is the objective market value of the services performed (an approach also adopted by Lord Neuberger and Lord Reed), Lord Clarke stated that he agreed with Etherton LJ as he then was, that the test to be applied when determining the objective market value is the price which a reasonable person in the defendant's position would have had to pay for the services in question.

Mr Tromans says that question (i) is answered in the affirmative because Thames Water has enjoyed the water owned by CRT; question (ii) is also answered in the affirmative because CRT has lost water to which it has a statutory right; question (iii) is also answered in the affirmative because Thames Water has known since at least 2006 that CRT and its predecessor BWB considered itself entitled to the market value of the water but freely accepted the benefit of the supply without proper payment. He dealt with question (iv) at more length and by reference to sections 48 and 48A of the 1963 Act and submits that neither section provides a defence to either the claim for unjust enrichment or restitutionary damages.

Defences?

Mr Tromans points out that a provision in the form of the original section 48 appeared at section 31 of the 1963 Act. He says that it would be very surprising if section 48 had the effect of preventing CRT from exercising its right to sell water and if such a drastic effect had been intended, it would have been the subject of an express provision. He submits that it is inherently unlikely that it was intended to extinguish the right to be paid for the water, that there is an express proviso in sub-section (4) for contracts and that there would be unfortunate results if the interpretation of that sub-section were limited only to contracts in existence. He says that there are compelling reasons for departing from the literal meaning where in this case it would have the effect of the expropriation of CRT's rights: Attorney General v Horner (supra) per Brett MR at 257 and to Bennion on Statutory Interpretation 6^th Ed 2013 at Code section 271.

He also referred me to Cargill v Gotts [1981] 1 WLR 441, a case in which a farmer had extracted water for agricultural purposes from a nearby mill pond. It was held that an easement to take the water for farming purposes at common law had existed before the 1963 Act and was not affected by the Act. However, it could not be exercised without obtaining a licence under the 1963 Act and in accordance with the terms of that licence. See Templeman LJ at 446H:

"… The Act of 1963, however, does not contain any provision which destroys an easement already acquired. An easement of water acquired before July 1, 1965, may not lawfully be exercised without a licence, but does not cease to be an easement if a licence is not obtained nor does it cease to be an easement until a licence has been obtained. The easement remains an easement but cannot be exercised without committing an offence under the Act of 1963."

Mr Tromans says that this is authority for the continued distinction between property rights and the statutory licensing provisions. Lastly, in this regard, he pointed out that it is not in dispute that Thames Water is obliged to make Special Payments under section 5 of the 1855 Act and if their wide interpretation of section 48 were correct, it would afford them a defence against such payments, which cannot be correct.

Mr Tromans submits therefore, that section 48 affords no defence to a contractual claim in relation to the excess water. He accepts that neither a claim for restitutionary damages nor one for unjust enrichment are now understood to be characterised as contractual but he says that the position was not so clear in 1963 and it is open to question whether Parliament intended to exclude claims in quasi-contract in relation to property taken in the absence of a contract and that such a construction would run counter to the principle against expropriation. In his written submissions he stated that section 48 was intended to preclude a riparian owner from taking action against the holder of licence in respect of interference with their common law riparian rights. However, he submits that there is no reason why the grant of a licence should prevent a person with statutory rights to the water from resisting it being taken without payment.

In any event, even if section 48 provides Thames Water with a defence, Mr Tromans also relies upon section 48A of the 1963 Act. He submits that there is no limitation or qualification upon the type of loss or damage falling within section 48A. That section creates a statutory duty not to cause loss or damage to another person by the abstraction of water from an inland waterway or underground strata and enables the person suffering the loss to bring a claim for breach of that statutory duty. He accepts that section 48A(5) provides that no claim can be made in civil proceedings against an abstractor in respect of loss or damage caused by the abstraction save under the section but that claims for negligence and breach of contract are preserved by section 48A(6). He submits that the taking of water by Thames Water, over which CRT has a statutory right of sale, amounts to a loss caused by abstraction which would fall within the section. He says that the wording of the section is clear but that if there is any ambiguity, certain extracts from Hansard make it clear that the phrase "loss and damage" was intended to have a wide meaning. The provisions which became section 48A were considered in Standing Committee D on 18 September 2003. An amendment was proposed which was to provide that "loss and damage" should not mean the diminution in the value of land. The amendment was premised upon the needs of watercress growers. The Minister replied that such an amendment would "nullify the current purpose of the clause." He went on:

"… It is intended to provide a remedy for third parties who suffer loss or damage as a result of any abstraction. Many relevant losses may well relate directly or indirectly to the value of land, such as harm caused by subsidence. It would not be fair to the owners who had suffered damages to limit losses in this way. We are trying to look at all eventualities…

Currently, an abstractor has a defence against legal action if the abstraction was made in accordance with the provisions of the licence. That is what we are trying to change. In no other similar licensing system does a licence provide a defence against legal action between individuals…"

The provision was debated in the House of Commons on 10 November 2003. The relevant exchange concerned the proposed amendment to insert a definition of "loss or damage" as meaning "loss occasioned by physical damage to tangible property." The Minister's response amongst other things was that "although the most common type of damage will be tangible damage to property, people who have suffered kinds of otherwise recoverable harm should have the ability to obtain the appropriate compensation." Mr Tromans submits therefore, that "loss and damage" is broadly defined for the purposes of section 48A and is not subject to any limitation or qualification and that abstraction of water pursuant to a licence could itself cause loss and damage.

Chetwynd v Tunmore [2016] EWHC 156 (QB), is the only reported case concerning a claim under section 48A for damages and injunctive relief in relation to the excavation of lakes on land alleged to have adversely affected the water levels in fishing lakes on adjoining land. Reddihough HHJ sitting as a Judge in the High Court first answered two questions of law, being the nature of the breach of statutory duty itself and whether the loss and damage was required to be foreseeable. As to the first question he held at [22] that: " . . . the actual breach is not the abstraction of the water but the causing of loss or damage by the abstraction." He relied upon a passage from Clerk & Lindsell on Torts (21^st Ed) at 9-50 which stated amongst other things that the non-compliance with a statutory duty cannot be actionable unless the injury was of the type which the statute was passed to prevent. Mr Tromans submits that the passage relied upon is unhelpful and that [22] is obiter, the real question being as to foreseeability.

Mr Hapgood on the other hand submits that CRT has no claim and therefore, it is unnecessary to consider sections 48 and 48A but if it had, those sections would provide a complete defence to any claim in respect of the supply of water. He submits that there is no reason to assume that only the claims of riparian owners are barred by section 48 and it certainly does not carve out an exception for potential claimants with statutory rights in the water. If the provision had been intended to be limited in that way, Mr Hapgood submits that it would have said so. He says that this point has all the more force in relation to the River Lee because the 1965 Order made express provision for the application of what was then section 31 to the River Lee Catchment. If Parliament had intended to preserve CRT's right to claim based on its alleged interest in the water under section 68 of the 1850 Act, the Order would have done so expressly.

As to section 48A, Mr Hapgood submits that it is not a credible interpretation of section 48A to say that "loss and damage" is suffered simply by taking the water from the River Lee and to do so would be to create a nonsense of the licensing regime. He says that instead, loss and damage should be construed to mean loss and damage consequential on the abstraction, that is distinct from the mere abstraction itself. This he says, distinguishes between what is permitted under the licence, being the abstraction itself and the responsibility of the abstractor not to cause harm to others by the abstraction and is consistent with the approach in the Chetwynd case. He also submits that section 48A is clear and unambiguous and there is no reason therefore to consider extracts from Hansard.

In relation to the Chetwynd case he says that [22] was not obiter but was essential for the decision in relation to foreseeability. Mr Hapgood says that the position in relation to sections 48 and 48A is simple. Section provides an absolute defence to a licence holder to any action "brought against [him] in respect of the abstraction of water".

In relation to the claim in restitution Mr Hapgood submits that CRT is precluded from bringing such a claim by section 48(2) of the 1991 Act. He says that such a claim cannot be characterised as contractual in order to bring it within section 48(4) and that there is no reason to assume that "action for breach of contract" was ever intended to include restitutionary claims. In any event, he says that there is no wrongful interference because Thames Water is entitled to abstract the water under the licences of right and a claim for wrongful interference would be tortious in any event.

In relation to the claim in unjust enrichment, as well as submitting that the claim is barred by section 48(2), he says that all of the elements of the claim are missing. First, he says that Thames Water is not unjustly enriched because it abstracts water in accordance with its licences for which it pays, in addition to the Special Payments under section 5. Secondly, any benefit as a result of the abstraction of the water is not at CRT's expense because the effect of Thames Water's licences of right is that CRT would not be able to sell the water to any other party unless the licences were revoked. Thirdly, even if Thames Water were enriched at CRT's expense the enrichment would not be unjust because it is merely doing what it is authorised to do under the statutory scheme. Finally, if it were entitled to bring such a claim, the measure of the award would be the lesser of the amount of CRT's loss as a result of the abstraction and the amount of Thames Water's gain.

Conclusion:

(i) Implied contract

It will already be apparent that I disagree with Mr Tromans that the 1855 Act merely embodied a contractual agreement and that the Special Payments under section 5 were directly and only payments for the supply of water. I agree with Mr Hapgood that: this matter has been governed by statute since at least 1855 and although there may be potential for a contract for sale in certain circumstances, it does not arise in relation to the water which was the subject of section 9 and is the subject of the licences as of right which are held by Thames Water and the continued obligation to make the Special Payments under section 5; there is no evidence upon which to base a contractual relationship, at least since the passing of the 1855 Act and nothing from which to conclude that the parties intended to create legal relations; and given the continuation of the section 5 Special Payments by the 1965 Order, there is no room and no basis upon which a contract in respect of the water which is subject to the licences of right could be implied.

Furthermore, in my judgment since the 1855 Act and in any event, since the 1965 Order there has been no necessity to imply such a contract. Although section 9 was repealed, MWB and Thames Water after it, retained the right to abstract all of the water from the River Lee but for that required for navigation and continued to make the Special Payments under section 5. I do not consider that Cargill v Gotts assists Mr Tromans in this regard or generally. Had there been a contract for the supply of water before 1965, it would have been unaffected by the new legislative regime save to the extent that the provisions of the 1963 Act are concerned with the person entitled to obtain a licence for abstraction in such circumstances and without such a licence abstraction could not take place. No such contract existed. Cargill v Gotts therefore, takes the matter no further.

(ii) Restitutionary Damages

I also agree with Mr Hapgood in relation to the alternative claim in restitution. Even if one assumes that there is water in relation to which there has been a wrongful interference, such a claim would naturally lie in tort and not in contract and therefore, would be barred by section 48(2) of the 1991 Act. I cannot accept Mr Tromans' submission that the reference to breach of contract which first appeared in section 31 of the 1963 Act was contemplated at that time to encompass claims of this kind. There is nothing to suggest it and it is not disputed that contemporary jurisprudence does not characterise such claims as contractual.

(iii) Unjust Enrichment

Lastly, I also agree with Mr Hapgood that the necessary elements of a claim in unjust enrichment are not made out and even if they were it would be barred by section 48(2). I have already found that there is no water which can form the basis for such an enrichment because the licences of right replaced the section 9 rights to all the water and the section 5 Special Payments continued. I also agree for the same reason that any benefit as a result of the abstraction of the water is not at CRT's expense. There was no water to which CRT was entitled. It sold its right to the water in 1855. Further, as Mr Hapgood points out, the effect of Thames Water's licences of right is that CRT would not be able to sell the water to any other party unless the licences were revoked. In any event, would such an enrichment at CRT's expense have been unjust? In the light of all my other findings, it is not necessary to decide this point. However, it seems to me that in the light of the continued section 5 Special Payments, it could not be said to be unjust. In the circumstances, it is not necessary to decide upon what the measure of damages would have been.

(iv) Section 48A

For the sake of completeness, I should also mention section 48A. First, I should say that I do not consider it necessary to refer to Hansard in order to construe the section. As Reddihough HHJ pointed out in the Chetwynd case, the breach of statutory duty is not the abstraction of the water itself but the causing of loss or damage by the abstraction. It is loss which is consequential upon the abstraction. That is the way in which the statutory duty is framed in section 48A(1). It seems to me that claims for payment for the water result from the abstraction itself and not from causing loss by abstraction. I agree that such an interpretation would create a nonsense of the licensing regime. Therefore, even if the other requirements in relation to unjust enrichment and/or restitutionary damages were met, it does not seem to me that section 48A would assist CRT.

Relief sought

In my judgment, therefore, none of the alternative grounds for seeking payment for the water abstracted under the licences of right would succeed even if the continued Special Payments under section 5 were concerned only with the amount of water referred to in sections 21 and 22 of the 1855 Act. I should make clear however, that in my judgment, the section 5 Special Payments reflected both the ongoing obligation to maintain the River Lee and the purity of the water supply and the transfer of the right to the bulk of the water flowing in the river above and beyond that necessary for navigation which took place in 1855. The answers to each of the agreed questions posed should be apparent from my reasoning. The precise nature of the declarations to be granted will have to be the subject of further submissions.