A claim for compensation for diminution in value of property under the Water Industry Act 1991 by the presence and use of an underground sewage storage reservoir has failed in Charlton and another v Northumbrian Water Ltd [2022] UKUT 313 (LC).
The claimants owned Bleach Green Farm near Durham, a property of around 16 acres. In 2018, the respondent constructed an underground sewage storage reservoir on neighbouring land in response to the increasingly frequent overflows from local sewers. It also upgraded the track to the farm over which the claimants had an easement to the highway.
The claimants argued that their property had been diminished in value by £124,500 by the upgrading of the track – which gave the area a more industrial feel – and because purchasers would be anxious about odours from the reservoir and the potential for flooding from the River Deerness. The respondents disputed the claim.
The 1991 Act, a consolidating statute following the privatisation of the water industry in 1989, provides for the appointment of water and sewage undertakers and permits them to lay pipes in streets and on other land. Section 2(3) of Schedule 12 requires payment of compensation to any person who has sustained damage to or injurious affection of any land by the exercise of the relevant sewerage provisions, with disputed compensation to be determined by the Upper Tribunal.
The Upper Tribunal (Lands Chamber) tried as a preliminary issue the question of whether the claim amounted to damage to or injurious affection of land. The parties agreed that by installing the reservoir and keeping it there, the respondent was and is exercising power to carry out pipe-laying works, but it was not agreed that the claimants could recover compensation for diminution in value of their land.
The term “injurious affection” has the same meaning as in section 10 of the Compulsory Purchase Act 1965, the conditions for which were set out in Metropolitan Board of Works v McCarthy [1874] L.R. 7 H.L 243:
(i) it must be the consequence of the lawful exercise of statutory powers;
(ii) it must arise from steps which if done without statutory authority would give rise to a cause of action;
(iii) the damage must be in respect of some loss of value of the land of the claimant;
(iv) the loss to the claimant’s land must arise from the execution of the works and not from its authorised use following completion of the works; and
(v) compensation must be ascertainable by reference to the principles applicable to damages in tort.
The claimants did not satisfy conditions (ii) and (iv), and so could not establish an entitlement to damages for injurious affection.
The words “damage to… any land” could not include diminution in value. Section 2(1) referred to a diminution in value in respect of private land. It was inconceivable that two sections referred to the same right using completely different language and it would be inconsistent with the public policy behind the 1965 Act. Damage required physical damage. A diminution in value with no physical basis could not be compensated under section 2(3).
Louise Clark is a property law consultant and mediator
