Water Act 1945 as amended–‘Leap-frog’ appeal to House of Lords from decision of Forbes J–Claims by water authority against developers of residential site in respect of provision of water supply–Whether new main proposed by authority to supply the developers’ housing site was a ‘necessary main’ within the meaning of section 37 of the Act, for which the developers could be required to undertake to make contributions and to deposit a sum as security–Question as to the point from which the ‘necessary main’ should start–Nearest distribution main to site was too small and was fully committed–Authority proposed to construct a new main with sufficient capacity but considerably further away–Developers’ contention that a ‘necessary main’ must run from nearest point where there is an existing distribution main–As this was too small and fully committed, developers argued that authority should carry out such extensions and other works required to provide a sufficient supply, however uneconomic and contrary to good water engineering practice this might be–Developers’ arguments rejected and decision of Forbes J affirmed–Proposed main a ‘necessary main’ and developers liable to pay required contributions–Speech of Lord Diplock in Cherwell District Council v Thames Water Board considered–The necessary starting point for new main is to be determined in the light of sound water engineering practice
This was an
appeal to the House of Lords from a decision of Forbes J (1978) 248 EG 599
under the ‘leap frog’ procedure authorised by section 12 of the Administration
of Justice Act 1969. The appellants, Royco Homes Ltd, had sought a declaration
that the respondents, Southern Water Authority, were not entitled under section
37 of the Water Act 1945 as amended to demand a deposit and guarantee of
payments in respect of a proposed new main between a point on the A2 road
(known as Key Street) and the appellants’ site boundary. Forbes J refused the
declarations sought and dis-
Lord Keith of Kinkel.
John
Drinkwater QC and Barry Payton (instructed by Harold Benjamin & Collins of
Harrow) appeared for the appellants; Conrad Dehn QC and William Ainger
(instructed by Barlow, Lyde & Gilbert) represented the respondents.
In his speech,
LORD KEITH OF KINKEL said: This appeal comes directly before the House,
pursuant to section 12 of the Administration of Justice Act 1969, from a
judgment of Forbes J dated June 9 1978.
The appeal is
concerned with the proper construction of section 37 of the Water Act 1945
which, as amended by section 46 of the Housing Act 1949 and section 11 of the
Water Act 1973, provides:
Duty of
Water Authority to provide domestic supply for new buildings
(1) Where an owner of land proposes to erect
thereon buildings for which a supply of water for domestic purposes will be
needed, he may require any water authority within whose limits of supply that
land is situated to construct any necessary service reservoirs, to lay the
necessary mains to such point or points as will enable the buildings to be
connected thereto at a reasonable cost and to bring water to that point or
those points, and thereupon the water authority shall, subject as hereinafter
provided, comply with that requisition:
Provided that
the water authority before complying with a requisition under this subsection–
(a) may require the owner to undertake to pay in
respect of each year a sum amounting to one-eighth of the expense of providing
and constructing the necessary service reservoirs and providing and laying the
necessary mains (less any amounts received by the water authority in respect of
water supplied, whether for domestic or nondomestic purposes, in that year from
those mains) until the aggregate amount of water charges as are stated by the
water authority to be payable for a supply of water for domestic purposes
payable annually in respect of the buildings when erected and in respect of any
other premises connected with the said mains at the rates for the time being
charged by the water authority equals or exceeds such sum as aforesaid or until
the expiration of a period of 12 years, whichever first occurs; and
(b) except where the owner is a local or public
authority, may also require him to deposit with the water authority as security
for payment of the said annual sums, such sum, not exceeding the total expense
of constructing the service reservoirs and providing and laying the mains, as
the water authority may require.
(2) The water authority shall pay interest at the
prescribed rate or, if no rate is prescribed, at four per cent per annum on any
sum in their hands by virtue of a requirement under paragraph (b) of the
proviso to the last foregoing subsection, and shall, on the request of the
owner of the land, appropriate out of that sum any amount due under the
undertaking referred to in paragraph (a) of the said proviso and shall, when
the said undertaking is finally discharged, repay to the owner any sum
remaining in their hands as aforesaid.
(3) Any question arising under subsection (1) of
this section as to the point or points to which mains must be taken in order to
enable buildings to be connected thereto at a reasonable cost shall, in default
of agreement, be determined by the Minister.
(4) If the water authority, after receipt of a
requisition under subsection (1) of this section and after tender to them of
any undertaking or deposit which they may require in accordance with that
subsection, do not before the expiration of three months (or, where a question
has, before that time, been referred to the Minister under the last foregoing
subsection before the expiration of three months from the date when the
Minister notifies the water authority of his decision, if that period expires
later) comply with the requisition, they shall, unless they show that the
failure was due to unavoidable accident or other unavoidable cause, be guilty
of an offence against this Act.
The relevant
facts as found by Forbes J are as follows. The appellants are developers of
land for residential purposes. They own and propose to develop for those
purposes a substantial site near Sittingbourne in Kent, known as the Milton
Church Farm Estate. The site is capable of accommodating 2,200 houses, and the
appellants have so far received outline planning permission for the erection of
700 houses, and detailed planning permission for the erection of 204 of those.
The respondents are the statutory water authority within whose limits of supply
the site lies. By letter, dated June 7 1976, the appellants required the
respondents to provide a domestic water supply to the 204 houses, but it was
common ground that this requisition was to be taken as applying to the whole of
the 700 houses for which the appellants had outline planning permission. The
existing position as regards water supply was that there were no mains actually
on the site. The nearest distribution main to the site was in Middletune Avenue
at a point to the south of it. This was a 4-in main. There were in the locality
other small distribution mains somewhat further away and certain larger mains
further away still. All these mains were fully committed. Well to the south of
the site, however, was a 10-in main laid under the east-west A2 Dover-London
road. This main was not fully committed. The respondents proposed, in response
to the appellant’s requisition, to construct a new 8-in distribution main connected
to the 10-in main under the A2 road at a point (known as Key Street) near the
junction of the latter with the A249 road running north-east to the Isle of
Sheppey. The proposed new main was to follow the A249 for some distance and
then turn eastwards into the appellants’ site. Its total length was to be about
3.5 km. The total number of houses capable of being supplied by this new 8-in
main was 950. The next smaller stock size of main, however, would not have
sufficient capacity to supply as many as 700 houses, while the cost of
manufacturing a special size of main capable of supplying precisely 700 houses
would be prohibitive. The respondents required from the appellants, in terms of
section 37(1)(b) of the 1945 Act, a deposit of £115,000 in respect of the
construction of the new main. There happened to be road works in progress at
the time on the A249, and the respondents took the opportunity, in order to
save greater expense in the future, of laying about one kilometre’s length of
the new main under the road. In respect of this work the appellants paid to the
respondents under protest the sum of £16,000 in part satisfaction of the
required deposit of £115,000.
By the present
action the appellants seek a declaration that the respondents are not entitled in
law to demand any deposit and guarantee of revenue in respect of the proposed
main from Key Street to the boundary of the appellants’ site, and that the
appellants are entitled to repayment of the sum of £16,000 with interest. By
the judgment under appeal Forbes J refused the declarations so sought and
dismissed the action in relation thereto. It is to be mentioned that by the
action the appellants also sought certain declarations related to another site
owned by them within the respondents’ limits of supply. These declarations were
granted by Forbes J, and the respondents do not seek to disturb the part of his
judgment concerned with that aspect of the case.
The appellants
accept responsibility in respect of distribution mains within the boundaries of
their site, but they maintain that they cannot lawfully be required to give any
undertaking or pay any deposit in respect of the proposed new main between Key
Street and the site boundary, on the ground that it is not a ‘necessary’ main
within the meaning of section 37(1). Their argument, in effect, is that no main
outside the boundaries of the site can be a ‘necessary’ main other than one
which runs to the site from the nearest point where there is an existing
distribution main. The particular point which they pick on here is the location
of the 4-in distribution main in Middletune Avenue. That main is, of course,
fully committed, and its capacity is in any event far too small for the purpose
of delivering an adequate supply of water for the appellants’ development. But
the appellants say that it is up to the respondents, at the expense of the
general body of ratepayers, to carry out all such extensions and improvements
of the existing system as may be necessary to secure that a sufficient supply
of water is available at the point indicated. This is on the face of it an
absurd proposition, involving as it does that the respondents might be required
to carry out
engineering practice. The appellants argue, however, that this result is
compelled by the decision of this House in Cherwell District Council v Thames
Water Board [1975] 1 WLR 448 and the reasons for that decision contained in
the speech of Lord Diplock, concurred in by all the other Lords of Appeal who
were party to the decision.
In my opinion
the decision, properly understood, does not support the appellants’
proposition. The facts were that the appellant council proposed to build houses
on two sites in Banbury, where there were no existing water mains. The water
supply at Banbury was obtained from a service reservoir into which water was
pumped from the river Cherwell. The supply was becoming inadequate, and the
proposed new houses would exacerbate the situation. To supplement the supply
the respondent water authority proposed to extract water from the Thames at
Woodstock and convey it by a new 27-in trunk main to the existing service
reservoir at Banbury. In response to an inquiry from the appellant council as
to the amount which they would be required to undertake to pay under section
37(1) in respect of the supply of water for the proposed housing development,
the water authority quoted a figure which comprised the cost of new mains in
the immediate vicinity of the site and also a very small contribution towards
the cost of the new 27-in trunk main. The matter at issue was the appellant
council’s liability in respect of the latter element. The case had become
unnecessarily complicated in the lower courts through counsel for the parties
agreeing that the issue turned on the answer to a hypothetical question as to
whether a trunk main was capable in law of being a ‘necessary main’ within the
meaning of section 37(1), but there is no need to go into that aspect. The
House decided that the appellant council was not liable for any contribution
towards the cost of the new trunk main, on the ground that, since it was not
provided solely for the purpose of conveying water to points at which the new
houses could be connected up by means of service pipes, it was not a ‘necessary
main.’ The ultimate ratio of the case is
to be found in the speech of Lord Diplock at p 457:
In the
instant case it is common ground that the 27-in trunk main, when completed,
would serve to supply water to the general body of consumers of water for
domestic purposes as well as to the proposed new buildings that were the
subject of the contemplated requisition. How small a part the necessity to
supply water to these buildings played in creating the need to provide the new
trunk main is indicated by the minute proportion of the total cost of it that
the board thought it equitable to ascribe to the council as requisitioners in
respect of those buildings. That the 27-in trunk main would serve such other
purposes as well in my view precludes it being a ‘necessary main’ within the
meaning of section 37 of the Water Act 1945.
In the course
of arriving at this ratio Lord Diplock made a number of general observations
about section 37, certain parts of which, as they were strongly founded on by
counsel for the appellants in the present case, it is necessary to quote in
full (p 455):
‘Mains’ is,
by virtue of its definition in the Act, a generic term which prima facie
includes trunk mains as well as distribution mains, unless the context in which
it appears makes it clear that it was used in some more restricted meaning. In
section 37 (as also in clause 29) the only express restriction upon its
generality is that the mains must be ‘necessary.’ This is, in my view, the key word in the
section for the purposes of deciding the actual question raised by the
originating summons. It poses immediately the question: ‘Necessary for what?’
The section
presupposes, first, that there are no existing mains bringing water to points
at which it would be practicable at reasonable cost to connect the proposed
buildings to those mains by service pipes. If there were, there would be no
need for any requisition. Once the building was erected the owner would be
entitled to require the connection to be made under clause 30, without any
liability to contribute to the cost previously incurred by the undertakers in
laying the existing mains or to the cost of replacing them by mains of greater
capacity to meet the additional demand resulting from the connection of the
newly-erected building to them.
Secondly, the
section presupposes that there will be a supply of water in bulk capable of being
brought to the new mains by the undertakers, which if it is not already
available to them it is their duty to procure without demanding from the
requisitioner any contribution to the cost of doing so.
So the
‘necessary mains’ with which the section deals are confined to new mains to be
laid by the undertakers in a street or other place where there are no existing
distribution mains and to start from a point to which a supply of water is
already being brought in existing works belonging to the undertaker; and the
answer to the question: ‘Necessary for what?’
is: necessary in order to convey the water from that starting point to
points at which it would be practicable to connect the proposed buildings to
those mains by service pipes, and for no other purpose.
The section
contemplates that as well as ‘necessary mains’ there may be ‘necessary service
reservoirs’ to be constructed. Ex hypothesi these must lie between the
starting point to which a supply of water is already being brought in existing
works belonging to the undertakers and the new distribution mains to which the
proposed new buildings will be connected. The new main which will carry water
from that starting point to the service reservoir may well fall within the
definition of ‘trunk main,’ and if the new trunk main and the new service
reservoir will serve no other purpose than to convey water from that starting
point to the new distribution main or mains to which the proposed buildings in
respect of which the requisition has been made will be connected it would, in
my view, fall within the expression ‘necessary mains.’ For in the context of section 37 I would
construe ‘necessary’ as applicable to new mains and service reservoirs provided
for that purpose only and not to mains or reservoirs which will also serve some
other purpose of the undertakers in connection with the supply of water to
existing consumers or to potential new consumers whose water will not be
brought to them through the new distribution main or mains.
To ascribe
any wider meaning to the word ‘necessary’ where it appears in section 37–or, in
a similar context, in clause 29–would, in my view, conflict with the general
scheme of the Act for allocating the cost of works between the proceeds of the
annual water rate payable by the general body of consumers of water for
domestic purposes and charges additional to the water rate imposed upon
particular consumers. Once works have been constructed by the undertakers which
bring a supply of water to an existing distribution main, the cost of additions
or improvements to any of those works lying between the ultimate source of the
supply and service pipes connected with that main which are needed to meet
increased demand for water must be provided for out of the proceeds of the
annual water rate or loans serviced out of the proceeds of that rate. No
additional charge may be imposed upon the individual consumers who benefit from
particular additions or improvements, even where they are new consumers whose
exercise of their right under clause 30 to have their premises connected to an
existing main has caused the increased demand. The Act thus appears to accept
as a general principle that new consumers as well as old are entitled to the
benefit of additions and improvements to existing works rendered necessary by
increased demand for water for domestic purposes which they themselves have
caused; and that they cannot be required to make any individual contribution to
the cost of those additions or improvements beyond what is payable by them by
way of the annual water rate in common with consumers who may derive no such
benefit.
It would seem
to conflict with that principle that an exception should be made in respect of
additions or improvements to works lying between the ultimate source of supply
and the point to which water had already been brought by the undertakers merely
because the supply to the new consumer involved, in addition to the laying of
service pipes, the laying of a new distribution main beyond that point to a
point in the vicinity of the premises for which the water was required.
In my opinion
it is clear that Lord Diplock did not have present to his mind, anywhere in the
course of this passage, the kind of situation which prevails here, where the
water authority have already brought to a point quite close to the proposed
development a distribution main of small capacity, carrying a limited supply of
water for existing buildings in the immediate vicinity, and where the extension
of that main
uneconomic and contrary to sound water engineering practice. The passage must
be read secundum subjectum materiam, namely a situation where the water
authority proposed to execute, and charge the requisitioner with part of the cost
of, works intended to enhance and improve the general supply of water in the
broad locality within which the proposed development lay. It is true that one
of the cases which Lord Diplock had in contemplation was that where the need
for an enhanced or improved supply was brought about entirely by the
requirements of the proposed development. But even so, the principle that the
cost of improvements or additions to the system cannot be laid to the charge of
the developers applies only, on Lord Diplock’s analysis, to improvements or
additions executed upon sections of the system short of the point at which any
new main necessary for the connection of the proposed development takes its
departure. The present appeal is concerned with the question what is the appropriate
starting point of a new main laid solely for the purpose of supplying the new
development, and the related question whether the choice by the water authority
of a particular starting point for such a main can have the effect of eliding
the developers’ liability in respect of it. These questions were not in issue
in the Cherwell case, and it would, in my opinion, be a mistake to
regard anything in Lord Diplock’s speech as being directed to their resolution,
or as imposing any necessary restriction upon the range of the search for the
correct answers.
It is evident
that any ‘necessary main’ must start from a point where water is available to
be led into it. So much was pointed out by Lord Diplock in the Cherwell
case in the course of the passage quoted. But what, if any, are the other
essential characteristics of the starting point? Is it enough that there should be a certain
limited supply of water there, albeit quite insufficient to charge the new
main, or is it right to postulate that the existing supply of water at the
point in question should be adequate for that purpose? Neither answer would, in my view, necessarily
be correct in all circumstances. I am of opinion that the necessary starting
point is to be determined in the light of sound water engineering practice. In
some instances that might indicate that the necessary starting point lay
somewhere on an existing main of adequate capacity. But in others it might
involve replacing an existing main of inadequate capacity with a larger one, and
connecting the new main to the replacement at a suitable point. In that event
no part of the cost of the replacement main could, under the decision in the Cherwell
case, lawfully be charged to the requisitioner. But there are no sound grounds
whatever for the view that the necessary starting point must invariably be the
nearest point to the proposed development at which there is an existing supply
of water in an existing main, however limited.
At this stage
there is to be noted an argument for the respondents to the effect that the
matter of the necessary starting point for the new main is entirely for the
judgment of the water authority, acting reasonably and in good faith. In my
opinion this argument is to be rejected. In this context the question is one to
be decided by the court, in the event of dispute, in the light of evidence led
about sound water engineering practice.
Upon the facts
of this case, as found by Forbes J, there can be no doubt that the starting
point selected by the respondents for the proposed new main was the correct one
from the point of view of sound water engineering practice, and that it did
not, in all the circumstances, have the effect of depriving the main of the
character of a ‘necessary main.’ The
main would be laid with the sole purpose of supplying the domestic water
requirements of the appellants’ proposed development, and at the end of the day
it was not maintained that its superfluity of capacity for that purpose
involved, in the circumstances, that it was larger than it need be.
For these
reasons I am of the opinion that the judgment of Forbes J was correct and
soundly reasoned, and that the appeal should be dismissed.
VISCOUNT
DILHORNE and LORD RUSSELL OF KILLOWEN delivered speeches agreeing that the
appeal should be dismissed. LORDS WILBERFORCE and SALMON also agreed.
