Common law remedy is not ousted by statute
Southern Gas Network Plc v Thames Water Utilities Ltd [25.01.2018]
The Court of Appeal provides clarity for gas distributors who have made statutory compensation payments to customers when the loss of supply is the fault of another utility provider.
In late December 2012, Thames Water failed to repair its water main beneath Crofton Road, Orpington, before it caused damage to Southern Gas Network (SGN)’s gas main resulting in the interruption to gas supplies to over 1,600 premises. As the period of interruption exceeded 24 hours, SGN was obligated under its Standards of Performance Regulations to compensate its customers by making Failure to Supply Gas (FSG) payments.
Under the strict liability regime of s82 (1)(b) of the New Roads and Street Works Act 1991 (NRSWA), Thames Water was liable to SGN for its “expenses reasonably incurred in making good damage” to its apparatus in the street. SGN’s claim for repair costs was compromised, leaving just the FSG payments outstanding. SGN sought to recover the FSG payments from Thames Water under the same statutory provision, alternatively in negligence.
Thames Water accepted it had breached any duty of care it owed to SGN. However, it argued that the NRSWA statutory scheme ousted the common law, and thus it did not owe SGN a duty of care.
High Court decision
At first instance, the Judge dismissed SGN’s claim on the basis that:
- The FSG payments were not recoverable as “expenses reasonably incurred in making good damage” under s82 (1)(b) NRSWA.
- The observations of Buxton LJ in Yorkshire Electricity Distribution PLC v Telewest Limited  that s82 formed a complete statutory code, which excluded common law rights of action were correct and in line with more recent authorities. The Judge also accepted that s82 was part of a broader statutory code (encompassing parts of the Water Industry Act 1991 and other parts of NRWSA) which effectively ousted common law rights, preventing SGN from pursuing its claim for FSG payments in negligence.
Court of Appeal decision
Finding that the FSG payments were not covered by the wording of s82 (1)(b) NRSWA, the issue facing the Court of Appeal was whether on its true construction the strict liability scheme in s82 was in addition to or displaced SGN’s common law rights.
The Court of Appeal found that any assistance derived from the Yorkshire Electricity case is limited as Buxton LJ’s observations were expressly obiter.
Further, s82(6) NRWSA contained the short answer to the issue:
“Nothing in this section shall be taken as exonerating an undertaker from any liability to which he would otherwise be subject”.
Contrary to Buxton LJ’s interpretation of s82(6) in Yorkshire Electricity, the Court of Appeal did not accept that the saving in this section applied only to an undertaker’s liabilities to third parties. Those without street apparatus are not affected by s82. In any event, there is no mention of third party liabilities in s82(6), which is written in more general terms.
Giving the leading judgment, Hickinbottom LJ held that s82(6) “expressly retains common law remedies that are or might be available to those with a strict liability claim under Section 82”.
Considering matters as a whole, the Court of Appeal did not find any ‘incompatibility’ or ‘positive inconsistency’ between the statutory remedy and the common law remedy to suggest that the statute was intended to replace common law remedies. Nor was the court persuaded that s82 NRSWA formed part of a wider statutory scheme excluding the operation of the common law.
The appeal was allowed.
This is the first time the English courts have considered whether FSG payments payable by one statutory undertaker are recoverable from another statutory undertaker, under either Section 82 NRSWA or the common law.
The loss of gas caused by water ingress is not an uncommon event. Therefore, this decision should provide welcome clarification for gas distributors who have been obliged to compensate their customers even if the loss of supply is not their fault.
Now, in addition to recovering from the water undertaker the costs of repair of a strict liability claim, the gas supplier is owed a duty of care under the common law. This means that if a water undertaker’s negligence caused the interruption to the gas supply, the gas supplier can also now seek to recover under the common law the compensation it was obliged to pay to its customers for loss of gas supply.
Kennedys acted for SGN.
Related item: One Crown Office Row blog - Water into gas should not go
Read more: http://www.kennedyslaw.com/casereview/common-law-remedy-is-not-ousted-by-statute/