Should judges hold Ofwat accountable?

This is the second of two articles considering judges’ powers to review the way in which the water regulator, Ofwat, exercises its enforcement powers and complies with its statutory duty to police sewerage companies. In the last article we considered Ofwat’s duty to regulate sewerage companies. We believe Wild Justice demonstrated there is an arguable case for judicial review in that Ofwat have failed to discharge their duty to ensure compliance with section 94 1991 Act; so was the High Court wrong not to review the legality of Ofwat’s stance to policing sewerage companies?

In Wild Justice v Ofwat [2022] EWHC 2608 (Admin) the High Court concluded there were no arguable grounds and the allegation that Ofwat were taking ‘an entirely passive stance’ to enforcement and failing to obtain information was rejected as too general or generic.

While it can be difficult to formulate grounds of challenge to public body decision making, there are two important features that are worth considering.

First, this was the “permission stage” in the Judicial Review process. A court will refuse permission to apply for judicial review unless satisfied that there is an arguable ground for judicial review which has a realistic prospect of success. Ofwat had rejected a disclosure request as being disproportionate and the High Court had to proceed without that information. In the absence of such disclosure, it seems inevitable that a court could characterise any claim as being put in “sweeping terms”. Moreover, the court could not “go behind Ofwat’s assertion” that it complies with its duties (Judgment at [51] to [55]). This is frustrating, but whether it is right requires a wider consideration of the nature of judicial review proceedings.

Second, Ofwat did not dispute Wild Justice’s standing to bring the claim i.e., there was sufficient public interest. Moreover, Ofwat didn’t contend that the events were incapable of amounting to a failure by them to ensure sewerage companies comply with environmental law. Quite the opposite: Ofwat told the High Court that, as it was under investigation by the newly created Office for Environmental Protection (OEP) in relation to a complaint made by an NGO this lessened the public interest in a judicial review. The High Court remarked that “The public may be reassured to hear that the OEP is investigating”. This raises an important question regarding access to environmental justice.

The nature of review

Disclosure

While Wild Justice sought disclosure of relevant documents showing inaction, Ofwat refused the request as disproportionate. Indeed the “Court does not have a set of documents setting out express consideration, in Board meetings or otherwise, of monitoring or enforcement methods.” By way of comparison, the EA publishes a ‘regulatory position statement’.

It is recognised that where objections to disclosure are made, for example, on the ground of the volume of the material concerned, it may be appropriate for the court to consider the material first. But disclosure is not automatic, and the court can at its discretion order disclosure. While disclosure orders almost always follow a grant of permission, it’s worth remembering Ofwat are under a duty of candour that applies to every stage of the proceedings. It strikes us as remarkable that there was no disclosure given the cause and effect of failing sewerage; in the first article we argued this is the right moment for an Ofwat mea culpa .

Proof

Ordinarily there is a persuasive burden of proof on the party who substantially asserts the affirmative of the issue: “He who asserts must prove”. That principle can be departed from but is the starting point in judicial review proceedings see Viscount Maugham in Constantine Steamship Line Ltd v Imperial Smelting Corporation Limited [1942] AC 154 (HL) [174].

The burden of proof is rarely the issue at permission stage of a judicial review claim; that is, the refusal to grant Ofwat permission is a matter of judgement. The court’s refusal was ostensibly the court refusing to exercise an inquisitorial jurisdiction. This seems wrong. Ultimately Ofwat’s position that the public could be reassured by the extant OEP investigation that is tantamount to saying there is something worth investigating.

Access to environmental justice

Ofwat argued the public interest was lessened where they are under investigation by the OEP. That accepts Ofwat are potentially accountable for an inadequate sewer system, but should the High Court or the OEP hold Ofwat accountable?

The OEP is newly created under the Environment Act 2021. The OEP’s appetite and capacity for enforcement (using “environmental review”) is, at the time of writing, an unknown quantity; accordingly, it would be for any court considering the relationship between judicial review and environmental review to first take stock and consider the wider powers of the courts to get Ofwat to regulate investment where loss and damage is caused by inadequate sewers.

There is no cause of action in trespass or nuisance for inadequate sewers (the principle in Marcic above). A cause of action in nuisance could arise where the nuisance resulted from a negligent act “at an operational level“, but that is not the cause for concern here . In any event the court won’t grant relief requiring construction of new sewers (Marcic). Crucially there is no direct remedy under the 1991 Act scheme.

The only option is indirect. In other words, individuals, NGOs and public interest groups like Wild Justice rely on judicial review to challenge the duty under the 1991 Act. This is fundamental to access to justice. The House of Lords in Marcic (Lord Hope [73]) stated:

“The question which Parliament had to address was how best to deal with this problem [of inadequate sewerage] in the public interest, while respecting the interests of the affected individual. It did so by means of the statutory scheme, in which the director [Ofwat] has a central role…. The fact that decisions of the director [Ofwat] are subject to judicial review provides a further important safeguard.” (our emphasis).

We argued the problem of inadequate sewers is a matter of economic retardation. That has not been halted since Helm’s analysis was published over a decade ago and, moreover, the courts have described judicial review of Ofwat, an economic regulator, as an “important safeguard”.

Whether or not the OEP is now the guardian of public interest in environmental justice was not something the court had to decide or will decide, as permission was refused for other reasons. However, there is a serious question of access to environmental justice if the OEP’s powers to commence environmental review leads to ineffective remedies noting the qualifications imposed against public bodies, like Ofwat.

It falls to the OEP to be satisfied on the balance of probabilities that there has been a failure to comply with environmental law. Given the disclosure issues here that risks no-enforcement action unless the OEP obtains disclosure of environmental information. If they don’t and where it is difficult for complainants to obtain environmental disclosure using the Environmental Information Regulations 2004 there is a real concern that cases won’t be properly investigated.

If the OEP bring a successful environmental review and a declaration granted that does not affect the validity of Ofwat’s conduct. The court would still need to grant a mandatory order and they are already reluctant to grant such orders. They have been described as ‘elusive’ (R v IRC ex p Federation of Small Business [1982] AC 617).

Section 38 Environment Act 2021 limits the court’ ability to grant relief. Other than a declaration (that doesn’t affect the validity of Ofwat’s conduct) the court’s powers to grant any other order are restricted where it would prejudice other’s rights. The type of balancing exercise identified in Marcic favouring the public interest over the interests of the affected individual might lead to a chilling effect on OEP’s use of environmental review. That is not the same in judicial review proceedings. To persuade the court to overlook any restriction on its right to grant a remedy, OEP will need to persuade the court it is necessary to grant a particular remedy to prevent serious environmental damage and there is exceptional public interest in doing so.

Comment

Clearly there has been a chronic failure to police the underinvestment in sewers by sewerage companies. The result is that sewers are increasingly inadequate leading to an unacceptable level of untreated sewage pollution.

Section 38 Environment Act 2021 limits judicial discretion in environmental review whereas judicial review remains subject to judicial development. It certainly remains an important safeguard. Taken together with a lack of available redress through the courts, we believe the statutory framework has given Ofwat what is tantamount to immunity from environmental justice when it comes to inadequate sewers being the cause of untreated discharges.

Human rights claims have received little attention in this area and may offer a way round this to secure access to environmental justice, however. This is not without difficulty. It is problematic to mount a human rights claim relating to sewage discharge where you need a claimant personally affected by the breach which rules out public interest groups and NGOs like Wild Justice. It also rules out the individuals who organise themselves into pressure groups as they cannot stake a personal claim to rivers and coastal waters.

Elsewhere, the courts have made great strides to extend “investigative” duties under human rights law where Article 2 (right to life) and 3 (prohibition on torture/inhumane treatment) are concerned (see landmark victories like DSD & NBV v. Commissioner of Police for the Metropolis [2018] UKSC 11). Where there is a structural failure then the courts have been willing to recognise public legal duties. Such a public duty is real and not abstract. Those duties can require the state to take positive steps to protect human rights as opposed to merely comply with a negative duty not to violate Convention rights. In the right circumstances, that could extend to require an effective investigation where Article 8 (Right to respect for private and family life, home…) is engaged (M.C. v Bulgaria No. 39272/98).

We believe there is potential for human rights litigation, but it would be pioneering litigation requiring evidence of structural failures, together with an identifiable group of claimants who can be shown to have suffered disproportionate interference with their Convention rights and the state (through Ofwat – which enjoys quasi-criminal enforcement powers) has failed to take positive steps to protect those rights. It would be brought as a civil claim as opposed to an application for judicial review but would necessarily involve the courts evaluating evidence of Ofwat’s approach to regulation and whether it had effectively complied with its investigative duties.

For the time being, however, human rights issues are not being litigated and so it appears to us there is both immediate public interest and (for reasons discussed) grounds to proceed to judicial review of Ofwat’s policing of sewerage companies. We believe that would take a step in the right direction – away from years of unaccountability and failures to a fair apportioning of blame and responsibility for underinvestment and inadequate sewers.

Permission was refused BUT watch this space! Wild Justice have appealed the permission refusal to the Court of Appeal.