The Cunliffe Report and Nuisance Caselaw Update

 In this week’s blog, Nicholas Ostrowski covers what is likely to be the most significant re-imagining of the regulation and set up of the water industry since privatisation in 1991 – the Cunliffe Report. Gordon Wignall also provides an analysis of the significant case of Nicholas v. Thomas [2025] EWHC 752 (Ch) which identifies the approach to be taken in establishing a private nuisance concerning ‘sensible’ injury.

 Independent Water Commission: review of the water sector

On 3 June 2025 the Independent Water Commission, chaired by Sir John Cunliffe, delivered its highly anticipated Interim Report.

Although only an Interim Report it covers 108 pages plus an additional 54 page Annex summarising the responses to the Commission’s call for evidence. It is obvious from the outset that this is a substantial piece of work.

Six Pump Court’s Water Law Group will be providing an in-depth assessment of the Interim Report over the coming weeks. At this stage, we thought it may be helpful to summarise the key issues and set out some of the things which may feature in the final report when it is due to be released ‘in the summer’.

By way of a structure, the report is in five sections, each of which represents a substantial and significant critique of the water industry.

First, the strategic direction and planning for the water sector is criticised, specifically, there is said to be no way of prioritising the different, and competing, objectives and implementing those objectives in the current framework.

Secondly, the legislative framework is criticised on the basis that the piecemeal legislative framework is unnecessarily complex and should be rationalised.

Thirdly, the regulatory framework (as distinct from the legislative framework) is said to be deficient on the basis that, particularly, Ofwat’s economic regulatory function is deficient and that a ‘supervisory’ function should instead be adopted.

Fourthly, the industry’s approach to ownership, governance and management is considered and while, given its terms of reference, the Commission does not consider whether wholesale changes to the corporate system to public ownership (such as enforced change in ownership models from private to public) is appropriate, it does dip into the question of the extent to which each company’s investment model is relevant to performance.

Finally, as to infrastructure and asset health, the Report notes that there is a dearth of objective, nationally-applicable industry standards about (1) mapping each company’s assets and (2) assessing the health of those assets. The Commission recommends that a more supervisory  approach by the regulator is required in which Ofwat works hand in hand with the regulated companies to assess what needs to be done.

There is an awful lot in this report and the Six Pump Court Water Law Group’s forthcoming article will delve into some of that detail. Our initial take is that this does represent a substantive re-imagining of the structure and regulation of the entire water section which, nevertheless, leaves a lot still to be determined. For instance, the Report plainly envisages that one core change which is needed is for Ofwat to become a regulator which adopts a ‘supervisory’ approach to regulation, indeed, the word supervisory appears 16 times in the report. This is perhaps not surprising given that the Bank of England (Cunliffe’s former home), after the 2008 world financial crash, adopted what is describes as supervisory regulation through the creation of the Prudential Regulation Authority. However, what a ‘supervisory’ regulator would actually look like in the water sector and how it would differ from the current Ofwat model is left unsaid. Put another way, how would the sort of ‘judgment-based, senior-level understanding of, and engagement with, each individual firm’ which is encompassed in ‘supervisory’ regulation actually work when that regulator is also required, every five years in the price review process, to set the prices which can be charged. Requiring Ofwat to know and intimately understand each business before setting prices seems, at first glance, to make Ofwat’s already difficult pre-setting function even more complex and likely to be challenged.

Nicholas v. Thomas – Establishing a private nuisance concerning ‘sensible’ injury

Nicholas v. Thomas [2025] EWHC 752 (Ch) is a significant case which identifies the approach to be taken in establishing a private nuisance concerning ‘sensible’ injury (such as noise, dust, smells).

This is the first reported case following the Supreme Court decision in Fearn v. Tate Gallery [2023] UKSC 4.

It should be remembered that the Supreme Court was divided in Fearn. Sales JSC, in the minority, was concerned that the decision of the majority constituted a “major change in the law” and one which would not always result in the fairest balance between neighbouring land uses according to traditional principles of reciprocity (the principle of ‘give and take’).  His view was that heavy reliance on an assessment of the “common and ordinary use of land”, especially that of the defendant was wrong, since this would undermine the correct and traditional approach, which was one of “objective reasonableness” overall.

It would have been possible for the next significant judgment after Fearn to have moved the target somewhat closer to the aim of those justices who were in the minority. In fact, the trial judge, HHJ Russen KC, in distilling nine distinct propositions from the judgment of the majority (Leggatt JSC), has applied a ‘two-stage test’ which has moved target farther away.

First, HHJ Russen KC established the proposition that: “any decision that the defendant’s activity is unlawful (and, therefore, constitutes an undue or unreasonable interference with the claimant’s enjoyment of his land) must at the first stage rest upon the twin-limbed conclusion that there has been a substantial interference with the ordinary use of the claimant’s land”.

Then, secondly, identifying an “exculpatory second limb of the test”, the judge continued: “The same notion of the common and ordinary use of land applies to the next stage of any determination of liability which is to consider the nature of the defendant’s activities upon his land.  In the absence of malicious behaviour …, if they constitute no more than the common and ordinary use of his own land and are done with proper consideration for his neighbours – i.e. “conveniently done” in the words of Bramwell B [in Bamford v. Turnley] – then he will not be liable”.

There is a very great deal to consider in this judgment, for instance as to foreseeability, the assessment of damages and even whether there is really any distinction between a ‘sensible’ nuisance and negligence (or even whether this was properly a claim in nuisance at all).

The judgment of HHJ Russen KC has taken Fearn to its next logical step. The case has placed in even sharper focus the “common and ordinary use of land”, especially on the part of the defendant, an approach which Sales JSC thought would “seriously distort the tort” by placing “excessive weight on one side of what is an inextricably two-sided relationship”.

This is a summary of an article which will appear in the 16 June edition of the Solicitors Journal. Gordon Wignall maintains a website at wiglaw.co.uk which contains further information about the law of nuisance.