A social landlord is found to be in breach of the Water Resale Orders by overcharging its tenant
The Court of Appeal decision in Royal Borough of Kingston-upon-Thames v Moss [2020] EWCA Civ 1381; [2020] PLSCS 192 has failed to provide the succour hoped for by many social landlords following the earlier decision of the High Court in Jones v Southwark London Borough Council [2016] EWHC 457 (Ch); [2016] PLSCS 72.
The statutory framework
Water undertakers have a statutory duty to supply water to domestic premises under the Water Industry Act 1991. A domestic water supply can be demanded from an occupier of residential premises or the owner of such premises pursuant to sections 52(1) and 52(5) of the Act. Section 144 provides that liability for the payment of water charges rests with the occupier, save to the extent that provision to the contrary is made by any agreement to which the undertaker is a party.
A person who is not a water undertaker can supply water to third parties with the help of services provided by a relevant water undertaker. Under section 150 of the Act, Ofwat has the power to fix a maximum charge for the water resale. A third party can recover any charges paid in excess of the permitted maximum charge.
KEY POINT
- Construing the terms of previous contracts as a means to interpreting a current contract is usually unhelpful
The Water Resale Orders 2001 and 2006 (the WROs) were made pursuant to section 150 of the Act. A “reseller” under the WROs includes any non-water undertaker who provides a supply of piped water to a “purchaser”, which has been supplied directly or indirectly to the reseller by a water undertaker. A “purchaser” includes a person occupying a private dwelling who buys water and sewerage services from a reseller. The WROs cap the amount a reseller can charge a purchaser.
The problem
In January 2003, Kingston entered into an agreement with its relevant water undertaker, Thames Water Utilities (TWU), for domestic water supply to Kingston’s unmetered tenants. Under the terms of the agreement, TWU invoiced Kingston globally for those charges, subject to an agreed percentage reduction in the amount charged to reflect a voids allowance and commission.
Derek Moss occupied a flat pursuant to a secure tenancy granted by Kingston. Moss’s rent included a water charge levied by Kingston. Moss argued that, under the terms of the 2003 agreement and for the purposes of the WROs, Kingston was a water reseller. He argued that TWU had supplied piped water and sewerage services to Kingston, which he had, in turn, purchased and paid for via the charges levied by Kingston as part of his rent. It was common ground between the parties that if Kingston was found to be a water reseller, the water charges levied by Kingston exceeded the statutory cap.
Kingston disputed Moss’s claim. Kingston argued it was acting as an agent of TWU under the terms of the 2003 agreement by collecting the tenants’ charges fixed by TWU. The High Court disagreed. It found Kingston to be a water reseller under the terms of the WROs. Kingston appealed.
Déjà vu
The key question for the Court of Appeal was whether “TWU [had] supplied Kingston, directly or indirectly, with a supply of piped water and/or a sewerage service”.
This appeared to be a straightforward exercise in interpreting the WROs and the 2003 agreement. Yet Kingston argued the question could only be answered if the Court of Appeal also had regard to pre-contractual negotiations and agreements between Kingston and a previous water authority under a different statutory regime. The Court of Appeal rejected this proposition. It found that construing the terms of previous contracts as a means to interpret the 2003 agreement would be “unhelpful”.
Kingston also failed to persuade the Court of Appeal that its relationship with TWU under the terms of the 2003 agreement should be analysed within the prism of agency. The language of the agreement ran contrary to an agent/principal relationship.
Construing the terms of the 2003 agreement, the Court of Appeal concluded that Kingston was a water reseller within the meaning of the WROs. TWU directly or indirectly supplied Kingston with piped water and/or a sewerage service. Accordingly, for the purposes of section 144 of the Act, the 2003 agreement was an agreement “to the contrary”. As had been agreed between the parties from the outset, the consequence of Kingston being found to be a water reseller was that it had overcharged Moss for the supply of water between 2000 and 2013.
That sinking feeling
If the decision in Jones was a shot across the bows for social landlords, this decision is a direct hit. It again opens up the possibility of tenants seeking to bring claims for overpaid water charges in circumstances where their social landlords have similarly worded agreements with water undertakers.
More significantly, it also permits such tenants to challenge the basis of any arrears figure in a claim brought against them by their landlord for possession based on rent arrears grounds. A tenant facing such a claim would be entitled to offset any overpayments against the alleged arrears.
Elizabeth Dwomoh is a barrister at Lamb Chambers
