Dwr Cymru Cyfyngedig v Corus UK Ltd

Statutory water undertaker – Agreement with respondent to supply non-potable water to steelworks – Agreement for fixed term after which charges to be determined by statutory regulator if not agreed – Judge holding regulator lacking authority to determine charges where charges scheme implemented – Sections 55 and 56 of Water Industry Act 1991 – Appeal allowedThe respondent water undertaker reached an agreement with the appellant’s predecessor by which it agreed to supply up to 91 megalitres of non-potable water per day to the appellant’s steelworks at rates that were to be calculated in accordance with the mechanism set out in the contract. Clause 12 provided that the agreement should be for a fixed term ending in March 2004. Clause 17, headed “Renewal Clause”, provided that, upon expiry, the right to receive non-potable water for steel production would continue on the terms “agreed between [the parties] at that time or, in the event of failure to agree, determined by the Director General of Water Services under Section 56 of the Water Industry Act 1991 or any succeeding Act”. Section 56(5)(a) provided that the director-general’s duty to determine charges in accordance with any request made under section 55 would apply only where no provision was in place under a charges scheme implemented pursuant to section 143.In April 2003, the respondent introduced a tariff for large users of non-potable water as part of its charges scheme. It brought proceedings against the appellant to recover water charges from April 2004 to March 2006 on the basis that, following the expiry of the fixed term of the contract, the appellant had been liable to pay for water in accordance with that tariff. It contended that clause 17 had not been intended to confer any contractual rights upon the appellant but had merely set out the position that would arise under the statutory provisions at the end of the fixed term. The appellant claimed that clause 17 had a contractual effect entitling it to a continued supply on terms to be agreed or determined by the Water Services Regulation Authority, as successor of the director-general, under section 56. The judge gave summary judgment in favour of the respondent under CPR 24.2. He held that clause 17 did not contemplate that the director-general would determine the charges if a charges scheme had been introduced by that time, because section 56(5)(a) expressly excluded his jurisdiction to do so. The appellant appealed.Held: The appeal was allowed. The terms of the supply, and especially the charging rates, were inevitably of great importance to a customer whose business depended upon the use of large volumes of water. It was obvious that such customers would not want to place themselves at the mercy of a monopoly supplier if they could avoid doing so. The obvious solution was to enter into an agreement for future supplies under which the price would be fixed by arbitration in the absence of agreement. The fact that the opening words of clause 17 referred to the expiry of the agreement was insufficient to demonstrate that the parties were not intending to provide for their respective rights and obligations thereafter. In the context of an agreement providing for the supply of water on specific terms for a prescribed period, the expression “the expiry of this agreement” was apt to refer simply to the expiry of the period during which the agreed terms applied. Where clause 17 stated that the respondent should “continue” to have a right to be supplied, it indicated that the parties were not contemplating that their relationship under the agreement would come to an end but that they were seeking to provide for their continuing rights and obligations when the original period expired.The existence of a contract for the supply of water did not take matters outside the terms of section 55; the contract reflected both the occupier’s “request” for section 55 purposes and the water undertaker’s response to it. The effect of clause 17 was that the parties had agreed that the respondent would continue to receive supplies under the agreement, rather than simply the statutory provisions, as from April 2004. In those circumstances, the relevant “request” had been made long before any charges scheme was introduced, such that section 56(5)(a) did not apply and the relevant authority had the power to determine the terms of charging under section 56(1) in accordance with the requirements of section 56(5)(b). Accordingly, clause 17 provided an enforceable mechanism for determining the terms of the continued supply.Dinah Rose QC (instructed by DLA Piper UK LLP, of Manchester) appeared for the appellant; Nigel Pleming QC and Aidan Robertson (instructed by Herbert Smith LLP) appeared for the respondent.Sally Dobson, barrister