Local authority – Water charges – Secure tenancy – Respondent tenant challenging amount charged by appellant landlord for supply of water and sewerage services supplied by water undertaker – Whether Water Resale Orders applying to arrangements between appellant and water undertaker – Whether appellant charging amounts exceeding maximum charge allowable – Appeal dismissed
The respondent was the tenant of a one-bedroom flat. The appellant was his landlord and his weekly rent included a charge for water.
The supply of water and sewerage services was governed by the Water Industry Act 1991. Under section 6, the secretary of state had power to appoint a company to be a water undertaker for an area within England and Wales. A water undertaker had a statutory duty to supply water to domestic premises and to maintain the connection between the undertaker’s water main and the service pipe by which that supply was provided to those premises: section 52(1).
Under section 144(1) of the 1991 Act, an occupier of premises was liable to pay charges to the water undertaker in respect of the supply of water unless “provision to the contrary” was contained in any agreement to which the undertaker was a party.
The appellant had a written agreement made on 14 January 2003 with the water undertaker (TWU) for the supply of water to its thousands of let properties. Under the agreement, TWU did not charge council tenants of unmetered premises for water and sewerage charges in relation to services provided to their premises, but billed the appellant for such charges. Under the agreement, the appellant paid the charges but the amount was reduced to reflect an agreed voids allowance and the appellant was entitled to a commission, which was set against the amount otherwise payable, and resulted in a reduction of the sum paid by the appellant to TWU.
If the appellant was a re-seller for the purposes of the Water Resale Orders 2001 and 2006 then the amount that the appellant could pass on to its tenants was capped and the charge made to the respondent exceeded the cap.
The High Court held that the appellant, under the terms of the 2003 agreement, was a water re-seller: [2019] EWHC 3261 (Ch). The appellant appealed.
Held: The appeal was dismissed.
(1) The critical question was whether TWU had supplied the appellant, directly or indirectly, with a supply of piped water and/or a sewerage service. The appellant argued that it had not: TWU had supplied water directly to the tenants of the various dwellings, and its own function was merely to collect water charges on TWU’s behalf. The respondent said that under the terms of the agreement, TWU had supplied piped water and sewerage to the appellant; and he had bought the water and sewerage service from the appellant in the shape of the water charge payable under the terms of his tenancy. Further, the agreement between the appellant and TWU was one that placed the responsibility on the appellant to pay water charges.
There were many features of the 2003 agreement which, taken together, pointed unerringly to the conclusion that TWU supplied piped water and sewerage services to the appellant; and that the agreement was one which replaced the liability of the occupier under section 144 of the 1991 Act. The appellant was described as “the customer.” Such labels were not chosen at random. They usually encapsulated the concept that they were intended to represent. If the appellant was the customer, it was the recipient of the provision of a good or service; not merely an intermediary. The recitals stated that the customer “will pay for the services”, rather than that it would collect charges payable to TWU. An agreement to pay indicated primary liability.
(2) The appellant submitted that if the 2003 agreement meant what the judge said it meant, the appellant had made a very bad bargain; and had deprived its tenants of valuable rights which they would otherwise enjoy as consumers. Moreover, the Water Resale Order 2001 was reasonably available to the parties at the date of the 2003 agreement; and the parties could not be taken to have intended that their agreement should fall foul of it.
The legal background was a relevant factor in interpreting a contract. There was no direct evidence that either party knew of the Water Resale Orders, although it was a fair inference that TWU did. Further, if there were two realistic interpretations of a contract, on one of which it was valid and on the other it was invalid, the court would choose that interpretation which validated the contract. In this case, however, the 2003 agreement was a valid agreement, as between TWU and the appellant, whether or not it fell within the scope of the Water Resale Orders. The validation principle did not apply. Nevertheless, the process of interpreting a contract, and classifying or categorising it according to some legal description, were different processes.
(3) In the present case, one first had to interpret the 2003 agreement to see what substantive rights and obligations it contained; and then see whether it met the terms of the Water Resale Orders. In the court’s judgment it did. It might well mean that the appellant made a bad bargain but that could not change the effect of the agreement. From the perspective of TWU, it was a matter of indifference whether the agreement did or did not fall within the scope of the Water Resale Orders; so there was no reason to attribute to TWU any particular desire to avoid their effect. The 1991 Act expressly permitted the water undertaker to enter into an agreement placing liability for water charges on someone other than the occupier, so that any potential mismatch was inherent in the scheme of the Act. In any event, the loss of any rights was simply a consequence of the agreement that the appellant in fact made.
There was no real doubt that under the terms of the 2003 agreement TWU supplied water and sewerage services to the appellant, rather than to the appellant’s tenants. The agreement was thus an agreement “to the contrary” for the purposes of section 144. It followed that under that agreement the appellant was a re-seller with the meaning of the Water Resale Orders.
Ranjit Bhose QC and Ruchi Parekh (instructed by Sharpe Pritchard LLP) appeared for the appellant; Martin Westgate QC and Tom Cleaver (instructed by Deighton Pierce Glynn) appeared for the respondent.
Eileen O’Grady, barrister
Click here to read a transcript of Kingston-upon-Thames Royal London Borough Council v Moss
