Thames Water Utilities Ltd v Ministry of Defence

A sewerage undertaker may calculate charges by reference to the volume of water supplied to premises, even where some water is lost before entering the public sewers. “Services provided” includes the wider facilities and functions supplied under the statutory scheme, not merely disposal of water discharged into the sewers. A charges scheme adopting that basis is within section 142 of the Water Industry Act 1991. A common law restitutionary claim is not barred merely because the dispute concerns a statutory scheme, but it fails where the charges were lawful and there was no overpayment.

The Ministry of Defence sought restitution of alleged overpayments for sewerage services at military barracks. It alleged that leakage from on-site pipework meant that less water entered the public sewers than was supplied, and that payments had been made under a mistake of fact.

The Technology and Construction Court decided that the court had jurisdiction to hear the restitutionary claim but held that Thames Water was not entitled to charge by reference to the volume of water supplied. Thames Water appealed. The central issues were whether sections 142 and 143 of the Water Industry Act 1991 permitted that charging basis and whether the statutory scheme excluded restitution.

1. Appeal allowed unanimously. The charges imposed by Thames Water were lawful, and the Ministry of Defence had no right to recover the sums paid.
2. “Services provided” in section 142 of the Water Industry Act 1991 has a broad meaning. It includes the customer’s entitlement to communicate with a system of public sewers which the undertaker must provide, maintain, empty and use to deal effectively with sewage. “Services” includes facilities, and sewerage services include sewage disposal and other services required for the undertaker’s functions.
3. Section 142(4) gives the undertaker discretion as to the matters, methods and principles used to calculate charges. Charging by reference to water supplied was therefore within the statutory power, even though some water was lost through leakage before reaching the sewers. The charges schemes also provided for abatements in appropriate cases.
4. The obligation introduced by section 144A(9), requiring charging by reference to the volume of water supplied in specified circumstances, reinforced that construction.
5. The court was required to assume that a restitutionary claim was possible for the preliminary issue. Restitution nevertheless depended on overcharging. There was no overcharging because the charges were lawfully calculated under a section 143 charges scheme within the power conferred by section 142.
6. Section 18(8) did not bar the claim. As explained in Marcic v Thames Water Utilities Ltd [2004] 2 AC 42, the saving words preserve remedies arising independently of a statutory contravention. A genuine claim for repayment caused by, for example, a faulty meter would not be barred. This claim failed on its merits because the statutory basis of charge was lawful.

• Court of Appeal (Civil Division): allowed Thames Water’s appeal and directed that the charges were lawful and that the Ministry of Defence had no right in the action to recover the money paid.
• Queen’s Bench Division, Technology and Construction Court: on 19 January 2006, Her Honour Judge Frances Kirkham decided the preliminary issues in favour of the Ministry of Defence on the central charging issue, holding that Thames Water was not entitled to charge by reference to the volume of water entering the sites.