Jones v London Borough of Southwark

A local authority collecting water charges is not necessarily acting as the water undertaker’s agent. The court must construe the agreement in its documentary, factual and commercial context, giving particular weight to its language and the usual incidents of agency. An unconditional obligation to pay the undertaker, payment of a net sum after allowances, no duty to account, no control or authority provisions, and the absence of other agency obligations may indicate a purchase and re-sale arrangement. Where the authority buys and re-sells water and sewerage services, the Water Resale Order 2006 applies. For unmetered supplies, the maximum charge is calculated by reference to the net amount payable by the re-seller to the undertaker, including contractual allowances and reductions.

Southwark collected water and sewerage charges from tenants of its unmetered properties and paid Thames Water under a 2000 agreement. The agreement described Southwark as the customer, required it to pay Thames Water’s charges, and allowed reductions for void properties and commission. Kim Jones claimed that Southwark was a re-seller within the Water Resale Order 2006 and had charged more than the permitted maximum. Southwark contended that it was Thames Water’s agent and that the Order did not apply. The issues concerned the effect of Thames Water’s charges schemes, the proper construction of the 2000 agreement, and the calculation of any maximum charge.

1. Charges schemes. Under sections 142 and 143 of the Water Industry Act 1991, a charges scheme could provide that the owner of premises let on a tenancy of less than 12 months or on a licence was chargeable for water and sewerage services. Southwark was therefore liable to Thames Water for the relevant services supplied to Flat 110 between 1 April 2002 and 31 March 2010. For other periods, Miss Jones bore liability unless a contrary agreement with Thames Water applied.
2. Construction of the 2000 agreement. The agreement had to be construed by reference to its language, relevant provisions, purpose, known background and commercial common sense, while disregarding subjective intentions. Negotiating evidence could not be used to infer contractual meaning, although it could establish relevant background facts. The court also considered the principles in Arnold v Britton [2015] UKSC 36 and Chartbrook Ltd v Persimmon Homes Ltd [2009] UKHL 38.
3. Agency. The 2000 agreement did not create a true agency relationship. Southwark was unconditionally required to pay Thames Water’s charges, the amount payable was a net sum after allowances and reductions, and there was no obligation to account, no provision for Thames Water’s control, no duty of care or skill, and no authority for Southwark to affect Thames Water’s legal relations with tenants. The labels “customer”, “commission” and “agency” were not decisive. The agreement instead involved Southwark buying water and sewerage services from Thames Water and re-selling them to tenants. The court distinguished the more clearly agency-based arrangement in Rochdale MBC v Dixon [2011] EWCA Civ 1173, while considering Lambeth LBC v Thomas (1997) 30 HLR 89.
4. Maximum charges. Paragraph 6(2)(b) of the Water Resale Order 2006 required the amount payable by Southwark to Thames Water to be determined after the contractual void allowance and commission had been deducted. Those reductions could not be treated as separate transactions. Southwark had therefore charged Miss Jones and other tenants with unmetered supplies more than the Order permitted, unless and until the 2013 deed took effect. The issue of the deed’s validity was adjourned because Thames Water was not a party.