Royal Borough of Kingston-Upon-Thames v Moss

A contractual arrangement under which a water undertaker supplies services to a local authority, which pays discounted charges, is not transformed into an agency, assignment or other collection arrangement merely because the result is commercially unattractive. The agreement must be construed according to its language and admissible background. Where the arrangement makes the local authority a Re-seller and the tenant a Purchaser under the Water Resale Orders, the maximum charge is calculated by reference to the amount actually payable by the local authority to the undertaker, after contractual allowances and reductions, subject to permitted administration charges.

The claimant local authority charged its secure tenant for unmetered water and sewerage services. Under a 2003 agreement, the water undertaker billed the authority for services supplied to council properties, subject to a 3.5% voids allowance and a further 9.3% reduction described as commission.

The tenant claimed that the authority was a Re-seller under the Water Resale Orders 2001 and 2006 and had exceeded the permitted maximum charges. He also relied on the tenancy agreements and challenged provisions in the undertaker’s charges schemes.

1. Construction of the 2003 agreement. The agreement provided for the water undertaker to supply water and sewerage services to the authority, for which the authority was to pay charges calculated after the 3.5% voids allowance and 9.3% commission reduction. Its language did not support an agency, an assignment of future charges, or an agreement for the authority to collect charges on behalf of the undertaker.
2. The statutory power permitting a local authority to collect charges on behalf of an undertaker formed part of the background but did not determine the agreement’s construction. The court had to determine the effect of the agreement for the purposes of the Water Resale Orders 2001 and 2006. Commercial common sense could not justify rejecting the natural meaning merely because the bargain was imprudent.
3. Water resale. Because the undertaker supplied services to the authority and the authority supplied them to, and charged, the tenant, the authority was a Re-seller and the tenant a Purchaser from 14 January 2003 until the deed executed on 3 August 2017.
4. For the purpose of calculating the maximum charge, the amount payable by the authority to the undertaker was the amount after the voids allowance and commission reduction. The authority could add the permitted administration charge of 1.5 pence per day per purchaser.
5. The authority had charged more than the maximum permitted by the Orders. The tenant therefore had a right to recover overpayments under section 150(5) of the Water Industry Act 1991 and paragraph 10(1) of the 2006 Order.
6. The revised tenancy agreement restricted recovery to the amount payable by the authority to the undertaker, including the 9.3% reduction, but did not require deduction of the 3.5% voids allowance. The tenant had nevertheless overpaid under the revised terms, subject to the scope of any restitutionary claim and possible defences.
7. On an alternative issue, the charges-scheme provision treating the owner as liable where premises were let on a tenancy of less than 12 months was invalid. If valid, it would have applied to a weekly tenancy. The tenant’s transparency claim was not pursued.