The Mayor & Burgesses of the Royal Borough of Kingston-Upon-Thames v Moss

For contractual classification purposes, the court must first construe the agreement to identify the substantive rights and obligations, and only then apply the relevant legal category. A formal agreement may replace the occupier’s default liability under section 144 of the Water Industry Act 1991 where it makes the local authority primarily liable to the water undertaker. If the agreement shows that the undertaker supplied water and sewerage services to the local authority, the authority may be a re-seller under the Water Resale Order 2001 and the Water Resale Order 2006. Labels such as commission or collection on behalf of the undertaker are not decisive. Earlier arrangements and comparable agreements cannot displace the meaning of the later written contract.

Kingston was the landlord of Mr Moss’s flat. His rent included a charge for water. Under a 2003 agreement, Thames Water Utilities Ltd supplied water and sewerage services to premises managed by Kingston, and Kingston agreed to pay the charges subject to stated reductions.

Morgan J held that Kingston was a water re-seller and that the charge exceeded the statutory cap: [2019] EWHC 3261 (Ch). Kingston appealed. It argued that Thames Water supplied the tenants directly, that Kingston merely collected charges on Thames Water’s behalf, and that earlier arrangements and a comparable agreement supported that construction. The central issue was whether the 2003 agreement made Kingston primarily liable for the services and therefore a re-seller.

The appeal was dismissed.

1. The court adopted a two-stage approach. It first construed the 2003 agreement to ascertain the substantive rights and obligations created by its language. It then classified that legal relationship. The parties’ labels and any supposed intention to create a particular legal category were not conclusive: paras [39]-[42].
2. The 2003 agreement had to be interpreted primarily from its own terms. Earlier arrangements, pre-contractual negotiations and internal documents were of little assistance, particularly because clause 9.1 expressly superseded previous arrangements and the agreement contained an entire agreement clause: paras [15]-[17], [22] and [27]. The court also noted the need for appellants to identify challenges to factual findings clearly in their grounds and skeleton arguments: para [19].
3. The agreement contained numerous indications of primary liability. Kingston was described as the Customer; it agreed to pay the Provider’s charges; Thames Water invoiced Kingston; payment was due whether or not Kingston recovered money from tenants; the voids allowance could require payment when premises were unoccupied; payment dates differed from the tenants’ weekly payments; Kingston bore the risk of late payment; and the reconciliation provisions could preserve liability after demolition: paras [23]-[23](viii).
4. The reduction called commission did not create an agency relationship. It was not dependent on Kingston’s collections and was properly characterised as a reduced price reflecting the transfer of collection costs and non-payment risk. The VAT invoice provision did not alter that conclusion: paras [24]-[27].
5. The agreement therefore placed liability for the services on Kingston, contrary to the default occupier liability in section 144 of the Water Industry Act 1991. Thames Water supplied the water and sewerage services to Kingston, and Kingston was a re-seller within the Water Resale Orders: paras [39]-[44].
6. Rochdale MBC v Dixon was materially different because its agreement expressly concerned collection on behalf of the water authority and contained obligations relating to tenants, invoicing and complaints. Its reasoning could not determine the construction of the 2003 agreement. The court accepted that collection on behalf of an undertaker could mean collection in place of, instead of, or for the undertaker, but Kingston’s contractual payment obligation meant that its collections were not for Thames Water: paras [28]-[37].
7. The validation principle did not apply because the 2003 agreement was valid between Kingston and Thames Water whether or not the Water Resale Orders applied. The remaining tenancy-agreement ground was unnecessary once the main ground failed. The appeal was dismissed: paras [38]-[47].

• Court of Appeal (Civil Division) — dismissed Kingston’s appeal and upheld the conclusion that it was a water re-seller under the 2003 agreement: [2020] EWCA Civ 1381.
• High Court of Justice, Business and Property Courts — Morgan J held that Kingston was a water re-seller and that its charge exceeded the applicable cap: [2019] EWHC 3261 (Ch).