It leads to the prospect of defended arrears possession claims and counterclaims for alleged overpayments.
The facts of the case and its impact is reviewed below:
1. What were the core facts of this case?
The decision relates to 37,000 properties without water meters where Thames Water (TW) supply water and sewarage services. Southwark entered into an Agreement with TW in 2000 to make payments for water supply and services. These payments were made regardless of whether Southwark was able to recover any payments from tenants or not. Southwark received a discount on the water bill by way of a commission charge and void allowance. (Southwark estimated that ending their agreement with TW would cause a £2.3m loss to their Housing Revenue Account).
The Agreement did not contain any reference to tenants or to the collection of water charge payments by Southwark from the tenants nor did it place any duty of care on Southwark.
The High Court held that at least until 2013 Southwark was acting as a ‘re-seller’ of water services and not acting as an Agent for TW.
(The question of the status of a Deed of Clarification entered into between the parties in 2013 to confirm that the relationship was an Agent/Principal relationship and not one of Re-seller was adjourned as TW are not yet and needed to be a party to the proceedings to argue that issue.)
2. How did the court approach the legislative framework and the Water Resale Order?
The legislation the Court reviewed is the Water Industry Act 1991 and the Water Resale Order 2006.
The Water Re-Sale Order 2006 limits the amount that a purchaser of water can charge when re-selling the water to the final consumer (in this case Southwark’s tenants). The Order only entitles re-sellers to impose very modest administration charges. This decision found that if an amount above the maximum is charged then repayment to the tenant is required.
Section 150 of the Water Industry Act 1991 gives water consumers a right to recover any charges paid in breach of the amounts allowed by the Water Re-Sale Order.
The Court decided that a “consumer” under the Water Industry Act 1991 did not need to be the person who was in occupancy of the premises benefiting from the services.
A previous case Rochdale BC –v- Dixon in 2011 involving a similar but not identical agreement had found the opposite –that Rochdale were the Agent not a Re-seller.
3. How did the court approach the 2000 Agreement?
The Court considered the 2000 Agreement on the basis of the rules for construction of contracts and previous case law. The Court considered whether it contained the necessary requirements for an Agency relationship. The Court placed weight on the fact that the Agreement did not contain any reference to Southwark owing any duty of care to TW with regards to the collecting and charging of the water charges and as a result it was not construed as an Agency agreement. Southwark was therefore a “re-seller”.
4. Practical implications of this decision?
First landlords who have agreements with water authorities need to consider those agreements in light of this decision. If their agreements cannot be Agency agreements then landlords need to: –
- Check the amount they are charging tenants does not exceed the maximum amount chargeable under the legislation;
- Consider whether to terminate existing agreements and require tenants to pay for their water supply directly which may require variation of tenancy agreements;
- Pending an appeal by Southwark which seems inevitable, take advice on how to deal with rent arrears possession proceedings where water rates are part of the rent arrears as defences and counterclaims should be expected.
For more information
Please contact Zishaan Saleem
Latest news
Anthony Collins advised B3Living on strategic acquisition of 250 social homes
The social housing team at Anthony Collins advised Hertfordshire-based B3Living on the successful acquisition of 250 social homes from Orbit Group.
Tuesday 19 November 2024
Read moreAnthony Collins promotes and appoints 19
19 promotions and appointments have been announced including two partners, two legal directors, two senior associates and four associates, as well as a number of appointments within the central management […]
Monday 4 November 2024
Read moreLatest webinars and podcasts
Podcast: Who gets the microwave? Episode 2 – Non-court dispute resolution
Listen to the second in a series of podcasts from our matrimonial team where Tom Gregory, Chris Lloyd-Smith and Maria Ramon put down their litigation weapons and discuss the importance of […]
Friday 22 November 2024
Read morePODCAST: Who gets the microwave?
The first in a series of podcasts from our matrimonial team begins with the team discussing what happens to pets during divorce and separation.
Friday 16 August 2024
Read more