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Court of Appeal upholds ruling that council overcharged tenants for water

The Royal Borough of Kingston-upon-Thames has lost its appeal to the Court of Appeal over a High Court ruling that it overcharged tenants for water.

The respondent was Derek Moss, the tenant of a one-bedroomed flat and whose weekly rent included a charge for water.

Like many local authority landlords, Kingston had a written agreement with the water undertaker (in this case Thames Water Utilities or TWU) for the supply of water to its thousands of let properties.

The relevant agreement was made on 14 January 2003 ("the 2003 agreement"). If Kingston was a re-seller for the purposes of the Water Resale Orders 2001 and 2006 then the amount that the council could pass on to its tenants was capped.

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The main issue on the appeal was whether Kingston, under the terms of the 2003 agreement, was a water re-seller before it was varied in 2017.

In Royal Borough of Kingston-Upon-Thames v Moss [2019] EWHC 3261 (Ch) Mr Justice Morgan J held that it was and the tenants had been overcharged because the council had not passed on the discounts it had arranged with TWU.

Before the Court of Appeal it was common ground that if Kingston was a water re-seller, the charge that it had made to Mr Moss exceeded the cap.

In The Mayor & Burgesses of the Royal Borough of Kingston-Upon-Thames v Moss [2020] EWCA Civ 1381 Lord Justice Lewison said: “There is, in my judgment, no real doubt that under the terms of the 2003 agreement TWU [Thames Water Utilities] supplied water and sewerage services to Kingston, rather than to Kingston's tenants.

“The agreement was thus an agreement ‘to the contrary’ for the purposes of section 144 [of the Water Industry Act 1991]. It follows that under that agreement Kingston was a re-seller with the meaning of the Water Resale Orders.”

The Court of Appeal judge noted that Kingston had raised one further ground of appeal relating to the interpretation of a clause in the tenant’s tenancy agreement. “But that ground only became relevant if Kingston succeeded on the main ground. Since it has not, no more needs to be said about the detailed terms of the tenancy agreement.”

Lord Justice Lewison, with whom the Master of the Rolls and Lord Justice Arnold agreed, said: “Accordingly, I consider that on the main issue raised on this appeal the judge [Mr Justice Morgan] was right for the reasons that he gave; and that Newey J was also right in his interpretation of an agreement in the same form between TWU and Southwark LBC: Jones v Southwark LBC [2016] PTSR 1011.”

Law firm Deighton Pierce Glynn, which acted for Mr Moss, said: “The judgment appears to be the last word on councils’ attempts to portray the contractual arrangements they had in place with Thames Water as a type of agency arrangement.

“The Court has unanimously found that it was not and that it functioned as a sale of water to the council, rendering the council’s sale of water to tenants a ‘resale’. That meant that Kingston was required by the Water Resale Orders 2001 and 2006 to pass the discount they had negotiated with Thames Water onto tenants. This they failed to do. They are now liable to refund tenants the difference.”

The firm said that some local authority tenants had now claimed for repayment of excess water charges in light of the Jones judgment and this pressure was likely to increase following the Court of Appeal judgment.

In June 2016 the London Borough of Southwark decided to repay 48,000 current and former tenants £28.6m following Mr Justice Newey's High Court ruling earlier in the year that it had overcharged for water and sewerage for 12 years.

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