The Royal Borough of Kingston-upon-Thames (“Kingston”) entered into an agreement with Thames Water Utilities Limited (“TWU”) in 2003 until 2017.
Many other councils in London and Thames Valley entered into similar agreements with TWU around the same time.
As a result of the agreement, TWU did not bill Kingston’s council tenants for water and sewerage charges in relation to the services provided to their premises but instead billed Kingston directly for such charges. It was also a term of the agreement that Kingston paid the charges made by TWU for the relevant premises but the amount of the charges was reduced by 3.5%. TWU and Kingston had also agreed that Kingston would be entitled to a further reduction (of commission) of 9.3% on the remaining sum payable.
A council tenant, Derek Moss, issued a claim against Kingston in respect of the water charges demanded from him. Mr Moss argued that the discount in the agreement was not included in the charges demanded from him and a result he has made overpayments over the years.
Mr Moss submitted that the 2003 agreement involved TWU providing water and sewerage services to Kingston and his tenancy agreement involved Kingston providing water and sewerage services to him. He further submitted that the arrangement between Kingston and himself is governed by Water Resale Orders 2001 and 2006 under section 150 of the Water Industry Act 1991 and that Kingston were a water re-seller. As a result, he argued that the charges payable by him should reflect the reductions within the 2003 agreement.
The Water Resale Orders allow water re-sellers to make a charge for reasonable administration costs, but that is limited to a nominal amount of 1.5 pence per day, which amounts to £5.48 per annum.
Mr Moss also relied on the terms of his tenancy agreement, which stated that in respect of water charges he was liable to pay “the exact amount payable for the property to the water authority”. He contended that the exact amount payable should take into account the reductions given by TWU in the 2003 agreement.
The High Court found in favour of Mr Moss on both arguments and ordered that he should be reimbursed for the overpayments made over the years. In his judgement, Mr Justice Morgan held that “Mr Moss has a right to recover overpayments of charges pursuant to section 150(5) of the 1991 Act and paragraph 10(1) of the Water Resale Order 2006 […] and “Mr Moss has overpaid the charges which were due under the revised terms of his tenancy agreement”.
This ruling comes after a similar decision in 2016 whereby Southwark London Borough Council was held liable to repay a council tenant for excess water charges. Following this decision it came to light that Southwark’s tenants had made overpayments worth £28.6m.
As a result of the above judgments, local authorities may now be faced with many more council tenants making claims for overpayments.