Court ruling leaves councils facing compensation bills for water overcharging

Councils could face compensation costs running into the millions after the High Court ruled that a council unlawfully overcharged its tenants for supplying water, according to lawyers.

The court last week ruled that council tenant Derek Moss had been left out of pocket because London Borough of Kingston failed to pass on discounts granted to it by water supplier Thames Water between 2002 and 2017.

Deighton Pierce Glynn (DPG), the solicitors that represented Moss, said that the ruling is likely to increase the pressure on councils to repay tenants for water rates overcharging.

SAVE THE DATE – LATIF NORTH
March 25th, 2020, Manchester
Council treasury investment & borrowing

Daniel Carey, solicitor at DPG, said: “I am pleased that the Court has recognised once again that local authorities should have been passing on to their tenants the group discounts negotiated with water companies.

“Although this comes too late for the many tenants evicted for non-payment it does provide a route to compensation for the many tenants who were overcharged.”

The case centred on discounts in the rate charged by Thames Water to the council, including a 3.5% reduction to take into account voids.

There was also a 9.3% “commission discount” to reflect the cost of the council’s costs in billing and collecting water charges from tenants.

However the court ruled that the council acted unlawfully in failing to pass these discounts onto tenants.

In making his decision, the judge acknowledged that for the council to lose the benefit of the 9.3% commission would make the arrangement uncommercial for Kingston.

However, he quoted another case, which said: “The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed.”

The ruling applies to an agreement between the council and the water company that was in place between January 2003 and August 2017.

In a statement, Kingston said it was considering the outcome of the case with its legal representatives.

The Room151 Weekly Newsletter covers local government treasury and pension investment, funding, development, resources and technical finance. Register here. 

The LGPS Quarterly Briefing focuses purely on pension fund investment. Register here.