England and Wales High Court (Administrative Court) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		7th March 2003

Mr Justice Lightman:

INTRODUCTION

1. This is an application made by the Claimant ("Mr Rowe") with the permission of Burton J for judicial review of the decision dated the 3^rd January 2003 of the Defendant the Vale of White Horse District Council ("the Council") to demand payment of retrospective charges for sewerage services over the preceding six year period. In the course of the hearing it became apparent that the real issue before the court was not a question of public law (the legality of the decision of the Council to demand payment) but a question of private law (whether the Council is entitled to the payments demanded). In the circumstances the just and convenient course is to treat the proceedings before me as the trial of the private law issue and give my judgment on that issue. When I told counsel that I intended to adopt this course, they expressed their concurrence.
2. The issue of private law raised is whether a claimant can recover payment for the supply of services under the principles of restitution where over the thirteen years that he made supplies to the defendant he never gave any intimation that he intended to make any charge for the supplies and in the circumstances the defendant reasonably believed that in obtaining such supplies he incurred no liability to the claimant or anyone else in respect of them. The issue is of some practical importance and merits anxious consideration.

FACTS

3. The Council as local housing authority built and operated a sewage treatment works and two pumping stations to provide for the disposal of sewage from its council houses in Letcombe Bassett and charged the costs of operating and maintaining the sewerage service to its Housing Revenue Account. The Council did not separately charge its tenants for the cost of the provision to them of the sewerage services, but (notionally at least) included the cost as part of the rents payable to the Council.
4. In 1982 the Council's tenants began exercising their statutory rights to buy their homes. In the case of some of the conveyances to such tenants the Council exercised its statutory right under section 139 and Schedule 6 para 5 of the Housing Act 1985 to include covenants for payment of charges for the continuing provision of such services. No such provision was included in the conveyance to Mr Row's predecessor in title who sold on to Mr Rowe in 1988. The Council entered into private contracts with the owners of certain properties which never belonged to the Council to provide sewerage services in return for payment for such services. No such contract was ever entered into between the Council and Mr Rowe or his predecessor in title. From 1982 until 2001, whilst the Council recovered payment from those who entered into contracts for payment for such services, the Council made no claim for any payment for sewerage services from any of the owners of properties which it had sold, least of all Mr Rowe. The reason for this lack of action during the period 1982-1995 was (according to the Council) an administrative oversight. The reason for the lack of action after 1995 related to the transfer in that year by the Council of its housing stock to Vale Housing Association. This transfer gave rise to an uncertainty in the mind of the Council whether the Council after making the transfer of the housing stock had the statutory power to retain and continue to operate the sewerage works and pumping stations. This uncertainty continued for some five years until October 2000 when the Council obtained the advice of leading Counsel that it did have the power.
5. Over the whole period from 1982 until the 26^th March 2001 the Council gave no intimation to any house owner or occupier to whom it was providing sewerage services other than those with whom it had entered into contracts that there was any question of any charge being made for them. The explanation for the adoption of the deliberate policy to this effect adopted in 1995 is given in a statement by Mr Nigel Gifford whose responsibilities included the management of the sewerage facilities:

"My view and the view of the Council's most senior lawyer was that it would not have been right to have notified residents when the legal position was so uncertain. That position did not become clearer until October 2000 when Leading Counsel's opinion was received…. Vague and ambiguous comments by the Council about the possibility of charging at an earlier time might well have caused unnecessary anxiety to residents, when the position might subsequently have changed and in any event it would not have been within the Council's power to bring the matter to a speedy conclusion."

6. The decision to adopt this policy in order to spare the residents anxiety was short-sighted and calculated to create a false sense of security, for it was at the cost of the shock and distress occasioned when on the 26^th March 2001 the Council wrote to the residents notifying them that a charge was to be made for use of the services over the last six years since April 1995. The letter (so far as material) stated as follows:

"The purpose of this letter is to inform you that every property will now be charged for the reception, treatment and disposal of sewage waste and the maintenance of the system. Since 1995, you have received the sewage treatment service without payment but you will appreciate that there has been cost to the Council in providing the service. You will be aware that the majority of sewage treatment plants across the County of Oxfordshire, and beyond, are operated and maintained by Thames Water Utilities and the residents benefiting from these plants are and always have been charged for the service as part of their water bill.

The Council now proposes to issue invoices to cover the cost of the service that has been provided over the period from April 1995 to the present.

The charges per property will be based on the actual costs of operating the individual works up to March 2001, and a proposed fixed annual charge of £250 for the year 2001/02. The charges will either be comparable to or less than the charges Thames Water Utilities would have made for similar services over the same period.

Recognising that six years worth of charges will be onerous for most owners, the Council will offer a facility to pay over two years (or longer by agreement) to clear the outstanding amounts, interest free."

7. The letter understandably caused shock and distress to Mr Rowe. For over the thirteen years he had lived at his property, paid Council rates to the Council and water rates to the Thames Water Authority ("the TWA"), he did not know that the Council was providing the sewerage service. All he knew was that he paid all that was demanded of him by the Council and the TWA and he had had no reason to believe that there was a separately chargeable sewerage service which was not included within and satisfied by such payments. This state of mind was encouraged by the facts that no covenant for any such payment was made in the conveyance to his predecessor in title, no contract had been proffered by or made with the Council for sewerage services and the Council not merely had made no claim for thirteen years, but had deliberately and successfully over the last six years set out not to disabuse him of the impression that there was no question of any liability existing or accruing.
8. Mr Rowe protested that, if he had known that there was any question of such a liability arising, he would have wished to consider an alternative to continuing to accept the Council's services (e.g. acquiring and using a septic tank) and would each year have made provision to meet the eventual liability. It is however clear on the evidence that there was no practical alternative to use of the Council's sewerage services available at a price comparable to that which the Council intends to charge and Mr Rowe raises no defence of "change of position". Mr Rowe was and is willing to pay the appropriate charges from the date of receipt of the Council's letter which put him on notice of its intention to charge in the future, but he was and is unwilling to make any payment in respect of the prior period. The Council however insists on payment in respect of the prior period and gives as a reason the desire to prevent the shortfall arising from the non-payment by Mr Rowe and other owners of former Council owned properties having unfairly to be borne by other users of the services. The impasse led to the commencement of these proceedings.
9. The evidence before me establishes the following as the context in which the Council's claim to payment is to be examined:

i) the disposal of sewage from a residential property is an essential, and (in the case of Mr Rowe) there was no practicable alternative at a comparable price;

ii) no local authority since 1974, when the function was transferred to (now privatised) water authorities, has provided sewerage services for the public paid for out of its General Fund (i.e. by Council Tax payers). The position in this regard is different from the position e.g. in respect of refuse collection. The sewerage service is a service targeted at specific properties rather than a service made available by the Council to all taxpayers but taken up by only a few;

iii) consequently householders have to pay separately from their Council Tax for sewerage services either by paying rates to the sewerage undertaker (here TWA) or by paying for the private disposal of their sewage, e.g. by the Council's sewerage facilities or by arranging for the emptying of septic tanks. In a word Mr Rowe was not legally entitled to the provision of sewerage services except on terms that he paid for those services;

iv) the charges made by the Council are cheaper than any alternative available (including installation and use of a septic tank) and if fully informed at any time prior to 2001 Mr Rowe would have chosen to use the Council's services and pay accordingly.

THE LAW

10. Where a supplier has supplied services to another and there is no contractual relationship in existence, the law may afford to the supplier a restitutionary remedy. Lord Wright stated in Fibrosa Spolka Akacyna v. Fairbairn Lawson Combe Barbour Ltd [1943] AC 32 at 61:

"Any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some of the benefit derived from another which it is against conscience that he should keep."

11. It is now authoritatively established that there are four essential ingredients to a claim in restitution:

i) a benefit must have been gained by the defendant;

ii) the benefit must have been obtained at the claimant's expense;

iii) it must be legally unjust, that is to say there must exist a factor (referred to as an unjust factor) rendering it unjust, for the defendant to retain the benefit;

iv) there must be no defence available to extinguish or reduce the defendant's liability to make restitution.

12. It is common ground between the parties that the first two and the fourth conditions are satisfied, for Mr Rowe obtained the benefit of the sewerage services provided by the Council and there is no defence available e.g. of change of position. Originally in a case such as the present of a supply of services, it was necessary in order to satisfy the second condition to establish a request by the defendant for the services. But under the developing law of restitution it is now enough if either of two principles are brought into play. The first principle is that the second condition is to be deemed to be satisfied if the defendant has freely accepted (or acquiesced in the supply for consideration of) the services rendered. The second principle is that in exceptional circumstances the second condition is to be deemed satisfied if the defendant has been incontrovertibly benefited from their receipt: see Goff & Jones The Law of Restitution 6^th ed. para 1002. The Council in this action contends that Mr Rowe freely accepted the sewerage services rendered and by reason of such free acceptance in accordance with the first principle the second condition is to be deemed satisfied. An essential ingredient for application of the principle of free acceptance is acquiescence by the defendant in the supply of the services for a consideration (a matter to which I turn when I consider the third condition). In the absence of proof of such acquiescence, the principle of free acceptance cannot be invoked to satisfy the second condition. But it is common ground that the receipt of the services constituted an incontrovertible benefit and that the second condition is to be deemed to be satisfied for this reason.
13. The critical question is whether the third condition is satisfied. The council cannot suggest the existence of any unjust factor (e.g. a mistake on the part of the Council in providing the service or a failure of consideration). Paragraph 1-019 of Goff & Jones above reads as follows:

"… a defendant who is not contractually bound may have benefited from services rendered in circumstances in which the court holds him liable to pay for them. Such will be the case if he freely accepts the services. In our view he will be held to have benefited from the services rendered if he, as a reasonable man, should have known that the [claimant] who rendered the services expected to be paid for them and yet he did not take a reasonable opportunity open to him to reject the proffered services. Moreover in such a case he cannot deny that he has been unjustly enriched."

In a word free acceptance may satisfy not only the second, but also the third condition.

14. On the facts of any ordinary case, a householder who receives and uses services from a supplier such as the Council must reasonably expect to pay for such services and will know that he has the option to reject them, and he will accordingly be liable under the principle of free acceptance to pay for them. This conclusion will in nowise be affected by the mere fact that the householder is unaware of the identity of the supplier: he may reasonably expect to pay the supplier whoever he may be. But the facts of this case are far removed from the ordinary case. Most particularly in the circumstances of this case and by reason of the administrative oversight of the Council over the period 1982 to 1995 and what can only be described as the extraordinary error of judgment by the Council between 1995 and 2001, the Council created and perpetuated the totally reasonable belief on the part of consumers of its services (and most particularly its former tenants) that there was no payment to be paid (beyond what was already paid to the Council and the TWA) in respect of the sewerage services and there arose no occasion for Mr Rowe to reject the services. The Council cannot establish (in the language of Goff & Jones) that Mr Rowe should have known that the Council or other supplier of the sewerage service expected to be paid for them anything beyond what was already paid to the Council and TWA. It is scarcely open to the Council to dispute this fact since on its own case the Council was ignorant until 2001 whether it could charge for the services and this ignorance was the occasion for its silence on the whole question. Where (as in this case) for good reason the defendant as a reasonable person should not have known that the claimant who rendered the services expected to be paid or paid extra for them, as a matter of principle the third condition cannot be satisfied and no claim can lie in restitution. Support for this view is provided by three authorities which establish that no claim lies against a defendant where there is a common understanding between the claimant and the defendant that a third party shall alone be liable to pay for the services supplied: (consider Bridgewater v. Griffiths [2000] 1 WLR 524 at 532); or where the claimant continues to foist his services on an unwilling defendant after the defendant has insisted that, if he does so, the defendant will not pay for them: (see Bookmakers Afternoon Greyhound Services v. Gilbert [1994] FSR 723); or where an architect, having agreed a fee for specified services, renders additional services where the client when he accepted them was reasonably entitled to assume that the architect was undertaking them for no additional charge: (see Gilbert v. Knight [1968] 2 All ER 248). In this case it does not matter that Mr Rowe has no defence of change of position. Under English law (unlike Continental law) it is a requirement of a claim in restitution that the claimant establishes the factor rendering it unjust for the defendant to retain the benefit of the services he has received: it is not incumbent on the defendant as a defence to the claim to establish that it is unjust for the liability to be imposed upon him: see Lord Hope in Kleinwort Benson Ltd v. Lincoln City Council [1999] 2 AC 349 at 408-9 and Mindy Chen-Wishart "In Defence of Unjust Factors", Johnston and Zimmerman "Unjustified Enrichment" Cambridge 2002 pp.159-193. There was no free acceptance and accordingly there was no unjust factor. The third condition for a claim in restitution being absent, the Council has no claim in private law against Mr Rowe.
15. I accordingly hold that the Council has no legal right to the arrears which it claims. The Council is the author of its own discomfort. It was folly and short-sighted to place and deliberately leave the residents of its former Council houses in the dark. Its duty in its dealing with users of its services was to be transparent and disclose what might be in store from the beginning rather than to spring a surprise and later claim payment of arrears. By its failure the Council forfeited the right to charge Mr Rowe for its services. The consequences may have to be borne in the form of higher charges by other users. The burden of those higher charges may be a cause of complaint by those who have to pay them against the Council and its officers, but cannot make good the absence of an essential element in the Council's cause of action against Mr Rowe.
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MR JUSTICE LIGHTMAN: For the reasons set out in the judgment, which I have just handed down, I hold that the defendant council has no legal right to the arrears which it claims in the second appeal from the 1st April 1995 to the 31st March 2001.

MR HUNT: My Lord, a draft form of the order, which I think your Lordship will see, is agreed subject to one addition in the first paragraph of the order. Counsel has requested that it be inserted in the second line in its letter to Mr Rowe of 26th March 2001.

MR JUSTICE LIGHTMAN: Yes, that is fine.

MR HUNT: Subject to that, my Lord, no orders.

MR JUSTICE LIGHTMAN: Otherwise it is all agreed, is it?

MISS GREANEY: Yes, we do, my Lord.

MR JUSTICE LIGHTMAN: Then I will make an order on that. Thank you both very much.