4 February 2016, Press Release
Many advisers have held the view that insolvency clauses in Water Companies Scheme of Charges were an attempt to avoid the provisions of the Insolvency Act. Coventry Law Centre secured a judgement against Severn Trent Water which could have a major effect on Water Companies and bankruptcy clauses within their Charges Schemes.
The Court held that Severn Trent Water cannot rebill a customer for the period commencing the day after a Debt Relief Order if the total outstanding debt was included on the Debt Relief Order.
The Law Centre assisted a client to a complete an application for a Debt Relief Order (DRO) on 9th April 2014. The application was approved by the Debt Relief Order Unit on 10th April 2014. The debt that was owed to Severn Trent Water was included in the DRO. This was for the sum of £1410.40: comprising £1148.15 for previous years water rates and £262.25 for 1st April 2014 – 31st March 2015.
Our client then received a bill from Severn Trent Water stating that she owed £254.34 for the period to 11th April 2014 to 31st March 2015. Coventry Law Centre disputed this amount. We argued that the total amount outstanding at 10th April was included in the DRO so there was no liability for water rates until 1st April 2015.Severn Trent issued proceedings in Coventry County Court against our client to obtain payment for the sum they stated was owed for the 11th April 2014 to 31st March 2015.
Our arguments in defence were:
We stated that a water debt was not an excluded debt.
There was no objection made to the inclusion of the water debt by Severn Trent Water within this time limit.
We argued that, under Severn Trent Water’s Scheme of Charges 2014 – 2015, liability for the water bill was due on 1st April. Section 14 states:
Charges payable by the occupier
(i) Unless we agree otherwise, all unmeasured charges under this Scheme for water supplied or sewerage services provided by us shall be payable by the occupier. Unmeasured charge due 1st April
(ii) Subject to section 4(iv) above and as appears below all unmeasured charges shall be due and payable on 1st April 2014
Our client’s water bill, dated 20/02/14, stated £262.25 was owed for the year 1st April 2014 – 31st March 2015. It stated it was payable on 1st April but payments could be made in two instalments, in April and October.
Section 4 (iv) of the Scheme of Charges deals with liability for charges when the person responsible for payment applies for bankruptcy or a DRO.
In summary, Section 4 paragraph b) purports to limit the amount of the debt included in the DRO to the amount outstanding up to the date of the DRO with any charges for future services being due on the following day and the occupier being treated as if the property had been newly occupied on that day.
We argued that the sum of £1410.40 was properly scheduled to the DRO as a qualifying debt as defined by s.251A(1). It is not disputed that the £1156.06 was a qualifying debt.
As at 10th April 2014 the Defendant had paid nothing towards her 2014 – 2015 liability of £262.25 and so the whole outstanding balance had become “..... immediately due and payable ....... “ under the provisions of section 14 paragraph vii) of Severn Trent Water’s Scheme of Charges.
We argued at the hearing that Section 4 paragraph b) does not alter the date when the debt fell due for payment under section 14 of the Scheme. It only takes effect after the DRO has been made. We stated at the hearing Severn Trent Water were attempting to avoid the effects of the Insolvency Act and that their actions was a ‘remedy in respect of the debt’ prohibited by section 251G (2)(a) Insolvency Act.
We relied on Ex parte Mackay (1873) LR 8 Ch App 643 and Secretary of State for Work & Pensions v Payne & Cooper  EWCA Civ 1431.
We stated that Severn Trent Water’s charges scheme requires payment in advance unless the customer takes advantage of one of their instalment schemes. If the customer fails to make payment, then the outstanding amount becomes due and Severn Trent Water would be entitled to obtain and enforce a county court judgment. It is, therefore, perfectly possible for Severn Trent Water to obtain payment for a service which they have not yet provided. Severn Trent Water did not dispute the amount of debt was owed on 10th April. They stated they could re bill the client from the 11th April due to their Scheme of Charges. They also argued that if the whole debt was included up to and including 31st March 2015, if our client moved out of the property they would not be able to bill the new occupant for their water bill as the debt for this property was included on the DRO. We argued against this as the water debt is a personal liability for water supplied at the property.
The Judge agreed with our submissions and confirmed that the whole debt up to 31st March 2105 was dealt with under the DRO and our client had no liability for this sum.
Central England Law Centre comprises two operating organisations: Coventry Law Centre, whose activities focus on Coventry and Warwickshire, and Birmingham Community Law Centre, whose activities focus on Birmingham.
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