Essex County Council v UBB Waste (Essex) Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Pepperall |
| Judgment Date | 18 June 2020 |
| Neutral Citation | [2020] EWHC 1581 (TCC) |
| Court | Queen's Bench Division (Technology and Construction Court) |
| Docket Number | Case No: HT-2017-000110 |
| Date | 18 June 2020 |
[2020] EWHC 1581 (TCC)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Rolls Building
Fetter Lane, London EC4A 1NL
THE HONOURABLE Mr Justice Pepperall
Case No: HT-2017-000110
Marcus Taverner QC, Piers Stansfield QC, Paul Buckingham and Daniel Churcher (instructed by Slaughter and May) for the Claimant
Roger Stewart QC, Martin Kingston QC, David Turner QC, Celina Colquhoun and George McDonald (instructed by Norton Rose Fulbright LLP) for the Defendant
Judgment No. 2
Site view: 1 May 2019
Hearing dates: 2, 3, 7, 8, 9, 10, 13, 14, 15, 16, 20, 21, 22, 23, 29 & 30 May, 4, 5, 6, 10, 12 & 13 June and 2, 3 & 4 October 2019
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
| Paragraph | |
| INTRODUCTION | 1 |
| THE FACTUAL EVIDENCE | 6 |
| THE PROPER APPROACH TO THE EVIDENCE | 6 |
| THE AUTHORITY'S WITNESSES | 10 |
| UBB'S WITNESSES | 20 |
| THE EXPERT EVIDENCE | 35 |
| INDEPENDENCE, IMPARTIALITY & OBJECTIVITY | 36 |
| THE AUTHORITY'S TECHNICAL EXPERTS | 41 |
| DR JOHN WEATHERBY | 45 |
| THE OTHER EXPERTS | 58 |
| THE PROCUREMENT OF THE FACILITY | 61 |
| THE AUTHORITY'S WASTE STRATEGY | 61 |
| THE PROCUREMENT PROCESS | 72 |
| UBB'S DESIGN | 21 |
| THE CONTRACT | 83 |
| THE PRINCIPAL OBLIGATIONS | 83 |
| APPROACH TO CONTRACTUAL CONSTRUCTION | 87 |
| IMPLIED TERMS: GENERALLY | 89 |
| IMPLIED TERMS CONSTRAINING THE EXERCISE OF A CONTRACTUAL DISCRETION | 96 |
| IMPLIED TERMS OF GOOD FAITH AND CO-OPERATION | 30 |
| THE ACCEPTANCE TESTS | 118 |
| TEST 1: THROUGHPUT | 119 |
| TEST 2: RECOVERY | 121 |
| TEST 3: BMW REDUCTION | 125 |
| TEST 4: RECYCLATES | 133 |
| TEST 5: SRF QUALITY | 137 |
| TESTING IN BIO-STABILISATION MODE | 42 |
| THE DENSITY PROBLEM | 158 |
| THE DESIGN DENSITY | 48 |
| THE DISCOVERY OF THE DENSITY ISSUE | 50 |
| CAN THE ORIGINAL FACILITY PASS THE ACCEPTANCE TESTS? | 169 |
| TEST 1: THROUGHPUT | 169 |
| TEST 2: RECOVERY | 51 |
| TEST 3: BMW REDUCTION | 51 |
| TEST 4: RECYCLATE | 200 |
| TEST 5: SRF QUALITY | 205 |
| COMPOST-LIKE OUTPUTS | 206 |
| THE QSRF LINE | 212 |
| THE DEVELOPMENT OF THE QSRF PLAN | 212 |
| THE APPROVED MODIFICATIONS | 228 |
| THE WALKING FLOOR AND TRAILER-LOADING SYSTEM | 69 |
| UBB'S ENTITLEMENT TO OPERATE THE APPROVED MODIFICATIONS | 243 |
| UBB'S ENTITLEMENT TO INSTALL THE WALKING FLOOR AND TRAILER-LOADING SYSTEM | 265 |
| THE MODIFIED METHOD STATEMENTS | 273 |
| CONCLUSIONS | 279 |
| BUYING DOWN THE ACCEPTANCE TESTS | 280 |
| CAN THE MODIFIED FACILITY PASS THE ACCEPTANCE TESTS? | 296 |
| TEST 1: THROUGHPUT | 297 |
| TEST 2: RECOVERY | 85 |
| TEST 3: BMW REDUCTION | 85 |
| TEST 4: RECYCLATES | 307 |
| TEST 5: SRF QUALITY | 308 |
| THE QUASI-ACCEPTANCE TESTS | 309 |
| COMPOSITION ISSUES | 86 |
| UBB'S DESIGN ASSUMPTIONS | 310 |
| THE COMPOSITION BANDS | 318 |
| THE FALL IN BMW PUTRESCIBLE WASTE | 324 |
| THE COMPOSITION DATA & ROLLING ANNUAL AVERAGE | 328 |
| CHALLENGING THE COMPOSITION TESTS | 335 |
| UBB'S CHALLENGE TO THE 2015 TEST RESULTS | 344 |
| THE AUTHORITY'S CHALLENGE TO THE 2016 TEST RESULTS | 354 |
| CONCLUSIONS | 355 |
| OPTIONS REVIEW | 100 |
| THE IMPACT & REMEDY REPORTS | 357 |
| THE OPTIONS REVIEW | 361 |
| A COMPENSATION EVENT | 364 |
| THE DIVERSION OF WASTE DUE TO THE 2017 ASBESTOS SCARE | 365 |
| THE ISSUE | 365 |
| THE CONTRACTUAL POSITION | 370 |
| ANALYSIS | 373 |
| CLAIMS FOR DECLARATORY RELIEF | 384 |
| THE AUTHORITY'S CLAIMS FOR DECLARATORY RELIEF | 388 |
| DECLARATIONS 1-5 | 391 |
| DECLARATION 6: THE RIGHT TO TERMINATE | 393 |
| UBB'S CLAIMS FOR DECLARATORY RELIEF | 424 |
| DECLARATIONS AS TO THE QSRF LINE | 425 |
| DECLARATIONS IN RESPECT OF COMPOSITION ISSUES | 427 |
| DECLARATION IN RESPECT OF THE INTERRUPTION IN DELIVERIES | 430 |
| FINANCIAL & OTHER CLAIMS | 432 |
| THE AUTHORITY'S CLAIM FOR DAMAGES | 432 |
| UBB'S COMPOSITION CLAIM | 444 |
| UBB'S ASBESTOS CLAIM | 447 |
| CONCLUSIONS | 1252 |
INTRODUCTION
On 31 May 2012, Essex County Council entered into a 25-year contract with UBB Waste (Essex) Limited for the design, construction, financing, commissioning, operation and maintenance of a mechanical biological waste treatment (“MBT”) plant in Basildon to process the county's household waste. The facility was built and on 25 November 2014 it was certified as having passed the Readiness Tests. The facility then entered the Commissioning Period and was required to pass the Acceptance Tests before the extended Planned Services Commencement Date of 12 July 2015. It is common ground that the facility has not passed the Acceptance Tests either by such date or by the Acceptance Longstop Date of 12 January 2017.
The Authority argues that UBB failed to design and construct the facility so that it was capable of passing the Acceptance Tests. It contends that UBB's failure either to pass the Acceptance Tests or to attempt to do so by the Acceptance Longstop Date was an event of Contractor Default and seeks, among other relief, damages and a declaration that it is entitled to terminate the contract pursuant to clause 67.
UBB, which is a joint venture company incorporated by Urbaser Limited and Balfour Beatty Investments Limited, denies any default. It argues that, upon the true construction of the agreement, the facility is capable of passing the Acceptance Tests and that Essex was wrong not to recognise the Quasi-Acceptance Tests as evidence of the same. Further, UBB contends that the performance of the facility was critically dependent on the composition of the waste. It argues that the facility would have passed the Acceptance Tests and would now be in the Services Period but for the Authority's failures:
3.1 first, to provide waste with the assumed composition provided to UBB when bidding for the contract;
3.2 secondly, to approve the use of modifications made to the plant referred to compendiously by the parties as the Quick SRF or (“QSRF”) Line; and
3.3 thirdly, to engage properly with UBB in the Options Review process to deal with the composition issues by agreeing necessary modifications to the Acceptance Tests.
In addition, UBB argues that it is entitled to an extension of time for passing such modified Acceptance Tests.
Accordingly, UBB denies that Essex is entitled to terminate the contract. It argues that the Authority is itself in breach of contract and seeks damages in excess of £77 million as well as declaratory and injunctive relief. This is, UBB submits, “termination for convenience dressed up as termination for contractor default.” Finally, UBB also claims compensation in respect of the temporary cessation of deliveries in February 2017 following the discovery of suspected asbestos-containing materials at the facility.
While the principal issues can be shortly stated, the arguments are complex and the documents voluminous. I heard this case over 25 days during which ten lay witnesses and six experts gave oral evidence. In addition, I am asked to consider reports from a further two experts. I have been provided with 1,775 pages of argument and 121 authorities spanning a further 5,100 pages, and I heard counsel between their opening and closing submissions over six days.
THE FACTUAL EVIDENCE
THE PROPER APPROACH TO THE EVIDENCE
This is a document-heavy dispute in which the best evidence comes not from the lay witnesses or their carefully crafted witness statements, but from the contemporaneous documents. In a well-known passage in Armagas Ltd v. Mundogas SA (The Ocean Frost) [1985] 1 Lloyd's Rep 1, Robert Goff LJ (as he then was), said that it was necessary to approach the assessment of factual witnesses “by reference to the objective facts proved independently of their testimony, in particular, by reference to the documents in the case, and also pay[ing] particular regard to their motives and to the overall probabilities.”
In Gestmin SGPS SA v. Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm), Leggatt J (as he then was) made some perceptive observations as to the fallibility of human memory, conventional misconceptions as to its reliability (at [16]–[18]) and the honest distortion of memory through the litigation process (at [19]). I agree with the judge's conclusion, at [22]:
“… the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.”
UBB's disclosure includes a number of internal documents in which UBB personnel exchanged unguarded comments. Such documents are sometimes illuminating. In assessing such evidence I do, however, keep in mind that it may well be that the Authority was, at least on certain issues, more astute to avoid recording matters in writing. Certainly, in April and May 2016 there were occasions when,...
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