Resource Recovery Solutions (Derbyshire) Ltd ((in Administration)) v Derbyshire County Council
| Jurisdiction | England & Wales |
| Judge | Mr Justice Constable |
| Judgment Date | 28 March 2023 |
| Neutral Citation | [2023] EWHC 708 (TCC) |
| Docket Number | Case No: HT-2022-000152 |
| Court | Queen's Bench Division (Technology and Construction Court) |
[2023] EWHC 708 (TCC)
Mr Justice Constable
Case No: HT-2022-000152
IN THE HIGH COURT OF JUSTICE
KING'S BENCH DIVISION
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
TECHNOLOGY AND CONSTRUCTION COURT
Royal Courts of Justice, Rolls Building
Fetter Lane, London, EC4A 1NL
Stuart Catchpole KC and Paul Bury (instructed by Ashurst LLP) for the Claimant
Karim Ghaly KC, Jess Connors and Samar Abbas Kazmi (instructed by Browne Jacobson LLP) for the Defendants
Hearing dates: 15 and 16 March 2023
Remote hand-down: This judgment will be handed down remotely by circulation to the parties or their representatives by email and release to The National Archives. A copy of the judgment in final form as handed down should be available on The National Archives website shortly thereafter but can otherwise be obtained on request by email to the Judicial Office (press.enquiries@judiciary.uk). The deemed time and date of hand down is 10.30am on Tuesday 28 th March 2023.
Introduction
The Defendants (‘the Councils’) seek summary judgment in respect of two issues of contractual interpretation on grounds that the Claimant (‘RRS’) has no real prospect of succeeding in relation to these issues and because there is no other compelling reason why these issues should be disposed of at a trial. The Councils also seek an order striking out those aspects of the Particulars of Claim and Reply which advance RRS's contended for construction on the basis that those averments are an abuse of process. Essentially the summary judgment application and the related strike out application stand or fall together. There is a further application before the Court relating to the contents of RRS's Reply (‘the Reply Strike Out’), which the Councils contend is (still) an abuse of process in that in various respects it contains a new case, and in places is tendentious, serves no purpose, and contains evidence and argument. The substance of the complaints were first made in front of Waksman J during a CMC on 2 December 2022, and some complaints remain after RRS amended its Reply on 15 February 2023.
The issues of contractual interpretation arise in relation to clause 58 of a contract made on 8 th December 2009 (“the Project Agreement’) for the procurement of waste management facilities and services. The Project Agreement was due to expire on 31 st March 2042, if not extended or terminated. However the Project Agreement was terminated lawfully on account of Contractor Default, namely a failure to pass contractual Acceptance Tests in relation to the construction of the New Waste Treatment Facility (‘NWTF’) by the contractual long stop date. Clause 58 provides the mechanism for assessing what sums are owed either to the RRS or to the Councils following termination. In general terms, Clause 58.2 provides the mechanism where the Councils intend to re-tender. Clause 58.3 provides the mechanism where there is no re-tendering anticipated because there is no ‘Liquid Market’ as defined in the Project Agreement. There is no dispute that this is the position in the present case, and that the relevant entitlements fall to be determined by reference to Clause 58.3. It is in this context that the principal dispute between the parties is the value of the Adjusted Estimated Fair Value of the Project Agreement (‘AEFV’), a defined term, and in particular the Estimated Fair Value (‘EFV’) which forms a part of the AEFV. In its Amended Particulars of Claim, RRS calculates the AEFV as £186,698,363, net of VAT, owing to RRS. In its Amended Defence, the Councils claim that the AEFV is no greater than £9,026,434 owing to the Councils, although given that RRS in is administration, no counterclaim for that sum has been brought. The value of the dispute is, therefore, extremely significant. The ultimate trial in this matter is set down for 28 hearing days (i.e. 7 four day weeks), excluding closing submissions, commencing 10 June 2024, following 4 reading days. As is plain from the time estimate, there are a wide range of contractual, factual, technical and quantification issues which the Court will be required to resolve.
The Councils seek summary judgment on the following two issues:
Issue 1: sub-clause 58.3.3.3 of the Project Agreement between the Defendants and the Claimant does not require an assessment of:
(a) how the Defendants actually intend to perform the Works and Services that the Claimant would have performed but for termination; and/or
(b) the rectification costs that the Defendants actually forecast that they will incur in performing those Works and Services (being the issue pleaded at paragraphs 153.2 of the Particulars of Claim; paragraphs 53, 60, 66 and 67 of the Defence; and paragraphs 13, 143, 146, 147 and 150 – 153 of the Reply);
Issue 2: the cost of providing and/or delivering the Project to the ‘standard required’ is the cost of procuring all the Contractor's obligations under the Deemed New Contract (as pleaded at paragraphs 68–70 of the Defence) and is not limited to the cost of Works and/or Services “that delivers the full Unitary Charge without Deductions and not any costs which may relate to any other requirement or obligation” (as pleaded at paragraphs 73, 123 and 124 of the Particulars of Claim and paragraphs 195–196 of the Reply).
I have considered the following evidence, relied upon by the parties: the Second, Third, Fourth and Fifth Witness Statements of Sarah Louise Evans for the Councils dated 23 November 2022 and 23 February 2023, and the Second and Third Witness Statements of Tom Duncan for RRS dated 25 January 2023. I have been considerably assisted by written and oral submissions of Counsel, Mr Catchpole KC and Mr Bury for the Claimants, and Mr Ghaly KC, Ms Connors and Mr Kazmi for the Defendants. I note that the page count of written submissions without appendices on the summary judgment application alone is 107 pages for the Claimants, and 30 pages for the Defendants. The oral submissions took place over two days, both counsel spending the majority of their time on the Summary Judgment application.
Overview of the Project and the Dispute
RRS was required pursuant to the Project Agreement to develop and implement an integrated waste management system to manage contract waste in accordance with the requirements, key performance indicators, and targets identified in the specification.
The targets included:
(1) NWTF Diversion Tonnage Target, essentially the amount of waste to be diverted from landfill by RRS;
(2) NWTF Re-Use, Recycling and Composting Target, essentially the amount of waste delivered to RRS which is to be re-used, recycled or composted;
(3) HWRC (Household Waste Recycling Centres) Re-Use, Recycling and Composting Target, essentially the amount of waste delivered to HWRCs which is to be re-used, recycled or composted;
(4) Contract Diversion Tonnage Target, consisting of the NWTF Diversion Tonnage Target and an enhanced HWRC Re-Use, Recycling and Composting Target.
It is common ground that central to the way in which RRS was to provide the services and seek to achieve these targets was through the design, construction and operation of the NWTF at Sinfin Lane in Derby. The NWTF was intended to receive and handle up to 190,731 tonnes per annum (“tpa”) of household waste and remove 14,080 tpa of recyclates. The NWTF was to comprise two sections. The front end of the NWTF comprised a mechanical and biological treatment facility and the materials recovering facility. This was to remove recyclates from the waste stream and process the waste into a form of fuel that was suitable for use in the back end of the new NWTF. The back end of the NWTF comprised 3 advanced conversion technology (‘ACT’) lines. This was to gasify the fuel, to produce ‘syngas’, and then burn that gas. The heat produced by this process would be used to create steam to drive a steam turbine and produce electricity. The production of electricity through this process was assumed at a certain level within the base case. On account of the assumed electricity production, the Unitary Charge paid by the council for the Services was to be reduced from the planned completion date of the NWTF. Should the amount of electricity produced exceed that assumed within the base case, the additional income was to be shared between the councils and RRS according to a contractual formula. Moreover, should the syngas produced in the ACT meet the minimum quality requirements set by Ofgem, then a proportion of the electricity produced would qualify for Renewables Obligations Certificates (‘ROCs’) which the contractor could sell to third parties as a further income stream to the project. In addition to the NWTF, there were other facilities envisaged, including two waste transfer sites and nine HWRCs.
The extremely large difference in valuation of AEFV is driven by the parties' different inputs into a ‘model’. The model was agreed between the parties as part of the Pre-Action process. Different assumed inputs are entered into the model and this then provides the compensation figure. The model runs to some 1,500 pages and contains hundreds of inputs. The inputs into the model are driven by a number of different technical assumptions. At a very high level, some of the key technical and economic differences between the parties are as follows:
(1) whether it is possible to carry out remedial works/modifications to the ACT to ensure that the ‘TOC’ limit (or Total Organic Carbon) within the ACT bottom ash is met, and so that in turn the ACT is capable of meeting ROCs requirements while running at an hourly throughput of 6 tonnes per hour per ACT line. This affects the existence and extent of an income stream within the model;
(2)...
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