Ruttle Plant Hire Ltd and The Secretary of State for the Environment, Food and Rural Affairs

This judgment concerns a dispute arising out of the Foot and Mouth clean up operations carried out across the United Kingdom between March 2001 and June 2001 with a small amount of further work in the early months of 2002. The claimant ("Ruttle"), was one of 86 companies whose contractual arrangements to carry out clean up operations under resulted in work of at least £1 million in value being completed. Ruttle's contract, according to its valuations, was in fact worth overall about £23.26 million plus VAT, which if accurate, would make it the fourth largest contract in terms of value. In all, over 1,200 contractors were employed on the supply of goods and services on clean up operations at a total cost of £1.1 billion1. The defendant, The Secretary of State for the Environment, Food and Rural Affairs ("DEFRA"), was responsible for arranging, managing, valuing and paying for this work as the successor to the Department involved at the time, The Ministry of Agriculture, Fisheries and Food. DEFRA was created as the successor Department of State to the Ministry of Agriculture, Fisheries and Food ("MAFF") after the Foot and Mouth outbreak had been eradicated but, for convenience, I will refer in this judgment to both as "DEFRA".

Ruttle's business is the hiring out and transporting of Plant and Machinery, with or without operatives, to the civil engineering industry and the provision of services, such as tractors and mini-diggers, for use in farming, by landowners and the transport industry for such activities as landscaping, drainage and road laying. Ruttle is the subsidiary of Ruttle Plant Holdings Ltd who owns 99.99% of Ruttle's issued shares. Ruttle is the operating company of the group of companies which are very much Ruttle family-run companies. Mr H Ruttle is Ruttle's managing director and it is based in Chorley, Lancashire. In 2001, its turnover was nearly £22 million and in 2002 nearly £19.9 million. The 2002 accounts excluded a debt of £8.3 million from its accounts, being most of the disputed element of the sum it has invoiced DEFRA for. Ruttle's accounts noted that it had been obliged to exclude this debt from the accounts because of these proceedings and that this debt would have to remain excluded until their outcome is known.

The company owned, in 2001, about 2,500 items of plant and equipment and had approximately 400 regular clients. Most of the plant drivers and the site-based operatives were subcontractors hired in as necessary, its own employees numbered 15 plant hire operatives and 6 administrative staff.

The work involved cleaning up 334 farms and undertaking erection and renovation work for a number of temporary offices required by DEFRA, particularly at Gisburn. This work was spread through 9 of DEFRA's Disease Control Centres ("DCC") which were set up at or under the direction of each

The dispute arises out of the non-payment of approximately £13.3 million of the total invoiced total of £23.2 million, both figures excluding VAT. Thus, approximately 57% of the invoiced sum remains unpaid. Since the hearing was concluded, DEFRA has paid a further £851,063.82 on account, being £1 million inclusive of VAT. Thus, 53.6% of the invoiced sum remains unpaid.

The disputed elements of the invoices cover a long list of separate grounds. However, three principal grounds predominate. These cover over £9.3 million of the disputed sum. They relate to timesheets that were never signed by a DEFRA representative during the work or subsequently; alleged overcharging for men who were not working on site confirmed by Ruttle's subsequent alleged refusal to produce back up sheets which DEFRA contend it is entitled to see and which Ruttle contends it is contractually entitled to withhold; and transportation costs, particularly the driver's time in driving the plant on low loaders to or from the depot or between sites. The disputes have acquired a surprising amount of documentation as a result of the various protracted stages through which the verification, authentication and approval processes that the claimed sums have been subjected. The dispute has now reached court. With the parties' active assistance, the first trial has been confined to 16 issues of principle since it is felt that much of the dispute will be resolved once these issues have been answered. The issues were conducted in relation to three of the nine DCCs and, in relation to issues arising out of time sheet verification and the documentation Ruttle can be required to produce, to a limited number of farms and other locations at these three DCCs.

The DCCs where Ruttle undertook work that have been investigated in greatest detail and were the basis of evidence and submissions at trial were those at Leeds, covering the affected Counties of Bradford, Leeds and North Yorkshire; Chelmsford, covering the affected Counties of Essex; Greater London and Thurrock, and Stafford covering the affected Counties of Cheshire, Derbyshire and Staffordshire. Chelmsford was chosen because a significant number unsigned timesheets, emanated from this DCC. About 80% in value of the sheets overall were said by Ruttle to have been signed but the schedules produced by DEFRA that support its defence suggest that that figure is lower at about 70% since DEFRA is currently disputing, on account of unsigned sheets, a total of £2.3 million, or about 30%, for labour; £2.5 million, or about 40%, for plant; and £900,000, or virtually 100%, for materials.

The Trial

Ruttle started proceedings by issuing a claim form on 28 January 2003 claiming the balance of its invoiced sums totalling £13,323,666 plus VAT. DEFRA, in its defence, pleaded in detail in schedules the invoiced sums accepted and challenged. These showed that the entirety was disputed and, further, since £9,828,293.87 had been paid 2, that Ruttle had been overpaid £428,487.21. However, as already noted, DEFRA has since paid Ruttle a further £851,063.83. The parties agreed the issues to be determined at the first trial and Ruttle has also applied for an interim payment, an application which I directed should be heard at the same time as the trial of the issues agreed to be heard first.

The parties have reached this agreement as to how the issues, when answered, should govern the claims at those DCCs other than Leeds, Chelmsford and Stafford. This agreement reads as follows:

"It is agreed between the parties that the Court's determination of and ruling on each of the Issues contained in the Schedule to the Order dated 24 February 2004, relating to Leeds, Stafford and Chelmsford DCCs, should apply to and bind the parties in respect of every like issue which is, or has been or will by raised by DEFRA on each and every invoice submitted by Ruttle as part of its account under the contract dated 20 June 2001, relating to the Foot and Mouth Outbreak."

In addition to the agreed list of issues, the parties argued and sought a determination of a number of generic contractual issues.

The trial and the interim payment application occupied seven days. The parties dispensed with oral closing submissions. The claimant called two witnesses, namely Mr Carrol Ruttle's Group Development Director and Mr O'Connor its Commercial Director. DEFRA called seven witnesses, namely two Animal Health Officers and a Dairy Hygiene Inspector being Mr Jarratt, Mr Brand-Benee, and Ms Holden and four consultants being Mr Heath a Meat Technician, Mr De Kock an Accountant, and Mr Ward and Mr Pye both quantity surveyors. In addition, Ruttle relied on two witness statements, from Mr Bramley and Ms Williams. Both of these were originally served by DEFRA, the first in this action and the second in an earlier Foot and Mouth case that I tried, JDM Accord v DEFRA3.

I will first summarise the evidence and make relevant findings. I will then apply those findings to the 16 liability issues and 3 contractual issues that I must decide.

Factual Information Background

The Foot and Mouth Outbreak

The outbreak and size of the Foot and Mouth epidemic in 2001, DEFRA's pre-existing plans to deal with such an epidemic, the huge strain placed on the available resources to eradicate persons, animals and premises that had become infected by the epidemic and the methods and administrative procedures adopted to clean up infected premises have been described in detail in my judgment in the JDM Accord case, a description taken largely from the NAO and House of Commons Public Accounts Committee Reports 4. The highly infectious nature of the viral disease, involving the infection of buildings, vehicles, equipment, fodder and anything else coming into direct or...