This case goes back some nine years. In May 2012 Essex County Council (‘ECC‘) contracted with UBB Waste for the design, construction, financing, commissioning, operation and maintenance of a 417,000 tonne capacity mechanical biological waste treatment plant. It was to be situated in Basildon and would process the county’s “black bag” household waste. The facility was to be capable of extracting recyclable materials before shredding and composting the remaining waste in “biohalls“. This would reduce both its volume and its biodegradable content. A 25 year term was agreed between the parties under a private finance initiative. The contract value was reputed to be worth some £800 million over its lifetime.
The plant, the Tovi Eco Park facility, was subsequently built and received its first consignment of residual waste in November 2014. However, part of the commissioning process involved acceptance tests which needed to be passed before the extended planned services commencement date of July 2015. Unfortunately commissioning did not go as planned and the plant was seriously underperforming. It failed to pass the test by this date or the acceptance longstop date of January 2017.
ECC sought a declaration that they were entitled to terminate the contract under clause 67 of the contract, as well as to substantial damages. They alleged that UBB had failed to design and construct the facility to the requisite standard which would ensure that it passed the acceptance tests. Their failure to pass these tests by the longstop date was a contractor default.
UBB contended that it was not the design which was the problem, but rather the ’mix’ of waste which they were being sent by the Council. It argued that it would have passed the acceptance tests had it received the type of waste envisaged by the contract. ECC had failed to engage with them adequately in the review process. Had they agreed to necessary modifications to the plant, and given UBB an extension of time, the waste composition problems would not have been an issue, and the facility would have been ‘deemed’ to have pass the test in July 2016. ECC should therefore pay damages equalling the combined amount of the payments they had lost out on since that date. Further they argued that the contract contained an implied term requiring the parties to act in good faith, and that ECC had breached this in a number of ways.
Not only did UBB deny that ECC was entitled to terminate the contract, but it alleged that ECC was in breach of contract themselves, and counterclaimed for damages of over £77million.
If you’re going to make rubbish, be the best rubbish in it.”
Richard Burton
The case was heard in the Technical and Construction Court before Mr. Justice Pepperall. He agreed with ECC that the true cause of the facility’s failure to pass the acceptance tests had nothing to do with any acts or omissions by ECC, but everything to do with ‘serious design errors’. It appeared that UBB had overestimated the density of the refuse so that the facility was substantially undersized for the actual quantity of waste it needed to process. This was a miscalculation by UBB rather than an incorrect ‘mix’ of black bag waste.
The Judge held that UBB was in breach of contract and ECC was entitled to over £9 million in damages (and continuing losses of nearly £1million per month). They were in breach for unilaterally modifying the plant and thereby operating a modified plant in breach of planning permission, not for design and construction failings. The damages represented the figure that ECC had expended as a result of UBB’s failure to process the waste as the contract stipulated. UBB was also entitled to £0.75 million compensation when deliveries had had to stop at one point, on the grounds that this was an employer risk under the contract. The Judge confirmed that there was an implied term that both parties should act in good faith. This was based on the fact that it was a long term contract, it required a high level of communication and co-operation and there were indications that the parties’ intention was to perform their roles with integrity, trust and confidence in each other. The implied term had not however been breached and it was noted by the Judge that it was somewhat ironic that UBB had alleged a breach by ECC as they themselves had been guilty of a series of concealments throughout the project. The Judge refused UBB leave to appeal, meaning that it would have to approach the Court of Appeal for permission to do so.
An interesting aside in this case is the comments the Judge made about expert witnesses. He was very critical of the use of a technical expert witness by UBB. The witness had been managing director of a company which had advised UBB in relation to the earlier design and construction phases of the project. This was an obvious conflict of interest and the expert should have known that his roles as consultant and witness could not co-exist. Expert witnesses should be independent, impartial and objective.
Link: Essex County Council v UBB Waste (Essex) Ltd [2020] EWHC 1581 (TCC)
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