Resource Recovery Solutions (Derbyshire) Limited (In Administration) V (1) Derbyshire County Council (2) Derby City Council
Citation:  EWHC 708 (TCC)
Paul Bury acted for the Claimant, Resource Recovery Solutions (Derbyshire) Ltd (“RRS”), in successfully resisting applications by the Defendants for summary judgment and/or strike out. RRS entered into a PFI project agreement with Derbyshire County Council and Derby City Council in 2009 to develop an integrated waste management system, including a New Waste Treatment Facility (“NWTF”) in Derby. The agreement was set to expire in 2042 but was terminated due to contractor default after RRS failed to pass contractual acceptance tests for the NWTF by the contractual long stop date. The dispute centred around clause 58 of the Project Agreement (based on a standard form PFI contract), which assessed the sums owed between RRS and the Councils following termination. RRS valued the ‘Adjusted Estimated Fair Value’ at £186,698,363 owed to RRS, while the Councils valued it at no greater than £9,026,434 owed to the Councils.
The Councils brought an application for summary judgment on two issues of contractual interpretation related to clause 58. These were:
Issue 1: Whether sub-clause 184.108.40.206 of the Project Agreement required an assessment of: (a) how the Councils actually intended to perform the Works and Services that RRS would have performed if not for the termination of the agreement; and/or (b) the rectification costs that the Councils actually forecasted they would incur in performing those Works and Services.
Issue 2: Whether the cost of providing and/or delivering the Project to the “standard required” referred to the cost of procuring all the Contractor’s obligations under the Deemed New Contract (as argued by the Councils), or if it is limited to the cost of Works and/or Services that deliver the full Unitary Charge without Deductions and does not include any costs related to any other requirement or obligation (as argued by RRS).
In addition, the Defendants sought to strike out parts of the Claimant’s Amended Reply on various different grounds including alleged tendentiousness, argument and evidence.
Held – Constable J
The court ultimately refused summary judgment on both issues, deeming that they should be resolved during a trial.
Constable J considered previous case law on summary judgment in the context of contractual interpretation and distilled the following principles:
- A point of construction being difficult or complex does not prevent it from being considered a ‘short’ one for the purposes of summary judgment;
- If the court is persuaded that a party’s construction has no real prospect of success and the point of construction is ‘clear’, summary judgment will usually be granted;
- a more difficult assessment arises where both parties’ contentions would, without more, be described as having real prospects of success. In these circumstances, a broader view of the appropriateness of finally determining the issue summarily will usually be relevant;
- in these circumstances, the Court should bear in mind whether the declaration would serve a useful purpose, in particular deciding if the issue is determinative of the whole or a substantial part of the dispute.
On Issue 1, Constable J found that the mechanism in 220.127.116.11–18.104.22.168 was not ‘clear’ and that even if summary judgment was given on one part, the court would have to return to the proper construction of other parts of the clause in the forthcoming trial, which was an unattractive proposition. Furthermore, Constable J held that understanding the technical and economic implications of the parties’ competing constructions would be appropriate when determining the correct interpretation of Clause 58.3.3. The court refused summary judgment on this issue.
On Issue 2, which concerned the meaning of ‘standard required,’ Constable J held that the term’s meaning within Clause 22.214.171.124 should be construed in the context of the real and underlying factual and technical debate between the parties. He also noted a real prospect that neither RRS’s nor the Councils’ interpretations might be correct. Therefore, summary judgment was refused on this issue as well.
Additionally, the Councils’ strike out application regarding the Amended Reply was dismissed by the court.
Paul Bury successfully acted for the Claimant.
A copy of the judgment is available here.