Waste processing company’s breach of contract action against city council continued to hearing

Lord Clark
Lord Clark

A waste management company that sought damages for breach of contract from a city council has had their case continued to a hearing to determine the nature and scope of the proof.

Patersons of Greenoakhill Ltd contracted with Glasgow City Council to process waste collected by the council. The council terminated the contract in 2017; an action which the pursuer alleged had been taken without a proper basis. Each party took issue with the relevancy of the other’s pleadings, and the case called for a debate on those matters.

The case was heard in the Outer House of the Court of Session by Lord Clark.

Not bulky waste

The pursuer and the defender entered into a contract for the pursuer to take and process bulky waste from the defender in 2015, following an invitation to tender and the taking of a trial load of bulky waste. One of the key provisions of this contract was that the pursuer was required to recycle at least 60 per cent of the waste. The pursuer had been able to recycle 75.4 per cent of the trial load.

Disputes arose between the pursuer and the defender about the pursuer’s treatment of the waste. The pursuer’s position was that the waste delivered by the defender materially deviated from the composition and quality of bulky waste and that significant amounts were not bulky waste. Around April 2016, the pursuer suspended performance of the contract.

The dispute between the parties continued until November 2016, when they both agreed to a binding joint waste instruction from a third party waste analysis firm, Albion Environmental Ltd. On 6 July 2017, the defender alleged that the pursuer was in material breach of the contract. They alleged that the pursuer continued to reject loads that were compliant with the contract without the council’s approval. They also considered that the pursuer was in a breach of their contractual duty to act in good faith given the ongoing negotiations regarding the dispute.

In response, the pursuer advised the defender that it was acting in good faith and that the defender’s interpretation of the contract was misconceived. The pursuer said it was not rejecting loads because they contained contaminated material within the meaning of the contract. Rather, the pursuer was rejecting the loads as being outwith the scope of the contract. The loads were not physically rejected in the sense of being turned away from the pursuer’s site, but they were sent to landfill.

Following upon the correspondence from the pursuer, on 5 December 2017 the defender issued a notice terminating the contract. The pursuer treated the termination notice as a repudiatory breach of contract and on that basis intimated its acceptance of the repudiation. Albion issued its report on 15 March 2018 and issued a supplementary report on 15 June 2018. Among other things, Albion concluded that the pursuer was operating at the standard of good industry practice, as defined in the contract.

The pursuer contended that “bulky waste” was to be defined as waste that did not fit into household bins, and the loads the defenders had given them included waste that would fit into such bins. The waste that they received also contained significantly less recyclable material than previous loads, and thus the defenders were materially deviating from the composition and quality of waste required by the contract. There were implied terms in the contract that allowed it to reject waste that fell outwith the scope of the contract.

The defender averred that no guarantees were made as to the nature, volume, or composition of bulky waste streams, nor on the percentage of contamination in each load. The implied terms proposed by the pursuer had no basis in the contract and indeed contradicted its terms. The risk fell entirely on the pursuer.

Relevant factual background

In his opinion, Lord Clark began by addressing the definition of “bulky waste”, saying: “Having reflected at some length on the parties’ submissions, I conclude that where the interpretation of any of the contractual terms depends upon or relates to the meaning of the expression “bulky waste”, those terms cannot properly be construed at this stage. The factual background may be relevant to the construction of those terms and it is therefore not appropriate to deal with this issue simply on the basis of legal arguments.”

He continued: “It is of course open to me at this stage to reach a view on the contractual terms that do not appear to depend in any way upon the meaning of the expression “bulky waste”, applying the principles in the case law, including the natural and ordinary meaning of the words used. At first sight, there may be some terms which fall into that category. However, it is not inconceivable that the meaning of that expression could impact even on such other terms. Out of caution, the true interpretation must await the hearing of any relevant evidence. Accordingly, I conclude that it is not possible to reach a decision at this stage on each party’s criticisms of the relevancy of the other party’s averments on the meaning of the express terms in the contract.”

Turning to the implied terms, he said: “Each side made careful and cogent submissions on whether these formed part of the contract. While the court can in some circumstances deal with such an issue at debate, in the present case it is not possible to reach a firm and concluded view on the implication of terms into the contract when the fundamental issue of the nature and scope of the express obligations under the contract to deal with bulky waste has not yet been determined.”

He continued: “The questions of whether it is reasonable or equitable to imply either of the two implied terms, or whether either term is necessary, or so obvious that it goes without saying, or capable of clear expression or whether either of them contradicts an express term, are best left to be determined once the evidence has been led and the meaning of the expression “bulky waste” for the purposes of this contract has been ascertained. As I have said, only then can the express terms which refer to or relate to that concept be fully and properly understood.”

On whether it was appropriate for the pursuer to terminate the contract, he added: “In my view, two major points arise which make a decision on this second issue also inappropriate at this stage. Firstly, the parties’ respective motions are founded upon the other side’s averments being irrelevant. But before being able to determine whether the notice of termination is valid, it will be necessary to understand the meaning of the key terms of the contract and to answer the fundamental questions noted above. Secondly, while the question of the meaning of the notice of termination can be addressed on its own, doing so in the abstract, purely on the pleadings and the terms of the document, is inappropriate.”

For these reasons, no pleas-in-law from either party were sustained or repelled, and the case was continued to a by-order hearing to determine the nature and scope of the proof before answer.

© Scottish Legal News Ltd 2020

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