Outer House refuses recycling firm’s bid for decree in SSPCA waste contract termination dispute

About this case:

• Citation:
  [2026] CSOH 90
• Judgment:
  External link
• Court:
  Court of Session Outer House
• Judge:
  Lord Lake

Lord Lake held that the animal welfare organisation had stated relevant defences concerning implied contractual obligations and alleged breaches by William Campbell Recycling Ltd which could not be determined without evidence.

William Campbell Recycling Ltd entered into an agreement with the Scottish Society for the Prevention of Cruelty to Animals in 2021 to provide waste management services at sites operated by the society around Scotland. For some sites the recycling company arranged contracts between the SSPCA and Veolia, while at others it engaged third parties as subcontractors. The agreement permitted either party to terminate on five years’ notice, although such notice could not expire before 31 December 2038.

Relations between the parties subsequently deteriorated. From December 2023 the SSPCA sought details of William Campbell Recycling’s risk assessments and procedures concerning health and safety in the performance of the services.

On 14 February 2024 its solicitors sent what was headed a “Waste Services Contracts: ULTIMATUM LETTER”. Relying on clause 6.3 of the agreement, it alleged that the recycling company was in default of a material obligation and required the default to be remedied within 30 days, failing which it said the SSPCA would be entitled to terminate the contract. The letter sought completed health and safety questionnaires for each relevant site. It maintained that William Campbell Recycling was in breach of an implied contractual term requiring it to perform the services in a way which did not place the SSPCA in breach of its own legal obligations.

William Campbell Recycling disputed the existence of that obligation but assembled information in response. After an unsuccessful attempt to send the material by email because of its size, it dispatched it by DX. The SSPCA said it received the documents on 27 March. Six days earlier, on 21 March, its solicitors had written to William Campbell Recycling stating that no response had been received within the required period and purporting to terminate the agreement. The recycling company maintained that the SSPCA had not been entitled to terminate the contract and that the termination letter itself amounted to repudiatory breach, which it subsequently accepted before seeking damages.
The case was heard by Lord Lake, with Timothy Young, instructed by Harper Macleod LLP, appearing for the pursuer and Dean of Faculty Roddy Dunlop KC and Karen Forbes, instructed by Morton Fraser MacRoberts LLP, appearing for the defender.

Implied health and safety obligation

William Campbell Recycling sought decree de plano on its conclusions for declarator that the SSPCA’s notice had not determined the contract and that the notice itself amounted to repudiatory breach. It argued that a request under clause 6.3 required strict construction and had to identify both the facts relied upon and the particular contractual obligation said to have been breached. The only obligation identified in the ultimatum letter, it submitted, was an alleged implied term requiring it to perform the services without placing the SSPCA in breach of the law. No such term existed, it argued, and the SSPCA could not subsequently seek to rely upon other alleged contractual obligations which had not been specified in the notice.

The SSPCA maintained that its pleaded case remained consistent with the basis set out in the ultimatum letter and that the surrounding context made sufficiently clear what William Campbell Recycling was being required to do. It also argued that, even if the notice had not been valid under clause 6.3, its averments that the pursuer was itself in material breach of contract were relevant to whether it could enforce the agreement and to the remedies available.

Lord Lake rejected the contention that the SSPCA’s case concerning the implied obligation was necessarily irrelevant, saying: “I doubt whether it could be said that such a condition arises in all contracts for services as the letter states, but, having regard to averments that of necessity the services are performed on the defender’s premises and require use of large vehicles, it is possible that there is an obligation that the services must be carried out in a way that would not result in the defender breaching the averred statutory duties.” He concluded that this is “sufficient for the averment to be relevant.”

Addressing the test for implying contractual terms, Lord Lake noted that business necessity did not require “absolute necessity.” The question could instead be whether, without the proposed term, “the contract would lack commercial or practical coherence.” On the facts averred by the SSPCA, that test was capable of being met if it could establish that, without the information it had requested, performance of the services would involve it in unlawful activity. He reached the same conclusion regarding a separately averred implied obligation on William Campbell Recycling to co-operate with the SSPCA, holding that it could not at that stage be said that the defender was bound to fail in establishing such a term.

Breach had to be identified

Lord Lake nevertheless accepted an important part of the recycling company’s argument concerning the requirements of clause 6.3. He rejected any general proposition that a contractual default notice must always identify the particular obligation allegedly breached. Whether it must do so depended upon the terms of the agreement in question. In the present case, however, clause 6.3 itself required a party to make a “request” to remedy a breach of a material obligation before termination could follow. Lord Lake said: “As the request must be to remedy the breach, it follows that the breach must be identified. That in turn requires that the obligation said to have been breached is identified.” This was not the implication of an additional contractual term, he explained, but part of determining what the parties’ agreement itself required.

‘Drastic’ consequences required strict approach

The judge went on to consider whether the February ultimatum letter met those requirements. He held that the letter had to be construed against the background of the parties’ earlier correspondence and in accordance with ordinary principles applicable to commercial contracts. However, given the consequences of the notice, strict compliance was required. Lord Lake said: “The effect of the ultimatum letter was to create a situation in which, if remedial action was not taken, the defender would be entitled unilaterally to terminate a contract which otherwise would last until at least 2038.” Furthermore, he continued: “I think that the effect of the letter can therefore properly be described as drastic and that a strict approach is required.”

The letter adequately identified the alleged obligation not to place the SSPCA in breach of its statutory duties, but it did not identify the separate obligation to co-operate later relied upon in the defences. “Taking the required strict approach,” Lord Lake concluded, “the letter is therefore not effective in relation to the latter obligation.”

Further procedure required

That conclusion did not, however, entitle William Campbell Recycling to decree. The SSPCA had also made relevant averments that the recycling company itself had been in material breach when the termination notice was served. Lord Lake held that determining whether the alleged implied terms existed, whether they were material and whether they had been breached required factual evidence.

If proved, those matters could affect not merely the level of damages but William Campbell Recycling’s entitlement itself to terminate the agreement in response to the SSPCA’s alleged repudiation. Lord Lake concluded that this provided a relevant defence to the declarators sought. He accordingly refused the pursuer’s motion for decree de plano. “Clearly, further procedure will be required in this case,” he said, directing that it be put out By Order so that parties could address the court on how effect should be given to his opinion and on the future procedure.