SITA loses Manchester waste PFI legal battle

SITA UK has today (February 24) failed to resurrect its bid to secure £92 million in damages over the procurement of the Greater Manchester Waste Disposal Authority’s £4 billion waste PFI contract, writes Nick Mann.

The company’s attempt to overturn a March 2010 ruling which prevented it from formally launching the damages claim was dismissed by three High Court judges Lady Justice Arden, Lord Justice Rimer and Lord Justice Elias.

They endorsed Mr Justice Mann’s March 2010 decision that SITA UK’s bid to secure damages had been launched too late to proceed to a full court hearing and that there was no good reason to extend the defined period within which it should have launched its action (see letsrecycle.com story).

Their decision follows a three-day hearing that was held at London’s High Court in December 2010 (see letsrecycle.com story).

The case was heard at the Royal Courts of Justice in Central London

The company has begun its claim for damages in August 2009 on the basis that, as reserve bidder for the Greater Manchester waste contract, it should have been allowed to resubmit a bid for the deal when preferred bidder Viridor Laing’s costs rose and the project changed significantly (see letsrecycle.com story).

However, the GMWDA claimed that due to SITA UK’s action not being launched until more than three months after the contract was finally signed with Viridor Laing, in April 2009 (see letsrecycle.com story), it was out-of-time and should not be allowed to proceed to a full trial.

At the February 2010 hearing, SITA had claimed the legal action was not launched until August 2009 because it did not have sufficient information to base its claim for damages on until after the deal was signed (see letsrecycle.com story).

But, in his original judgment, Mr Justice Mann sided with the GMWDA, stating that SITA UK knew enough to “threaten and commence” proceedings against the Authority over its alleged breach of procurement regulations in April 2009, and not based on later correspondence.

Appeal

And, this is endorsed by todays judgement on SITAs appeal where, explaining his decision to dismiss the appeal, Lord Justice Elias outlined why he believed SITA UK could have launched its appeal within the three month period formally allowed under UK contract law.

He said: “I have no doubt that SITA’s primary case fails, essentially for the reasons given by the judge. SITA was aware that the price of the contract had increased very significantly; that the capital costs had also risen; that the number of employees had risen, and that in all these respects its own tender came in lower than VL’s.”

Lord Justice Elias said it was abundantly clear from a letter sent by the GMWDA to SITA on May 9 2008 that the facility being developed at Runcorn, with chemicals company INEOS Chlor, as part of the contract involved a significant change in Viridor-Laing’s original main proposal for dealing with refuse derived fuel.

He added this would result in a far greater capital expenditure than had been envisaged in its original proposals.

And, in rejecting SITA’s arguments for the time within which they could launch an appeal to be extended, Lord Justice Elias, who provides the majority of today’s lengthy judgement, said that the fresh breaches of contract law identified by SITA were not enough to start the three-month period running again.

He said: “In my judgment the matters being relied on as constituting the fresh breaches are simply further particulars of the infringement which could already be pursued. They do not constitute separate causes of action in their own right.”

GMWDA

Today’s judgement was welcomed by the GMWDA, whose chair, councillor Neil Swannick, said: “It is good news for the Authority. GMWDA carried out the procurement of its 25 year Recycling and Waste Management contract fairly and according to procurement law, and we are very satisfied with our decision in 2009 to award the contract to the Viridor Laing consortium.

“We had a duty to robustly defend both the initial proceedings and the subsequent appeal in order to protect the public purse and recover the costs incurred.”

The GMWDA said SITA UK has confirmed it will not petition the High Court over the decision and that an interim award of costs, for an as-yet-undisclosed amount, was made to the GMWDA.

Cllr Swannick added: “The judgement is lengthy and we want to take the time to consider it carefully and in detail. However, I am glad we can now concentrate on delivering our world class recycling and waste management vision for the people of Greater Manchester.”

SITA UK

In a statement, SITA UK said it was “very disappointed” that the judges’ ruling meant its case for a damages claim would not be heard in an open court and said that the decision not to allow it to bring its action “surprises us”.

It said: “Our original decision to go to court was taken as a last resort, only after we were advised that we had obtained sufficient evidence to do so and only after we were absolutely certain that we were not bringing our claim wrongly or prematurely.

“Being a responsible company that has served the public sector for over 20 years, this was of paramount importance to us.”

The company also said that the ruling could have wider implications for other potential legal actions in a similar vein, claiming: “Today’s decision could leave a negative legacy for others; the fear of bringing a claim too late might force others to bring legal proceedings prematurely.”

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