Case Nos: CA-2024-002136 - [2025] EWCA Civ 921

Discussion

Ms Parkin pointed out that the declaration made by O’Farrell J which I have quoted in paragraph 28 above did not specify whether the income to which it referred represented “Third Party Waste Excess TPI Share”, on the one hand, or “Other Excess TPI Share”, on the other. We were told by Mr Mort that, when the parties came to the trial before the Judge, they both proceeded on the basis that the relevant income fell within paragraph 11.4 of schedule 15 to the Project Agreement as “Third Party Waste Excess TPI Share”. In any event, that appears to me to be clear from what O’Farrell J said in her judgment. It was when discussing paragraph 11.4 of schedule 15 to the Project Agreement that O’Farrell J made the remarks which I have mentioned in paragraph 26(ii)-(iv) above. More specifically, she noted that paragraph 11.4 refers to “the actual Third Party Income” (paragraph 88 of her judgment), that those words “must be read against the defined term, Third Party Income, which explicitly includes income from Affiliates as part of the Contractor’s income” (paragraph 89) and that “[t]he income received by [FCCWS] from [Hertfordshire] CC and from London Waste is ‘for the treatment of Third Party Waste at the Facilities’”, as those words feature in the definition of “ATPW_TPI” given in paragraph 11.4 (paragraph 90). I do not, therefore, accept that the income at issue in the present proceedings is correctly categorised as “Other Excess TPI Share”. It is rather, I think, “Third Party Waste Excess TPI Share”.

In any event, it seems to me, with respect, that the Judge failed to focus on the need for costs to be “specifically and solely” related to the generation of additional Third Party Income. In my view, it follows from the findings which the Judge made when considering whether costs had been “directly incurred” in generating relevant income that they were not, either, “specifically and solely” related to the generation of additional Third Party Income. The position is especially stark as regards the sums which FCCB has claimed to deduct in respect of divisional overhead (“management costs in an operating division that are not specific to an individual operating site or contract”: paragraph 275 of the Judgment), corporate overheads (including “all the management and support costs associated with support functions e.g. Finance, IT, HR, Procurement, Directors”: paragraph 277 of the Judgment) and “operational support charge” (including “the support costs to the operational sites of Fleet and Plant, SHEQ and Engineering”: paragraph 279 of the Judgment). There can be no question of such costs being “specifically and solely” related to additional Third Party Income. Costs which do not arise “solely” in relation to additional Third Party Income but also in generating “Guaranteed Third Party Waste Third Party Income” must also fail to satisfy the requirements of proviso (a).