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

O’Farrell J’s judgment

In the latter part of 2020, the Council issued proceedings seeking, among other things, declarations as to the meaning and effect of the Project Agreement. One of the issues was whether, for the purpose of the calculation required by schedule 15, Third Party Income included income derived by other companies in the FCC group from contracts with third parties under which they would accept waste which was ultimately treated at Greatmoor. The matter came before O’Farrell J. In a judgment dated 26 October 2021, O’Farrell J concluded that the reference to “the Contractor’s … income” in the definition of “Third Party Income” “includes income received by [FCCR] and [FCCWS]” and that the income which FCCWS received from Hertfordshire CC and London Waste was “income from third parties” within the meaning of the definition: see paragraphs 82 and 83. As for the requirement for income to be “associated with the Project”, O’Farrell J went on:

The type of income within scope is ‘income from third parties … associated with the Project’. As [counsel for the Council] submits, that is a broad description. The Project comprises the provision of waste management services to the [Council], including the construction of the Facilities and satisfaction of the requirements in the Specification, but the income referred to as Third Party Income is deliberately stated to extend beyond that derived from FCCB’s performance of its contractual obligations under the Project Agreement. The natural and ordinary meaning of the words ‘associated with the Project’ indicates that the definition is concerned with income from a wide range of activities related to the availability of the Facilities. It is not confined to income payable only from the activities of waste treatment or disposal after waste arrives at the Facilities; no doubt such income is included; but it is capable of extending to income from ancillary activities of collecting waste at a site remote from the Facilities and transporting it to the Facilities for the purpose of treatment and disposal.

The definition of Third Party Income expressly includes income ‘derived from Third Party Waste…’ Third Party Waste is defined as: ‘all waste received at the Facility(ies) other than Contract Waste and Substitute Waste’. The definition could have stated that it was limited to income generated from the time at which waste arrived at the Facilities, or income generated directly by the treatment and disposal processes at the Facilities provided by FCCB to the [Council]; it does not do so. The natural and ordinary meaning of income ‘derived from Third Party Waste’ is that it extends to all income arising from waste that is ultimately received at the Facilities, regardless of the point in time at which the sums from which the income is derived become payable. The Waste that is the subject of the [Hertfordshire] CC and London Waste contracts falls within the definition of Third Party Waste if it is received at the Facilities.

It follows that the income received by FCC Waste Services from [Hertfordshire] CC and London Waste, in respect of waste that is delivered to the Facilities for treatment and disposal, falls within the definition of Third Party Income.”

Addressing an argument advanced on behalf of FCCB to the effect that the formula for calculating Third Party Income Share in paragraph 11 of schedule 15 indicated that the Council’s entitlement was “limited to the specified share of excess gate fee income received by FCCB for the treatment of waste from third parties at the Facilities”, O’Farrell J said:

“although the formula in paragraph 11 sets out the steps in the calculations required and the components to be used in such calculations, it does not purport to override the defined terms set out in Appendix A of the Project Agreement and must be read subject to those express terms” (paragraph 87);

The “ordinary and natural meaning” of “gate fee revenue” is “revenue from charges for waste received for treatment or disposal at the Facilities” and, “[i]n the absence of clear words to the contrary, the mere reference to gate fee revenue would not override the references to the defined terms, ‘Third Party Waste’ and ‘Third Party Income’; in particular, it does not displace the clear and express definition of Third Party Income in Appendix A of the Project Agreement” (paragraph 88);

While ATPW_TPI is described as “the actual Third Party Income received by the Contractor”, “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

“It is not a requirement of the Third Party Income definition that the third party waste should be treated by the Affiliates or that it should be treated by the Affiliates at the Facilities. It is sufficient that the Affiliates receive income from third parties that is derived from waste received at the Facilities for the purpose of treatment” (paragraph 90).

O’Farrell J added in paragraph 92, “If the waste is in fact delivered to the Facilities for treatment or disposal, then the income derived from such waste, whenever generated, is Third Party Income”.

On that basis, O’Farrell J made an order including the following declaration:

“Income received by [FCCB], or by any Affiliate (including [FCCWS]), in respect of:

the treatment of waste from third parties at [Greatmoor];

the movement of such waste to the Facilities for that purpose (and/or any other handling of waste for that purpose);

metals or any other residue or by-product of the process at [Greatmoor];

is (i) income ‘associated with the Project’ and (ii) ‘Third Party Income’ as defined in the Project Agreement.”

The contracts between FCCWS and, respectively, Hertfordshire CC and LondonWaste were at issue before O’Farrell J. The contract with Luton BC did not form part of the proceedings.

There was no appeal from O’Farrell J’s judgment.