[2024] EWHC 1435 (TCC)

“For 1/6/10 to 31/5/20

Total increase in losses: 129,537m³

Already paid for in relation to 2013/4 and 2015/6 1:50 Events: 51,032m³”

The volume of 51,032m³ is a credit against the claim reflecting recovery pursuant to the provisions of Schedule 11.

Given the inapplicability of many of the provisions of Schedule 12, paragraph 1.5(b) to claims under paragraph 1.2(g) it is also noteworthy that the parties did not set out a separate regime for recovery of those elements not caught elsewhere.

The provisions of Schedule 11 anticipate that the Agency has an option to decide how to deal with a dynamic situation. It may choose to alter the services to provide in the future thereby limiting its expenditure. This ability to plan and budget for the future also finds expression in Schedule 12 in the ability to reduce Service Levels to obviate the necessity for any Proposal (paragraph 1.6(f) refers).

It is this ability to consider the dynamic situation and both plan and budget for the same in the future which, in my judgment, is a central element and intent of the Agreement. In the course of Mr Nissen’s submissions I questioned whether the purpose of paragraph 1.2(g) was to allow a “re-baselining” to that effect. Perhaps understandably it was a description which was rejected by Mr Nissen and embraced by Ms Hannaford. I accept Ms Hannaford’s submission that the wording of paragraph 1.1 of Schedule 12 (and in particular paragraph 1.1(ii) which is relevant to the present analysis) suggests it is not intended to relate to payments for past events but to the management of future obligations.

By reference to the losses claimed then, on the case advanced by PCDL, there would be no ability to manage those costs which are sought under paragraph 1.2(g) because they had already been incurred and were payable. Further, the situation would not be brought to the attention of the Agency until the end of the 10-year period in accordance with the provisions of Schedule 12. This is not consistent with a central element and intent of the Agreement as I interpret the same.

However, as I have already observed, Schedule 11 does provide for recovery of costs already incurred, however the relevant period is significantly less. Notice needs to be given within three months. As such, decisions can be taken as to how such matters are to be addressed although, as to timescale, I note that paragraph 4.6 of Schedule 11 states that any methodology agreed under paragraph 4.5 above shall:

include provision for a period of monitoring the volume of shingle on the Frontage which shall, unless the parties otherwise agree, be for a period of no longer than four (4) years.”

This reflects paragraph 4.5 which provides:

“Within 28 days of receipt by the Agency of PFIC’s notice under paragraph 4.4 above, the Agency and PFIC will meet and in good faith make efforts to agree a reasonable method for determining whether there has been a Shingle Loss Event and, if so, the Permanent Shingle Loss (if any) in accordance with paragraph 4.6 below.”

Thus far, my analysis suggests that the intent of the Agreement is that retrospective costs are not recoverable under paragraph 1.2 (g) to Schedule 12. However, given the competing clauses one has to look at the Agreement and such an exercise cannot ignore the provisions of paragraph 4.6 to Schedule 12. On a natural reading this expressly recognises that the Agreement provides for a Relevant Cost (or Relevant Saving) where there has been an increase or decrease in the frequency of Storm Events for the first ten-year period commencing on the Effective Date but provides that where that cost is less than £100,000 neither party is able to claim a Relevant Cost or Relevant Saving under Schedule 12.

Ms Hannaford submits that this does not deal with the period in respect of which PCDL makes its claim. That is correct. Nevertheless, it goes directly to the proper interpretation of Schedule 12 and in particular, the extent of recovery for the circumstances provided at paragraph 1.2(g). Similarly, the fact that it is a prohibition not an entitlement is not an answer. The prohibition recognises that, but for the prohibition, a Relevant Cost may be recoverable in respect of the first 10 years.

The terms of paragraph 4.6 taken with the definition of a Relevant Cost as a cost suffered or incurred at the relevant time or in the future support a conclusion that the parties did intend there to be provision for recovery in circumstance of paragraph 1.2(g) of costs already incurred in the 10 year period determined in accordance with the provisions of Schedule 12. The parties expressly directed their minds to the period and determined that the circumstance 1.2(g) in the Proposal would cover a ten-year period. In turn this supports my conclusion that the costs claimed for the second ten-year period are similarly recoverable (if established).

On that construction, the ability to manage the costs potentially payable by the Agency is limited to future costs and although liable, they will not be able to manage cost already incurred. However, that applies to all circumstances if, as I conclude, Relevant Costs are taken to include costs in addition to those suffered or incurred in the future. The recognition of the past circumstances will still allow management of future costs even if, as I have concluded, the costs of those past circumstances are recoverable in principle. Further I can see no good reason, and Ms Hannaford was unable to identify any, why a claim by an innocent party for the cost consequences of a breach should be limited to future costs only. As I have noted above, this is one of a number of examples where PCDL as the innocent party would be limited to compensation only for future effects. That is a conclusion which would require clear words and is not one to which I am driven on the proper interpretation of the Agreement as a whole.