Council succeeds in High Court bid for rectification of waste recycling contract

A local authority has successfully applied to the High Court for the rectification of a major waste recycling contract.

Milton Keynes Council entered into the 15-year contract with Viridor on 1 October 2009. The High Court (Coulson J) said this contract recognised that waste recycling was a profitable business so it stipulated that the defendant was obliged to make both fixed and variable payments to the local authority.

The fixed payment was sometimes referred to as rent, because it related to an existing recycling facility owned by the claimant and used by the defendant. The variable payment was the product of a profit-sharing arrangement between the parties.

Viridor’s final tender bid of May 2009 included an Income Generating Payment Mechanism ("IGPM") which identified a fixed payment of £500,000 per annum "indexed for inflation".

When the final contract documents were put together by Milton Keynes’ consultants, an earlier and incomplete version of the IGPM, which contained gaps and made no reference to indexation, was included in the contract documents.

The council submitted that this was either a common or a unilateral mistake, and therefore sought rectification of the contract by the replacement of the earlier, erroneous version of the IGPM with the later, correct version, including its reference to indexation.

Viridor took a range of points in resisting the claim for rectification.

In Borough of Milton Keynes v Viridor (Community Recycling MK) Ltd (No 2) [2017] EWHC 239 (TCC) Mr Justice Coulson concluded that the council was entitled to the rectification of the contract as a consequence of common mistake. In the alternative, he found that Milton Keynes was entitled to rectification as a result of unilateral mistake.

The judge said the council had been able to demonstrate all of the relevant ingredients for rectification. “Indeed, I consider that the claimant has made out an overwhelming case to that effect.”

Mr Justice Coulson rejected the defence to the claim of rectification based on either laches (delay) or acquiescence.

He said he was confident that rectification with the correct paragraph for the IGPM would “then properly record the parties' rights and liabilities, including the defendant's entitlement to calculate the profit share by deducting the £5 per tonne before the 30%/70% split.”