Citation: [2024] EWHC 1435 (TCC)
On the proper construction of a 25-year PFI agreement for the provision of services for the delivery of sea defences, the service provider could retrospectively make a claim for additional cost that it had incurred as a result of a material increase in the frequency of storm events in the second decade of the agreement compared with the first decade. Background
- C asked the court to interpret a PFI agreement which it entered with the Environment Agency (‘EA’) in 2000. Under the agreement, C agreed to provide services for the delivery of sea defences at Pevensey Bay over 25 years.
- Clause 15 enabled the EA to propose changes to the service requirements during the lifetime of the agreement, and Schedule 12 set out the circumstances in which it could do so. Schedule 12 para.1.2(g) provided that one such circumstance would be a material increase in storm events, and para.4.2 allowed for a review of storm event frequency on the 10th and 20th anniversaries of the commencement of the agreement. Schedule 12 also introduced ‘relevant cost’, defined by Schedule 1 as cost incurred by the claimant as a result of a change proposal.
- The issue was whether, if there had been a material increase in the frequency of storm events in the second decade of the agreement compared with the first decade, Schedule 12 permitted the claimant to make a retrospective claim at the end of that decade for the additional cost it had incurred in providing services. The claimant asserted that it did, while the EA argued that Schedule 12 permitted only claims for future costs.
Decision (DJHC Simon Lofthouse KC)
- The agreement was not a model of clarity. Some provisions suggested that retrospective recovery might be possible, while others appeared more relevant to addressing future matters. The EA’s aim in entering into the agreement was to provide a sustainable policy for management of the Pevensey Bay sea defences. It recognised that the situation might change over the 25-year lifespan of the agreement, and that that provision had to be made to address any such change.
- The ability to consider and budget for a dynamic situation was thus a central element. The definition of ‘relevant costs’ embraced costs incurred at a time other than in the future and, taken with Sch.12 para.4.6, which recognised that the agreement provided for a relevant cost where there had been an increase in the frequency of storm events in the first decade of the agreement, that supported the conclusion that the parties intended there to be provision for recovery, in a Sch.12 para.1.2(g) circumstance, of costs already incurred. Thus, if there was a material increase in the frequency of storm events in the second decade of the agreement, Sch.12 enabled the claimant to claim, after the end of the second decade, additional payment in respect of services performed in that decade.
Representation
- Alexander Nissen KC for the Claimant. Sarah Hannaford KC for the Defendant.
- Full case: https://www.bailii.org/ew/cases/EWHC/TCC/2024/1435.html
