Biffa given green light to sue Scottish Government for £160m over failed DRS scheme

Waste disposal company Biffa, which was selected as the “logistics partner” for the deposit return scheme [DRS], said it invested “significant sums” in preparation for the initiative before it was scrapped.

The firm is suing the Government for a sum of £166.2m, following the decision to scrap the DRS.

The scheme, which was originally intended to come into force on August 16, 2023, would have seen shoppers charged a deposit when buying drinks in cans and bottles, which would have then been repaid to them when empty containers were returned.

READ MORE: How Scotland's troubled deposit return scheme could return under Labour 'review'

However, the Scottish Government changed its plans when UK ministers used the Internal Market Act (IMA) to rule glass bottles could not be included, overhauling the previous position of both the Scottish and UK governments.

The legal case will now proceed to a proof before answers hearing after Lord Clark's agreed the proceedings could move ahead.

Ms Slater - the minister previously charged with delivering the DRS - insisted she had no regrets with pressing ahead with a Scotland-only scheme, with the policy devolved to Holyrood.

Asked if in hindsight, she thought it would have been better to have “waited and introduced a scheme right across the UK”, Ms Slater said: “No, I don’t.”

The Scottish Greens co-convener added: “It was always intended that the schemes across the UK would work together, would be interoperable - that was always the case.

“Devolution allows the Scottish Government to move ahead with things to protect our environment, like putting in recycling schemes without Westminster’s permission.

“In a lot of ways, it made sense to pilot the scheme in Scotland to get the kinks out before you roll it out to the whole of the UK. So it absolutely made sense for Scotland to go first.”

Tuesday’s legal judgement, following a hearing at the Court of Session, states Biffa “claims to have suffered loss of profit and costs as a consequence of entering into the contract, and the contract then coming to an end because the DRS was delayed”.

The judgement adds: “In the oral submissions for the pursuer [Biffa], it was made clear that if the warning had been given the pursuer would not have entered into the contract.”

Biffa has made two separate claims against the Scottish Government, including that ministers “owed a duty of care to Biffa” and that duty was breached. There is also an allegation that Ms Slater, who was a minister at the time, “negligently misrepresented” the state of the scheme, which led to the company investing significantly.

Biffa has claimed it suffered “pure economic loss”, because if there had been no breach of the duty of care, it would not have entered into the contract.

The judgement adds: “But the pursuer [Biffa] also says that as a consequence of that breach of duty it entered into the contract, from which it expected to make a profit of £114.8m.”

The company has argued that before entering into the contract, it raised concerns with Circularity Scotland, which was set up to deliver the scheme, but has now collapsed, “in connection with the significant upfront financial outlay that Biffa would have to make” and “sought assurances as to the deliverability of the DRS”.

A letter from Ms Slater to Michael Topham, Biffa’s chief executive, sent on May 17, 2022, states the waste management firm was the Scottish Government’s “preferred partner to deliver operations and logistics services” for the policy.

Biffa claims it “specifically sought assurances from the Scottish ministers as to the deliverability of the DRS prior to incurring the expenditure it would commit and incur on entering into the contract”.

In the letter, Ms Slater highlights the Government’s “commitment to delivering DRS by 16 August 2023, which remains unwavering”.

The company said it expected to make profits of £114.8m over ten years through the contract and it invested £51.4m in assets such as sorting machines as it prepared for the “go live” date.

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The Scottish Government’s lawyers have previously said the decision by Biffa to start spending money on the scheme was a “commercial risk” the company had “chosen to take”.

They denied Ms Slater had made any “negligent misrepresentation” and said ministers did not owe a duty of care to Biffa.

In his ruling on Tuesday, Lord Clark said the case would not be dismissed.

He said: “On the first part of the claim, for the pursuer to succeed at the proof the court will have to be satisfied on the following points: there was an assumption of responsibility; the duty was not inconsistent with the statutory powers and duties of the defenders; the pursuer relied, and reasonably relied, upon the defenders’ conduct; the breaches of duty occurred; and the loss was caused by the alleged breaches.

“On the alternative case on negligent misrepresentation, the pursuer mainly requires to prove that the pursuer’s contention on the proper interpretation of the letter, when viewed in its full context, is correct, and that the pursuer relied, and reasonably relied, upon it, causing the loss of costs.

“Questions also remain in play about the amount of loss on costs and profit, which the pursuer can establish.”

Scottish Labour net zero spokesperson Sarah Boyack pointed to the “disastrous handling” of the DRS by the Scottish Government and the Scottish Greens.

She said: “The Scottish Government’s mismanagement of this scheme has already cost taxpayers millions and it has exposed the public purse to even greater risk.

“Time and time again, Scottish taxpayers and businesses are being badly let down by the arrogance and incompetence of this SNP Government.

“After all these years of chaos, Scots still don’t have the modern and accessible recycling system they need.”

A Scottish Government spokesperson said: “The Scottish Government cannot comment on live litigation.”