Government assurances on deposit return ‘foundational’ to investment, says Biffa

Assurances from Scottish Government ministers over a delayed bottle return scheme were “foundational” in a company’s decision to invest millions of pounds on it, a court has heard.

Waste management firm Biffa is suing the Scottish Government for £51.4 million, following the decision to delay the proposed deposit return scheme (DRS).

The DRS, which was 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 be repaid to them when empty containers were returned.

The Scottish Government changed its plans for the scheme when UK ministers used the Internal Market Act (IMA) to rule glass bottles could not be included.

The IMA governs rules on trade around the UK and was introduced post-Brexit.

Circularity Scotland (CSL), which was set up to administer the Scottish DRS, fell into administration in June 2023 and Biffa’s contract was terminated.

At the heart of Biffa’s case is a letter of “comfort” sent to the firm by then Scottish circular economy minister Lorna Slater in May 2022, which the firm alleges negligently misrepresented the true level of risk facing the project.

Giving submissions at the Court of Session in Edinburgh on Thursday, Biffa’s lawyer Roddy Dunlop KC said the letter had come when his client’s decision on whether to sign up to the scheme had been on a “knife-edge”.

He said it had the “express purpose” of persuading Biffa to come on board, but it “actively concealed” the risk the scheme would be undermined if the UK Government failed to grant an IMA exclusion.

He said that at the time, Biffa had been “reluctant” to agree to become the scheme’s logistics partner due to concerns the DRS could be cancelled or face material delay.

On the letter, he told the court: “It’s being written to try and persuade Biffa to get past the mental roadblock they have got of not wanting to expose (themselves) to a risk of cancellation and delay.

“Looked at in context, a letter that says ‘we are unwaveringly committed to Aug 2023, nothing bad is going to happen to CSL, CSL have demonstrated an ability to endure for five years, this scheme will be the first in the UK’.

“All that without putting in the caveat – which could have been done in parenthesis, in half a sentence – ‘as long as we get an IMA exclusion’, is misrepresentation by omission.”

He added of the letter’s role in Biffa’s decision-making: “It was important. It was foundational.”

Judge Lord Sandison pointed out Ms Slater had only been asked by CSL to reassure Biffa on the Government’s commitment to the scheme, and the fact CSL was not going to be replaced, and she had done exactly that.

The judge also said that at the time the letter was sent, it was “true” Ms Slater genuinely believed securing an IMA exclusion would be possible.

Mr Dunlop responded that her degree of confidence had been “negligent” as it was without a “proper basis” and ignored “readily-available information”.

Mr Dunlop was also challenged on the extent to which the letter had been relied upon by the Biffa board in arriving at the decision to sign up to the DRS.

Lord Sandison put it to him that after being sent to Biffa the letter left “precious little footprint” in the company’s decision-making, and there was no record of it having been discussed by the board.

“If that letter was a material part of the board’s decision, it has not left any trace,” he said.

Mr Dunlop responded that since the letter had persuaded Biffa chief executive Michael Topham of the case for signing, it had also persuaded the board since Mr Topham was a “key decision-maker” who had recommended it to the board.

“If it’s operative in Mr Topham’s mind, and he’s the one making the recommendation, then that’s enough,” Mr Dunlop said.

The hearing continues.