The judge said neither Multiplex nor Cleveland Bridge could claim outright victory over Wembley, but on all the big money questions, the Aussies came out on top
In His judgment on the wembley stadium case last week, Mr Justice Jackson ruled that Multiplex had won the key points in its High Court battle with Cleveland Bridge (CBUK). But before I analyse the judgment, here's a brief recap of the case.
CBUK entered into a £60m lump sum contract in September 2002. At trial Multiplex argued that CBUK had underpriced the job. In any event, by February 2004 a financial deal was done, complete with heads of agreement covering payment and a deadline for erecting the arch by 21 April 2004. A supplemental agreement was signed on 14 May 2004. In an attempt to agree the valuation, an oral agreement to pay CBUK £32.66m was arrived at. At trial, the subcontractor argued this was an agreed settlement. Multiplex said it was "on account" and subject to counterclaims for damages. By July 2004, Multiplex was exercising its right to withhold payment and seeking to recover money paid. On 2 August 2004, CBUK left the site, alleging breach of contract.
Each side alleged that the other was in repudiatory breach of contract - meaning it had acted in such a way that it did not intend to honour its obligations under the contract, thus entitling the innocent party to end the contract. The trial centred on four key areas:
- What had been settled in the supplemental agreement between the parties?
- What were CBUK's contractual obligations regarding progress?
- What can be claimed by the parties?
The judge said Multiplex's claims for abatement were not correct in law but could be amended so as to constitute a valid reduction in CBUK's valuation. He went on to decide the way in which that reduction should be measured. This will mean Multiplex will be able set off their costs of remedial work carried out by Hollandia and others against CBUK's valuation of the works, reducing the value considerably. Both parties next step is to revisit the valuation of CBUK's work and Multiplex's counter claims for damages and set-off.
It appears the supplemental agreement incorporated a full and final settlement of CBUK’s claims but left Multiplex free to contracharge
Any oral agreement on the sum of £32.66m could not be relied upon by CBUK because it was not incorporated into the subcontract. On the evidence it was accepted by CBUK that there was an express refusal by Multiplex to have the valuation agreement within the supplemental agreement.
On the key issue as to whether Multiplex orally agreed that the final valuation of CBUK's work to 15 February 2004 would be £32.66m, the judge found in Multiplex's favour. He concluded that £32.66m was a figure Multiplex was prepared to pay in valuation certificates but not as a final valuation figure. He found that if CBUK had negotiated a final figure it would have insisted it be included in the formal agreement. No such agreement was made.
- Who was in repudiatory breach?
Because Multiplex's actions in not paying CBUK were lawful, it followed that CBUK's own action of leaving site on 2 August 2004 was not an entitlement and therefore was in repudiatory breach of contract.
CBUK now face an uphill battle in recovering any further cash after the judge's decision. Its most likely course of action is to resort to a damage limitation exercise to limit the amount that it has to give back to Multiplex.
Jane Ryland is head of construction at Cripps Harries Hall