The Multiplex vs Cleveland Bridge dispute is an example of what happens when a case gets overtaken by blind emotion: both sides lose a lot of money they could have kept
Who would have thought an everyday row between main contractor and subcontractor could have sunk to such depths? The project was our world-class, 90,000-seat Wembley stadium, built and erected by Cleveland Bridge (CBUK), which was in a subcontract with Multiplex.
Now, construction work always has rows, whether it takes place in your back kitchen or on a dam site in Dar es Salaam. If this particular row had happened 20 or 15 years ago we would have shrugged, tutted and got on with things. But now the UK prides itself on being the best in the world at sensibly managing disputes. The Multiplex and CBUK dispute is one that got off the leash. The legal costs of reaching a conclusion was – wait for it – £22m, and the judge described the litigation as “Herculean”.
The parties to the £60m subcontract got into a dispute about who was to design what. I call this the fuzzy-edge disease. Each blamed the other for delays and there was talk of 30 weeks extension of time, then 50. Multiplex said there was none, and things went from bad to worse. A year into site works, CBUK accused Multiplex of underpayment, then walked.
Multiplex accused CBUK of all sorts of breaches of contract, including negligent design, defective work and wrongfully walking away. The judge decided CBUK had been wrong to leave and decided Multiplex was entitled to hire a new subcontractor.
The UK prides itself on being the best in the world at managing disputes sensibly. The Multiplex and CBUK dispute is one that got off the leash.
The main trial ended recently. Multiplex held its hand out for £25m compensation from CBUK for leaving site and for hundreds of issues on top of that. This trial lasted 12 weeks. The judge said the trial actually should have taken a year, but he coaxed them to stick to a “chess clock” allocation of time – up to six weeks per side. On top of that the judge spent three months in private, reading, believe it or not, 550 files.
Now for the bombshell. Remember, I told you Multiplex claimed £25m for CBUK wrongfully packing its bags, and that CBUK had indeed been wrongful. Well, Multiplex didn’t get £25m; it got two. No, no, not £2m – £2. It so happens that Multiplex did a helluva job replacing CBUK. Instead of paying more than it would have paid CBUK, it actually paid less. It was one of those rare occasions when repudiatory breach resulted in no loss; hence the two quid nominal damages. Rumour has it the two little coins are in a frame on the wall in the reception of Multiplex’s parent’s head office in Australia.
As for the hundreds of other items about the painting of bits of steel, surface areas, columns and beams, and the odd daywork sheet … the judge reckoned that CBUK had been overpaid by about £4m. By the time interest was calculated, CBUK was to repay a smidgen over £6m. So, have you figured out if all this was worthwhile? Has Multiplex got a grin from ear to ear? Well, much depended on what the judge said in his final judgment about who pays the costs. Remember the figure? It was £22m plus a few oddments such as £1m (!) on photocopying. Guess what? Multiplex said CBUK should pay all the legal costs, whereas CBUK said Multiplex should pay.
Everyone knew full well that CBUK would be repaying something to Multiplex, so the outcome was not a surprise. That being so, it surprised the judge that CBUK had not made what we call a “protective offer” – a settlement sum to tempt Multiplex. If CBUK had made an offer that was rejected, then it would have been significantly protected if this offer was more than the eventual award.
So the judge now applied the rules about who pays the costs. The starting point was that in a fight like this the one who ends up receiving payment gets its costs paid by the loser, but the judge can exercise his discretion. In this case he weighed up Multiplex’s attitude towards settling and both parties’ conduct. He roundly criticised both. They were obstinate, he said, and CBUK was more blameworthy. It ought to have offered a cheque in settlement. In the end Multiplex will not grin at their costs award. They get a mere 20% of their expenses. By my calculation, both sides have lost millions. It might have been wiser to toss one of those pound coins for a result instead – heads you win £10m, tails I do.
“The UK prides itself on being the best in the world at managing disputes sensibly. The Multiplex and CBUK dispute is one that got off the leash.”
Tony Bingham is a barrister and arbitrator at 3 Paper Buildings Temple