Justice Jackson came down largely in favour of the main contractor in the Wembley stadium case but made a number of withering comments about its conduct
Wembley contractor Multiplex operated a "ruthless" but "lawful" strategy in its dealings with steel firm Cleveland Bridge, the judge in the High Court trial said in his verdict this week.
Delivering his summing up on Monday Mr Justice Jackson ruled that Multiplex's alleged "Armageddon" strategy, which Cleveland Bridge claimed was a plan to put CBUK under extreme financial pressure and force it off the site, was not illegal as it was never a certain course of action. He said Multiplex was entitled to have a plan to enable it to remove a subcontractor it "rightly or wrongly saw as incompetent".
The judge said that despite Multiplex's hardnosed conduct, the firm had not been guilty of a repudiatory breach of contract, a breach so severe it would entitle CBUK to treat the contract as broken, in this or any other respect. Therefore, he ruled, Cleveland Bridge acted illegally by walking off the project in August 2004.
Jackson said that although in his view Multiplex had breached one part of the contract, as it had not adequately consulted CBUK before issuing payment certificates for amounts lower than those claimed by CBUK in July 2004, this breach was not serious enough to be considered repudiation. He said the certificates themselves were allowable as Multiplex was prepared to defend them in adjudication.
Jackson said: "Multiplex issued certificates at the lowest valuations it believed it could defend. This strategy, although ruthless, was lawful."
We have always been confident that Multiplex acted lawfully in its dealings with CBUK. Today’s judgment vindicates that belief
Martin Tidd, managing director, Multiplex UK
He went on to condemn Multiplex's lack of consultation over the certificates but said that that still did not mean Multiplex had acted outside the law. He said: "I do not condone Multiplex's breach of contract on 16 July - I deplore it. But that breach of contract had no future implications and so was not repudiatory."
In a further blow for Cleveland Bridge the judge also ruled that the disputed £32.66m figure, which CBUK claimed was a "final and binding" valuation for its work to 15 February 2004, was intended for cash flow only. The judge rejected claims by CBUK that a final figure had been agreed, but was omitted from the supplemental agreement for Multiplex's internal political reasons.
Jackson said: "It does not make sense for two major construction companies entering into a formal agreement deliberately to omit a crucial term on which they had agreed … Relations between the two had been acrimonious to say the least. CBUK did not trust Multiplex, and if they had negotiated a figure, they would have insisted it was included."
The judge added that he believed evidence given by Cleveland Bridge witnesses Brian Rogan, Roddy Grant and James Child, which referred to a "final and agreed" figure, was a "reconstruction". He said: "I do not suggest these witnesses were dishonest. But their recollection has been coloured since [the time] by what they wish to hear."
The decision by Justice Jackson in relation to the preliminary issues put before him is helpful and should now allow both parties to reach an early resolution on the issues that remain in dispute
Cleveland Bridge spokesperson
Justice Jackson insisted that neither party could claim an outright victory, with Cleveland Bridge achieving success on some of the more minor points of the trial. These included an acknowledgement that CBUK could not have been expected to adhere to its outline programme past February 2004, when the two parties signed a revised agreement designed to supersede elements of the original contract. The ruling greatly reduces Multiplex's scope to sue them for delays on the project.
Meanwhile it has emerged that Cleveland Bridge has written to Multiplex to demand the return of £4.5m worth of equipment that the firm left on site after their departure.
Multiplex has already paid CBUK £500,000 for the equipment's hire and are able to keep the equipment until the steel works on site are complete.
Implications for client and subcontractors
Wembley National Stadium Limited
The Multiplex vs Cleveland Bridge case shows CBUK was responsible for some of the site’s problems, and that Multiplex tried to manage its subcontract problems to the extent that it resorted to ruthless means to minimise its own losses. This may mitigate any allegations against them by Wembley National Stadium Limited of poor management, but ultimately Multiplex remains responsible to WNSL for the actions or failings of its subcontractors.
Other subcontractors on the project
Many Wembley subcontractors are understood to have lodged claims against Multiplex due to cost and time overruns on the project. It is possible that Multiplex’s victory over CBUK will buoy it to carry through these disputes in court. However, the triumph looks set to ease Multiplex’s finances so may reduce its need to chase subcontractors for money.
Contractual points to watch out for:
- Oral agreements and proper documentation: Justice Jackson ruled that an oral agreement from Multiplex would not have been contractually binding.
- Any clause that allows a main contractor to contracharge against a valuation for design, workmanship or materials issues.
- Multiplex Overall claim reduced to £20-25m from about £37m to include about £3m from CBUK for breach of contract and £17m for defects
- Cleveland Bridge Potential counterclaim cut from £19m to £11-13m. Cleveland Bridge not liable for costs of employing Hollandia; liability for damages and delays capped at £6m; to pay 80% of Multiplex’s legal costs, which have been estimated at £1.9m. Must pay £700,000 upfront.
- Likely outcome CBUK to pay Multiplex up to £13m. Multiplex has a bank guarantee on CBUK’s liability for £6m damages, and has a parent company guarantee to protect its claim should CBUK become insolvent. Should any of these safeguards fail, sources at the company have indicated they would be prepared to pursue individuals, including Sheikh Abdullah Al-Rushaid, to recover money.