litigation David Thomas QC Keating Chambers, London
or over 75 years, the Empire Stadium
(its original name) was the centre of Englands sporting life, spanning every FA Cup Final since the white horse final of 1923 (when a policeman on a white horse achieved immortality by trying to control vast crowds of supporters), through the 1948 London Olympics, Englands 1966 World Cup victory and Manchester Uniteds emotional 1968 European Cup win. The original stadium, built from 25,000 tons of ferro concrete and 1,000 tons of steel by Sir Robert McAlpine, took just 300 days to complete, at a cost of 750,000. In 2000, the old stadium was closed, to be replaced by a structure of 212,000 tons of concrete and 23,000 tons of structural steel. The client, Wembley National Stadium Ltd, awarded the main contract to Australian contractor Multiplex Constructions Ltd. Contracts and subcontracts were awarded in 2002 and the old stadium was demolished in 2003. The new stadium was scheduled to be open for the FA Cup Final in May 2006 but that had to be moved to the National Stadium in Cardiff. The Football Association received the keys of the 90,000 capacity stadium in March 2007. It is claimed that, with the total cost of the project estimated to exceed 1 billion, it is the most expensive stadium in history. In the legal world, Wembley Stadium has acquired different connotations. As early as the autumn of 2004, Multiplex was engaged in litigation with Cleveland Bridge, its steelwork subcontractor. The four years which followed have seen litigation concerning the project on an unprecedented scale. During that time, Multiplex has been engaged in litigation with Cleveland Bridge, with communications subcontractor Honeywell Control Systems, with concrete 28
subcontractor PC Harrington and with
Wembleys engineering consultant, Mott Macdonald which was partially novated to Multiplex. The Australian Broadcasting Corporation entered the fray at one point in 2005 with an application to the Technology and Construction Court (TCC) for an order permitting them to see and copy the pleadings of the parties in the Multiplex v Cleveland Bridge litigation (which they obtained despite resistance by Multiplex). Perhaps not surprisingly, the popular press and construction journals have focused attention on the scale and cost of the litigation. Comments by Mr Justice Jackson in Multiplex Constructions (UK) Ltd v Cleveland Bridge (No 6) [2008] EWHC 2220 (TCC) at the end of September 2008 received widespread coverage, notably his references to the 550 ring-binders of documents, the 1 million photocopying bill and some 22 million of costs overall. His conclusion was that this was expenditure which far exceeds the sums which (after stripping out the froth) are seriously in dispute between the parties. His criticisms of the parties for having thrown away golden opportunities to settle this litigation upon favourable terms were given added piquancy when, in November 2008, both parties lodged applications to appeal to the Court of Appeal against aspects of the judgment. It is not the purpose of this article to rebut or endorse these criticisms or to comment upon the history of the relationships between the various parties beyond agreeing that it is factually correct, as Jackson J (as he then was) stated, that the aspects he had criticised were in no way typical of litigation in the Technology and Construction Court. Construction Law International Volume 4 No 1 March 2009
For legal commentators, the Wembley
Stadium litigation has another, more lasting, importance, as a rich fund of discussion and decision of a range of points of law of significance to the construction industry. Although it was the first element of the litigation and perhaps the highest-profile aspect of it, it may be that the Multiplex Constructions v Cleveland Bridge case is not the most important in terms of legal analysis. Of the number of points of issue which obliged Jackson J to give a 79-page judgment ([2006] 107 Con LR 1) including the effect of a supplemental agreement made between the parties concerning valuation of variations, the subcontracts entire agreement and the employers entitlement to a defence of abatement, probably the only one of major import was that on repudiatory breach. Multiplex and Cleveland Bridge had accused each other of repudiation entitling them to terminate the contract. The judges finding was that, while Multiplex was in breach of contract, the breach was not repudiatory. So far as its Armageddon strategy was concerned, by which Cleveland Bridge was to be forced out of the subcontract, this was a strategy which, although ruthless, was lawful. What Multiplex was doing was to issue certificates in the lowest sums it felt were defensible in adjudication. Cleveland Bridge accordingly gave notice that it would stop work and did so, but in doing so it repudiated the contract itself. Cleveland Bridge applied for leave to appeal to the Court of Appeal on several points ([2006] EWCA Civ 1834). Lord Justice May rejected most of these and warned that the first instance judgment was unlikely to be susceptible to factual appeal. Multiplex had succeeded in the ten preliminary points of its claim, although Cleveland Bridge experienced some success in Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd (No 2) (2007) 111 Con LR 48, where it was held that temporary roof works designed to support the roof during construction did not form part of the works covered by the fixed lump sum agreed. The Court applied the test of what the meaning of the relevant clause in the contract would convey to a reasonable person having the background knowledge which was available to the parties at the time. In Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd (No 3) [2007] Adj LR 03/12 the rule that costs would normally be reserved where an unsuccessful party had Construction Law International Volume 4 No 1 March 2009
made an offer or payment into court was
varied. Here, an immediate costs order would be made because Multiplex had made a new claim without legal basis. However, the decision in (No 2) was reversed in part in favour of Multiplex by the Court of Appeal in Multiplex Constructions v Cleveland Bridge [2007] EWCA Civ 1371 on interpretation of the provisions of the scope of the agreement. The Court of Appeal in Multiplex Constructions Ltd v Cleveland Bridge Ltd [2008] EWCA Civ 133 had to decide whether Cleveland Bridge had been successful in resisting the appeal, because it had retained its position on more than it had lost, but in the result Multiplex succeeded on costs because the Court of Appeal had moved significantly in their favour away from the first instance decision. Multiplex Constructions (UK) Ltd v Cleveland Bridge (No 4) [2008] EWHC 231 was an application by Cleveland Bridge to re-re-reamend part of the Scott Schedule, which was rejected because of substantial prejudice to Multiplex and notable only for the colourful metaphor of Jackson J, who compared his task in managing the litigation to the labours of Hercules and specifically the slaying of the Lernaean Hydra. Multiplex Constructions (UK) Ltd v Cleveland Bridge (No 5) [2008] EWHC 569 was an application to amend by Multiplex which only partially succeeded. Much of the lengthy judgment by Mr Justice Jackson in Multiplex Constructions (UK) Ltd v Cleveland Bridge (No 6), referred to above, concerned the extent to which Multiplex should be able to recover for Cleveland Bridges repudiation of the contract. Overall, the effect was that Multiplex had benefited and should only obtain nominal damages, although it did obtain damages in respect of defective work by Cleveland Bridge, which would not be deducted from its windfalls arising from the replacement subcontractor proving cheaper than Cleveland Bridge. The net effect was that Multiplex was to be paid 6.1 million. On the same day, Mr Justice Jackson gave judgment on costs in Multiplex Constructions (UK) Ltd v Cleveland Bridge (No 7). He set out basic principles, starting with the premise that the party receiving payment should be regarded as the winner, where both parties assert that a balance is due to them. The successful party is entitled to the order for costs. Judges should beware issue-based costs orders but can and should reflect the relative success of the parties through a proportionate costs order. Approach to negotiations and 29
general conduct of litigation on both sides
should be taken into account. The litigation between Multiplex and the clients consultant engineers novated (in part) to Multiplex (Multiplex Constructions Ltd v Mott Macdonald [2007] EWHC 20) is of interest because of its concentration on the issue of crystallisation and scope of a dispute. It arose from an adjudication between the parties in which Multiplex had been successful. Mott contended in the adjudication and in court that the adjudicator had no jurisdiction to decide the meaning of pertinent records under the novation agreement because no such general question had been referred to him; he could not widen the scope of the dispute. The Court, using inter-party correspondence to interpret the dispute, held that it did include the definition in question and so would give the adjudicator jurisdiction over that point. Multiplex thus obtained a declaration to that effect which they could utilise in enforcing the decision in their favour. PC Harrington Contractors Ltd v Multiplex Constructions (UK) Ltd [2007] EWHC 2833 was also an adjudication case arising out of the concrete works subcontract. Multiplex referred to adjudication of a dispute arising out of the subcontract provisions for interim payments. Harrington claimed a declaration to the effect that it could establish an entitlement to sums on figures which it claimed were agreed. It should therefore commence the adjudication with a balance in its favour of 2.3 million, reflecting those sums. This would have led to no monetary recovery by Multiplex. The Court refused the claim for the declaration, following Rupert Morgan Building Services v Servis [2003] EWCA Civ 1563, to the effect that the provisions comprised a scheme for making interim payments, not for establishing the ultimate position between the parties. Probably the most significant Wembley proceedings in terms of legal principle were those between Multiplex Construction (UK) Ltd and Honeywell. An application had been made in a hearing reported at [2007] BLR 167 in the TCC for leave to appeal against the refusal of the court to order disclosure of certain documents relating to an agreement between Multiplex and the client, Wembley National Stadium Ltd. The Court was satisfied that it had jurisdiction to entertain the application for leave to appeal but on the facts refused permission as having no real prospect of success. 30
A further procedural point was heard in
Honeywell Control Systems Ltd v Multiplex Constructions UK Ltd [2007] EWHC 390. The claimant Honeywell (the communications system subcontractor) sought a declaration against Multiplex that it was entitled to view a settlement agreement between Multiplex and Wembley which had varied some of the terms of the main contract. Multiplex argued unsuccessfully that Honeywell was only entitled to view the main contract in its original unamended form. Multiplex Constructions (UK) Ltd v Honeywell Control Systems Ltd [2007] BLR 195 [see the authors Keating Chambers column at (2007) 2(2) CLInt 18] contains a number of important points on delay and, even more important, substantial discussion of them. It was held by Jackson J that, under the prevention principle, legitimate actions of the employer (or in this case, the main contractor) could still constitute acts of prevention. So, here, the issue of directions causing delay could be relied upon by the subcontractor as acts of prevention. There was also significant discussion of the so-called Gaymark principle, deriving from Gaymark Investments Pty Ltd v Walter Construction Group [1999] NTSC 143; (2005) 21 Const LJ 71. Gaymark held, in respect of the modified standard form contract considered in that case, that if acts of prevention justified extension of time, but the contractor (here, subcontractor) failed to claim an extension of time by noncompliance with the contractual machinery, the effect would be to put time at large and prevent the recovery of liquidated damages. Jackson J, in common with the late Ian Duncan Wallace QC and other Australian cases, doubted the correctness of Gaymark as a generally-applicable principle, despite noting support for it from Keating on Construction Contracts (8th edition 2006) in the absence of decisive English authority. In the result, however, Gaymark was held to be readily distinguishable from the Honeywell case, where there were no automatic consequences for the subcontractor in noncompliance with the contractual machinery. Multiplex would only be able to recover for delay caused by Honeywell, not delay caused by itself. The Wembley litigation has fascinated and troubled many observers in the construction industry and legal profession. The purpose of this article has been to note the substance of what has been decided in the extensive reported judgments, which together comprise an important addition to construction case law. Construction Law International Volume 4 No 1 March 2009