Multiplex Constructions (UK) Ltd v Cleveland Bridge UK Ltd

A later formal agreement may retrospectively supersede an earlier preliminary agreement where that is the parties’ intention. An obligation to use reasonable endeavours to agree a future price or programme is unenforceable where it is no more than an agreement to agree. Contractual releases and entire-agreement clauses are construed according to their language and may preserve present as well as future defect claims. A repudiatory breach requires conduct evincing an intention not to be bound; disputed valuations operated through an agreed adjudication procedure did not meet that threshold. Abatement is available for defective work involving labour and materials, but is limited to diminution in value and cannot exceed the sum otherwise payable.

The claimant main contractor and the defendants, its steelwork subcontractor and holding company, litigated disputes arising from the construction of Wembley Stadium. The parties first entered into a subcontract, then a Heads of Agreement in February 2004 and a Supplemental Agreement in June 2004.

The court tried ten preliminary issues concerning the retrospective effect and construction of the Supplemental Agreement, programme obligations, settlement of variations, defect claims, an alleged valuation agreement, repudiation, the enforceability of a reasonable-endeavours clause and abatement.

1. Retrospective effect and programme. The Supplemental Agreement was effective from 15 February 2004 and superseded the inconsistent provisions of the Heads of Agreement, including its clause 9 programme obligations. The subcontractor was bound to complete the specified activities by the dates expressly stated, subject to extension of time, but there was no implied obligation to proceed with diligence and expedition to meet later programme dates. The BP Refinery implication tests were not satisfied. No obligation to achieve an average erection rate of 400 tonnes per week arose.
2. Settlement and defects. The Supplemental Agreement compromised the costs of designing and fabricating disputed variations after 15 February, whether on or off site, while properly incurred erection costs remained recoverable. The clause preserving claims for design, workmanship or materials not conforming to the subcontract was not limited to latent or unknown defects.
3. Valuation and entire agreement. The court found that £32.66 million was agreed only as an interim valuation, not as a final valuation. Even if a final oral agreement had been made, the amended subcontract’s entire-agreement and document-priority provisions prevented reliance on it because it was not incorporated into the contractual documents.
4. Repudiation. Multiplex’s disputed deductions and withholding notice were not repudiatory, particularly because the contractual adjudication procedure was promptly invoked. Multiplex did breach the obligation to consult before issuing certificates 37 and 38, but that breach was not repudiatory. CB therefore repudiated by stopping work on 2 August 2004.
5. Reasonable endeavours. The obligation to use reasonable endeavours to agree a future programme and price was an unenforceable agreement to agree.
6. Abatement. Abatement was available for defective steelwork, measured by diminution in value. Remedial cost could be evidence of diminution in value, but was not automatically the measure. It could not include overheads, insurance, delay or consequential damage, and could not exceed the amount otherwise payable. It was unavailable for professional services, although wholly worthless drawings could attract no payment.