Cleveland Bridge UK Ltd & Anor v Multiplex Constructions (UK) Ltd

A supplemental agreement varying an existing construction subcontract must be construed according to its wording and the retained subcontract terms. A reference to a valuation of work completed at a specified date does not, without clear language, incorporate an earlier valuation. The relevant inquiry is the physical state of completion at that date. Work not completed then falls to be dealt with under the provisions governing remaining work or reimbursable site costs. Disputed variations relating to work completed by the date may be compromised by a full and final settlement clause. Completed unvaried work is valued under the subcontract’s payment machinery, with any inconsistent cashflow cap disregarded.

The appellants appealed decisions of Mr Justice Jackson in the Technology and Construction Court concerning disputes under a steelwork subcontract for the rebuilding of Wembley Stadium. The appeal concerned issue 4 and part of issue 7. The principal question was whether Schedule 1(a) of a Supplemental Agreement incorporated an alleged earlier valuation of £32.66 million for work completed by 15 February 2004. The court also considered the treatment of disputed variations and whether an entire agreement clause prevented reliance on an earlier collateral valuation agreement. The decision under appeal is reported at [2006] EWHC 1341 TCC.

Lord Justice May delivered the judgment. Lord Justice Dyson and Lady Justice Smith agreed. The appeal was dismissed.

1. The Supplemental Agreement varied the original subcontract. It did not rescind and replace it. Except as amended, the subcontract remained in force.
2. Schedule 1(a) referred to a valuation, in accordance with the subcontract, of work properly completed on site and goods, materials and off-site materials brought in accordance with the subcontract by 15 February 2004. It did not incorporate by reference the earlier figure of £32.66 million. The wording did not say that it adopted an antecedently determined amount, particularly where other amounts were expressly stated as fixed sums.
3. The decisive question was the physical state of completion at the specified date. Work ordered before that date but performed afterwards was not work properly completed within Schedule 1(a). It fell under Schedule 1(b) or (c), depending on whether it was fabrication work or reimbursable erection and site work.
4. The court substantially accepted the judge’s construction of clause 2.1. Disputed variations were among the disputes and claims compromised by the Supplemental Agreement where they related to work properly completed by 15 February. This included disputes whether work was varied work and disputes about the amount payable for agreed variations.
5. The valuation mechanism remained workable. Variations were valued under clauses 4.6 and 4.7, including the fair and reasonable fallback. Unvaried work was valued through the activity-bar mechanism in clauses 21.3.2.1 and 21.4.2. The progressive cashflow cap had to be disregarded for the Schedule 1(a) valuation.
6. Fabrication work remained within Schedule 1(b), and erection and site works within Schedule 1(c). Fabrication did not become site work merely because it was transferred to and performed on site.
7. Alternatively, if an earlier oral final valuation agreement had been established, clause 1.8.1 would prevent reliance on it as a collateral agreement. The clause would operate by reference to the varied subcontract from the date of the Supplemental Agreement. This alternative conclusion was academic in light of the construction of Schedule 1(a).

• Court of Appeal (Civil Division) dismissed the appeal concerning issue 4 and part of issue 7.
• High Court of Justice, Queen’s Bench Division, Technology and Construction Court decided the relevant issues on 5 June 2006 in [2006] EWHC 1341 TCC. Permission to appeal was addressed in [2006] EWCA Civ 1834.