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Multiplex Construction (UK) Limited v Cleveland Bridge UK Limited

3 October 2008

"The final result of this litigation is such that (when costs are taken into account) neither party has gained any significant financial benefit." HH Mr Justice Jackson

The results of the long running dispute between Multiplex Construction (UK) Limited (Multiplex) and Cleveland Bridge UK Limited (Cleveland) are finally in! HH Mr Justice Jackson handed down a 226 page judgement on 29 September 2008. The bottom line is that Cleveland is to pay Multiplex circa £6m in damages. But with the costs of the litigation amounting to circa £14m since the preliminary issue hearings in 2006 (the costs of photocopying alone approaching £1m) they have far exceeded the sums seriously in dispute between the parties. So, with the disproportionate balance between damages recovered and legal costs incurred, could and should the parties have prevented the dispute running to final trial?

To recap on the history, Multiplex is the main contractor who constructed the new stadium at Wembley. Cleveland was the steelwork subcontractor. The two companies never appeared to see eye to eye and their relationship came to an end with an acrimonious split in August 2004. Litigation followed soon after. Multiplexs ensuing claim for damages arising out of alleged defects and repudiation of contract and Clevelands cross claim for sums due for work done and materials supplied were consolidated into one action at the end of 2004.

At a Case Management Conference on 5 December 2005, the Judge had what he described as a "constructive discussion" with leading counsel as to how the disputes might most economically be resolved. Nine preliminary issues were formulated (latterly increased to 11), the answers to which it was hoped and expected would enable the parties to resolve their differences.

In his judgement of the preliminary issues in 2006, HH Mr Justice Jackson made it clear in an address to the parties that:

"with the assistance of this courts decision on the [preliminary issues], it may now be possible for both parties to arrive at an overall settlement of their disputes, either through negotiation or else with the help of a mediator, who is unconnected with this court".

He went on to strongly recommend settlement to the parties in order to save costs and management time. He gave the clear message that although the court would determine any remaining issues that the parties wished to litigate, the court was encouraging the parties to enter into a sensible commercial settlement.

Whilst stopping short or requiring the parties to settle the dispute instead of going to trial (to do so may be a breach of Article 6 of the European Convention of Human Rights: the Right to a Fair Trial), the message from the court to the parties to settle the dispute could hardly have been stronger. Regardless, the parties proceeded to serve pleadings, witness statements and evidence in readiness for the main trial, due to start in March 2008; aside from a failed attempt at mediation along the way, it was full steam ahead.

The Judge, seemingly unimpressed with the parties behaviour commented that:

"Whilst the parties were battling out the 11 preliminary issues at all levels, their enthusiasm for the main fray never wavered. All thoughts of reaching a sensible settlement after resolution of the preliminary issues…were seemingly jettisoned…both parties have brushed aside repeated judicial observations on the wisdom of settling this particular litigation"

The matter indeed proceeded to a lengthy three month trial (and it could have been considerably longer had much of the evidence not been left to the Judges private reading). Judgment was made in favour of Multiplex in the sum of £6,154,246.79 in respect of overpayments previously handed down by Multiplex to Cleveland, damages for breach of contract and interest. Such was the Judges strength of feeling that the parties could and should have reached a sensible settlement rather than proceeding to trial, he thought fit to include an unusual section in his judgement entitled "The Lesson to be Drawn from this Litigation". Unsurprisingly, the "lesson" does not relate to the issues in dispute between the parties, but is a commentary emphasising the role of the court in assisting parties to resolve disputes at proportionate costs before trial. Rather succinctly, the Judge remarked:

"The lesson for the future which may be drawn from this litigation is that parties would be well advised to use the dispute resolution service offered by the Technology and Construction Court in a more conventional and commercial manner than has been adopted in this case. Once the court has decided questions of principle, the parties can save themselves and their shareholders many millions of pounds by instructing their advisers to agree reasonable figures for quantum, if necessary with the assistance of a mediator unconnected with the court. If one party is not prepared to negotiate then the other. party can protect its position by making a timely and realistic offer under Part 36. The courts decision on preliminary issues should be used by both parties as a basis for sensible discussion or at least as a basis for sensible assessment."

Parties to litigation would do well to remember that the modern day courts approach to disputes is to encourage commercial settlement in a number of ways including: setting pre-action requirements, using active case management and the provision of and judicial recommendation towards an alternative dispute resolution. To resolve matters sensibly, parties should consider using the court to decide disputed questions of principle to enable them to then sort out the financial consequences themselves. Such an approach often leads to the resolution of multi-million pound disputes at proportionate cost, and enables the parties to focus their efforts and funds on their real business.

With Cleveland indicating they are keen to lodge an appeal and liability for the circa £14m million litigation costs still to be carved up, it will be interesting to see if the parties heed this advice going forward.

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