Cleveland Bridge UK Ltd & Anor v Multiplex Constructions (UK) Ltd [2010] EWCA Civ 139

Case No. A1/2008/2631 and A1/2008/2639

[2010] EWCA Civ 139

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

TECHNOLOGY AND CONSTRUCTION COURT

Venue Royal Courts of Justice

Date 19th February 2010

The Strand

London

WC2A 2LL

Before

THE PRESIDENT OF THE QUEEN'S BENCH DIVISION

LORD JUSTICE DYSON

LORD JUSTICE STANLEY BURNTON

Between

CLEVELAND BRIDGE UK LTDAppellant

CLEVELAND BRIDGE DORMAN LONG ENGINEERING LTDAppellant

-v-

Between

MULTIPLEX CONSTRUCTIONS (UK) LTDAppellant

(Transcript of WordWave International Limited

A Merrill Communications Company

165 Fleet Street, London EC4A 2DY

Tel No: 020 7404 1400, Fax No: 020 7404 1424

Official Shorthand Writers to the Court)

MR R STEWART QC, MR P BUCKINGHAM and MS A SIMS (instructed by Clifford Chance) appeared for Claimant.

MR A WILLIAMSON QC and MS L GARRETT (instructed by McGrigors LLP) appeared for Defendant.

Judgment

[1]THE PRESIDENT: This is at least the fourth occasion on which this court has had to address matters of contention arising from the steelwork subcontract entered into between Multiplex Construction (UK) Limited and Cleveland Bridge UK Limited for the design, supply, fabrication and erection of structural steelwork for Wembley Stadium.

[2]On 5 June 2006 Mr Justice Jackson, as he then was, sitting in the Technology and Construction Court, gave judgment on ten preliminary issues of liability:

[2006] EWHC 1341

TCC.

[3]On 20 December 2006 this court dealt with applications for permission to appeal against parts of that decision:

[2006] EWCA Civ 1874

[4]On 27 April 2007 this court decided some of the permitted grounds of appeal:

[2007] EWCA Civ 443

. Some other grounds of appeal were not pursued.

[5]On 21 December 2007 this court determined a further liability appeal on an 11th issue --

[2007] EWCA Civ 1372

-- on appeal from a further decision of Mr Justice Jackson on that issue:

[2007] EWHC 145

TCC.

[6]We are now concerned with thankfully quite confined appeal issues arising from Mr Justice Jackson's quantum judgment:

[2008] EWHC 2220

TCC of 29 September 2008.

[7]I would like to pay tribute to the outstanding skill and economy of those who have presented these appeals, and this extends to those whose preparation has enabled those who have spoken to do so to such effect.

[8]At the same time, I would like to endorse, without expanding on, what the judge said in chapter 37, paragraphs 1668 to 1673 of his monumental judgment under appeal as to the apparent commercial disproportion of this litigation. To a neutral outsider, the time, effort and expense that has been incurred, and which continues, makes no sense, and doubtless dwarfs the total sum of £6,154,246 which the judge ordered Cleveland Bridge to pay to Multiplex. That said, the present appeal proceedings taken alone do not appear unduly disproportionate.

[9]General factual introductions may be found at: first, paragraphs 1 to 101 of Mr Justice Jackson's judgment of 5 June 2006; second, paragraphs 1 to 16 of this court's permission judgment of 20 December 2006; thirdly, the introductory paragraphs of this court's judgment of 27 April 2007.

[10]The terms of the supplemental agreement of 16 June 2004 are set out in full in paragraph 74 of Mr Justice Jackson's judgment of 5 June 2006. The main parts of clause 21 of the subcontract conditions are set out in paragraphs 11 to 16 of this court's judgment of 20 December 2006. I shall not repeat any of that material in extenso. As on previous occasions, considering as I do that no point of more than passing general interest arises on this appeal, I shall not attempt to fashion a potentially reportable judgment.

[11]The relevant general background to these appeals in very short summary is as follows. On 26 September 2002 the parties entered into a subcontract whereby Cleveland Bridge were to design, fabricate, paint and erect structural steelwork for the new Wembley Stadium. Multiplex were the main contractors for that project.

[12]For a number of now immaterial reasons, the progress of the structural steelwork fell into delay during the course of 2003. Various claims were intimated in that regard.

[13]To resolve those matters, the parties entered into heads of agreement in mid-February 2004. The heads of agreement were subsequently superseded by a supplemental agreement made on 16 June 2004. The principal features of the supplemental agreement were that:

[14]One, Cleveland Bridge's works were to be valued in accordance with the subcontract up to 15 February 2004, and various other payments were to be made to Cleveland Bridge.

[15]Second, for a revised lump sum price of £12 million, Cleveland Bridge were to design, draft, fabricate and paint some, but not all, of the remaining structural steel.

[16]Third, Cleveland Bridge were to continue with the on-site erection on a cost plus basis, but with a provision whereby Multiplex could, on 28 days' notice, remove the erection works so as to give it to another contractor.

[17]Between February and August 2004 the parties proceeded in accordance with the contractual regime set out in the supplemental agreement.

[18]On 30 June 2004 Multiplex gave 28 days' notice to Cleveland Bridge to cease erection, and Multiplex engaged a company called Hollandia, a Dutch company, to proceed with the erection work.

[19]Shortly after expiry of this 28-day period, on 2 August 2004, Cleveland Bridge, as Mr Justice Jackson found, repudiated its remaining duties under the subcontract and Multiplex accepted that repudiation. At that stage, so far as is material to this appeal, the following facts are relevant.

[20]First, Cleveland Bridge had been paid significant sums by way of interim payments. Multiplex asserted then and subsequently that Cleveland Bridge had been overpaid.

[21]Secondly, Cleveland Bridge had supplied substantial quantities of fully fabricated and painted steel. As at the date of repudiation, Cleveland Bridge had steel in their possession which was raw, part fabricated or fully fabricated, and they continued to deliver this to Multiplex after 2 August 2004.

[22]Third, Hollandia began to erect steelwork on site from about the beginning of August 2004 and from then onwards.

[23]Both parties almost immediately instituted High Court proceedings, each asserting that the other had repudiated the subcontract.

[24]In May 2006 Mr Justice Jackson tried the preliminary issues 1 to 10. The principal issue, which the judge resolved in Multiplex's favour, concerned which party had repudiated the subcontract. The judge also dealt with certain other matters in his judgment, including the extent to which disputed variations had been compromised.

[25]Cleveland Bridge sought permission to appeal against this judgment. Permission to appeal was given on certain issues, but in the event the appeal was unsuccessful.

[26]As I have said, the Court of Appeal delivered its first judgment in this matter on 27 April 2007. Cleveland Bridge did not obtain permission to appeal against the finding as to repudiation. Certain of the matters canvassed on this first appeal are of some relevance to the present appeal.

[27]Meanwhile, in January 2007, Mr Justice Jackson heard the further 11th preliminary issue. This concerned matters of contractual interpretation relevant to temporary works. The judge held that Cleveland Bridge were not obliged to fabricate or design temporary works after 15 February 2004. This decision also was appealed by Multiplex to the Court of Appeal. The Court of Appeal upheld the judge as to the fabrication, but not as to the design of the temporary works on 21 December 2007.

[28]The case thus proceeded in relation to quantum issues. Multiplex essentially advanced three claims against Cleveland Bridge.

[29]First, schedule 1, that Cleveland Bridge's work before repudiation has been defective in certain respects. This was a claim for some £2.5 million. In the event Multiplex was awarded damages of £150,305 plus interest in respect of this schedule 1 claim.

[30]Secondly, schedule 2, that Multiplex had overpaid Cleveland Bridge on an interim basis in the order of £14 million. Cleveland Bridge, to the contrary, asserted that they had been underpaid by approximately £10 million and sought a decision to this effect as part of the schedule 2 issues. In the event, Multiplex was awarded the sum of £4,020,061, plus interest of about £1.8 million, for the schedule 2 claim.

[31]Thirdly, schedule 4, that Multiplex had suffered substantial delay and other damages by consequence of the repudiation. This was put at about £25 million, although it was subject to a contractual cap of £6 million. In the event, Multiplex was awarded nominal damages of £4 in respect of this schedule 4 claim. There is no appeal against this element of the claim.

[32]The quantum hearing on schedules 1, 2 and 4 took place in the summer of 2008. The judgment was handed down on 29 September 2008. The judge awarded Multiplex sums amounting in all to £6,154,246.

[33]Each of the parties' appeals relates to the schedule 2 claims, and Cleveland Bridge's ground 4 also would affect the schedule 1 claim.

[34]As the appeals arise out of the valuation dispute, the background to the schedule 2 issue needs to be somewhat expanded. There were two separate valuation exercises to undertake. The first was the valuation of Cleveland Bridge's works to 15 February 2004. The second was the valuation of the work carried out between 15 February and 27 July 2004 or 2 August 2004, as appropriate. This double exercise was necessary as a result of the supplemental agreement which, in summary, set up two different contractual schemes for each valuation of the works.

[35]Schedule 1(a) of the supplemental agreement required a valuation up to 15 February 2004 in accordance with the original terms of the subcontract. The remainder of schedule 1 to the supplemental agreement provided that after 15 February 2004 some work was to be carried out pursuant to a new lump sum price of £12 million, and some work was to be carried out on a cost reimbursable basis, and it additionally provided specifically for other lump sum payments. Such work was to be valued in accordance with the subcontract, except where amended by the supplemental agreement itself. This regime applied to the work carried out between 15 February and 27 July 2004.

[36]In relation to Cleveland Bridge's grounds of appeal, only the preliminaries issues relates to the pre-15 February 2004 valuation. The remaining grounds relate to post-15 February 2004 exercise, and Cleveland Bridge's ground 4 also relates to schedule 1.

[37]In relation to Multiplex's grounds of appeal, the SV399 issue concerns variations and relates to the pre-15 February 2004 valuation. The retention issue relates to the post-15 February 2004 exercise.

[38]By way, again, of introduction, parts of the relevant terms of schedule 1 of the supplemental agreement were as follows.

[39]Schedule 1(a). The adjusted subcontract sums shall comprise(a) the gross valuation as at 15 February 2004 of work properly completed on site and goods and materials brought on to the site by the subcontractor and off-site materials in accordance with the provisions of the subcontract, subject to the deduction of retention and other reductions permitted under the subcontract;

(b) a fixed lump sum of £12 million for the completion of all remaining works, services and other obligations under the subcontract, save for those reimbursable cost items referred to in paragraphs (c) and (f) below, and those lump sum items referred to in paragraphs (d) and (e) below;

(c) all costs reasonably incurred by the subcontract from 15 February 2004 in connection with the erection and site works, being site staff, direct labour, cranes and other site-related costs.

[40]The supplemental agreement, as I have said, provided at clause 8 that Multiplex had an option, on 28 days' written notice, to remove the unperformed reimbursable cost items referred to in schedule 1 paragraph (c).

[41]Cleveland Bridge's first ground of appeal concerns the valuation of preliminaries. Under schedule 1(a) of the supplemental agreement the adjusted subcontract sum was to include the gross valuation as at 15 February 2004 of work properly completed on site in accordance with the provisions of the subcontract. This valuation had to include the appropriate amount for preliminaries. Cleveland Bridge claimed that that amount should be £11,246,712. Multiplex's case at trial was that the correct figure was £7,339,143.

[42]The main essential underlying difference between the parties was whether the valuation of preliminaries, at a stage when the subcontract works were incomplete, should be on a time elapsed basis, as Cleveland Bridge contended, or with reference to the due proportion of the work properly completed on site in accordance with the provisions of the subcontract as Multiplex contended.

[43]Multiplex's contention, on the face of it, was a straight application of the provisions of schedule 1(a) of the supplemental agreement. Cleveland Bridge's contention at first blush would appear to risk overpaying them if the subcontract works were, as Multiplex contended they were, significantly behind programme.

[44]The judge found in favour of Multiplex on this issue and awarded an adjusted amount of £7,200,316. Cleveland Bridge have permission to appeal on this issue. They contend that the judge misconstrued the subcontract and the supplemental agreement.

[45]Clause 21.3.2.1 of the subcontract provided for monthly applications for payment, to include the value of the work properly completed, which under clause 21.4.2 was to be:

"... ascertained by allocating to each activity bar in the Payment Programme a monetary value equal to the same percentage of the total amount attributed to the whole of that activity bar in the Payment Programme as the percentage of the total work represented by the said bar has been properly completed on Site and in accordance with the Sub-Contract ... and aggregating the said monetary values for all activity bars."

[46]By clause 21.4.3 the aggregate amount was not to exceed the amount specified in the cumulative monthly amount column, as shown in the payment profile. By clause 21.6 the parties were from time to time, but at least once every calendar month, to review the payment profile and the payment programme and carry out an assessment of the extent to which the subcontract works and performance of the design obligations had been carried out and the subcontract sum had been amended, and the clause enabled Multiplex to revise the payment profile and the payment programme. As I understand it, no such revision was ever made.

[47]Clause 1 of the payment programme provided that its purpose was to show the values of the various elements of the works for the purpose of valuation and payment under clause 21 of the subcontract conditions.

[48]Clause 1.8 referred to clause 21.6 of the subcontract conditions. A following simple bar chart had a bar for "management and preliminaries" running from the beginning of month 1 to the end of month 29. There were two other bars, one for procurement and fabrication and the other for construction activities, running for substantial but different periods.

[49]Schedule 1 showed four amounts for preliminary items as follows: project management, £6,035,207; site management, £1,194,753; design and engineering, £2,880,918; general site preliminaries £6,939,977. The schedule showed that stated percentages of the first third and fourth of these were variable and that the remaining amounts were fixed. Mathematically, rather more than a total of £13 million of these sums were fixed, and approximately £3.2 million were variable.

[50]Schedules 2 to 5 show a monthly breakdown of the anticipated payments of each of these four elements. These show the variable elements being paid with reference to activities, and the fixed elements payable periodically by month, although not always in the same amount each month.

[51]There is a summary of schedules 2 to 5 following schedule 5. The monthly amounts are taken with the payment profile, which totals the full subcontract sum of £60 million which assumes no variations and no delay.

[52]The neutral cashflow procedure was part 6 of the pricing document of which part 1 was the payment programme and part 5 the payment profile.

[53]The neutral cashflow procedure provided that it was to be read in conjunction with the requirements of clause 21 of the subcontract conditions, and that clause 21 should take precedence if there was any divergence or discrepancy between the two.

[54]It provided in paragraph 6.5.1 that the monthly value of the subcontract completed on site should be ascertained by allocating to each activity identified in schedule 1 an agreed percentage reflecting the actual amount completed in accordance with the subcontractor's progress report.

[55]Paragraph 6.5.4 provided that the monthly value of the subcontractor's project management should be valued against the amounts identified in schedule 2 so that the fixed amounts should be ascertained by allocating the amount defined for the relevant month, and the variable amounts should be payable against the contractor's confirmation that the defined deliverable stated for this activity had been achieved.

[56]Paragraphs 6.5.5, 6.5.6 and 6.5.7 were equivalent provisions for the other elements of the procedures.

[57]In paragraphs 886 and 887 of his judgment,

the judge summarised the parties' contentions as follows:

"[Cleveland Bridge] contend that in valuing their work up to 15 February 2004 the fixed elements of the preliminaries should be paid for on a time elapsed basis, whereas the variable elements should be paid for by reference to what 'deliverables' (as shown in schedules 2 to 5) had been delivered. CB pointed out that this is how preliminaries were assessed during the course of the project. CB maintain that this is what the subcontract required. Accordingly, CB refer to the summary of schedules 2 to 5 and point out that 15 February 2004 fell in the middle of month 17. CB claim all the fixed preliminaries shown in that summary up to month 16 plus half of the fixed preliminaries shown for month 17 plus such of the variable preliminaries as had been delivered by 15 February 2004. "

Multiplex contend that no part of the preliminaries should be assessed on a time elapsed basis. Preliminaries due to CB in respect of work done up to 15 February should be assessed by reference to the stage which steelwork had reached on that date. Multiplex accept that the summary of schedules 2 to 5 is a useful tool, but contend that one should not focus upon the mid point of month 17, because time elapsed is irrelevant. Instead one should look at the stage which the steelwork had actually reached on 15 February 2004 and identify where on the summary sheet that degree of completion is to be found. Because of the delays that occurred, that point lies towards the end of month 13. Multiplex have produced a graph (claimant's supplemental 1, referred to by counsel as the 'Everest' graph, because of its shape) showing the originally predicted project spend, in order to illustrate their point. Chart 2 of supplemental 1 illustrates the effect of a four-month delay."

The judge then said this, paragraph 888:

"In choosing between these rival submissions, I start with paragraph (a) of schedule 1 to the Supplemental Agreement. The court has to determine 'the gross valuation as at 15 February 2004 of work properly completed on site and goods and materials brought on to site by the contractor and off-site materials in accordance with the provisions of the subcontract'. Each of those three activities (completing work on site, bringing materials on to site and procuring materials off-site) generate preliminary costs. The whole thrust of paragraph (a) is directed towards work actually done and materials actually provided. As the Court of Appeal pointed out in CA judgment 1, paragraph (a) of schedule 1 to the Supplemental Agreement is closely linked to clause 21 of the subcontract conditions; and within clause 21 the 'core provisions' is clause 21.3.2: see paragraphs 100 to 101 of May LJ's judgment. Clause 21.3.2.1 requires interim applications for payment to be based on 'the value of the works properly completed'. "

Clause 21.4.2 states that 'the value of the works properly completed' shall be ascertained by reference to the value of work 'properly completed on site and in accordance with the subcontract'."

[59]Missing out a bit of that paragraph, paragraph 890:

"Clause 21.4.1 of the subcontract conditions provides that the gross valuation shall be the lesser of (1) the amount specified in the Payment Profile and (2) the gross value of the works in accordance with clause 21.3.2. This provision indicates to me that (absent the Supplemental Agreement) both the Payment Profile and schedules 2 to 5 (which feed into the Payment Profile) were intended to operate as a cashflow cap, rather than as provisions which conferred automatic entitlement to payment on a time elapsed basis. "

The cashflow cap was removed by the Supplemental Agreement. Nevertheless, it remained the case under the subcontract, both before and after the Supplemental Agreement, that valuations up to February 2004 were to be assessed by reference to work done and materials supplied or procured. If CB's interpretation of the subcontract were correct, it would mean that CB became entitled to substantial monthly payments of the fixed elements of preliminaries, even if CB did no work and procured no steel. In the present case, it would mean that CB became entitled to reimbursement of preliminary costs which CB had not begun to incur. For example, in the valuation up to 15 February CB would be entitled to recover £638,000 in respect of strand jacking, even though CB had not incurred those costs."

[60]And a reference is made to an expert's report:

"That interpretation does not make commercial sense. Nor does it accord with the express terms of the subcontract."

[61]The judge then said that the neutral cashflow procedure did not displace this. It was expressly subordinate to clause 21 of the subcontract conditions. The judge accordingly concluded that Multiplex's approach was correct, and he rejected Cleveland Bridge's approach. He then dealt with quantum.

[62]Cleveland Bridge contend that the effect of the relevant subcontract conditions, especially clause 21.4.2 and the payment programme to which it refers, is that preliminaries are to be paid in accordance with the payment programme; fixed items are to be paid upon the passage of the relevant time; variable items are to be paid if the specified deliverable is achieved. This is said to be consistent with clauses 6.5.4 and 6.5.7 of the neutral cashflow programme. The possibility of delay was catered for by clause 21.6 of the subcontract conditions.

[63]Mr Williamson submits that the judge was wrong to find that the whole thrust of schedule 1(a) was directed towards work actually done and materials actually provided. The whole thrust was towards the gross valuation in accordance with the provisions of the subcontract.

[64]That seems to me to be an emphasis without consequential effect, taken by itself. The gross valuation in accordance with the provisions of the subcontract was still of work properly completed on site and of goods and materials brought on to the site as at 15 February 2004.

[65]Mr Williamson submits that clause 21.4.2 requires the activity bars in the payment programme to be apportioned with reference to the percentage of the total work represented by that bar which had been properly completed in accordance with the subcontract. For the fixed items of the preliminaries bar there is no other measure of completion than the lapse of time.

[66]The fact that schedules 2 to 5 contain both fixed and variable parts is another indication towards this conclusion. The variable parts have been given milestones but the fixed parts have not. The effect of clause 1.1 of the payment programme is to the same effect. The fact that under clause 21.4.1 there was originally a cap does not mean that a time elapsed calculation for preliminaries is wrong. The effect of the judge's construction is that the payment programme is not used at all.

[67]Mr Williamson further submits that the judge's construction fails to give any effect to section 6 of the pricing document, clauses 6.5.4 to 6.5.7 of which require precisely the exercise for which Cleveland Bridge contend.

[68]Mr Williamson then submits that the judge failed to have due regard to clause 21.6 of the subcontract conditions, to which I have referred. This contemplates that progress might get behind programme and gave Multiplex a unilateral right to revise the payment programme and the payment profile. The judge was wrong, Mr Williamson submits, to relate Cleveland Bridge's contention here with a point made under clause 6.1 of the neutral cashflow procedure. They are dealing with separate things. Mr Williamson further says that the level of achievement of the physical works may or may not be equivalent to overall progress, especially since fabrication and other activities were taking place off site.

[69]Multiplex support the judge's conclusions for the reasons he gave. Mr Stewart particularly emphasised the lack of commercial reality in Cleveland Bridge's position. The expenditure of many preliminary items is time related, so that if there is delay, the additional preliminary costs so caused may be recoverable or not, depending on responsibility for the delay.

[70]Here there were delays, and disputes as to responsibility were compromised within the £5.25 million payable under schedule 1(d) and (e) of the supplemental agreement.

[71]Not only could Cleveland Bridge's construction result in recovery for work not executed, for example the strand jacking, but there could be double recovery for a number of possible reasons.

[72]The core contractual provisions, both in schedule 1(a) and in clause 21.3.2.1 of the subcontract conditions, emphasised the value of work properly completed to which, among others, the neutral cashflow procedure was expressly subordinate.

[73]Further, the payment programme assumed a 29-month contract, not a delayed contract. On Cleveland Bridge's case, they would be entitled to payment for preliminaries which had not been incurred or earned for delay if it were their responsibility.

[74]I have not found this a straightforward dispute to determine, not least because there are powerful arguments in favour of the judge's conclusion. Schedule 1(a) on one reading ties the gross valuation, as at 15 February 2004, to the work properly completed on site and goods and materials brought on to the site, which suggests that the valuation is to be measured against the proportion of the works properly completed, and you would perhaps expect that the amount to be included for preliminaries would be proportionate to that degree of completion. A time elapsed valuation of preliminaries could include payment for matters which had not been completed.

[75]Further, the terms of clause 21.4.2 of the subcontract conditions appear to require the three activity bars in the payment programme to be treated in the same way and by reference to the percentage of the total work represented by the bar as had been properly completed on site and in accordance with the subcontract.

[76]There is a general point that this valuation under schedule 1(a) is a snapshot valuation on a particular date, and that this is a different thing from progressive monthly valuations under a continuing subcontract, and a more particular point that a neutral cashflow procedure was not relevant to a snapshot valuation when cashflow had ceased to be relevant.

[77]However, it remained that the valuation had to be undertaken in accordance with the provisions of the subcontract, and I do not consider that a changed approach can be derived from the wording of schedule 1(a) itself, which is no more than an abbreviated synthesis of provisions already to be found in clause 21 of the subcontract conditions.

[78]Mr Stewart was constrained to accept that schedules 1 to 5 of the payment programme, read with paragraphs 6.5.4 to 6.5.7 of the neutral cashflow procedure, provide for the payment of variable preliminaries when the defined deliverable has been achieved, and for the fixed amounts to be paid according to the monthly allocation in the schedules; that is on a time elapsed basis. That is not inconsistent with condition 21 when all the relevant parts of the contract documents are read together.

[79]That was, in my view, how the relevant preliminaries were to be included in valuations before the supplemental agreement was entered into, and I am not persuaded that the supplemental agreement effected a change.

[80]Clause 21.6 of the subcontract conditions was there to enable Multiplex to make adjustments to the payment programme if it got out of kilter with progress, and if in the event there was something of an uncommercial result, this was because(a) Multiplex had not operated clause 21.6 up to 15 February 2004, as they could have done, and

(b) because they made, by means of the supplemental agreement, the commercial bargain which they did.

[81]The relevant provisions of this subcontract are not beautifully crafted as an elegant whole in an obvious and consistent meaning, but the treatment of preliminaries is plainly enough derived from schedules 1 to 5 of the payment programme and paragraphs 6.5.4 to 6.5.7 of the neutral cashflow procedure. These are not to be seen as inconsistent with clause 21, and the supplemental agreement did not in this respect effect a fundamental change. I would allow Cleveland Bridge's appeal on this ground.

[82]Cleveland Bridge's grounds 2 to 3 concern an 1898 authority called Sumpter v Hedges and may be gathered together under a general heading of restitution.

[83]The judge dealt with the post-15 February 2004 valuation exercise in chapters 19 to 27 of his judgment. The issues arising from grounds 2 and 3 of Cleveland Bridge's appeal are focused on its claims to be entitled to be remunerated for work done, in particular steel fabrication and labour costs, between the date of the last effective certificate and 2 August 2004, when Multiplex accepted Cleveland Bridge's repudiation.

[84]The steel fabrication process applicable to the project operated as follows. Raw steel or black steel was purchased by Cleveland Bridge in different sizes and configurations. Thereafter the steel was subjected to a fabrication process whereby Cleveland Bridge modified the raw steel through the addition of components such as fins or by drilling and cutting holes.

[85]The contractual scheme under which Cleveland Bridge were to be remunerated in respect of this steel during the period after 14 February 2004 differentiated between payments made in respect of black steel, which were paid for under schedule 1(f) of the supplemental agreement on a cost plus basis, and payment for the fabrication process which was included in the lump sum price of £12 million under schedule 1(b).

[86]Schedule 1 to the supplemental agreement provided that payment of the £12 million lump sum shall be made monthly in accordance with the provisions of the subcontract. The last certificate issued by Multiplex in relation to Cleveland Bridge's lump sum work, including the supply of black steel before Cleveland Bridge's repudiation, was certificate number 37 of 16 July 2004, which related to work done up to 30 June 2004.

[87]The next application for payment made by Cleveland Bridge for their lump sum work was application number 24, dated 27 July 2004, which sought payment for lump sum work done by them up to 27 July. It was held by the judge that application number 24 could not give rise to any contractual entitlement to payment. By the time that Multiplex came under a duty to issue a certificate for payment in that respect, the contract had been repudiated.

[88]The right to payment only arises upon issue of a certificate or upon expiry of the period within which a certificate ought to be issued. See Lubenham Fidelities v South Pembrokeshire District Council

[1986] 33 BLR, page 39

at page 55, and associated authorities cited in paragraph 1086 of the judge's judgment.

[89]Accordingly, the judge held that Cleveland Bridge had forfeited any contractual right to payment for lump sum work carried out between the date of certificate 37 and the date of repudiation. The judge's interpretation of this contractual right to payment is not challenged on this appeal.

[90]For reimbursable costs in connection with erection and site works, including labour, falling under clause (c) of schedule 1 of the supplemental agreement, the final paragraph of schedule 1 provided for application for payment to be paid at two-weekly intervals. Cleveland Bridge made fortnightly applications for reimbursable costs, and certificates for payment were duly issued by Multiplex for each two-week period. The last certificate issued by Multiplex before Cleveland Bridge's repudiation was dated 30 July 2004 and was for work done up to 16 July 2004. Mr Justice Jackson held that Cleveland Bridge had no contractual right to recover reimbursable costs after 16 July 2004, and that finding also is not challenged on appeal.

[91]The judge's valuation of labour costs properly and reasonably incurred by Cleveland Bridge up until 16 July is dealt with in paragraphs 1143 to 1153 of his judgment in chapter 22, and was assessed at £3 million.

[92]Cleveland Bridge submitted that, notwithstanding the absence of any contractual right to payment in respect of the lump sum works, they were nonetheless entitled to payment for materials supplied by Multiplex after 30 June. This argument was founded on the judgments of Lord Justice AL Smith, Lord Justice Chitty and Lord Justice Collins in Sumpter v Hedges

[1898] 1 QB 673

[93]Mr Sumpter was a builder who had contracted to erect buildings on the defendant's land for a lump sum. After he had completed part of the works, Mr Sumpter abandoned the contract, leaving half-competed buildings on the defendant's land and loose building materials. The defendant then completed the half-finished work himself, making use of the materials abandoned by Mr Sumpter.

[94]The Court of Appeal held that Mr Sumpter was not entitled to recover on the original contract, the law requiring that where there is a contract to do work for a lump sum, the contract price cannot be recovered until the work is completed. The court further rejected the argument that the plaintiff was entitled to recover for the work he had done on a quantum merit basis, there being no evidence of a fresh contract to pay for the work already done.

[95]The judgment of the court below, that Mr Sumpter was entitled to recover the value of the materials left on site which the defendant had made use of, was not appealed, but was approved by the reasoning of the court.

[96]Cleveland Bridge framed this argument to include not only a claim to be entitled to payment in respect of black steel, but also for partly fabricated steel and fabricated steel left on site at Wembley, and delivered to Holland at a rate equivalent to not only the contractual value of the black steel, but also the value of the fabricated or part fabricated steel. It was submitted that Multiplex, in common with the defendant in Sumpter v Hedges, had a choice whether to keep the steel materials or to return those steel materials to Cleveland Bridge.

[97]The judge upheld Cleveland Bridge's Sumpter v Hedges argument in relation to black steel, falling under schedule 1(f) of the supplemental agreement, holding that Multiplex could not retain that steel without reimbursing Cleveland Bridge for the purchase costs. Accordingly, the judge rejected Multiplex's contention that Cleveland Bridge's entitlement ceased on 30 June 2004.

[98]However, he rejected the contention that Cleveland Bridge was entitled to payment for any work done upon that steel, whether fabrication, storage or painting, under clause (b) of schedule 1.

[99]Cleveland Bridge had reserved the right in its final written submission to seek payment for schedule 1(b) fabrication works and schedule 1(c) cost reimbursable works on the basis of a restitutionary claim for work done after the time of the last certificates for payment. This argument was not advanced before the judge on the basis that Cleveland Bridge accepted that it was precluded from making any wider restitutionary claim by reason of the Court of Appeal decision in Sumpter v Hedges.

[100]Since this claim was not advanced below, no specific findings were made by the judge as to the underlying factual basis for such a claim. The judge did not, for example, make any assessment of labour costs incurred subsequent to 16 July 2004, or any findings as to the nature and extent of Cleveland Bridge's activities on site after this date. Cleveland Bridge contends that the valuation of labour costs would be required to be remitted, should this court determine that it is entitled to payment on a restitutionary basis.

[101]The claim to further restitutionary payment is now advanced to this court on two grounds. In summary, the first ground, ground 2 of the notice of appeal, is that Cleveland Bridge are entitled, pursuant to Sumpter v Hedges, to payment for the fabrication and labour costs which they incurred after 30 June or 16 July 2004 respectively, broadly on the basis that the fabrication work increased the value of the materials which Multiplex took over and that Sumpter v Hedges should be taken as embracing that increased value.

[102]The second ground, ground 3 of the notice of appeal, is that Sumpter v Hedges has been overtaken by developments in the law of unjust enrichment and should no longer be regarded as good law.

[103]This argument was not developed before the judge because Sumpter v Hedges was thought to be binding on him. I do not understand how the same should not apply to this court; nor why, if the court is no longer bound, the same should not have applied before the judge.

[104]Thus the judge decided that Cleveland Bridge, upon their repudiation, were entitled to payment for lump sum work under schedule 1(b) to 30 June 2004, for reimbursable costs under schedule 1(c) to 16 July 2004, and to the costs of purchasing steel under schedule 1(f) to 2 August 2004, the last being equivalent to the building materials in Sumpter v Hedges.

[105]The ratio of Sumpter v Hedges is that the right to payment depends on an inference of a fresh contract to pay: see Lord Justice Chitty at page 675 and Lord Justice Collins at page 676. Relevant to that enquiry is the question whether the defendant had an option to take the benefit of the work or not: see Lord Justice Collins at page 676.

[106]Cleveland Bridge's second ground of appeal relates to the date to which they are entitled to be paid for lump sum work. Mr Williamson accepts that the judge's conclusion that Cleveland Bridge do not have a contractual right to payment beyond the date of the works certified in certificate 37 -- that is 30 June -- is correct. Cleveland Bridge contend, nevertheless, that they were entitled to be paid for materials supplied after 30 June. The point in Sumpter v Hedges is that upon repudiation the contractor in this case has a choice whether to retain unincorporated materials or to reject them. There is no more subtle concept such as whether it is practicable for the contractor to use alternative materials. The contractor is entitled to a reasonable sum for the value of materials supplied.

[107]Cleveland Bridge supplied(a) raw steel and

(b) fabricated or part fabricated steel. Under the supplemental agreement, the black steel was to be paid for under a cost plus basis under schedule 1(f). The valuation was part of the £12 million lump sum under schedule 1(b).

[108]Fabrication confers an additional value. The judge concluded in paragraph 1088 that Cleveland Bridge could not recover for fabrication because once Multiplex had reimbursed Cleveland Bridge for the black steel, it could not sensibly be suggested that they could return the fabricated elements to Cleveland Bridge. Steel which Multiplex had paid for was not analogous, so the judge held, to builder's materials in Sumpter v Hedges. Multiplex had no real option but to retain the steel.

[109]Mr Williamson says that this is wrong. Firstly, he says that Multiplex only became obliged to reimburse Cleveland Bridge for the black steel under the exception in Sumpter v Hedges; in other words, because it had the option of rejecting that black steel but did not do so. There is no suggestion that Multiplex should pay for black steel and return it to Cleveland Bridge.

[110]Secondly, the point as to fabricated steel is that such steel has an additional value. If Multiplex choose to retain fabricated steel which could have been rejected because it had not been incorporated in the structure, then Multiplex must pay for the value of fabricated steel which the parties agreed was significantly higher than the value of black steel. The effect of the judge's conclusion is that Multiplex retains steel which it could physically have returned and pays a significantly lower sum for the value of that steel.

[111]Thirdly, steel which Cleveland Bridge had worked upon but which had not yet been incorporated into the stadium is, it is submitted, precisely analogous to the builder's materials in Sumpter v Hedges. Further, Multiplex has not paid for that steel. It has paid for black steel, but it has got fabricated steel ready to be erected.

[112]Fourthly, the reference to Multiplex having no real option is irrelevant. The test is whether the materials could physically be returned.

[113]Finally, the reference to Cleveland Bridge never requesting the return of the steel are flawed for two reasons: firstly, because there is no suggestion in Sumpter v Hedges that the builder asked for the return of his materials or that this was necessary for him to recover; and secondly, Cleveland Bridge did not request the return of the steel at the time the steel was fabricated and supplied. It is relevant to note that Cleveland Bridge continued to supply both fabricated and black steel to Multiplex, pursuant to an express request of 22 June 2004 by Multiplex to deliver all steels off site, and secondly, a contract which was still on foot between the parties under which both parties believed that Cleveland Bridge was obliged to fabricate and supply Multiplex with steel, in return for which obligation both parties believed Cleveland Bridge would be paid. Cleveland Bridge submit that the amount to be awarded to them under this head should be increased by £1,120,298.

[114]As to the restitutionary claim, Cleveland Bridge accepted before the judge that it was bound by the Court of Appeal decision in Sumpter v Hedges, but its only relevant claim on repudiation was for materials. Cleveland Bridge reserved their position as to a restitutionary claim, which is an alternative route, they say, to an additional £1,120,298.

[115]A successful restitutionary claim would also carry with it, first, in respect of the other schedule 1(b) items up to 2 August, if the restitutionary claim is right, the value of Cleveland Bridge's schedule 1(b) works increases the total by a total of £1,278,998; and secondly, in respect of schedule 1(c) costs, reimbursable works up to 27 July 2004, rather than up to 16 July 2004, as found by the judge.

[116]It is submitted that that paragraph is correct in the judge's judgment as regards a right to contractual payment. It is wrong as regards a restitutionary claim. If the restitutionary claim is right, the value of Cleveland Bridge's works increases by a minimum of £479,779, excluding any increase in the valuation of labour costs.

[117]Multiplex relies on the additional grounds for upholding the order set out in paragraphs 4 to 11 of its respondent's notice.

[118]In summary, the restitutionary claim is as follows. In Sumpter v Hedges the Court of Appeal were unanimous in finding that the reason that the builder had no claim in restitution for the value of his works done prior to the repudiation was that it was not possible to find any evidence of an implied contract to pay for such work. Reference is made to the judgment of Lord Justice AL Smith at 674, Lord Justice Chitty at 675 and Lord Justice Collins at 676.

[119]However, in Westdeutsche Landesbank v Islington London Borough Council

[1996] AC 669

, Lord Browne-Wilkinson said in the House of Lords:

"Subsequent developments in the law of restitution demonstrate that this reasoning is no longer sound. The common law restitutionary claim is based not on implied contract but on unjust enrichment: in the circumstances the law imposes an obligation to repay rather than implying an entirely fictitious agreement to repay."

[120]The other law lords, although differing on the point in issue before them, were unanimous in agreeing that the implied contract theory as a basis for a restitutionary claim was wrong.

[121]It is pointed out that the editors of Goff & Jones on The Law of Restitution were able on the basis of this authority to conclude that the implied contract theory is now a ghost of the past. The effect of this, it is submitted, is that there is House of Lords authority binding on this court that it is wrong to reject a restitutionary claim on the basis that it is not possible to find an implied contract between the parties. Sumpter v Hedges to the opposite effect must be wrong. Cleveland Bridge's appeal is founded on unjust enrichment.

[122]The effect of a lack of a restitutionary claim, it is said, is that Multiplex receives a very high value windfall. It gets a free one month's worth of work in respect of the lump sum schedule 1(b) works and two weeks' worth of site work in respect of the schedule 1(c) works. The injustice of this result in the circumstances prevailing in Sumpter v Hedges, and in this case, has, it is said, been the subject of sustained and unanimous academic criticism, for example Glanville Williams' Partial Performance of Entire Contracts, 1941, LQR 373; paragraphs 20-047 to 20-057 of Goff & Jones; paragraphs 354 to 349 of Burrows on The Law of Restitution; and in a Law Commission report, number 121, dated July 1983, Pecuniary Restitution on Breach of Contract, which recommended that the law should be changed to allow a statutory claim on precisely the same basis as what is now known as unjust enrichment.

[123]It should be noted, it is said, that the Law Commission's report predated the developments in the law of restitution summarised in the Westdeutsche Landesbank case. The statutory reform suggested has largely been carried out by the House of Lords already.

[124]It is suggested that other jurisdictions allow a restitutionary claim in such circumstances, and reference is made to paragraph 374 of the United States Restatement of Contracts, second edition.

[125]Mr Williamson submits that this court is not precluded from departing from the reasoning behind the decision in Sumpter v Hedges. On the contrary, it is bound by House of Lords authority which is to the opposite effect. The simple position is that since Sumpter v Hedges was decided in 1898, the law of restitution has developed very significantly so that the case is, at least insofar as it refers to the rejection of a restitutionary claim on the ground that no contract can be implied, bad law.

[126]It is then suggested that Multiplex has received an incontrovertible benefit of the supply by Cleveland Bridge of goods and services, including the fabrication and erection of steel forming part of Wembley Stadium and all attendant work activities. This conferred a positive benefit on Multiplex consisting of the value of goods supplied as increased by the facts they had been installed into position, and what might be referred to as a negative benefit, since Multiplex is saved from the expense of paying someone else to carry out that work and is saved the cost of the delay which would have resulted had those works not been done.

[127]It is submitted that the benefit has plainly been carried out at Cleveland Bridge's expense, and that it would be unjust to allow Multiplex to retain that benefit because the value of the benefit conferred is out of all proportion to the loss which Multiplex has suffered as a result of Cleveland Bridge's repudiation.

[128]Multiplex submit that the subcontract here was quite different and much more sophisticated than that under consideration in Sumpter v Hedges, which apparently contained no detailed provisions for interim payment. Mr Stewart submits that the judge's decision was generous to Cleveland Bridge, since the provisions as to certificates, taken with clause 1.8.1, could have precluded any non-contractual claim or rights. He submits that no interpretation or application of Sumpter v Hedges would extend Cleveland Bridge's right to recovery. In the absence of a reasonable opportunity to accept or reject part performance, there can be no restitutionary claim.

[129]As the judge held, Multiplex had no real option but to retain the steel worked upon by Cleveland Bridge, and Cleveland Bridge would not have welcomed the return of the steel or suggested that they would like to receive the steel back. Such findings were inevitable, given that Cleveland Bridge delivered steel in mixed loads to Multiplex, without separately identifying which steel had been worked on in July 2004. Throughout July 2004 Multiplex did not know that Cleveland Bridge would subsequently repudiate the subcontract and could not take any steps to investigate which steel had been worked on after the last previous certificate. Any exercise after August 2004 to identify what steel had been worked on since the last valuation date would have been enormous, expensive and extremely time-consuming.

[130]Furthermore, given that Multiplex had property in the steel, requiring them to pay for fabrication and painting would have involved requiring Multiplex to pay for work done, not just for materials.

[131]Mr Stewart submits that none of the academic works to which Mr Williamson refers support or wholly support a restitutionary claim such as is advanced before this court: see Goff & Jones at paragraph 20-088; Glanville Williams at page 392; and page 143 of Professor Burrows' works.

[132]He points out that the recommendations in the 1983 Law Commission report have not been implemented and submits that, even if they had, Cleveland Bridge would not have succeeded on a restitutionary claim in this case.

[133]He says that academic opinion is not unanimous, except that all agree that parties should be able to contract out of restitution. Mr Stewart suggests that the certification procedure in this subcontract may be seen as a species of contracting out, and that policies should not encourage contractors to give up contracts before completion.

[134]There are, in my judgment, numerous difficulties with each of these Sumpter v Hedges grounds of appeal. These include, but are certainly not limited to, firstly, the fact that the claim was barely pleaded and not pleaded at all with reference to any implied contract to pay; and secondly, the submission that Sumpter v Hedges has been overtaken by subsequent House of Lords decisions so that it is no longer good law, was not advanced before the judge. The submission now made in this court, that Sumpter v Hedges is no longer binding, could have been advanced before the judge, and equally, if Sumpter v Hedges was binding on the judge, it binds this court.

[135]A material consequence of these two points is that the judge did not make necessary findings of fact to support the conclusion contended for. I am quite unpersuaded that this court should disregard Sumpter v Hedges. True it is that it has been subjected to academic criticism and was the subject of recommendations from the Law Commission. But the Law Commission recommendations have not been taken into legislation and, as importantly, the House of Lords decision in the Westdeutsche Landesbank case, on which Mr Williamson relies, cannot possibly be taken as overruling Sumpter v Hedges.

[136]The subject matter of the Westdeutsche Landesbank case, an ultra vires interest swap contract, is far removed from the subject matter of builders' materials. Sumpter v Hedges was not referred to or cited in the Westdeutsche Landesbank case; nor was Munro v Butt 8 E&B 738, or Cutter v Powell, [1795] 6 TR page 320, which the Court of Appeal in Sumpter v Hedges followed. The Westdeutsche case was concerned with money had and received: see page 710D.

[137]Academic opinion does not support the proposition for by Mr Williamson contends. Goff & Jones certainly says that the implied contract theory is now a thing of the past with reference to the Westdeutsche Landesbank case: see paragraph 1-011. But at paragraph 20-047 the authors give, as the general rule, that if the contract is not entire but divisible, the party in breach can recover payment under the contract for any divisible part or parts of services rendered or goods supplied by him under the contract; but if the contract is entire, the party in breach can generally obtain no recompense for services ordered or goods supplied if the innocent party determines the contract before the contract has been substantially or wholly performed.

[138]Sumpter v Hedges is cited at some length in support of this general rule. In my judgment, Sumpter v Hedges remains intact and binding, at least for the moment, and Cleveland Bridge's third ground of appeal fails.

[139]As to their second ground of appeal, Cleveland Bridge did not plead or seek to establish any implied contract or other basis for recovering for steel, be it black steel or otherwise, after 30 June or 16 July 2004 respectively. The judge made no factual findings sufficient to support a Sumpter v Hedges claim for the fabrication of black steel in this period, and Mr Stewart satisfied me that the factual situation on site in July 2004 was sufficiently complicated to preclude this court from making factual assumptions without such findings.

[140]I have some sympathy with Mr Stewart's wry suggestion that the judge's finding about the black steel, although it is unappealed, may not be supportable on the findings he made. I would accordingly dismiss the second ground of appeal as well as the third.

[141]Cleveland Bridge's fourth ground of appeal, for which Lord Justice Richards did not give permission, concerns the welding of rakers on site. This work consisted of uniting sections of the very large raking steel members which had to be transported to site separately because the fully welded members were too large to transport to site if they had been welded off site.

[142]The site welding work was incomplete upon Cleveland Bridge's departure, and the issue was whether this work was site works, to be paid for under schedule 1(c) of the supplemental agreement, or fabrication, within the £12 million lump sum payable under schedule 1(b). Cleveland Bridge's method statement of 4 March 2004, which Multiplex approved, provided for the welding to be done on site.

[143]The judge decided that the welding of the rakers should properly be regarded as fabrication, wherever Cleveland Bridge chose to carry it out, rather than part of erection. He pointed to paragraph 76 of my judgment of 27 April 2004, to the effect that schedule 1(b) comprised fabrication work and schedule 1(b) erection and site works, and that fabrication would not cease to be fabrication work only because fabrication was transferred to and done on site.

[144]Mr Williamson, does not, I think, now contend that this site welding was erection, but he does seek to say that it is within the expression "site works" in schedule 1(c). The full relevant part of the provision in schedule 1(c) is:

"All costs ... incurred by the subcontractor from 15 February 2004 in connection with the erection and site works (being site staff, direct labour, cranes and other site related costs)."

[145]The words in brackets are descriptive of site works, and are apt to describe general work on site. Those who weld the rakers may have been direct labour, but it is the character of the works which matters, not the employment status of those who were to carry it out. This welding was, in my judgment, plainly fabrication work, and the fact that it was to be carried out on site is incidental and does not alter its character. It accordingly came within schedule 1(b), as the judge correctly decided.

[146]We announced at the conclusion of Mr Williamson's submission in this respect that we would refuse permission to appeal on this ground, and those are my summary reasons for doing so.

[147]Ground 5 has three limbs, the third of which is not pursued. The first depends on Cleveland Bridge succeeding on their ground 4, which they will not, and the second depends on their succeeding on their Sumpter v Hedges ground, which again, in my judgment, they do not. No separate additional points arise on ground 5.

[148]I turn to Multiplex's two grounds of appeal, the first of which concerns site variation 399.

[149]SV399 was a variation notice sent by Multiplex to Cleveland Bridge on 4 February 2004, which approved an increase in the subcontract sum of £2,884,712 for change notices 1 to 720. Cleveland Bridge had previously asserted that the completed value of change notices 1 to 694 would be £20,124,213, of which work to the value of £8,504,830 had, they said, been completed by the end of 2003.

[150]They said that the total additional quantity of steel would be 1,912.3 tonnes. Multiplex did not agree. Their assessment had been 1,200 tonnes.

[151]A build-up of the £2,884,712 in SV399 compared that amount with the £8,504,830 which Cleveland Bridge claimed was the value of work which they said had already been carried out.

[152]The judge considered that there were conflicting indications within SV399 itself, whether it was giving Multiplex's value for the work carried out to date or what the value would be when the variations were fully performed: see the judge's paragraph 916.

[153]Earlier decisions by the judge on the preliminary issues, and on appeal to this court, were that Cleveland Bridge disputed only two items within Multiplex's SV399 valuation. Those two items amounted to £343,680. The undisputed balance was £2,370,728.

[154]The judge's finding on preliminary issue 4, upheld by this court, was that the supplemental agreement resolved disputed variations. The valuation of £2,370,728 remained as a value for undisputed variations.

[155]The judge said that he had held in paragraph 561(vi) of his preliminary issues judgment that Cleveland Bridge were entitled to "some £2.37 million" in respect of undisputed variations. This was a reference to the £2,370,728. This paragraph of the preliminary issue judgment was approved by the Court of Appeal.

[156]In his quantum judgment the judge considered that he had held in his preliminary issue judgment that the £2,370,728 was the value of the undisputed SV399 work to 15 February 2004, not a value of all the variation work in change notices 1 to 720.

[157]Multiplex nevertheless contended that Cleveland Bridge were only entitled to £1,749,000 because only 42 per cent of the bowl steel variation work was complete on 15 February 2004.

[158]The judge rejected this contention because(1) it was inconsistent with his earlier decision and that of this court, and

(2) because the £2,370,728 had already been discounted to reflect the fact that the variation work was only partially carried out on 15 February 2004. He therefore valued Cleveland Bridge's entitlement under SV399 as £2,370,728.

[159]Lord Justice Richards gave Multiplex hesitant permission to appeal on this decision. Multiplex say that both the judge's reasons were wrong. They say that the relevant earlier decision of the judge under preliminary issue 4 was that the value of disputed variations was resolved by the supplemental agreement, but that Cleveland Bridge were entitled to be paid for undisputed variations in accordance with the subcontract.

[160]It is said that Multiplex's consistent position was that Cleveland Bridge had not earned the full value of undisputed SV399 variations on 15 February 2004. Mr Stewart referred to paragraph 553 of the judge's preliminary issues judgment, which I do not read as recording this point, but reference to the transcript of Day 16, page 96 and 97 shows that this was indeed Multiplex's explicit position. Mr Stewart says that the judge's reference in paragraph 561(vi) to "some £2.37 million", if it were not an error, must have been an intentional recognition that some lesser sum was due. He says that neither party was then contending that, on the basis of the judge's liability decision on issue 4, the full £2.37 million was payable.

[161]Cleveland Bridge's case in its skeleton argument before the Court of Appeal acknowledged explicitly in paragraph 45 the point now made by Multiplex. The proper amount to be derived from SV399 was not an issue in the Court of Appeal. The discussion with counsel indicated that I had had the impression that the £2.884 million was Multiplex's version of Cleveland Bridge's original £20 million. That is, it was a value of the variation work when it would have been completed. Thus, said Mr Stewart, both parties proceeded on the basis that the 2.37 million was not a value of the variation work which was complete on 15 February 2004.

[162]Cleveland Bridge's position on the quantum trial was inconsistent with their position at the liability trial. The quantum hearing should have determined the appropriate valuation on the evidence, but the judge did not do so.

[163]Mr Stewart says that the judge's conclusion that the £2.37 million had already been discounted sits uneasily with his paragraph 916, in which he says that there were indications in the document both ways as to whether it represented the value of work to date or not. The judge had said in his liability judgment that there was confusion in both camps as to what had been settled.

[164]Mr Stewart refers to documents and evidence to the effect that Multiplex did not at the time consider that varied work to the value of £2.7 million had been carried out. He says that Cleveland Bridge had never sought to contend that all the SV399 work was complete on 15 February 2004; nor that SV399 was referable to partially completed work. He says that the judge's own valuation of partially completed varied bowl steel is inconsistent with his finding that £2,370,728 is payable under SV399 for the very same varied steel.

[165]Mr Stewart submits that the only effect of SV399 was to vary the scope and price of Cleveland Bridge's subcontract works by £2,370,728. That is to say £60 million became £62.37 million. The valuation of the subcontract works as at 15 February 2004 should only include the value of varied works properly completed on that date, which is not the same thing.

[166]SV399 was a variation notice under clause 4.6 of the subcontract conditions. Its effect as to undisputed variations was to vary the subcontract price by adding £2,370,728 under clause 4.6.2.3 of the conditions.

[167]Mr Stewart points to a letter dated 6 February 2004 to indicate that Cleveland Bridge understood at the time this to be the effect of the variation notice. The document itself was not valuing work carried out to its date. It was a variation notice, not an interim valuation of work carried out, for which Multiplex used entirely different language.

[168]In the result, Multiplex say that Cleveland Bridge should be entitled to 57.5 per cent of £2,370,728; that is to say £1,371,803. 57.5 per cent is the proportion of the bowl steel which the judge held to have been completed on 15 February 2004: See his paragraph 13.22. He also held that the variation steel should be spread evenly over all categories of work: see paragraph 1002. So the completed percentage of the varied bowl steel should be the same. Multiplex accept that the balance of SV399 work was 100 per cent complete.

[169]Cleveland Bridge contend that paragraph 561(vi) of the judge's preliminary issue judgment is a finding that Cleveland Bridge were entitled under the supplemental agreement to £2.37 million for the undisputed variations value of SV399. Mr Williamson points to two paragraphs in my judgment in this court on the main preliminary issue appeal as approving the judge's decision.

[170]I note that the issue raised under issue 4 was whether the supplemental agreement compromised disputed variations, and that the £2.37 million was under discussion on the question whether the sums payable under the supplemental agreement represented a superficially reasonable compromise.

[171]The judge's formulation of the answer to issue 4, reproduced in paragraph 75 of my judgment, was that, insofar as variations were disputed, the costs of designing and fabricating the varied elements of the work after 15 February 2004 were compromised by the terms of the supplemental agreement. The judge did not, I think, then address directly the question whether the full £2.37 million value of the undisputed SV399 variations had been properly completed on 15 February 2004.

[172]Mr Williamson says that there is no inconsistency with Cleveland Bridge's position before the judge and this court. He says that the judge was right to hold that the issue had already been determined against Multiplex.

[173]As to the proper interpretation of SV399 itself, Mr Williamson submits that although it states on its face that the resulting amount is an adjustment to the subcontract sum, the build-up is referable to and placed alongside the amounts claimed by Cleveland Bridge, totaling £8,504,829, which they contended was the value of the work completed as at December 2003, as it happens, not 15 February 2004. Multiplex's certificate for December 2003, dated 11 February 2003, valued SV399 in the same amount, £2,884,712, as appeared in SV399. Cleveland Bridge say that Multiplex's internal thoughts and documents are irrelevant and inadmissible.

[174]As to Multiplex's contention that Cleveland Bridge had accepted that the variation work was incomplete on 15 February 2004, Cleveland Bridge point out that its contemporary position was that they had completed variation work to a value of about £8 million out of work which, when it was complete, would have had a value of about £20 million. The question is not whether the variation work was complete on 15 February 2004, which it was not, but whether £2.37 million was a valuation of the partly completed work or of all the work upon its eventual completion.

[175]As to Multiplex's case on quantum, Cleveland Bridge say that this is Multiplex's third attempt at quantifying its answer to this dispute. The details of this, however, do not matter since we are told that the parties have agreed the monetary consequence of whatever is the court's eventual decision on this topic.

[176]It is, I think, plain that the judge at the time of his preliminary issues judgment regarded £2.37 million as a valuation of the part of the undisputed SV399 variations which was complete on 15 February 2004. I am not, however, persuaded that his unappealed statement to that effect in paragraph 561(vi) is to be regarded as a binding decision to that effect; nor do I regard anything which I said on appeal from that decision as endorsing that proposition.

[177]Multiplex had made it plain to the judge that this was not their position, and it is an open question what Cleveland Bridge's position was. It is not to be regarded as a binding decision because this was not an issue which the judge was deciding. He was deciding in essence whether disputed variations had been resolved by the supplemental agreement, and on no view did the £2.37 million then represent disputed variations.

[178]His reference to the £2.37 million was in the course of a supporting reason for what he was deciding. He could only have positively decided, contrary to Multiplex's contention, that the £2.37 million was a valuation of undisputed variations which were properly completed on 15 February 2004 if either(a) he had positively construed the SV399 document itself as having that effect, or

(b) considered on appropriate evidence what the physical state of the relevant subcontract works was on 15 February 2004. He did neither of these. Accordingly, I do not consider that the judge's first reason for his decision is supportable.

[179]The judge's second reason -- that is, that the £2,370,728 had already been discounted to reflect the fact that the variation work had only been partly carried out before 15 February 2004 -- is a bare assertion unsupported, I think, by evidence or reasoning.£2.37 million was palpably less than £8.504 million, but that difference is not a relevant discount. A relevant discount would have been one which discounted a valuation for completed variations.

[180]I therefore reach the conclusion that neither of the judge's reasons support his conclusion.

[181]Although there is a degree of confusion on the documents, I consider that the position is reasonably clear as follows.

[182]First, Cleveland Bridge's valuation for work up to 31 December 2003 asserted that the measured value to that date of variations was £8,504,829, and that the estimated value of those variations, when complete, would be £20,124,213.

[183]Second, Multiplex's payment certificate number 17, dated 23 January 2004, explicitly allowed £955,011, not £2.88 million or £2.37 million, for the then completed value of the variations for which Cleveland Bridge's valuation had been £8.504 million: see bundle 9, tab 2, page 378. It was at that date plain, therefore, that Multiplex were not saying that £2.88 million or £2.37 million was the valuation of variations carried out to date.

[184]Thirdly, SV399 is in explicit form a variation notice, referable to clause 4.6 of the subcontract conditions, and it states in terms that it has the effect of adjusting the subcontract sum. It was not, therefore, an interim valuation of variation work to date, and is not to be read as such because the schedule confusingly sets Multiplex's valuation of the adjustment of the subcontract sum alongside Cleveland Bridge's figure for the value of variations to date.

[185]Fourthly, Cleveland Bridge understood SV399 to be a variation notice, as their letter dated 6 February 2004 clearly shows. That letter gave formal notice that Cleveland Bridge did not accept the valuation in the variation notice, and can only be read as an acknowledgment by them of the contractual status of that notice.

[186]Fifthly, Multiplex's subsequent payment certificate, dated 11 February 2004, in which they included £2.884 million for the variation against Cleveland Bridge's application for £8.504 million, is to be taken as a perpetuation of muddle which did not change the contractual status of SV399.

[187]In my judgment, therefore, the £2.37 million derived from SV399 is to be seen as Multiplex's valuation for the undisputed variations upon their eventual completion, not to the extent that they were complete on 15 February 2004. Multiplex's appeal in this respect, therefore, should in my judgment succeed.

[188]It is ironic that if Cleveland Bridge's case on this ground of appeal had been factually correct, these would all have been disputed variations which the subcontract agreement had compromised, and Cleveland Bridge would have been entitled to nothing for them, as part of the schedule 1(a) valuation on the judge's decision as to issue 4, upheld by this court.

[189]Multiplex's second ground of appeal concerns the treatment of retention for the purpose of interest calculations. By the original subcontract clause 21.12, Multiplex were permitted to deduct retention monies at the rate of 5 per cent from interim payments, half of which was to be released upon practical completion of the subcontract works, and the other half of which was to be released following the issue of a notice of completion of making good defects.

[190]The subcontract in its original form, clause 39.5, further provided Cleveland Bridge with the right to choose to provide a retention bond in lieu of retention in the period after practical completion for an amount equivalent to 2.5 per cent of the subcontract sum. Clause 39.5 was subsequently varied by the supplemental agreement, schedule 2, to extend Cleveland Bridge's right to provide a retention bond instead of a retention in the period to practical completion. Cleveland Bridge took advantage of this in part, but the details do not matter. At the date of repudiation, Multiplex had withheld a substantial sum by way of retention.

[191]The issue of retention money and the precise mechanism for its release was not identified as being an issue until a very late stage in the proceedings, after the conclusion of the evidence and the circulation of a draft judgment. From the court's perspective, at least, it had been assumed that there was no issue between the parties about retention. This view was formed on the basis of the parties' opening submissions in the course of which Multiplex had submitted:

"One point to note relates to the handling of retention. Retention was originally levied against the sums sought by Cleveland Bridge in accordance with the conditions of the subcontract as a safeguard against any future sums that might become due to Multiplex. Now that the project is complete, Multiplex accepts that Cleveland Bridge are entitled to the release of the retention levied against the valuations under schedule 2. However, it is Multiplex's case that the retention monies withheld can be applied to reduce the sums due to Multiplex by way of damages under Scott schedule 4. In these circumstances, Multiplex continue to levy retention against the sums due to Cleveland Bridge under schedule 2, but will make an appropriate cash credit for that sum against monies found to be due to Multiplex under Scott schedule 4."

[192]Cleveland Bridge in their opening note had adopted a similar position as follows:

"In fact retention was a complete irrelevance to the valuation exercise which the court had to undertake. Retention is obviously applicable in relation to interim valuations as work progresses. Since, however, this is a final account calculation, retention is irrelevant. Equally, the amount of the retention bond is irrelevant. However, what is relevant is that when the court carried out its final assessment of the sums payable to Cleveland Bridge and the sums paid, credit must be given for the fact that Cleveland Bridge have paid back to Multiplex in excess of £1.5 million in respect of this bond. That is the sum paid calculation will need to be £1.5 million less than it otherwise would have been."

[193]It appears that neither party adopted a contrary position to that indicated in the above extracts from their respective skeleton arguments in the course of the trial; nor did they expand upon the issue of retention monies in their respective closing submissions.

[194]After the trial, on Day 40, both parties appear to have been agreed that the sums to be credited to Cleveland Bridge under schedule 2 should not be subject to any deduction in respect of retention. The manner in which the retention should be brought into reckoning emerged as a contentious issue when the parties were invited by the judge to agree interest due to Multiplex as a result of the judgment of the court.

[195]At this late stage, each party made further submissions with respect to retention money. Multiplex contended that it was entitled to retain the retention sums in accordance with the contractual provisions until a notice of making good defects had been issued under the head contract. Multiplex said that Cleveland Bridge had no subsisting contractual right to the release of retention money. It was further contended that retention should not be released to Cleveland Bridge at this stage, since to do so would put Cleveland Bridge in a better position than it would have been in had it not repudiated the contract.

[196]Cleveland Bridge contended that Multiplex had conceded the issue of retention through its position adopted during the trial and, accordingly, that Cleveland Bridge was entitled to the release of rejection levied. In the alternative they argued that that in any event they were contractually entitled to the retention monies, and they submitted that the provision of the bond on 7 April 2004 extinguished any entitlement of Multiplex to retain any retention money after that date.

[197]The judge dealt with the question of retention at paragraph 1675 to 1685 of the judgment. He considered that the position adopted in Multiplex's opening note, which I have quoted, amounted to a concession that in March 2008, at the end of the 12 months' defects liability period, Cleveland Bridge were entitled to the return of all retention money. The judge considered that Cleveland Bridge's opening note essentially said the same thing as Multiplex's opening; that retention money, although a bond equivalent, was properly withheld by Multiplex in the past, but that the time had now come for its release. In his view, the position of neither party had diverged during the course of the trial, and the judge determined that neither party should be permitted to resile from their adopted positions at such a late stage in the proceedings.

[198]He further expressed the view, at paragraph 1682, that his understanding was that the trial had proceeded on the basis that the retention money was properly withheld during the currency of the work, that one half of the retention was due for release upon practical completion in March 2007, and that the other half was due for release upon the expiry of the defects liability period in March 2008.

[199]Accordingly, having determined that the parties were not entitled to reopen the question of retention, the judge gave effect to his understanding of the position adopted by the parties and held that Multiplex were entitled to withhold 5 per cent retention money up to 9 March 2007, and that after that date Multiplex were entitled to withhold 2.5 per cent of the retention money to 3 March 2008. Multiplex were held to have no entitlement to withhold any retention after March 2008.

[200]Multiplex's appeal is on the basis that the judge wrongly attributed to them a concession which they never made. They had conceded that now, in March 2008, the project was complete. Cleveland Bridge were by then entitled to have the retention which Multiplex then held taken into account in their favour. They had never conceded also that one half of the retention was due for release upon practical completion in March 2007, and the judge was wrong to explain his decision as he did, in refusing Multiplex's application for permission to appeal, by saying that the concession from March 2008 only made sense if the first half of the retention fell due upon practical completion in March 2007.

[201]It is in my view perfectly plain that Multiplex's concession did not extend to this, and Mr Williamson's attempt to submit that the words "are entitled", with reference to March 2008, somehow carried with it the judge's extension, was entirely unpersuasive.

[202]The logic of Multiplex's position was, I think, plain. Their entitlement to deduct retention had accrued while the subcontract subsisted: see Bank of Boston v European Grain. But Cleveland Bridge's entitlement to its relevance had not. Upon Multiplex's acceptance of Cleveland Bridge's repudiation, the relevant provisions of the subcontract fell away. Practical completion of the subcontract works was never achieved or achievable. Multiplex were not entitled to hold on to the retention forever, at least in the sense that it had to be brought into account in Cleveland Bridge's favour at an appropriate time. Meanwhile, Multiplex were able to set it off against their damages claim, which is what in essence their concession asserted.

[203]There was no subsisting subcontract condition entitling Cleveland Bridge to release of half the retention upon practical completion which they never achieved anyway. Mr Williamson's reliance on the final words of clause 14.2 was entirely unpersuasive because the whole of clause 14 is predicated on the continuing existence of a subcontract in the course of which there is a disagreement about the date of practical completion.

[204]In the result, in my judgment, there was no proper basis for the judge concluding that an interest calculation should take account of a notional entitlement in Cleveland Bridge to payment of half the retention in March 2007. The concession extended no further back than March 2008, and the relevant interest should be calculated with reference to that date.

[205]For these reasons, I would allow Multiplex's appeal to that extent on the retention issue.

Cleveland Bridge UK Ltd & Anor v Multiplex Constructions (UK) Ltd [2010] EWCA Civ 139

the judge summarised the parties' contentions as follows:

The judge then said this, paragraph 888:

LORD JUSTICE DYSON: I agree.

LORD JUSTICE STANLEY BURNTON: I also agree.

Cited in 8 later judgments