Multiplex versus Cleveland Bridge - Coursework Example

Introduction Founded in 1877, Cleveland Bridge UK Ltd is an English company based in Darlington renowned in the world over. The company is in the business of building bridges and structural engineering. Some of the famous bridges they are responsible for building include the Humber Bridge and the Victoria Falls Bridge (Clevelandbridge.com 2015; Smale 2002). Founded by John Roberts in 1962 and headquartered in Perth, Australia, Brookfield Multiplex, on the other hand, is a global contracting and Development Company involved in the business of designing, building, and infrastructure assets and property maintenance. The company is well known for taking on large projects such as the Sydney King Street Wharf (Brookfieldmultiplex.com 2015; Gysin 2007). In 2002, Brookfield Multiplex (henceforth, Multiplex) won a contract for steelwork for the proposed Wembley Stadium. There, however, broke a contractual dispute between themain contractor, Multiplex, and its subcontractor, Cleveland Bridge, who were both involved in this project. The dispute eventually led to Cleveland Bridge exiting the undertaking in 2004. This dispute resulted in a massive lawsuit that the construction industry would not soon forget between Multiplex and Cleveland Bridge. Moreover, the Wembley Stadium project experienced great delays in completion, and there was mass sacking of 200 employees who had been transferred to Hollandia employment from Cleveland Bridge on the site and picketing of the same (Smale 2002; Beveridge 2009). Evaluation of the Case between Multiplex versus Cleveland Bridge Common causes of contractual disputes in construction Contracts are put in place in order to try to ensure harmony in the construction project. However, contracts cannot cover for every eventuality thus when problems arise, each party may want to gain as much as possible from the other. The parties may also equally misinterpret the facts, and one or both parties may have unrealistic expectations and prevent coming to an agreement. They may also deny responsibility altogether in order to avoid liability. Following are a few common causes of contractual disputes in construction (Semple, Hartman & Jergeas 1994) One of the most common causes of legal construction disputes is concerning the scope of work/specification of tasks. Such disputes typically arise between the project owner and the contractor or subcontractor. One of the reasons why this is such a commonly occurring dispute is that there are often different interpretations of the documents by the contactors and design professionals especially of the task specifications/plan is ambiguous or the work plan contradicts the specifications. It is typically upon the owner to guarantee the accuracy and viability of the specifications/plan. If the owner wishes to shift this responsibility to the contractor, there are provisions for this in an exculpatory clause which is to be included in the contract. In the event of a dispute in this case, the battle is often over the implied warranty and the exculpatory clause enforcement (Wilson 2005). Changes in the work, that is, revisions to the drawings of the contract as issued at the time when the contract was signed. However, concerning the interpretation of the contractual terms, an RFI (request for information) may be employed in order to help clarify matters in the handling of the problem at hand. RFIs may however further compound the problem when one or more of the parties delay their response to the RFI, or the design professional fails to recognize or own up to the problems, or there is crossover between the construction means used and the design of the project, or there is misuse/abuse of the RFI process by the contractor. In this situation, the RFI process may fail, and also worsen the problem (Cakmak & Cakmak 2014). A dispute may also arise concerning the scope of work between the contractor and their subcontractor. When the contractor asks the subcontractor to bid for a certain scope of work by isolating a sub-trade of work in lieu of specifying the details of the plan/specifications that apply to the scope of work, the subcontractor is then left to define the scope of work for themselves. The subcontractor may thus bid for only a portion of the work while the expectation of the contractor involved a larger scope than what has been bided and this may cause a dispute to arise between the two (Cakmak & Cakmak 2014). Another very common cause of legal disputes in construction is poorly documented drawings. A general contractor (GC) may receive drawings in which there are several errors/conflicts between the ductwork and lighting, for example. Being unaware of the problem, when the owner is asked for clarification once the GC raises the issue, they may be surprised to find that the A/E resolves the problem but the project now requires, say, five more light fixtures. The issue here now becomes: who will pay for the extras? In such a case, coordinating engineering and architectural drawings from the word go is a good way to ensure prophylaxis for such conflicts (Rains & Strand 1962). Change orders or the insertion of extra work out of the scope originally agreed one are another major reason leading to legal conflicts construction. These changes boil down to whether the contractor(s) is entitled to extra time as well as the change order price. The dispute is often caused when the owner disagrees on the new price or denies the extension request, insisting that the work should proceed as originally scheduled. This leaves the parties battling over time and finances toward the completion of the project (Cakmak & Cakmak 2014). Finally, Differing site conditions are another great source of legal conflict in construction. Regarding the owners responsibility on the existing conditions on site, there are two approaches: the majority approach being that the owner is exclusively responsible for disclosing all information in their possession on the site, whether studies have been done or not. This means that the owner cannot contract away the warranty implied which means that an exculpatory clause does not apply in this matter. The minority approach is only applicable to public owners. If they have been found to be fraudulent or have intentionally concealed information that is known, the exculpatory clause is enforced, and the responsibility for the site conditions is thus shifted to the contractor (Rains 1962). How Disputes Can Be Avoided in Construction Contract? Resolving disputes once they have already occurred is often more tedious than avoiding these disputes in the first place. There are therefore a variety of ways by which these disputes can be prevented from occurring: 1) specifying in very clear terms the when and how of the terms of payment in the contract, these must be acceptable to all parties. 2.) Adjudications clauses must state if and when one party is to pay another. It must also state who is to be the adjudicator or how they are to be chosen in the event of a construction dispute. The contract should at least utilize clear, concise language; generalization must be avoided and the specific details must be entailed. It is also important that the contract is reviewed by an expert prior to signing or the beginning of work (Barkai 2003). Aside from the actual terms of the contract, the interaction between all parties involved must be just so in order to avoid conflict (Gaitskell 2011). This involves constant and timely communication—with each other among the contractors as well as with the owner. Frequent updates help manage everyone’s expectations and keep all parties correctly informed. In case of any changes to the scope of work or contractual terms, it is important that this is done in writing. The writing should also include the agreement on payment for extra work in order to avoid payment disputes. The payment should preferably be received prior to the commencement of work, though if this is not possible an agreement should be obtained on when payments can be made before the work is complete. The contract must allow for work to go on even when disputes are ongoing (Eilenberg 2003). The Dispute For the steel fabrication—including the arch of the stadium which was the project’s signature—in the construction of Wembley National Stadium, the main contractor was Multiplex while Cleveland was the subcontractor. The two parties, however, did not work very well together. Cleveland’s chunk of the project was eventually significantly reduced, and this diminished task was now to be completed at a fixed price by the company. By 2004, relations between these two parties completely broke down leading to Cleveland’s walking away from the project. Multiplex therefore stepped up to fill the shoes of their counterpart by hiring a new contractor to see the through the unfinished business that Cleveland left when it exited the project regarding the fabrication of steel for the bowl of the stadium, that is. Moreover, Multiplex also made the move to issue proceedings against Cleveland for their untimely exit, citing breach of contract (Beveridge 2009; Lloyd 2014). In 2006, a ruling on the matter was given by the Court of Appeal that Cleveland was indeed in breach of contract by walking away. Although this ruling should have served as the beginning of the end for this dispute, the two parties did not stop there; they went on to proceed with further litigations. The main reason for the over four-year long case was the unwillingness to settle by the two parties (Beveridge 2009; News.bbc.co.uk 2006). The matter was eventually brought forth to the Technology and Construction Court in 2008. At this time, the bone of contention was summarized into two major issues: one was the amount owed to Cleveland by Multiplex for the portion of the task completed and the supply of materials up until the repudiation; while the second was the damages owed to Multiplex by Cleveland for their breach of contract which was brought on by the latter’s walking away. Multiplex claimed that Cleveland’s actions had caused them to incur losses amounting to twenty-five million Euros when they walked away. In addition to this, Multiplex also made a move to claim back what they deemed as overpayments that were made to Cleveland. To this, Cleveland’s rebuttal was that Multiplex made no losses because the costs incurred by the hiring of another contractor would have been incurred anyway had Cleveland stayed on the project (Multiplex accused of illegality in Wembley dispute 2006). Comments and Verdicts of Justice Jackson and Lord Justice May On June 6th, 2006, Justice Jackson ruled in favor of Multiplex that Cleveland was found guilty of repudiatory breach. An appeal application was granted on issue 4: the construction of a supplemental agreement, and trial followed by Lord Justice May on December 20th, 2006. On January 31st, 2007, there was a hearing concerning the issue of who was responsible under the terms of supplemental agreement for the cost of temporary works for the stadium roof which the court under Justice Jackson found in favor of Cleveland. In the same year on December 21st, on the appeal involving the stadium roof— the dispute was concerning the extent of the “Temp Works – Roof Props’—Lord Justice May was not persuaded that whoever erected the roof must also be responsible for the temporary works’ design and fabrication. The appeal was therefore allowed in part, finding in favor of Cleveland (Adjudication Case Summaries 2015). Justice Jackson criticized both parties for their willingness to settle. As a matter of fact, the trial would have gone on for longer than twelve weeks had he not limited the length of trial from the get go. The combined legal fees incurred by both parties totaled up to twenty-two million Euros including (£1m in photocopying fees) all to identify an overpayment of £6m to Cleveland. He advised being slow to go to court in favor of mediation and reasonable settlements in the resolution of conflicts (Lloyd 2014). The Repudiation of Contract Repudiation of a contract is when one party in a contract unconditionally refuses to perform as agreed upon on the contract, regardless of when this performance was set to take place. This is an unlawful termination and is known as a “repudiation” of contract. To prevent such a case an employer or contractor may put in a clause known as ‘termination at will’ or ‘termination for convenience’ which allows them to terminate the contract between themselves and the contractor or subcontractors respectively. In light of this, Multiplex was the only party in a position to legally terminate the contract, had they included this clause in their contract with Cleveland. The latter, as the subcontractor, was unequivocally in breach of contract due to their repudiation (Allensworth 2009). The use of article of agreement in contract with regards to temporary or supplementary works in contract Under the article “contract adjustments” the owner of the contract (employer or business manager) may, at any time of their choosing, alter the conditions set forth on the contract. This applies to any part of the work or the contract including temporary or supplementary work. This is therefore at the discretion of the creator of the contract provided it was agreed to by the other party prior to signing the contract (Bailey 2011). Conclusion The dispute between Multiplex and Cleveland Bridge raised a number of legal issues the result of which was a long and tedious lawsuit at the end of which neither party gained much. The court finally ruled that Multiplex be paid 20% of the losses they incurred by Cleveland, causing them to end up experiencing great losses which were unnecessary. This case should serve as a lesson for the overly litigious and slow to settle in a bid to get what each party feel they should. At the end of the day, there was no winner, and no one took it all when time and money as well as a cordial relationship would have been left intact had the two parties just simply been more reasonable. References Adjudication Case Summaries. (2015). [online] Available at: http://www.nadr.co.uk/articles/published/AdjudicationLaw/Multiplex%20v%20Cleveland%20Bridge%20No2%202008.pdf [Accessed 19 Nov. 2015]. Allensworth, W. (2009). Construction law. Chicago: Forum on the Construction Industry, American Bar Association. Bailey, J. (2011). Construction law. London: Informa Law. Barkai, J. (2003). Using Alternative Dispute Resolution Techniques In Construction Disputes. Social Science Reaearch Network Electronic Journal. [online] Available at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1435381 [Accessed 20 Nov. 2015]. Beveridge, M. (2009). Mine is bigger than yours!. NZLawyer Magazine, [online] pp.16-18. Available at: http://queencitylaw.co.nz/wp-content/uploads/2012/09/Construction-article-Wembley-Stadium-Marcus-Issue-112-NZ-Lawyer.pdf [Accessed 18 Nov. 2015]. Brookfieldmultiplex.com, (2015). Brookfield Multiplex. [online] Available at: http://www.brookfieldmultiplex.com/company/about_brookfield_multiplex/ [Accessed 17 Nov. 2015]. Cakmak, E. and Cakmak, P. (2014). An Analysis of Causes of Disputes in the Construction Industry Using Analytical Network Process. Procedia - Social and Behavioral Sciences, 109, pp.183-187. Clevelandbridge.com, (2015). Cleveland Bridge UK Ltd - About Cleveland Bridge. [online] Available at: http://www.clevelandbridge.com/ [Accessed 17 Nov. 2015]. Eilenberg, I. (2003). Dispute resolution in construction management. Sydney: UNSW Press. Gaitskell, R. (2011). Construction dispute resolution handbook. London: Ice Publishing. Gysin, C. (2007). Wembley kick-off: Stadium is ready and England play first game in fortnight. [online] Mail Online. Available at: http://www.dailymail.co.uk/news/article-441182/Wembley-kick-Stadium-ready-England-play-game-fortnight.html [Accessed 17 Nov. 2015]. Lloyd, N. (2014). The winner takes it all?. 1st ed. [ebook] nabarro.com. Available at: http://www.nabarro.com/downloads/the-winner-takes-it-all.pdf [Accessed 20 Nov. 2015]. Multiplex accused of illegality in Wembley dispute. (2006). The Sydney Morning Herald. [online] Available at: http://www.smh.com.au/news/business/multiplex-accused-of-illegality-in-wembley-dispute/2006/05/24/1148150301153.html [Accessed 19 Nov. 2015]. News.bbc.co.uk, (2006). BBC NEWS | UK | England | London | Ruling on Wembley stadium dispute. [online] Available at: http://news.bbc.co.uk/2/hi/business/5047546.stm [Accessed 20 Nov. 2015]. Rains, H. (1962). Book Review: Labor-Management Relations: Jurisdictional Disputes in Construction: The Causes, the Joint Board and the NLRB. ILR Review, 15(2), pp.260-261. Rains, H. and Strand, K. (1962). Jurisdictional Disputes in Construction: The Causes, the Joint Board and the NLRB. Industrial and Labor Relations Review, 15(2), p.260. Semple, C., Hartman, F. and Jergeas, G. (1994). Construction Claims and Disputes: Causes and Cost/Time Overruns. Journal of Construction Engineering and Management, 120(4), pp.785-795. Smale, S. (2002). Cleveland Bridge Group Wins Wembley Stadium Steelwork Contract Worth £60 Million. [online] Web.archive.org. Available at: http://web.archive.org/web/20040616202743/http://www.clevelandbridge.com/news/sept2002wembley.htm [Accessed 17 Nov. 2015]. Wilson, S. (2005). Examining the current law relating to limitation and causes of action (tortious and contractual) within a construction context. J Build Apprais, 1(4), pp.344-353. Read More