Multiplex v Bathgate: Legal Riddles and Unsolvable Problems

Mr Justice Fraser’s decision in Multiplex Construction Europe Ltd v Bathgate Realisation Civil Engineering Ltd and Others is one of the more curious decisions you will ever read.

Not that I would particularly encourage anyone to read it. The case necessitated some pretty comprehensive and in-depth legal analysis that means the judgment runs to some 206, fairly dense, paragraphs, and an Appendix; I would challenge even the most avid consumer of legal treatises to read the whole thing in one sitting without their eyes glazing over at some point. Helpfully, my colleague Vijay Bange has already produced a very useful summary of the decision and its legal implications here.

However, the density and depth of the judgment does not mean it is without interest; far from it. In fact I suspect this case will prove to be one of the more fascinating legal tangles the Courts will be asked to unravel this year. This article looks at some of the more curious aspects of this dispute, away from the key aspects of the case.

Background

Multiplex’s claim centres around the construction of 100 Bishopsgate, a new 40-storey edifice in the City of London that was completed in 2019.

Multiplex was the main contractor. It employed Dunne Building and Civil Engineering Ltd to carry out the design and construction of all of the concrete works, including the core, and all of the temporary works required to carry out that construction. Those temporary works included a slipform rig used for the construction of the concrete core.

At a later date Dunne went into administration and changed its name to Bathgate (not necessarily in that order); hence the name of this case.

To carry out the design of the temporary and permanent works required, Dunne engaged a Dubai-based consultancy, BRM Construction LLC.

Dunne was also required by the terms of its sub-contract to employ an independent design checker to carry out Category 3 safety checks. To that end it engaged a third party consultant called RNP Associates Ltd. RNP is now also in liquidation.

When Dunne went into administration, Multiplex terminated its sub-contract and employed a new sub-contractor to complete Dunne’s works. That new sub-contractor advised both the 7 levels of concrete core that Dunne had constructed up to that point, and the slipform rig they had used to do it, were defective. Multiplex therefore carried out remedial works to the core and procured a new slipform rig, and works were able to resume.

Multiplex says that it incurred around £12m in costs in resolving these problems – money, understandably, that it wants to recover from somewhere.

The problem Multiplex has is one of finding someone who has cash to pay them. Dunne is in administration; its consultant, BRM, is located out of the jurisdiction and is apparently uninsured. Multiplex has obtained judgments in default against both but evidently does not hold out much hope of extracting significant cash from either.

RNP, the Cat 3 checker, is also in liquidation. However, RNP is insured, so Multiplex is attempting to bring a claim directly against RNP’s insurers, using the Third Parties (Rights Against Insurers) Act 2010.

This Act is a very useful piece of legislation that essentially allows a party with a claim against an insolvent but insured company to claim against that company’s insurers directly. So useful is it, in fact, that the insurance industry lobbied hard against it and delayed some of its provisions coming into force for several years.

However, in order to rely on the Act, Multiplex has to show that RNP owed it some kind of legal obligation, and then breached that obligation. This case, which was a trial of a preliminary issue, was exclusively about establishing what duties, if any, RNP owed to Multiplex.

Sympathy for the Lawyers?

Claims under this Act are far from unusual, particularly in the construction industry, where (i) companies become insolvent at a relatively high frequency; and (ii) most companies are required to carry some level of insurance. Usually, however, the claimant under the Act will have a direct contractual relationship with the insured party, which will make it much easier to work out what the insured party was required to do.

Not so here; but, in order to work out what duties (if any) were owed by RNP to Multiplex, the Court first had to work out what contractual duties RNP owed to its employer, Dunne.

You’d be forgiven for thinking that that would be an easy process – that Dunne and RNP would have had a written contract in place between them. What in fact happened was that RNP sent Dunne its terms and conditions, and Dunne replied sending over its own Consultancy Agreement.

What happened after that is anyone’s guess. The parties couldn’t produce Dunne’s Consultancy Agreement, nor could either party produce evidence as to whether discussions had taken place between RNP and Dunne to settle the contract terms. The best either party could do was to produce a witness from Dunne whose evidence was, essentially, that settling the contract terms was somebody else’s job, and he had no idea what had happened.

If this astonishing dearth of evidence seems scarcely believable, it is because this case was essentially between Multiplex and RNP’s insurers, Argo. Though listed as defendants, neither Dunne nor BRM participated in proceedings, and RNP was not a party to the case at all. Of course, neither Multiplex nor Argo were parties to the discussions between Dunne and RNP about their contract, and it seems clear that they had very little success in obtaining documentation or other evidence from either party. This is actually a relatively common problem, at least for insurers in defending claims under the Act, and was one of the reasons the industry lobbied against it.

This complete lack of evidence clearly made life very tricky for both Multiplex and RNP’s lawyers, and led both sides to file and serve amended and re-amended versions of their statements of case – in one instance on the first day of the hearing.

It seems that these issues elicited that usually most chimeric of things: judicial sympathy. The fact that these issues with the production of statements of case did not prompt criticism of the lawyers from Mr Justice Fraser suggests that he acknowledged the issues both sides faced attempting to plead their cases with no evidence on which to rely.

Ultimately, faced with this complete lack of evidence, the Court concluded that the agreement between Dunne and RNP was confined to its most basic and essential terms.

The Dreaded F-Word (no, not that one)

With no contractual assistance available, Multiplex presented its claim against RNP’s insurers in negligence. RNP, it said, issued to Dunne a certificate that negligently stated that Dunne’s designs of both the slipform rig and the concrete core were ok. It did so knowing that Dunne would provide that certificate to Multiplex and Multiplex would rely on it. When Dunne provided the negligent certificate to Multiplex, RNP negligently misstated to Multiplex the quality of Dunne’s design.

The Court ultimately disagreed with Multiplex’s argument. In doing so, the judge alluded to the other half of this story that he was not required at this hearing to determine, and because of his decision probably won’t have to be determined.

The parties agreed that RNP did certify Dunne’s design, and Dunne did provide two certificates from RNP to Multiplex. However, the certificate issued by RNP and the one received by Multiplex were two different documents; the latter conveniently omitted a number of caveats and comments included by RNP in their certificate. The implication of this was that Dunne had – probably deliberately – removed from the certificate issued to Multiplex some of RNP’s stated concerns about Dunne’s design.

In fact, Dunne went even further: the design of the slipform rig certified by RNP was not the design Dunne actually used. It appears that Dunne changed the design without informing anyone and without obtaining the necessary certification.

These issues are only alluded to in the judgment and the judge offers no commentary on Dunne’s conduct, but the inference to be drawn is that Dunne may have been, to some degree, fraudulent.

Actual fraud is mercifully fairly rare, but it can have a serious effect on claims. How could Multiplex claim against RNP if the certificate they received and relied upon wasn’t the one issued by RNP in the first place? If Dunne was always going to issue a favourable certificate to Multiplex regardless of what they received from RNP, surely any breach or negligence by RNP becomes irrelevant? How can Multiplex show loss due to any breach by RNP given the design certified by RNP wasn’t the design Dunne used?

Conclusions

None of this helps Multiplex, particularly given that Dunne are insolvent and apparently impecunious. It seems likely based on this judgment that unless they have relevant insurance coverage in place, Multiplex will be left holding the proverbial baby.

It is undoubtedly an easy thing to say in hindsight, but the contractual travails Multiplex faced do highlight the benefit for main contractors in particular of:

    • securing collateral warranties from everyone involved in the supply chain, particularly those involved in the design of temporary and permanent works (requiring a warranty from RNP would have compelled RNP and Dunne to settle a written contract between them and provide a copy of the same to Multiplex); and
    • ensuring that everyone in the supply chain responsible for design carries appropriate insurance.

That said, there’s not much that anyone can realistically do in contractual terms to protect against fraud by your contracting partners.