Cleveland Bridge UK Ltd v Severfield - Rowen Structures Ltd

Factual and Procedural Background

This case concerns a subcontract dispute between two steelwork contractors, Company A and Company B, related to the fabrication and delivery of steelwork for the first nine levels of the Shard, a major construction project. Company A was engaged by Company B to fabricate and supply steelwork up to Level 9. The dispute centers on alleged delays by Company A in providing steelwork and the impact of such delays on Company B's progress in erecting subsequent steelwork levels. Company B was the principal steelwork contractor for the project, while Company A was a substantial fabricator engaged under a subcontract. The project involved complex logistics, restricted site access, and coordination with multiple tower cranes.

The subcontract was formalized in early November 2009, comprising a purchase order and an appendix detailing scope, price, and obligations. There were competing programmes discussed during the contract period: the June Programme and the December Programme, neither of which was formally agreed as contractually binding. The December Programme, however, reflected Company B’s communicated requirements and was considered realistic and achievable.

During fabrication and delivery, Company A experienced significant quality issues and delays, attributed internally to an "extraordinary overload" of work and organizational problems. Company B encountered delays in steel erection and instituted acceleration measures including extended working hours and night shifts. The parties exchanged numerous communications concerning delays, defects, and claims for payments and damages. Company A initiated proceedings claiming outstanding sums due under the subcontract, while Company B counterclaimed for damages related to delays, defects, and acceleration costs.

Legal Issues Presented

1. Whether the June Programme or the December Programme constituted the binding contractual programme for fabrication and delivery of steelwork.
2. Whether Company A was in breach of its contractual obligations by failing to complete fabrication and delivery in accordance with the relevant programme.
3. Whether delays and defects were caused by Company A and the extent of liability for damages.
4. The quantum of damages recoverable by Company B for delay, disruption, acceleration, and defects.
5. The entitlement of Company A to sums claimed under the subcontract and the appropriate VAT treatment.

Arguments of the Parties

The opinion does not contain a detailed account of the parties' legal arguments.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The Court found that neither the June Programme nor the December Programme was formally agreed as a binding contractual programme. However, the December Programme reflected Company B’s communicated and reasonable requirements and was to be treated as a de facto programme against which Company A’s performance was to be measured.

Company A failed to prove that delays were caused by late variations, late information, or late provision of free issue materials. The Court found that Company A was not delayed by these factors but rather by internal organizational issues and an excessive workload. Company A was in breach of its subcontract by failing to complete fabrication and delivery in accordance with the December Programme.

Delay analysis established that the critical path ran through a specific phase of the steelwork (Phase 803), which Company A delivered 38 days late. Additional delays were attributable to a planned shutdown of Company B’s paint shop and site restrictions caused by crane and gantry works, though the latter delays were not attributable to Company A.

Company B’s acceleration measures to recover delays caused by Company A were reasonable and recoverable, although costs incurred after a certain point, when other factors caused delay, were not attributable to Company A.

The Court carefully analyzed the quantum of claims and counterclaims, including fabrication costs, delay damages, disruption, acceleration costs, crane costs, and defects. It found that Company A’s claim for the edge beam variation was not fully substantiated, with significant parts of the claim disallowed due to lack of evidence or unreasonable assessments.

Regarding defects, the Court accepted evidence of poor workmanship and found that many defects identified in Non-Conformance Reports (NCRs) were attributable to Company A, though quantification was deferred. The Court rejected some defect claims due to insufficient evidence.

The Court applied principles of mitigation of damage, accepting that Company B’s efforts to accelerate work to recover delay were reasonable and that costs incurred in mitigation were recoverable to the extent attributable to Company A’s breaches.

Holding and Implications

The Court held that Company A was in breach of the subcontract for failing to deliver fabricated steelwork in accordance with the December Programme and was liable for damages related to delay and defects.

Company A’s claim for outstanding sums under the subcontract is allowed in the net sum of £928,472.55 plus VAT, subject to adjustments for counterclaims.

Company B is entitled to damages in the sum of £824,478.49 for delay, disruption, acceleration, and defects, with some claims deferred for further quantification.

The VAT issue was resolved in favor of the higher rate (20%) to be applied on any net balance due after set-offs.

The decision directly affects the parties’ financial liabilities and rights under the subcontract but does not establish new legal precedent. It underscores the importance of clear contractual programming, substantiated claims for delay and defects, and the reasonableness of mitigation efforts in construction disputes.