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Wembley contractor Multiplex has rejected claims made last week by Cleveland Bridge that it tried to bust the firm with an "armageddon plan", write Chloë McCulloch and Sarah Richardson.

The firm has denied that its intention was to force Cleveland Bridge out of business by withholding £1.25m bonus for the lifting of the arch. It claims it was entitled to withhold the money by a breach of contract.

The claims are presented in a legal reply to Cleveland Bridge, filed with the Technology and Construction Court on Wednesday.

Multiplex also denies that it intended to appoint steel firm Hollandia as soon as the arch was lifted, but rather spoke to the firm as a contingency measure in case it could not reach agreement with Cleveland Bridge. Hollandia was not engaged to take over on site erection until 6 July but did not conclude commercial terms until November 2004.

Instead, Multiplex claims that Cleveland Bridge had its own plan, codenamed Project Trafalgar, to stop work on the pretext that Multiplex had repudiated the terms of its contract.

Multiplex claims that in December 2003 it was approached by a representative of Cleveland Bridge, who suggested that the firm purchase part of Cleveland Bridge or remove some of the steelwork from the contractor's scope.

It claims that the board of Cleveland Bridge's parent company was told on 7 May 2004 that Cleveland Bridge had "dramatically overspent" its budget and that the overspend was in the region of £6m. Multiplex claims Cleveland Bridge realised that it was substantially at fault but sought a mechanism to avoid realising the effect, and implemented Project Trafalgar.

It also denies that Hollandia was the only practical alternative to Cleveland Bridge and that as such it paid over the odds. It claims that because Cleveland Bridge abandoned the project, Multiplex did not have the opportunity to negotiate a fixed price with Hollandia. Multplex adds: "Once Hollandia discovered the full extent of the disarray left by CBUK, Hollandia was unwilling to agree to a fixed price arrangement."

Multiplex's other contentions are as follows:

• It denies that it planned to make Cleveland Bridge "fall over under pressure" and says this phrase was a reference to "CBUK backing down in the face of claims being made by Multiplex against it."
• It denies it agreed to pay £32.7m for works up to 15 February 2004.
• It denies it acted dishonestly in going back on the £32.7m deal and sought repayment of £8.7m from Cleveland Bridge. It says that even if Mr Stagg was acting dishonestly "he had no actual or ostensible authority to do so" and such dishonesty is not attributable to Multiplex".
• Multiplex claims Cleveland Bridge should have informed it of the 15 February deal, saying: "Given CBUK's knowledge of its own case that Mr Stagg was not informing his superiors [of the deal] not only is any dishonesty not to be attributed to Multiplex, but rather such dishonesty led to Multiplex being deceived with the knowledge and connivance of CBUK."
• It claims that it was entitled to deduct £4.6m in certificate of payment "in respect of inefficient site works". It says that "CBUK's progress on site had fallen well short of the rate of 400 tonnes per week that a reasonably skilled and competent steelwork contractor would have achieved."

Multiplex and its former steelwork contractor are suing each other for damages and breach of contract after Cleveland left the job 18 months ago. Multiplex is claiming £38m whereas Cleveland is seeking about half that amount.

The two have revised their original claims, first drawn up in November 2004, ahead of a four-week trial, which begins on 25 April.