The Lawbuild Blog

Last week I received this email from the Society of Construction Law to its members:

Some of you may have seen the following entry in The Times on Tuesday 17th October.

It was thought that some members will have known Ian and perhaps also missed this notice.

"WALLACE

Ian Duncan passed away on 1st August 2006. A Thanksgiving Service will be held for his life and work on Monday 13th November 2006 at TempleChurch, Temple, London EC4 at 5.45 pm"

I sensed in this message a hint of embarrassment that it should have taken the Society two and a half months to bring to its members’ notice the passing of that giant of construction law which Ian Duncan Wallace QC, the learned editor of Hudson’s Building and Engineering Contracts, assuredly was.  Though (I believe) he retired some time ago, did members of his family not swiftly notify his former chambers of his death, and did his erstwhile colleagues not rush to impart the news to their construction law associates, so that one might have expected it to have reached the Society of Construction Law within days if not hours?  Apparently not.

Incidentally, although the notice in The Times appears to give the deceased's surname as Wallace and his forenames as Ian Duncan, the fact is that he was known to the construction law world as “Duncan Wallace”, and I always understood that Duncan was not his second forename but was the first part of his surname.

Be that as it may, though this humble practitioner was almost certainly unknown to Duncan Wallace he did have a decisive effect upon my career.

(I say "almost certainly" because I know of one instance in which his name was linked to mine by no less a legal luminary than Lord Millett, in the 2000 House of Lords case of Alfred McAlpine Construction Ltd v Panatown Ltd.  Referring to an article of mine published in the Construction Law Journal, his lordship said: "I agree with the Court of Appeal that the [collateral warranty] was primarily designed to cater for subsequent purchasers.  This is also the view expressed by Mr. Duncan Wallace Q.C. in "Third Party Damages: No Legal Black Hole?" (1999) 115 L.Q.R. 394 and is confirmed by an article by Mr.David Lewis in (1997) 13 Const. L.J. 305."  My pride in being cited as persuasive authority by Lord Millett, and also by his colleague Lord Goff of Chieveley, is only slightly dented by the fact that they were outvoted in the decision by three to two.)

Between 1974 and the mid-1980s I was Assistant Borough Solicitor with Islington Council.  My responsibilties included oversight of the Legal Department’s Contracts Section, whose staple diet was the JCT 63 form of building contract.  At that time I wasn’t all that familiar with building contracts, but there came into my hands a copy of an article written by Ian Duncan Wallace in one of the law journals.  The article was about JCT 63, which the author demonstrated, using numerous examples, to be heavily weighted against employers and in favour of contractors.

At this point I should mention Duncan Wallace’s writing style, which I became familiar with over the years.  Not for him a delicate raising of the eyebrows to suggest moderate surprise, nor even the rapier thrust of fierce debate.  Duncan Wallace’s method was the hammer blow, or rather a succession of hammer blows raining down on his luckless victim.  His prose was an equally blunt instrument: on a good day you could more or less understand what he was saying; on a bad day he could be thoroughly obscure.  But however impenetrable his words, there was never any mistaking the object and vigour of his attack.

JCT building contract forms and their forerunner, the RIBA form of contract, were created and developed first by the RIBA and later by the JCT or Joint Contracts Tribunal, and they have dominated the field of building (though not engineering) contracts since the early years of the twentieth century.  Unlike the Holy Roman Empire (mentioned elsewhere in this blog), the JCT was and is joint, and was and is to do with contracts.  But just as the Holy Roman Empire was no empire, so the Joint Contracts Tribunal was (and is) no tribunal.  What it was (and despite incorporation more or less remains today) is a committee composed of representatives of employers (property owners, developers and local authorities), construction companies and main contractors, tradesmen and subcontractors, and neutrals (architects, quantity surveyors and engineers).

During the 1960s and 1970s the JCT had come under the domination of the contractors’ side, and I have no doubt that this was due to weakness and inertia on the part of the employers’ side and their unwillingness to invest time and resources in fighting their corner.  As I later discovered when a member of a JCT working party, the contractors had the power to make things happen, and the subcontractors had the power to stop things happening.

Fast forward to 1979.  The JCT is planning a new edition of its flagship standard form of building contract, which will become known as JCT 80.  The Association of Metropolitan Authorities, one of the local authority representative bodies on the JCT, sends a circular to its member authorities inviting comments on and criticisms of JCT 63.

The circular lands on my desk, perhaps (I cannot now remember) with a request or instruction to respond to it.  At all events, I am ready and willing to respond.  I have long been in possession of, and have read and absorbed, a photocopy of Ian Duncan Wallace’s 1973 article (and how I wish I had taken a copy with me when I left the Council’s service in 1990).  I now compose a lengthy reply to the AMA’s circular, paraphrasing copiously from Duncan Wallace’s article, clause by clause, hammer blow by hammer blow.

My letter is well received at the AMA.  The then Borough Solicitor and I are invited to join the Contracts Panel which the AMA and GLC have set up to advise their representatives on the JCT.  I find myself serving on the Contracts Panel during most of the 1980s.  Local government is at last using its strength to improve the contractual position of employers, and I am part of that effort.

In 1982 I am appointed as the Association’s representative on the JCT’s Management Contracting Working Party, where I labour mightily to help in producing the JCT form of management contract.  I address the JCT, on the management contract, in a speech which asserts the rights of the employer and occasions no little controversy among the members of that august club.  Five years on, in 1987, the working party’s efforts are rewarded by the publication of the JCT management contract, a fast-track procurement method still being successfully used to this day.

And for me it all began with that piece by Ian Duncan Wallace.  I don’t know whether, if I had not read that article, which made such a great impression on me, I would have become as involved as I did in construction law, or whether I would have acquired the theoretical knowledge which later enabled me to obtain employment in private practice and to translate that knowledge into practice.

Obituaries and eulogies of Ian Duncan Wallace will rightly emphasise his great contributions as a barrister and a writer to the knowledge and practice of construction law.  To which I would add a mention of his iconoclasm, his championing of the just against the unjust, of the fair against the unfair.  For it was undoubtedly his righteous indignation at the injustice and unfairness of the JCT contracts in 1973 which set me on my decades-long career as a construction lawyer.

With all due modesty, and perhaps with a degree of self-delusion, I have gone through life trying to think clearly, to see things as they are, and occasionally to point out that the Emperor has no clothes.  (As you will see later, that is not the last imperial reference in this article.)

Although I must have always had the innate ability to do this, I often didn't succeed in the early part of my career.  A great friend of mine and a fine lawyer, Michael Fox, who was my boss and my mentor during the 1960s, trained me in the art of thinking clearly, largely by urging me not to "think in blocks".  After absorbing Michael's wisdom, I trained myself in the art of clear thinking, and I continue to do so.  (Sadly, Michael died in 1987, at the age of 50.)

There's a distinct downside to being a clear thinker, because you find that many around you prefer the woolly variety of reasoning.  And woolly thinking is not necessarily a drawback in life; if accompanied by emotional intelligence, charm and charisma, woolly can earn you as much money and respect as intelligence (more in fact).

These thoughts were prompted by an interesting discussion I had with a quantity surveyor (and a very clear-thinking one) about one of those buzzwords that cause confusion in the construction industry: confusion not to the woolly but to the clear-thinking.

The buzzword is "Guaranteed Maximum Price" or GMP, and it is often used in the context of a design and build contract.  The woolly know exactly what it means, while the clear-thinking can only guess.

There was an immediate meeting of minds between my QS friend and me, when we found that neither of us had been able to discover any difference between a GMP and the contract sum under a standard JCT design and build contract.  The contract sum under a design and build contract is a guaranteed maximum price for all practical purposes.

When someone talks about GMP, ask them if a client under a building contract with a GMP can require the contractor to (say) build an extra storey without an increase in the contract sum.  They will obviously have to admit that a significant variation must entitle the contractor to an increase in the contract sum, GMP or not.

Then try to find out what else might distinguish a GMP from an ordinary contract sum under a design and build contract.  Is it that the contractor bears the risk of  adverse weather conditions or other "neutral" delaying events?  When they gratefully seize on this, point out that such a transfer of risk wouldn't affect the contract sum; instead it would require the contractor to pay liquidated and ascertained damages for the resultant period of delay.

Is it that a GMP contract sum remains the same even if the contractor finds difficult ground conditions which cost him money to overcome?  Perhaps, but under a design and build contract adverse ground conditions are normally at the contractor's risk anyway.

So what is a GMP, precisely?

I discovered the apparent answer to this question in Cockram's Manual of Construction Precedents, which contains a "Price and Payment Schedule (Target Cost/Guaranteed Maximum Price) for use with JCT 2005 SBC/XQ".

The learned author of this work, in a footnote, says that the principle behind this form is to convert the contract sum into a prime cost arrangement, under which the contract sum has three elements: the amounts payable by the contractor to subcontractors and suppliers (the "work cost"); the contractor's site overheads ("prelims cost"); and a percentage mark-up on works cost and prime cost for the contractor's head office overheads and profit ("fee").  And the form also allows for provisional sums, i.e. elements which cannot be priced before the contract is awarded.

The Cockram form provides for a Target Cost, which is the estimated total of the works cost and the prelims cost and is stated in the contract.  The Target Cost can be adjusted for variations or provisional sums.  And then you have an incentive adjustment, so that the contract sum is reduced if the actual cost exceeds the Target Cost, or increased if the Target Cost exceeds the actual cost.  So the contractor (apparently) has a monetary incentive to keep his costs down.

It strikes me that a contractor who is incentivised to keep his costs down might be equally incentivised to cut corners.  But be that as it may, a contractor under an unamended lump sum contract is just as incentivised to keep his costs down because (since the contract sum is fixed) he can thereby increase his profits.

It was at this point in my researches - and possibly while pondering the absence of His Imperial Majesty's new clothes - that I was reminded of Voltaire's famous remark about the Holy Roman Empire: that it was neither holy, nor Roman, nor an empire.

Could one not likewise say that a Guaranteed Maximum Price (according to Cockram) is neither guaranteed, nor maximum, nor a price?