Walter Lilly vs Mackay: A curate’s egg

A maxim often stated is that hard cases make bad law. The problem is that doing justice in a difficult case can lead to an outcome that looks extreme or is capable of being misapplied in more moderate cases. Oliver Wendell Holmes, a US Supreme Court judge until his 90th year, remarked: “Great cases, like hard cases, make bad law. For great cases are called great … because of some accident of immediate overwhelming interest which appeals to the feelings and distorts the judgment”.

Now that the dust has settled somewhat, I wonder if the decision in Walter Lilly vs Mackay is just such a hard or great case. Certainly it achieved “immediate overwhelming interest”.

I suspect I am not the only adviser in the construction industry who has started to see the Lilly case quoted as authority for a wide array of propositions. It is danger of becoming a “rogue’s charter” for all sorts of arguments using the precedent of the judgment in a way that is not appropriate or intended. 
I am not for a moment suggesting that the findings are not significant. They are. But they turn on what are very unusual facts and circumstances. As such, great care is needed in applying this judgment to other cases. Even greater care is needed when one considers that the judgment runs to some 659 paragraphs. The potential for pulling an observation out of its context and setting is massive.

Why is Walter Lilly a hard case? Well, first it concerns a top-end residential development. Most reported construction law is founded on commercial cases between corporate bodies. As a result of the type of property involved, the case was peculiarly personal and emotive. It then became more so as a result of the parties involved, particularly Mr Mackay, who was described as having “lost nearly all sense of objectivity”. His statements have been widely quoted and are colourful. Observations such as the “nearest to a Ferrari you’ll ever get is a toy one” attract headlines but he was also found to display “behaviour [which] … was not simply coarse … [but] was combative, bullying and aggressive …”. He developed a strategy to “pressurise the design team”. 

Mr Mackay’s statements have been widely quoted. Observations such as the ‘nearest to a Ferrari you’ll ever get is a toy one’ attract headlines

The project was unusual from the off. It started as a project to develop three houses. It was running tight against a planning requirement to start the development by June 2004. The houses were to be very different inside. The design was largely uncompleted. 

At tender in March 2004, much of the work was provisional sums. After work commenced, the contract for three houses was effectively split into three separate contracts but that did not prevent a certain level of dispute between the different employers later in the project. It also meant that the contractor’s record keeping was based on one project not three.

Later, work was omitted from the scope by the client in an attempt to expose the contractor to the risk of future delay claims. Further, consultants, project managers and advisers came and went. The impact of one consultant was described as “certainly to raise the temperature”. Questions were raised as to whether the architect was really still the architect and another architect was appointed. There was alleged to be “aggressive interference in the administration of the contract”.

Adjudications commenced – nothing unusual in that, but one went off to the court, the decision was overturned and when later the main action came to court that previous decision was not challenged.

In the context of all of this, some care needs to be exercised when taking the final elements of the judgment and relying on them. For instance, some commentators are asserting that the case now allows global claims in a way that was not permitted prior to the case. This alone needs to be viewed in the context of the amount of provisional sums and the fact that the work originally started as one contract for three houses and was then split into individual contracts after the works commenced.

The problem is that in a lengthy and detailed judgment written against the backdrop of all the unusual circumstances of the case, there is a real risk of finding some words that seem to support an argument you might want to make. Whether the case truly does is another matter. A hard case right on its own facts can still be the source of bad arguments.

Perhaps this is a case that we will all live to regret, not just Mr Mackay. It will cause arguments and claims to be advanced that should not have been and will cost parties large costs based on overly optimistic application of the judgment. It is a long judgment about a difficult case on peculiar facts. It does not make the judgment bad merely because it can be badly misapplied. If not read fully it appears to be a curate’s egg with a little in it for everyone. Apply with caution.

James Bessey is a partner in the construction, infrastructure and projects department at DWF