May 7, 2023
Bio
A technology lawyer of some 40 years’ experience, Richard has
seen the IT industry from all sides - as an in-house lawyer with
two substantial UK based systems houses, a lawyer in City of London
practice and now as the head of his own practice offering legal
services to IT companies large and small as well as acting as
mediator and arbitrator in IT disputes.
Over the course of his career, Richard has been involved in some of
the largest IT litigation and transactions and now gets involved in
particular with Cloud contracting. When Richard set up his own
private practice, the Chambers Guide to the Legal Profession
described him as a “leader in his field” and as “good news on the
most complex of matters”. Richard is a well
known IT lawyer, having served two years as Chair of the Society
for Computers & Law and is currently serving as Chair of the Legal
Affairs Group at techUK. He has been a regular speaker at
conferences both in the UK and internationally and has been
providing training for over ten years: his annual lecture on
Contract Law Developments attracts hundreds of attendees every
year.
More recently, he has ventured into writing with the publication of
“Stephens on Contractual Indemnities” published by Law Brief
Publishing.
Social media/ website(s):
· LinkedIn: Richard Stephens on LinkedIn
· Richard’s Website: https://www.the-lors.co.uk
Books/References
· ‘Stephens on Contractual Indemnities’ by Richard Stephens – Law Brief Publishing
Interview Highlights
07:20 Don’t leave any slippery bananas
09:15 Kicking the can down the street
15:20 Peppercorn rent
16:55 Blue v Ashley case
21:31 DSDM
22:40 Agile contracts
32:20 Atos Origin v De Beers
37:15 Hogjaard v EON
Episode Transcript
Ula Ojiaku
Hello and welcome to the Agile Innovation Leaders podcast. I’m Ula Ojiaku. On this podcast I speak with world-class leaders and doers about themselves and a variety of topics spanning Agile, Lean Innovation, Business, Leadership and much more – with actionable takeaways for you the listener.
So, Richard, thank you so much for joining us on the Agile Innovation Leaders’ podcast.
Richard Stephens
Pleasure to be here.
Ula Ojiaku
Fantastic. Now, as I start with all my guests, we want to know who Richard Stephens is. So, can you tell us about yourself?
Richard Stephens
Well, it depends what you want to know Ula. I'm a solicitor, and it's not terribly exciting as professions go. So, I spend a lot of time reading long documents, commenting on them, marking them up, doing contracts. It’s probably everyone's worst nightmare when it comes to a profession really, I suppose, I don't know.
Ula Ojiaku
Well, I like the way you've just summarised your profession as reading long documents and making comments. I'm wondering if you ever had long debates over phrases and words in a document?
Richard Stephens
Yes, that's what the job consists of. And when you get into negotiating big contracts, and over my career, I've done, I’ve been involved in huge global outsourcing of huge cloud contracts, huge this, huge that, huge development implementation contracts. The job consists of arguing about words and trying to get it right for your client to be honest, you don't want to leave any slippery bananas in there which are going to trip them up later on.
Ula Ojiaku
So that phrase slippery bananas, we'll get back to it. But in the meantime, how did you end up in a career in law, because you said, the way you've described it, you said it's not the most exciting thing. So, there must have been something that still drew you to this, “non-exciting path”?
Richard Stephens
Well, I don't know, really, you just, I don't know, why do you do anything when you're young, and you decide to become, you know, typically, young little boys will say, well, I want to be a train driver or whatever. And you just, as you grow up, you just become gravitated to do something, and there are a lot of us in our school who said they wanted to be lawyers, others said they wanted to be consultants or some wanted to be accountants, but you have to understand that I worked in a time when IT didn't really exist. So, I don't think there was anybody who wanted to go into technology, for example, because I was, you know, at school in the 70s. So that was very much an arcane shut away job where people would wear white coats and go into air conditioned, filtered air rooms to feed mainframe monsters. But of course, that sort of thing, we knew nothing about.
I don't know, I don't know why I went into being a lawyer. I mean, I could have run away to the circus, I suppose, but I lacked the courage to do it, I suppose - too boring and unadventurous is typical lawyer you see.
Ula Ojiaku
Okay, okay. Well, that's an interesting, will I say, narrative of your career to date. So, do you have any thing you would have done differently, knowing what you now know?
Richard Stephens
I think I would have run away to the circus, Ula.
Ula Ojiaku
Okay, well, that's an interesting response, Richard. Well, thanks for sharing your career story to date.
And so, for someone who is, for example, listening, and that's considering a career in law that you know, no matter what stage in life they're at, what would be your advice?
Richard Stephens
Don't put your daughter on the stage, Mrs. Robinson, I think is probably what I would say.
You know, they're all different types of lawyers. And you can go through lawyers who do criminal work, for example, and I think some lawyers get a good deal of pleasure out of doing that sort of thing. I don't think the criminal lawyers make a huge amount of money out of it. Or a lot of people do very harrowing areas of law like family domestic law and they’re dealing with battered people of, frankly, these days, both sexes and horrible emotional scars and, you know, battles over, but I, you know, I went to, did some of my CPD and I went to a talk given by a probate mediator. Now you think that probate was a nice sedate area of the law, but that's the most, he said, is the most vicious, dispute ridden thing, because he said all families will have secrets and they will harbour them. And he said, what will happen is that, you know, Aunt Maud dies, and she has some valuable art collection or something like that, and then all these little, all these little disputes and resentments that you had against your elder brother for 30 years suddenly all bubble to the surface. And he said, it all comes out as a horrible, vicious fight. People are going into Aunt Maud’s house and stealing her property while she's dead. And they're arguing over who gets the fine china and who gets this and who gets that. He said, one of the horrible things is that you, know, when he does the settlement between the brothers or whoever it may be, and one of the clauses he's very often asked to put in is that such and such brother, should not ever again seek to contact him by phone, email, writing, or anything. So, you get that sort of thing as well. So, but you know why it is I would become a commercial lawyer, I say it's not that boring and actually, when you get in a deal, you get the excitement of trying to work the deal together, put it all together, bring it all together for the day of signature, I say there is a pressure, a dynamic, and every team has its own dynamic, and you're working towards getting something done. A bit like looking at your agile principles as well, I suppose. You know, you're trying to get it done. Although it's not done in incremental delivery, it's all done in one big drop at the end on the day of signature, of course.
Ula Ojiaku
Now, that's an interesting story about, you know, different kinds of law, probate and going kindly back to commercial law, which you practice, if I'm correct in the understanding.
Richard Stephens
That's right. I mean, I work for myself, when I say I do the big contracts, and I certainly do that, I work for SMEs as well, one of the things I also do is, I work as a mediator and an arbitrator in the IT sector. So, I'm there either helping people resolve disputes, or as an arbitrator, I'm actually resolving disputes, issuing binding awards. But I also provide some coaching in commercial law subjects as well. So, I do a variety of different things that helps keep my sanity.
Ula Ojiaku
Now, the phrase slippery bananas because you said, you know, when you were, you know, you when you're drafting contracts, you make sure you're avoiding those slippery bananas.
So, what's the perspective? Could you give us a glimpse into what goes on, you know, behind the scenes or in your mind, at the back of your mind when you're, you know, drafting, you're involved in drafting, and reviewing contracts on behalf of a client. What's the perspective you're doing this from?
Richard Stephens
The first line is, and the first principle I start from is that projects, as has been said before, projects don't go wrong for terms of conditions. And I have a friend in the industry, who says that, and he, like me, works for himself. And he says that when he's doing a big contract or for a major client, he's up against a really big city of London law firm. He's there, he'll be negotiating the front end, as we call it, the terms and conditions, the legal bit, that goes at the front, the core of the contract, he'll spend days talking about liabilities and warranties and indemnities.
He says, I'm talking with a partner of the law firm on that, he said, but when it comes to talking about the scope, the SLA, the charging schedule, all these things, he said, I end up negotiating with the trainee. He said, well, why does a contract go wrong? It won't be for anything to do with the indemnities or the liabilities or the warranties. They're there for after it has gone wrong. Why does it go wrong? It goes wrong for the things that are in the schedule, the operational things, that's the thing that you get wrong.
And the second principle I move on to is this, that in my lifetime, I think drafting has simply got worse and worse and worse, and contracts have got longer and longer and longer. And so, having talked about slippery banana skins, then we now get on to another metaphor. And we talk about kicking the can down the street, as lawyers find it harder and harder to come to agreement on important issues, you know, when will such and such a sum be paid? You know, what you have to do to get acceptance of milestone three such that payment can be released. And so, they then insert modern drafting, like the parties will reasonably agree the amount to be released, and it's called kicking the can down the street, it's not actually legally binding. And it's not actually, it's nothing, it's a thing, it gets rid of the immediate problem. And all you're saying is that, you know, the judge or the arbitrator later on can make the decision for you, or you hope they can, they may just throw it out and say, well, it's not really an agreement at all. So that, I think, those are the things that I have noticed in my career, and those I think are the banana skins, the slippery bananas I try to avoid for my client wherever possible.
Ula Ojiaku
Well, that's interesting, and how successful is it? Would you say that a good contract then, this is me stating my view and as a non-expert in this area, I would stand to be corrected by yourself.
So, would a good contract be drafted in a way that enforces both parties to act in the best interests of the other, does it always result in a win-win situation?
Richard Stephens
No, because I'm an English lawyer, I deal with the English common law. And the common law has typically, traditionally taken the line, and still, to a very large extent does, that each party looks after its own interests. I'm not here, when I represent a party, I'm not looking after the other party's interests at all. And my instructions, so to speak, or my implicit instructions, are to do the best deal for my clients, to do the worst deal for my opponent.
Now, of course, that means I'm not actually trying to hamper them or hinder them or throw banana skins under their feet, because of course, if I hamper them or hinder them in the contract it could come back on me or come back on my client, I should say later on, if it's a long project, or outsourcing where the parties have to cooperate, so you do have to get a sort of balance. But the common laws approach, the English common law’s approach is typically that each party is expected to enter into a contract, looking after its own interests, it's actually highly topical. I don't want to, you probably don’t want to get into the riveting and fascinating details of English contract law, and it's sort of moving in practice and theoretically to adopting a, what you might call a more continental civil law approach by trying to import concepts of good faith (Note: Whilst correct at time of recording, the English Court of Appeal has since limited the use of the term 'good faith'), reasonableness, which are concepts I have to say, which are still by and large alien to my system of law, to the system of law, the country in which we live.
Ula Ojiaku
Okay, wow. So, how then because, we've kind of dug into, you know, speaking about contracts for the, in the interest of the listener, who probably is just jumping in and wondering, okay, what are they talking about? What would you define a contract as?
Richard Stephens
It’s just a binding agreement for someone to do something for someone else and for the other to do something to the other party, which is normally payment, that's all it is. But contracts are all around us. And so, I mean, obviously, you know, it looks like you're sitting at home at the moment and you're not in an office. But if you, on the days or hopefully in the days to come when you go back into an office or you go to a physical meeting, and you might stop in a little shop somewhere and buy yourself a cup of coffee. Well, that's a contract. It's actually quite a complex contract as well, because it's a sale of goods and to some extent services, if they're making the coffee for you, in front of you. It imports therefore goods to the law to do with the sale of goods and services. It imports a whole lot of law to do with consumer law because you're a consumer buying a coffee, it’s got a lot of law in there to do with health and safety because you know, you want your coffee shop to be a safe place from which to buy your beverage. So, if you actually look at that, and you took all the law and regulations relating to that very simple, I'll have a cappuccino, please, that you could probably fill a shelf with just the law and the cases dealing sales of goods and services, health and safety, consumer law, and all the rest of it. But you don't need to worry about that Ula, because all you want is your cappuccino at the end of the day. So, that is a contract and the contracts are all around us.
Ula Ojiaku
And the seller I would dare say wants to be paid for the cup of cappuccino they made for me.
Richard Stephens
That's the consideration, of course, that's traditionally the consideration, which has been a key feature, of course of English contract law, and not necessarily other systems of contract law, the Scots, for example, don’t require consideration in their system of contract law. So, they don't require one party to do something for the other in exchange for something else, it can be a one-sided thing. But don’t ask me how they get by, but they do. But the idea of consideration if you drew up, just to show, just to sort of mark out as it were, a casual deal, which you didn't really think was a contract from a proper contract. But a consideration can be anything, it can be a promise to do anything. It can be a promise to go for a walk around the park afterwards. So, I mean, it can be a thing of commercial, it can be commercially valueous. And that's why we have the concept of the peppercorn rent, if you've heard of a peppercorn rent?
Ula Ojiaku
I'm not sure what that means. Could you explain please?
Richard Stephens
Its where you rent a property, in exchange for the promise to pay a peppercorn, where the peppercorn has no commercial value at all. But it's a promise to hand over a peppercorn and the promise, and it's that promise that makes the contract a binding thing. You don’t even have to hand it over. But if you promise to pay the peppercorn, that's the consideration. I'd like to see anyone suing someone else for a peppercorn but maybe the law reporters have got examples of that. I think not. But we need some levels of detail there.
Ula Ojiaku
Oh, well, you might find me weird but I do find the concept of contracts interesting. And the fact that someone is promising a peppercorn, is it to show that there has been some sort of fair exchange between the two parties?
Richard Stephens
It simply marks out a contract from what would otherwise be a gift. And it simply marks out what a contract is, so the law simply said, we want just these early signs, it only has to be basic, that the parties were actually serious about entering into a contract. And so, they required consideration, as a consideration can be commercially valueless. But it's just that the parties have thought to do something for each other. We won't even get into an intention to create legal relations, which is another requirement. And you still get some fantastic cases on that. And the case of Blue and Ashley recently, which is where Mr. Blue worked for Mike Ashley of Sports Direct and they were all drinking heavily in the pub. And the evidence was at the end of the evening, that they consumed about 14,15 pints of beer by the end of the evening, although Mr. Blue wasn't present at that stage, but the evidence was that Mike Ashley said that if you can get my share price over eight pounds, then I will give you, you know, a huge bonus of several million pounds, I forget exactly how much it was. Well, is that a contract? And it went to the High Court and the High Court had to, well, what do you think, is that a contract or not? It was said the share price did go a bit over eight pounds and Mr. Blue carried on working there trying to make sure that the share price was maximized. He did actually get an ex gratia bonus of 1 million pounds from Sports Direct. So, did that make a contract?
Ula Ojiaku
That's a question. Yes, because I audited a course in contract law being taught by a Harvard professor, so of course the focus is on the US laws and all that, so not necessarily here, but there's like intent of the person you know if it's a phrase that, or a statement that has been made jokingly, you know, how outrageous it is or whether the other party is being seen to get something in fair exchange, or whether it's a promise for a gift you know, so in those, in those situations, the three situations I've mentioned, it probably wouldn't hold water in a court of law if someone promised you a gift, because it's not contractually binding. But that’s…
Richard Stephens
You’re learning legal skills already, because you know what you’ve done, don't you, you’ve actually used the word probably, you haven't committed yourself.
Ula Ojiaku
No.
Richard Stephens
And you've actually used the word probably because you're not willing to bet the farm on one decision, or the other, one resulting in the other, you know the old joke don’t you about the client who goes into the solicitor's office and speaks to the receptionist and says, I want a meeting with the one-armed lawyer, please. The receptionist says we haven’t got a one-armed lawyer here, why do you want to meet a one-armed lawyer and he said, well I’m fed up of meeting lawyers who say, well on the one hand this, and on the one hand that, but you’ve done it immediately, you've used that little word probably and it just came tumbling out in your speech, and you probably didn't even notice it. But I can recognise that you have legal skills already.
Ula Ojiaku
Very kind of you Richard, that means a lot coming from you. But I do fancy myself going, you know, to go and do some sort of studies in law at some point in time. Wish me luck. But this brings us to the concept of agile. Have you had any experience with agile, and what does that mean to you, that term?
Richard Stephens
Agile, I first got used to agile, when I was doing a lot of big scale litigation, when I was working in the city as a partner in a law firm there, and I did a lot of very large IT disputes, and it introduced me to some very odd concepts. And we had to get used to reading up about methods.
And so, on some government projects, they mandated in those days, I don't know if they still do, but in those days, they were mandating the use of SSADM, and Prince overlaid on that as a management methodology. And we looked at this, and it was very odd, and I found it very strange, because what the SSADM and Prince would be doing would be mandating behaviours and actions that were flatly contradictory of the contract that had been written for the parties. And so, moving on from there, as agile became the big thing. We had, first of all, things like extreme programming, and that was getting everything going. And then other more formalised methods of Agile working, or Agile development came out, and I got involved with looking through DSDM as it then was, and thinking and the thing, the word that struck me was that everything will be fit for business purpose. And, of course, fit for purpose is very much a legal expression that's used in sales of goods contracts. And I thought, well, what does it mean to have an agile contract where you're promising the client that something is meant to be fit for business purpose, what is the business purpose? Did you know what it was before you started? What if it changes? I'm a lawyer, and I ask all of these questions. What if, what if, what if? And so I got very interested in writing DSDM, and I put together an industry committee of in-house lawyers working for tech companies and others, and we were just looking through Agile and we had a very senior person from the DSDM Consortium come and speak to us and train us on DSDM, and give us examples of how DSDM could deliver in a way that was better than the old waterfall method of delivery, especially when they were allied with the cumbersome approach of Prince 2 and so we got very interested in this, we tried thinking, well, what would an Agile contract, a contract for Agile development, actually look like? You know, how would it be different from what lawyers have been drafting up until that point and we had a go at it and we sort of let it sort of slip and slide and, you know, we all moved on to different things. And so, we never got there, but it's never gone away as a problem. And I think it is a problem. And I've given various ways I was a proponent of contracting for Agile development, Agile implementation at the time I was doing this, I find myself now cast in the role of villain. And Stewart, a chap called Stewart James has been taking the role of proponent of Agile contracts and I sort of, I the Devil's advocate, and I proposed a different way of working, and I just try and rubbish the view and so we had a go at each other there, we've had a go at each other at techUK if you know techUK, which is the industry body representing IT suppliers in the UK and we recently had another little go at each other in the BCS as a follow up to that talk we both attended over zoom.
But interestingly, they had a poll at the end, and it garnered a huge amount of attention. We had a poll at the end of that having speakers do you have any confidence in the ability to contract for Agile and over 70% said they either had little confidence or no confidence in being able to contract for Agile. So…
Ula Ojiaku
And why do you think there is that low confidence? What could be some of the root causes for this?
Richard Stephens
Oh, because I took them through the points I've made before, and I just pointed out that the Agile working doesn't fit in with English law, and we've already covered that up in a sense, because and I said to you that each party expects the English law, sorry, I should say English law expects each party to look after its own interests, and this idea of collaborative working, where you're working together to do the best you can with the resources available, and tried to come up with incremental deliveries, lots of short, sharp deliveries that give meaningful functionality to the customer, agreeing things on the fly, these things just don't sit very happily with the legal system that expects each party to look after its own interests. A legal system, which requires solid agreements, and which doesn't really regard reasonable endeavors, all these things and good faith doesn't regard these things as binding principles in law.
Ula Ojiaku
Right, okay. Now, but in a case where, on one hand, you know, the two parties are more involved in the contract setting, as in, all right, we’ll act in good faith, but at the same time, we would have our lawyers, our legal people, you know, put together an iron clad contract. Do you think that hypothetical situation is possible, in your experience?
Richard Stephens
No, it's not, it’s not possible at all, and that's the real problem. And I can take you through some of the cases that show this, if you like, referring to one of them, just got out the slide deck now, might be very interesting to you. It goes back to your first question, what's the point of a contract? Why have it?
Because at the last outing I had, we had Andrew Craddock from the Agile Foundation, and he was proposing, you know, the benefits and the efficacy of agile, agile development, agile implementation. But of course, he was saying it's wonderful it, you know, beats waterfall hands down, it delivers all these great things and I said well, if it's that good, you probably don't need a contract anyway then, do you because it's never going to go into a dispute, then you don't need a contract. On the other hand, if you're a responsible business, you should be asking yourself as the directors of a responsible business, well what if the project doesn't go very well, what if it doesn't? What if it fails? What if I don't get what I expect at the end of the day, and on that point, I propose two reasons. And there are two reasons and both two sides of the same coin, for why an agile contract simply doesn't work. And the first reason is a legal reason. The other reason is a commercial reason. The second reason is what I call the FD principle, or the Financial Director principle. And the legal reason, to put it shortly is that the law, as I say, doesn't recognise a contract for good faith. And in any case, even if it did, you'd just be kicking the can down the street, because if you had a contract to do what you did in good faith, if it all went horribly wrong, which it inevitably will, how would you know whether someone had performed in good faith anyway? You just end up in another dispute, working out what the dispute was all about.
So, and the second reason as I say is the FD principle, because while I was doing this DSDM thing, and I was chatting to a Financial Director of a good sized, medium sized company that was moving very much into IT and technology, it was mostly in the manufacturing sector, but very much absorbing IT, or what tech could do for it. And he said, look, I have the final sign off for any major expenditures, and I get a contract for 5 million pounds. He said, I want to know that at the end of the day, I've got something, when it's over that I that I can touch, I can feel with my fingers, hold with my hands. And I want to know that that's worth 5 million pounds, at least 5 million pounds to my business.
And he said if I just get a contract that's agile, but people are simply saying well we'll work in good faith with each other, and we don't know what we'll deliver, but it'll be small, little bits incrementally and your you may or may not, to use the language of DSDM in the old days, you know, they have this concept of the minimum usable subset. And he said, well, is that worth 5 million pounds, because if that's only 60, 70%, of the full 5 million pounds, then I've been robbed, haven’t I, and I've lost 30% of what I contracted for. And that's what I call therefore, the FD principle. And I remember when we were trying to draw up an agile contract, we were pulling teeth, trying to satisfy that FD, or his ilk that the contract would have some sort of effects, something that could be used to beat the supplier over the head. But I don't think we succeeded. And the problem is that every agile contract since, just drifts into this language, as you've said already, of good faith and reasonable endeavours and reasonable agreements on this. And these are all things that English law simply doesn't recognise.
Ula Ojiaku:
Now, that's an interesting story. And you've just brought to light another perspective, that's not usually, explicitly considered in drafting contracts, which is that of the finances, the people who hold the purse strings, the people who sign off, you know, the projects or the programs of work. Sometimes, you know, people have the notion that, you know, agile is the be all and end all, it's not, there is still a place for waterfall. But waterfall is good for where you have straightforward issues, you have a problem, you know the solution, and there's a straight line from A to B, there's no need to go agile. But if it's a complex, adaptive problem where it's complex, and as things change, you know, the environmental change the nature of the problem, you know, keeps changing, you have to, well I say, adopt that agile approach to that now that's why the concept of a minimum viable product comes into play.
And part of it is that, you know, you identify the minimum viable product, you state your assumptions, and then you, you know, create those, experiments based on the hypothesis of the assumptions you've made. And if you're validating, if your assumptions are validated, then you can go forward with, you know, the initiative. But if, at the very, you know, early instance, you're having negative results, you know, that negates your assumptions, then there's no need to go forward.
Although from the Financial Director’s perspective, you know, you say, okay, I've wasted it, I've been getting millions worth of money, but the learning has shown that it's a dead end we're moving towards, and it's better that we stop at a million than spending 10 million or even some other humongous amount on something that's probably not going to give any return.
Richard Stephens:
I think it's time to test your legal skills, again then.
Ula Ojiaku:
I'm not a lawyer. I'm not a legal professional.
Richard Stephens:
I think you are a very modest lady indeed. I think you’re probably going to go on and say you studied at the New York bar as well.
But let me test your legal skills again, okay? And De Beers is the big diamond sorting diamond company in the world, as you may have heard of them, and Atos Origin are another company, you will doubtless have heard of, and they came to blows back in 2010, because they put out of ITT, for their diamond sorting and aggregating process, which, of course, is dealing with very high value things, namely diamonds. And so, it's all got to be it's a very difficult system to replicate and had all sorts of security and things built into it. So at first, they started doing the requirements analysis. And they did a mini survey, and they got their own view of what it was, and what was involved in doing this complex system.
But they started work and found it was a hell of a lot more complex than they thought, and because De Beers and their operatives started asking for more and more and more, it got much more expensive. So, the original price was 2.9 million and Atos said well actually, it’s going to cost nearly 5 million more than that to deliver everything you actually want. But it's interesting looking at what they said because, their Atos internal report said that this project was originally intended to be developed agile style, the team was organised into BAs who could refine the requirements and a pool of devs would be organised into teams to build elements of the solution incrementally, with a project beyond the requirements definition, set up Scrum star, this must be music to your ears, I would have thought Ula, all supported by an architect and a few key designer devs all very DSDM and can work fine in the right context. And of course, with the right customer.
But what happened was, Atos said we need this extra 5 million odd to complete the project. De Beers said, I would have thought if anyone had, you know, 5 million pounds sitting around, it was like De Beers with all their diamonds, just sell a couple of those, I would have thought it was fine but they say get off site. And it all fell apart and they ended up in court. But which way did it go?
So, you've got Atos, who's done the requirements analysis, they've done their best, they've tried to work out what was involved, they underbid. You've got De Beers that asked for more and more and more during the requirements analysis. Who wins at the end of the day? This is the time to put that Harvard training to use and no use of the word probably who won, someone won and someone lost.
Ula Ojiaku:
Before I answer your question, I’m just saying that I'm taking it in good faith you're not being sarcastic about my auditing the Harvard course online, but my answer to your question is going to be it depends, because all I know right now are the details you've given me and I know that there’s usually more to a situation than meets the eye. So, it depends, again, I can see Atos’s point of view, in the sense that if they did some sort of initial discovery work, and had given a quote, based on De Beers’ requirements, now, and over time, you know, De Beers is asking for more, definitely that's called, you know, scope creep, and there might be some things, it inevitably would result in more costs. Now, on De Beers’ hand, if they had been promised a pipe dream that agile is equal to cheaper, or fixed costs. So, they had also been working on a misinformed basis in the fact that if they thought, okay, yeah, agile solves everything, and it's going to be cheaper and faster. That's not true.
Richard Stephens:
So, we've got so far on the one hand this, and on the other hand that, so I'm looking for the one-armed lawyer now. I can see both your hands, Ula. You’ve got to decide, who wins?
Ula Ojiaku:
I think I wouldn’t qualify for a one-armed lawyer. And the key thing is to know that I think it's the beginning of wisdom is to know that there is a limit to what I know. And in this case, it is definitely a good example. I don't know all the details behind it to make a firm judgment in favour or against one or the other.
Richard Stephens:
I think you know enough actually, come to have a go. Shall I tell you what the judge said?
Ula Ojiaku:
I'd like to know what the judge said please.
Richard Stephens:
In my judgment, he said, Atos went into this contract with its eyes at least half open, in the sense that it knew or should have known that it had not acquired a good grasp of the detail of De Beers diamond sorting and aggregating process. So, Atos lost is the important thing on that one. And because the general work, well, let me test your legal skills again, in case of Hojgaard and EON, okay. This is all about constructing offshore wind turbines. Okay. You get a lot of those around, we don’t see them because they're offshore, but you've seen wind turbines on land, and the employer, so the customer, in construction contracts they’re known as the employer, mandated the use of an international standard called J101 for the construction of these wind turbines, okay. So Hojgaard had to use J101, or the methodologies for constructing wind turbines, as set out in that contract, in that international standard, I should say. Okay, so it started using J101. And what nobody knew was that J101, was fundamentally flawed. It had a design defect in it, and it underestimated the strength of the foundations needed to be built. So, as soon as they built these wind turbines, they started collapsing, and it cost 26 million pounds to put them right, 26 million euros, I think in those days. Okay. So, the question was, who was responsible? Well, Hojgaard said, well, you told me to use J101, so we only did what you said. And EON said, well, it doesn’t matter, you're the provider, your supply, you should jolly well know, and you take the responsibility, so straightforwardly question. So no on the one hand..
Ula Ojiaku:
…on the other hand, straightforwardly answer. Again, based on the details you've set out I would say that EON is liable.
Richard Stephens:
EON is the employer. So, they've made the use of this standard.
Ula Ojiaku:
Yeah. So, my view is that EON is liable because they mandated the use of the standard. Now, that would be my view. Yeah, if that's the contract, and you know, you told someone build this for me and use this standard, because that's what we want. Now, as a responsible supplier, though, I would want to go to offer advice on what I think are the pros and cons of their decision. But finally, the client’s decisions is theirs, so EON.
Richard Stephens:
So EON as the employer takes a rap, they have to cough up 26 million euros, went all the way to the Supreme Court, and they said it was the builders’ responsibility. So even where the user has mandated that particular method, then it's the developer. The courts, they said are generally inclined to give full effect to the requirement that the item, as produced, complies with the prescribed criteria.
Even if, even if the customer or employer has specified or approved the design, it's the contractor who can be expected to take the risk if he agreed to work to a design which would render the item incapable of meeting the criteria to which he has agreed. And it's not an inflexible rule of law, it's an approach of the courts. And this is one of the things that's highly relevant to agile because the parties are working cooperatively. And it may well be the customer that's mandating the use of, to get this result, or to use this method to get it and both parties are working in good faith. But when it all goes horribly wrong, which it inevitably will, the court’s approach is generally, it's not mandated, you could put something different in your contract, the approach of the court is going to be well, it's the developer, it's the provider, it's the supplier, who's going to take the rap at the end of the day.
And this is when you come back to the FD problem, because as soon as you then put something in your contract saying, nothing to do with us gov, it's all your responsibility, and we're not, you know, we'll just, we're just, you know, humble operatives doing as we're told, the FD’s not going to sign off. He's gonna say, well, I'm paying my 5 million pounds, I want you to take some responsibility, I want you to take the responsibility at the end of the day. And as I say, these are the, these the interesting reasons why, in fact, trying to contract for agile is not so easy as you might think.
Ula Ojiaku:
So, what would be your recommendation then to, for example, leaders of organisations who want to continue with, you know, agile delivery, and agile ways of delivery and ways of working and wish to engage with their vendors. Because, on one hand, there are benefits to working in this manner, in the sense that you're working together, you're learning and then you are adapting your plan based on the new learnings. But on the other hand, it seems like there is a way to go in bringing up you know, bringing along legal colleagues and colleagues in finance, alongside this journey to have the same perspective, what would be your advice?
Richard Stephens:
One of the things is I fully accept all the good things that agile has done and all the good things it promises to do, but what I'm saying is contracting for that is very difficult, and if you end up with a contract that simply proceeds in talking about, you know, good faith, and many lawyers, many modern lawyers these days just lapse into this language of you know, we'll talk in good faith and reasonably agree this and reasonably agree that, and it doesn't really work, you end up with a contract that's just kicked the can down the street numerous times.
And so, you need to come up with something that does actually have some teeth, and with agile, that's going to be difficult. I mean, there are ways of drafting around it, but it's, in some ways they're quite cumbersome. So, for example, you can have agreements to agree which are meaningless in English law, English law simply doesn’t recognise an agreement to agree and you can add as many good faiths and reasonables around it as you like, but what you can do is you can then say, well, one of the drafting techniques you can use is to say, well, if we don't agree after a period of one week, three months, six months, whatever it is, that a third party, adjudicator will make the decision or the arbitrator or whatever it may be, will make the decision effectively for us, and we'll provide some criteria for that person to make a decision for us.
Now in the construction industry, they introduced what's known as an adjudication scheme, which is a fix first and fight later, effectively. So, it’s simply that if the parties get a dispute rather than just simply falling out with each other and having a huge arbitration, leaving the building unfinished, you get an adjudicator and it's now compulsory by law for domestic construction contracts, and the adjudicator comes in and just makes a quick decision, and it doesn’t really matter that it’s not ultimately binding, for the present purposes it is, I think it's been called temporary finality.
And one of the things that the Society for Computers and Law has done is introduce a similar adjudication scheme for IT projects. Now, that's maybe one way to go, but of course there are two risks immediately with that, which you'd have to advise anybody on and that is, obviously it introduces a certain amount of delay and cost because the party is going to get into lots of little micro-spats trying to get up to come if they have lots of little adjudications in a major project.
And the other problem, of course, is this problem of temporary finality. Once the adjudicator has issued his decision, then you've got to comply with it, even if you think it's wrong, or even if you think it's monstrously unfair, or very expensive for you. It's temporarily final, and then you'd have to wait till the very end of the project before you could then relitigate the matter.
So, I mean, there are ways of getting around it. But as I say they're not necessarily risk free or problem free. Let's say one of the problems I find, and for the purposes of my talks on agile, taking devil's advocate, one of the things you can do is do a word search of any English contract, English law contract, and just count up the number of reasonables or reasonablys in good faith. Actually one agile contract I looked at, which is available from an online supplier, provider of legal services, over 36 pages, it had a staggering total of 29 reasonables,s 26 reasonablys and 4 good faiths. I mean, that is a very high batting average for using these rather horrible terms that in many cases don't really mean anything. So, you have been warned.
Ula Ojiaku:
Well, thank you, Richard, for that. I would take it then that these are your guidelines for anyone who is considering drafting agile contracts, be careful about how you go about it. It's not risk free, and there are pitfalls to be aware of, and I guess it also depends on the jurisdiction, you know, the legal jurisdiction where the contract would be.
Richard Stephens:
You're never going to get away from that, because as soon as you start using words like a reasonable endeavours, good faith, even if the legal system you're working under actually recognises them, you then have a dispute trying to work out what on earth it means in practice, and you want a really good example of that, what’s a contract under Belgian law that we all know about at the moment, and everyone's been talking about it, have a guess? It's the AstraZeneca contract with the EU Commission, and what’s a horrible phrase it uses, best reasonable efforts, a monstrosity. So not just reasonable efforts, but best reasonable efforts. Belgian law recognises that as a concept and English law does as well. But what on earth does it mean? What does it mean in practice? What behaviour does it mandate? What result does it mandate? And so, the parties then just lumber into the dispute, a dispute a dispute about the dispute because nobody really knows what they're supposed to be doing anyway. So, you can do it, but you have been warned.
Ula Ojiaku:
Now, to wrap up, based on our conversation, are there any books that you could, that you would recommend to the listeners, if they want to learn more about contracting, agile?
Richard Stephens:
That’s the book, Ula, Stephens on Contractual Indemnities. I mean, what a right riveting read. Thrilling from beginning to end, and it will tell you everything you've ever wanted to know.
Ula Ojiaku:
Fantastic, thanks for sharing. We will put the link to your book in the show notes alongside with everything else about this episode.
Richard Stephens:
It’s for lawyers only. Otherwise, don't open its covers, you will be horrified. Well, actually, I mean, as a lawyer, as you proved yourself to be, maybe you would find it interesting.
Ula Ojiaku:
Now, do you have any, anything you'd like to ask of the audience, or let them know about your practice?
Richard Stephens:
Yeah, I mean, as I say, I do three things which may be of interest to your audience out there. One is, I'm a commercial solicitor, who is very well experienced in these areas in terms of putting together contracts for developments implementations, agile, or otherwise.
And I provide training not only to lawyers, I do this one-day course introducing people to the principles of contract law, insofar as it would affect professionals working in the IT industry. And I've had people come on that, who were Project Managers all the way up through to Board Directors of SMEs or even quite large companies. I had one major American international company send its commercial management team on that course, for example. And as I say, the other thing I do is I work as a mediator if you're in a dispute, and you want someone to try and facilitate a resolution to that dispute, then again, I can help you with that. I could even, if he's got an arbitration clause, you want to have an arbitrator appointed someone who understands a little bit about these things and can come to a legal decision on your dispute, I can do that too.
Ula Ojiaku:
Fantastic. Thanks for sharing those. And with respect to for example, your trainings and you know, the other services you offer, how can the audience reach you?
Richard Stephens:
As usual these days, they can Google for me, and if you look up for Richard Stephens there are various academics and I think, artists who are masquerading as Richard Stephens, just put Richard Stephens Solicitor, you will find me and you will find my website, and you can find me or you can search for me on LinkedIn, all sorts of possibilities. So that's very easily done.
Ula Ojiaku:
Okay. Well, I have to say, from my experience, but maybe I'm not good at googling, but the last time I tried finding you on LinkedIn, even though I'd put solicitor against your name, I still had a lot of what's it called, results for Richard Stephens solicitor. So, what I'm going to do to make it easier for the audience is I'm going to put a direct link to your LinkedIn profile in the show notes, if that's okay with.
Richard Stephens:
Yes, you can do that, link into, connect to my LinkedIn profile, or link to my website. It's very easy, no objection to that.
Ula Ojiaku:
Okay. Fantastic. So, any final words for the audience before we close this out? It's been a great conversation so far.
Richard Stephens:
It's been it's been nice, I mean it's funny how this is a problem, which I first got involved in 25, 30 years ago. And it rumbles along as an issue for IT lawyers. It's never lost its interest. But in 25 or 30 years, equally, I haven't seen a particularly good resolution to the problem, either.
And so, you've got the industry doing one thing, and the lawyers trying to play, not so much catch up, but trying to work out still after 25, 30 years of lawyers thinking about it, what an agile contract or a contract for an agile project would look like such that it was both legally effective and would satisfy that avaricious Financial Director. But it hasn't been resolved yet.
Ula Ojiaku:
And the question is, will it? You don't have to answer, well…
Richard Stephens:
There is a sort of, there are all sorts of resolutions out there. As I mentioned, the adjudication one, but that, then is the sort of thing you don't want in an agile project because it's, whilst it’s legally effective, the idea of Agile as you're working cooperatively together, and then having little micro adjudications where you're at war with each other, trying to get the best out of the adjudicator in terms of decision.
It then actually tends to drive the parties further away, which is, goes against what you did an agile project for in the first place. So, I mean, you can do but, you know, I just don't know how it would work in practice.
Ula Ojiaku:
It's been great speaking with you, Richard, thank you for sharing your wealth of knowledge and experience with the audience and myself.
Richard Stephens:
Pleasure.
Ula Ojiaku:
That’s all we have for now. Thanks for listening. If you liked this show, do subscribe at www.agileinnovationleaders.com or your favourite podcast provider. Also share with friends and do leave a review on iTunes. This would help others find this show. I’d also love to hear from you, so please drop me an email at ula@agileinnovationleaders.com Take care and God bless!