The Chinese year of the snake has just started. Hello to the year of the snake, goodbye to the year of the dragon. This got us thinking: perhaps it’s time to slay a construction law dragon.
There’s a common saying among lawyers and commentators that NEC contracts are rarely before the courts. We’re not sure that’s really true any more. Here’s a summary of our case:
The TCC has dealt with or referred to the NEC in 2012 and 2013
Here are four cases that have dealt with NEC contracts between February 2012 and February 2013 (others have referred to NEC contracts in passing):
- SGL Carbon Fibres Ltd v RBG Ltd, where the Outer House of the Court of Session agreed with the arbitrator that the employer bore the burden of proof when seeking to recover alleged overpayments to the contractor.
- WSP Cel Ltd v Dalkia Utilities Services Plc, where Ramsey J interpreted the dispute resolution provisions in clause W1 of the NEC Professional Services Contract (PSC).
- Arcadis UK Ltd v May and Baker Ltd (t/a Sanofi), where Akenhead J enforced an adjudicator’s decision following a dispute under an NEC3 Engineering and Construction Contract (ECC).
- Atkins Ltd v Secretary of State for Transport, where Akenhead J considered an amended NEC ECC used by the Highways Agency.
The courts have referred to good faith clauses in 2012 and 2013
One of the criticisms levelled in the past at the NEC suite was that its “act in a spirit of mutual trust and co-operation” obligation would be difficult to enforce (NEC3 clause 10.1). While it might be too much to label recent cases as a new trend, it seems to us (and our contributors) that the courts are increasingly happy to deal with a “good faith” clause in practice. See, for example:
- Blog posts, Contracting to use good faith and £84,540 for a chocolate mousse – that’s a bit rich…, referring to Compass Group UK and Ireland Ltd (trading as Medirest) v Mid Essex Hospital Services NHS Trust.
- PLC’s podcast on developments in this area.
Adjudicators are used to dealing with the NEC
While we admit that our evidence is mostly anecdotal, we know that adjudicators deal with NEC contracts. Adjudicators tell us they are dealing with NEC disputes and, if a dispute arises, adjudication is what the NEC suite demands.
The courts refer to the detail of the current JCT contracts less often than you might think
Although JCT contracts were in the background of many disputes in the public domain, there are only a few recent decisions (since February 2012) that arguably add to the TCC’s interpretation of JCT contracts. For example:
- WW Gear Construction Ltd v McGee Group Ltd, where the TCC declined to give a declaration in regarding a JCT Trade Contract’s payment terms.
- Walter Lilly & Company Ltd v Giles Patrick Cyril Mackay and another, which looked at extensions of time, global claims and loss and expense.
- Aviva Insurance Ltd v Hackney Empire Ltd, where the Court of Appeal considered the effect of a side agreement on a JCT form of bond.
While JCT contracts are in very widespread use in practice, and while not all JCT clauses change each time their contracts evolve into a new edition, none of these cases referred to the JCT’s latest editions.
Perhaps if you want to say that the NEC contracts are rarely before the courts, it’s necessary to concede that the JCT contracts are rarely before the courts too.
However, the advantage the JCT has, where its clauses have not had to change over time, is that there are older authorities, pre-dating even the first edition of the NEC suite.
Why might this matter?
It’s a double-edged sword (or should that be a snake in the grass?):
- For those who would like to see the NEC used more, perhaps they must accept that it can and does lead to disputes.
- For those who argue that the NEC may be untested, there is increasing judicial authority to support the view that the TCC is capable of robustly interpreting and testing the NEC as the need arises, just as they must test new JCT clauses from time-to-time.
We’d argue that the NEC comes before the courts often enough for parties to reassess the “untested” label.