The Meaning Of 'Mutual Trust And Cooperation' In NEC

The NEC3 form had the (widely publicised) aim of encouraging cooperation, collaborative working and a fair allocation of risk between the parties to the contract. This was typified by clause 10.1, which appeared in each contract in the NEC3 suite and imposed an obligation on the parties to act in "a spirit of mutual trust and co-operation".

This clause created a great deal of debate amongst lawyers and those working under the contract which, until recently, had been left largely unresolved due to the lack of judicial comment on the clause. However, there have been two court judgments this year which have drawn on clause 10.1 in support of their respective decisions and in doing so have shed light on what it means in practice for parties to act "in a spirit of mutual trust and co-operation."

Costain Limited v Tarmac Holdings [2017] EWHC 319 TCC was a dispute about which form of tribunal should hear the underlying dispute between the parties, based on the contractual agreements between them. One contract incorporated the NEC3 Supply (Short) Conditions. These conditions provided, at clause 93, for adjudication and then arbitration, with strict time limits applying in each instance. However, another contract provided for adjudication, followed by litigation. Costain had attempted to adjudicate the dispute but the adjudication claim was rejected as it had been commenced beyond the contractual time limits to refer. Understandably, fearing that an arbitrator would reach the same conclusion and find an arbitration claim was time-barred, Costain launched court proceedings to resolve the dispute. However, Tarmac applied to the court to have the court proceedings stayed under s.9(1) of the Arbitration Act 1996, on the basis that the parties had entered into an arbitration agreement, and that the correct tribunal to hear the dispute was an arbitral tribunal, and not the court. Tarmac made this application, knowing that Costain would be time-barred from commencing an arbitration. Costain raised a number of counter-arguments, including that, as the contracts together provided for adjudication, arbitration and litigation, the "mutual trust" provision must mean that it was open to the parties to decide which tribunal was most appropriate for the dispute.

Coulson J endorsed (for the most part) the commentary in one of the leading textbooks on NEC (Keating on NEC3), in his reasoning in granting Tarmac's application. He held that for parties to act with...