Parkwood Leisure Ltd v Laing O'Rourke Wales and West Ltd [2013] EWHC 2665 (TCC)

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

summary

Depending upon its wording and the relevant contractual background, a collateral warranty can be a “construction contract” for the purposes of the Housing Grants, Construction and Regeneration Act 1996 (“HGCRA”) and be subject to the mandatory adjudication regime.

Technology and Construction Court, Mr Justice Akenhead

Background

In April 2006, Orion Land & Leisure (Cardiff) Ltd (“Orion”) engaged Laing O’Rourke Wales & West Ltd (“LOR”) under a standard JCT design and build contract to design and construct a swimming and leisure facility in Cardiff (the “Contract” and the “Works”). The Works were due to be completed by 21 December 2007.

In January 2008 Orion sub-let the facility to Parkwood Leisure Ltd (“Parkwood”) to provide facility management services and operate the facility. On 6 December 2007 and before the Works were completed, LOR executed a collateral warranty in favour of Parkwood which included the following terms:

“1. [LOR] warrants, acknowledges and undertakes that:-

1) it has carried out and shall carry out and complete the Works in accordance with the Contract;

2) subject to this Deed, it owes a duty of care to [Parkwood] in the carrying out of its duties and responsibilities in respect of the Works;

3) in the design of Works or any part of the Works, in so far as [LOR] is responsible for such design under the Contract, it has exercised and will continue to exercise all reasonable skill and care to be expected of an architect or, as the case may be, other appropriate professional designer…”

The Works were completed in 2008 and the facility was opened to the public. Defects arose andin July 2013 Parkwood issued Part 8 proceedings seeking a declaration that the warranty was a construction contract for the purposes of Part II of the HGCRA “on the basis that it contains [LOR’s] express agreement to carry out construction work”.

Issues

The Court was asked to address whether the warranty was a construction contract for the purposes of part II of the HGCRA.

Decision

The Court held that:

  • LOR did not merely warrant or guarantee that the Works had been carried out in accordance with the Contract. Pursuant to Clause 1(1) it undertook that it would actually carry out and complete the Works in accordance with the Contract.
  • The fact that the warranty was retrospective in effect was not a bar to it being a construction contract. It was common for construction contracts to be finalised after the works had started.
  • On a proper interpretation of the wording of the warranty and in the light of the factual background, the warranty was a construction contract “for the carrying out of construction operations” within the meaning of section 104(1) of the HGCRA.
  • It did not follow from the above that all collateral warranties given in connection with all construction developments will be construction contracts under the HGCRA. It is necessary primarily to determine in the light of the wording and of the relevant factual background each such warranty to see whether, properly construed, it is such a construction contract for the carrying out of construction operations. A very strong pointer to that end will be whether or not the relevant contractor is undertaking to the beneficiary of the warranty to carry out such operations. A pointer against may be that all the works are completed and that the contractor is simply warranting a past state of affairs as reaching a certain level, quality or standard.

This summary was provided by CMS Cameron McKenna LLP.

For more information visit http://www.cms-cmck.com/Construction/Construction-Disputes

 

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