Addleshaw Goddard

UK 200 2014 position: 22

Are collateral warranties construction contracts?

The High Court has decided that a collateral warranty provided by a building contractor to a tenant for a building was a ‘construction contract’ for the purpose of section 104 of the Housing Grants (Construction and Regeneration) Act 1996. The decision means that, as things stand, beneficiaries under collateral warranties may be able to bring claims against warrantors by way of adjudication. The decision has prompted debate and attracted a certain amount of criticism, with some commentators stating that the decision is ‘wrong’. The judgment was given by Akenhead J in Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltd [2013] EWHC 2665 (TCC). Parkwood was the tenant of a swimming and leisure facility under a 10-year lease granted by Orion Land & Leisure (Cardiff). Orion had engaged Laing O’Rourke to carry out and complete the design and construction of the swimming pool at the facility.

Laing O’Rourke executed a collateral warranty in favour of Parkwood as tenant. This collateral warranty was executed after the works had commenced, but before practical completion.

Following a dispute between Laing O’Rourke and Parkwood regarding various alleged defects in the works, Parkwood applied to the High Court for a declaration that a collateral warranty was a construction contract for the purposes of the 1996 act…

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