Parties may now adjudicate claims arising under collateral warranties
The High Court has decided that a collateral warranty provided by a building contractor to a tenant for a building was an ‘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 met with a lot of commentary within the legal community including a certain amount of criticism from those who consider that the decision is ‘wrong’.
The judgment was given by Akenhead J in Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltd  EWHC 2665 (TCC). In brief, the relevant facts of the case are as follows. Parkwood was the tenant of a swimming and leisure facility under a 10-year lease granted by a company called Orion Land & Leisure (Cardiff), which was the employer under a JCT design and build contract. Under that contract, Orion engaged Laing O’Rourke to complete the design and carry out and complete the construction of a swimming pool.
Laing O’Rourke as contractor, and is often common in these situations, executed a collateral warranty in favour of Parkwood as tenant. This collateral warranty was executed after the works had commenced but before practical completion…
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