Parkwood Leisure Ltd v Laing O'Rourke Wales and West Ltd

The collateral warranty given by the contractor to the facilities manager as sub-tenant of the swimming pool and leisure facility was a contract for the carrying out of construction operations and was therefore a construction contract for the purposes of the Construction Act
 
 

PARKWOOD LEISURE LTD v LAING O’ROURKE WALES AND WEST LTD
Technology and Construction Court
Akenhead J
29th August 2013

 

 
The owner of the swimming pool and leisure facility let it to the employer under a lease. The employer sub-let the facility to the facilities manager and engaged the contractor to complete the design for the facility and carry out and complete the construction. The contractor entered into a collateral warranty in favour of the facilities manager as sub-tenant before practical completion of the works had been achieved. Defects appeared in the works. The facilities manager applied to the court that the warranty constituted a construction contract for the purposes of the Construction Act, section 104(1) of which provides that a contract for the carrying out of construction operations is a “construction contract”.
 
Akenhead J in holding that the warranty was a construction contract noted that not all collateral warranties given in connection with all construction developments will be construction contracts under the Construction Act. One needs 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 contractor is undertaking to the beneficiary of the warranty to carry out such operations.
 
The recital of the warranty states that the underlying contract was "for the design, carrying out and completion of the construction of a pool development". That wording is replicated in clause 1 of the warranty which relates expressly to carrying out and completing the works. Clause 1(1) is not merely warranting or guaranteeing a past state of affairs and is providing an undertaking that the contractor will actually carry out and complete the works. The warranty, being contractual in effect, will give rise to the ordinary contractual remedies so that if the contractor completes the works but not in compliance with, say, the employer's requirements or the standards therein specified, the there will be an entitlement for the facilities manager to claim for damages because there will be a breach of contract. Also there could be remedies if the contractor had repudiated the building contract because it will then have failed to complete the works at all.
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