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

Citation: [2013] EWHC 2665 (TCC)

Background Facts​

  • Parties & project:

    • Parkwood Leisure Ltd (Parkwood): operator of Cardiff International Pool, holding a sub-lease and operating agreement.

    • Laing O’Rourke Wales and West Ltd (LORWW): design-and-build contractor for the pool.

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  • Works & warranties:

    • LORWW entered into a design-and-build contract in 2006 with Orion (the employer) to design and construct the pool.

    • Under Article 10 of the contract, LORWW issued a collateral warranty to Parkwood in December 2007, warranting proper completion and compliance with standards.

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  • Defects & disputes:

    • Parkwood later identified serious issues with air handling units (AHUs), leading to humidity problems, staining, corrosion, and operational difficulties.

    • There was a Settlement Agreement in 2012 resolving certain previous AHU-related issues but allowing new claims relating to new matters.

    • In 2013, Parkwood served a new claim for defective AHUs, alleging inherent design flaws and seeking substantial damages.

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  • Legal question:
    Parkwood wanted to adjudicate under the Housing Grants, Construction and Regeneration Act 1996 (HGCRA). It needed a determination that the collateral warranty was a "construction contract" under the Act to have adjudication rights.

​Judgment

  • Collateral warranty as a construction contract:

    • The court held that the collateral warranty was a "construction contract" under the HGCRA.

    • The warranty contained express obligations to "carry out and complete" the works in accordance with the contract, not just retrospective promises about past work.

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  • Settlement Agreement issues:

    • The parties agreed that some AHU claims were settled in 2012.

    • The court did not definitively resolve whether the new 2013 AHU claims were compromised; it noted that further factual analysis would be needed.

    • However, Parkwood was entitled to argue these points substantively later, and the court gave declarations reflecting the parties' agreed positions.

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  • Outcome:

    • Declaration granted that the collateral warranty was a construction contract, allowing Parkwood to adjudicate.

    • Declarations as to the settlement were issued as agreed by counsel.

General Principles Developed

  • Collateral warranties as construction contracts:

    • A collateral warranty can be a "construction contract" if it includes ongoing obligations to carry out and complete works, not merely retrospective assurances.

    • This depends on the wording — especially the use of active terms such as "warrants", "undertakes", "acknowledges" covering future performance.

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  • Adjudication rights extended:

    • Beneficiaries of such collateral warranties can access adjudication under the HGCRA if their warranty qualifies as a construction contract.

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  • Effect of settlement agreements on future claims:

    • Settlement agreements must be carefully drafted to clarify whether future or separate claims are excluded.

    • New or separate issues arising after a settlement may not automatically be barred, especially where new defects or factual bases arise.

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  • Practical drafting lessons:

    • Clear distinction in warranties between purely historic (past state) obligations and future performance obligations.

    • Careful definitions in settlement agreements to avoid unintended release or exclusion of future claims.

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