The recent case of Hurley Palmer Flatt Ltd (“HPF”) v Barclays Bank plc [2014] EWHC 3042 (TCC) has given us construction lawyers food for thought when advising clients on the form of third party rights to be granted to beneficiaries. 

Whilst collateral warranties are still the preferred method of providing third parties (such as tenants and funders) with the benefit of contractual protection, there has been a small, but steady increase in the number of projects where the Contracts (Rights of Third Parties) Act 1999 has been used to provide protection to third parties. 

In the case in question, HPF was appointed as mechanical and electrical engineer by Barclays PLC.  Barclays Bank PLC then brought adjudication proceedings against HPF in relation to problems with the chilled water system.  HPF claimed that Barclays Bank PLC was not the client under the appointment and therefore could not commence an adjudication against HPF.  Barclays Bank PLC argued that clause 14.3 of the appointment granted third party rights to “Affiliates” of Barclays PLC, which included Barclays Bank PLC.

Barclays Bank PLC’s case was rejected and the Court held that Barclays Bank PLC did not have the right to bring an adjudication against HPF meaning that if it now wants to pursue the claim against HPF it will have to do so through the courts. 

The case seems to have created a contradictory judicial outcome to that in the case of Parkwood Leisure Limited v Laing O’Rourke Wales and West Limited EWHC 2665 (TCC).  In this case (which admittedly turns on its own facts) it was held that a third party beneficiary under a collateral warranty couldrefer a dispute to adjudication. 

Given that third party rights and collateral warranties are two different methods of skinning the same cat, further judicial guidance is necessary to resolve the conflict between the two decisions. 

Please note no cats were harmed in the writing of this blog.