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

[2013] EWHC 2665 (TCC)

LOR had entered into a standard JCT Design and Build contract to design and build a swimming and leisure facility in Cardiff. Article 10 required LOR to enter into “a deed of warranty” with any financier of the project, first purchaser and mortgagee. LOR did this and Parkwood the tenant was named as the beneficiary. A question arose as to whether the warranty amounted to a contract for “construction operations” in accordance with the HGCRA. The warranty included the following:

“1 The Contractor warrants, acknowledges and undertakes that:-

1 it has carried out and shall carry out and complete the Works in accordance with the Contract; owes a duty of care to the Beneficiary in the carrying out of its duties and responsibilities in respect of the Works;

3 it has exercised and will continue to exercise all reasonable skill and care [in respect of the design]…

7 it has complied and will continue to ...carry out its obligations under the Contract [including in terms of proceeding regularly and diligently].

Looking at the wording of the warranty, the Judge had no doubt that it was be treated as a construction contract “for…the carrying out of construction operations”. He noted that the recital to the Warranty set out that the underlying construction contract was “for the design, carrying out and completion of the construction of a pool development” and that clause 1 of the warranty related expressly to carrying out and completing the Works. Further clause 1 contained express wording whereby LOR “warrants, acknowledges and undertakes”:

“One should assume that the parties understood that these three verbs, whilst intended to be mutually complementary, have different meanings. A warranty often relates to a state of affairs (past or future); a warranty relating to a motor car will often be to the effect that it is fit for purpose. An acknowledgement usually seeks to confirm something. An undertaking often involves an obligation to do something. It is difficult to say that the parties simply meant that these three words were absolutely synonymous.”

In the view of the Judge, the warranty related to the past as well as to the future. It was recognised that the Works under the Contract remained to be completed albeit that LOR had already carried out a significant part of the Works and the design. The undertaking primarily went to the execution and completion of the remaining works. The warranty went to the work and design that had already been carried out or provided and to that yet to be carried out and provided. Whilst LOR in clause 1 was undertaking that it will carry out and complete the Works in accordance with the underlying contract, the undertaking was being given to Parkwood, that, in the execution and completion of the Works, it would comply with that contract. This related to the quality and completeness of the Works.

The Warranty, being contractual in effect, would give rise to the ordinary contractual remedies. Although clause 10 expressly excluded liability for delay in progress and completion, it did not exclude liability otherwise for non-completion. This was not a contract which was simply limited to the quality of work, design and materials. Thus LOR was not merely warranting or guaranteeing a past state of affairs, it was undertaking that it would actually carry out and complete the Works to a standard, quality and state of completeness called for by the Contract. Whilst to some, this may seem unexpected, the judgment is certainly not to be taken as meaning that it will apply to every warranty. As ever, it will all depend on the circumstances and precise wording.