Monthly Archives: August 2013

Construction Act does apply to Collateral Warranties !

There had been doubts as to whether claims under collateral warranties were claims under “construction contracts” such as to fall within Part II of the Housing Grants Construction and Regeneration Act 1996 (“HGCRA”). The point being that such claims are susceptible to being determined by adjudication as provided for under the HGCRA.

In Parkwood Leisure Limited – v- Laing O’Rourke West and Wales Limited (2013) the claimant was the tenant of a new property and had been provided with a collateral warranty by its Landlord’s contractor Laing.

The High Court found that the introduction to the warranty referred to the underlying construction contract (between the Landlord and Laing) as being “for the design, carrying out and completion of the construction of a pool development”. As such there [could] be little or no dispute that the Contract was a construction contract for the purposes of the HGCRA”. Furthermore that wording was replicated in Clause 1 of the Collateral Warranty which related expressly to carrying out and completing the Works.

The Court was impressed that Laing had undertaken to Parkwood “that, in the execution and completion of the Works, it [would] comply with that underlying contract.” Most obviously the warranty obligated Laing to Parkwood in relation to:
– the quality and completeness of the Works,
– compliance with the Contract specifications and drawings,
– compliance with any relevant legislation and
– compliance with the Employer’s Requirements and Contractor’s
Proposals.

It did not follow from the above that all collateral warranties given in connection with all construction developments will be construction contracts under HGCRA.

You need to decide on the wording and the circumstances of each such warranty to see whether:

– it is a construction contract for the carrying out of construction operations. A major indicator will be whether or not the Contractor is undertaking to the beneficiary of the warranty to carry out such operations.

– Conversely if all the works are completed and the Contractor is simply warranting that previous works have attained a certain level, quality or standard that will be factor strongly militating against the Warranty being a Construction Contract under the Act. However the fact that all the works had been completed would not necessarily be the deciding factor against it being a “construction contract”.

Accordingly the Court ruled that the warranty was a “construction contract” so as to entitle Parkwood to seek adjudication under HGCRA

Cash is King!

It’s the policy of the English Construction Act 1996 (as amended) to maintain the life blood of cash flow throughout the construction chain especially in straightened times. Here’s a reminder of that.

True Fix Construction Ltd v Apollo Property Services Group Ltd (2013) involved a claim by True Fix Construction Ltd (“TFC”) who were, in part, a sub-sub-contractor of Powerwall. Powerwall were a roofing sub-contractor employed on the project by Apollo, the Main Contractor. When Powerwall went bust, Apollo had directly appointed TFC to undertake work that Apollo had previously engaged Powerwall to carry out. Powerwall’s insolvency had left TFC out of pocket for money Powerwall owed TFC for other work Powerwall had hitherto sub-sub-contracted to TFC.

The Court ruled that Apollo were aware that TFC were struggling when they gave them Powerwall’s work. If anything, TFC’s finances had improved as a result of getting that work. So when Apollo failed to pay TFC under an Adjudication Award requiring them to pay TFC for an interim account, it was insufficient grounds to defer payment that Apollo were concerned that TFC would be unable to refund them any monies that might, at a further Adjudication, be found to be due back to Apollo at the Final Account stage.

The High Court Judge said “the essence of adjudication is to provide cashflow” and the Court could not delay enforcing an earlier adjudication decision, admitted by Apollo to be unchallengeable and enforceable by Summary Judgement, just because Apollo speculated there might be a later adjudication ordering TFC to pay money back to them.

So the Court awarded TFC immediate summary judgement for the amount claimed.

Elderly Lady in horse centre defeat

In Davies v Welsh Minister (2013) the High Court in Mold, Wales quashed the planning inspector’s decision to uphold a planning appeal to create an equine centre. The court found that the planning appeal had given insufficient weight to the personal circumstance of the agricultural tenant’s mother who had been living in a house affected by the scheme for about 60 years.

The court reminds us that the personal circumstances of a third party affected or aggrieved by a planning decision may be “material considerations” which in the process must be seen to be taken into account as potentially overriding policy considerations that might have been supportive of the planning permission being granted.