Adjudication Round-up (Winter 2013)

Collateral warranties as construction contracts

The case of Parkwood Leisure Ltd v Laing O'Rourke Wales and West Ltd [2013] EWHC 2665 (TCC); [2013] CILL 3413 concerned Part 8 proceedings raising the question of whether, and in what circumstances, a collateral warranty can amount to a 'construction contract' within the meaning of section 104 of the Housing Grants, Construction and Regeneration Act 1996.

The court held that it is a question of interpretation in each case, but that the particular warranty in this case was to be treated as a construction contract. The underlying contract was for the carrying out of construction operations, and the warranty provided an undertaking that the works would be carried out and completed. Importantly, the warranty included a prospective element.

However, the judgment made clear that not all collateral warranties given in connection with all construction developments will be 'construction contracts' under the Act.

This judgment will no doubt be of great interest to those who regularly provide collateral warranties and would not suspect that, as a result, they could find themselves in adjudication proceedings. For a full analysis of the implications of this case, see Justin Mort's article, Collateral Warranties as 'Construction Contracts', at Page 12.

Timing of Referral

In the case of KNN Coburn LLP v GD City Holdings Limited [2013] EWHC 2879 (TCC), the court considered whether the requirement to refer the dispute to the adjudicator within seven days of the date of the notice of adjudication (paragraph 7(1) of the Scheme) was satisfied in circumstances where the Referral Notice was received by the adjudicator within seven days but the appendices (in hard copy) were received on the eighth day.

The court held that the referral notice is to be distinguished from the supporting documentation.

In this case, it was wrong to suggest that the nature of the dispute could not be identified without reference to the supporting documents. The referral notice identified the material facts upon which the claim was based.

Thus, the dispute was referred in time. This reflects a common sense approach, but of course the question of whether the referral notice is, on its own, sufficient to identify the dispute will be a question of fact in each case.

It is worth noting also that the defendant did not raise an objection on these grounds during the course of the adjudication, and then contended that the decision was issued too...