WHEN COLLATERAL WARRANTIES MATTER: BUILDING SERVICES DEFECTS IN ONE HYDE PARK
It is not unusual for building contractors to provide collateral warranties. The recent England and Wales (Technology and Construction Court) decision of One Hyde Park Ltd v Laing O’Rourke Construction South Ltd [2026] EWHC 155 (TCC) is one such case, where the result was that the building contractor was ordered to pay in excess of £34 million pursuant to the collateral warranty given.
Background. One Hyde Park Ltd v Laing O’Rourke Construction South Ltd [2026] EWHC 155 (TCC) (the “Judgment”) concerned a claim brought by the freeholder of the luxury One Hyde Park development in Knightsbridge against the contractor, Laing O’Rourke Construction South Ltd (“LOR”), for defects in the building services systems.
The works had been carried out pursuant to a building contract under which LOR undertook to carry out and complete the works and design elements of the development. Under the contract, LOR warranted that the works would comply with the employer’s requirements and that the materials used would be of sound and satisfactory quality and workmanship (Judgment 41]).
LOR also entered into a collateral warranty with the claimant, One Hyde Park Limited (“OHP”), pursuant to which it warranted its performance of the main contract (Judgment [44]).
Following completion of the development, defects were discovered in several building systems, including severe corrosion in chilled-water (“CHW”) pipework, failures in butterfly valves, leaking soldered joints and defects in the pantograph cradle used for façade maintenance (Judgment [32]).
Extensive investigations revealed that the pipework corrosion was widespread and that significant remedial works would be required across the development.
A key dispute. A key dispute in the case was whether the chilled-water pipework formed part of individual apartments or part of a common building-services system (Judgment [69] – [96]).
This may seem strange: In what case would the builder not be responsible for defects?
However, it must be borne in mind that the claimant, OHP, did not have a direct contract with LOR. LOR had a collateral warranty with OHP.
For OHP to claim on the collateral warranty, as found in Judgment [45], OHP had to first establish that it had maintenance and repair responsibilities in respect of the defects in the CHW pipework, which caused it to suffer substantial loss.
As set out in Judgment [56], the tenants of the units were obliged to “… keep the Apartment … and drainage water and air handling and processing and electrical apparatus … serving solely the Apartment in good and substantial repair decoration and condition”.
Given this clause, this led to the issue of whether the CHW pipework within the apartment fell within the above obligation, or if they fell within the scope of common building-services system that OHP had an obligation to maintain and repair.
At Judgment [60]–[61], the court accepted expert evidence that the chilled-water pipework distribution system was “a single, sealed pressurized containment system, containing a single recirculating volume of CHW distributing cooling throughout the Property.”
On that basis, the court concluded at Judgment [62] that the chilled-water system was a common service, and that the pipework distributing it fell within the category of services that the landlord, OHP, was obliged to maintain.
Although parts of the pipework were physically located within apartment ceilings, the system operated as a building-wide network supplying chilled water throughout the development (Judgment [60] – [62]]). Accordingly, the pipework could not properly be characterised as serving individual apartments exclusively (Judgment [64] – [66]).
As such, at Judgment [67], the court concluded that OHP was responsible for maintaining the chilled-water pipework and was therefore the party that had suffered and would suffer the loss caused by the defects in the CHW pipework.
Aside. As an aside, it is noteworthy that at Judgment [68], the court indicated that it was prepared to find in OHP’s favour based on the narrow ground in St Martin’s Property Corporation Ltd. v Sir Robert McAlphine Ltd [1994] 1 AC 85, being that a contracting party can recover substantial damages for a third party’s loss if the contracting parties contemplated that the property would be transferred to that third party
And from a Singapore perspective, under the Building Maintenance and Strata Management Act read in line with the Land Titles (Strata) Act, the management corporation responsible for maintaining common property, known as MCST, is typically established only after completion of the development on the date the strata title plan is registered with the Singapore Land Authority and is therefore not a party to the construction contract entered into by the developer. As a result, absent collateral warranties or statutory rights, the management corporation may lack a direct contractual claim against contractors or consultants. This is why such collateral warranties are often sought, as they usually offer a more straightforward basis for recovery.
Quantum. Once the defects and the freeholder’s entitlement to recover the cost of repairs were established, the court then considered the scope of remedial works and the resulting damages.
At Judgment [81]–[86], the court accepted evidence that remediation required wholesale removal and replacement of pipework in an occupied development, with complex access arrangements and sequencing constraints. The court accepted that the remedial works would take approximately 10.46 years (Judgment [85]).
The court ultimately awarded £34,437,122.60 for the replacement of the chilled-water pipework alone (Judgment [96]), in addition to further sums for the butterfly valves, soldered joints and the pantograph cradle.
No Defence Advanced at Trial. It is also notable that the action ultimately proceeded without a defence being advanced at trial. Although the defendant had filed a defence, served factual and expert evidence, and participated in the joint expert process, it withdrew suddenly before trial and the defence was struck out (Judgment [1], [10]–[17]).
Even so, the court required the claimant to prove its case.
Accordingly, the claimant opened its case fully and called factual and expert evidence (Judgment [31]), and the court considered the evidence on both entitlement and quantum before entering judgment.
In particular, the court addressed the lease structure and expert evidence to determine who bore responsibility for the pipework (Judgment [45], [58]–[67]), and examined the scope of remedial works, programme duration and costing methodology before accepting the claimant’s quantum assessment (Judgment [81]–[96]). Only after that analysis did the court accept the claimant’s revised figure for the CHW pipework.
Conclusion. It is quite common for collateral warranties to be given. Indeed, this is a reason why it is not unusual for construction disputes, when they go to trial, to involve multiple parties, as causes of action may arise under the construction contract, under collateral warranties given, or under tort law where a party seeks to claim in tort (e.g., based on negligence) against another party whom it had no direct contract with.
This case demonstrates, however, the importance of securing collateral warranties if you do not have a direct contract. While the court was prepared to find on the narrow ground, as can be seen from the judgment, having a collateral warranty appeared to have significantly simplified the claimant’s case against the defendant.
Additionally, what is noteworthy is that, even though there was no defence, the court spent significant time to make sure that the claimant had proven its claim. This is a reminder to claimants that, when claims go to court, even when there is no defence, the courts are not rubber-stamps and will scrutinise a claimant’s case to ensure that it has been properly proven.
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