Case
Abbey Healthcare (Mill Hill) Ltd v Simply Construct (UK) LLP [2024] UKSC 23
https://www.supremecourt.uk/cases/uksc-2022-0124
Heard on 29 April 2024
Judgement on 9 July 2024
Question before the Court
Under the Housing Grants Construction and Regeneration Act 1996 (as amended) (hereafter “the Act”). A party to a Construction Contract has a legislative right to refer a dispute to adjudication.
So, is a collateral warranty a Construction Contract?
Background facts
This dispute was around fire safety defects at a care home in London. Simply Construct was the Contractor and Abbey Healthcare was the tenant and operator of the Care Home.
Simply Construct provided Abbey Healthcare with a Collateral Warranty promising that Simply Construct “has performed and will continue to perform diligently its obligations under the [Building] Contract”.
Courts Logic
1) A collateral warranty will be an agreement “for … the carrying out of construction operations” if it is an agreement by which the contractor undertakes a contractual obligation to the beneficiary to carry out construction operations which is separate and distinct from the contractor’s obligation to do so under the building contract.
(2) A collateral warranty where the contractor is merely warranting its performance of obligations owed to the employer under the building contract, will not be an agreement “for” the carrying out of construction operations.
Decision
Simply Construct’s promise that it “has performed and will continue to perform” under the building contract did not give rise to any construction operations. It was not promising to do anything that it had not already promised the employer under the building contract.
The Collateral warranty in this instance was not a Construction Contract for the purpose of Section 104 of the Act
Important takeaways
Most collateral warranties will not be construction contracts. Lord Hamblen stated this himself.
There will be a dividing line between collateral warranties that merely replicate undertakings given in the building contract (I,e most collateral warranties) and those that give rise to distinct and separate undertakings to carry out construction operations.
If it is the latter, then the facts will distinguish itself from this case and there is a strong chance that such a collateral warranty will be a Construction Contract for the purposes of the Act.
Why it matters
Where a collateral warranty is not a Construction Contract, there will be no legislative right to adjudicate a dispute arising under it, by way of the Act. The parties can still adjudicate, but both parties will need to agree, i.e the adjudication will be voluntary.
If a party wants to leave the door open for adjudication, it may be sensible for that party to include a provision within the collateral warranty that a dispute arising from it is capable of being referred to adjudication.
Note
This case overrules Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltd [2013] BLR 589 (TCC).