The Supreme Court To Consider Whether A Collateral Warranty Is A Construction Contract

• Published date: 09 January 2023
• Subject Matter: Litigation, Mediation & Arbitration, Real Estate and Construction, Trials & Appeals & Compensation, Construction & Planning
• Law Firm: Birketts
• Author: Ms Rebecca Childs and Katrina Bretten

Abbey Healthcare (Mill Hill) Ltd v Simply Construct (UK) Ltd

In this ongoing battle as to whether a collateral warranty constitutes a construction contract; the defendant, Simply Construct (UK) Ltd ("Simply Construct"), now has leave to appeal to the Supreme Court. At first instance, it was held by the Technology and Construction Court (TCC) that a collateral warranty was not a construction contract and so the adjudicator had no jurisdiction and therefore his decision could not be enforced. This decision was subsequently overturned by the Court of Appeal. However, it will now be for the Supreme Court to make a final ruling which, depending on the decision, could have wide reaching implications for the industry.

We covered this case when it first went to trial in the TCC at the end of July 2021, in an article titled: 'Collateral warranties - to be, or not to be, a construction contract?'

Since that first instance decision, the claimant, Abbey Healthcare (Mill Hill) Ltd ("Abbey"), took the matter to the Court of Appeal and won, with only one judge dissenting. It was held that the collateral warranty they had with the contractor, Simply Construct (UK) Ltd, did amount to a construction contract and therefore Abbey was entitled to refer the dispute to adjudication, meaning that the adjudicator did have jurisdiction to consider the dispute which arose between the parties. His decision could therefore be enforced.

The Court of Appeal reached that decision based on the following:

• Where a collateral warranty is given in relation to future works (regardless of whether those works have, in reality, already been completed), it is a construction contract.
• It is not relevant when the warranty is executed, only the wording of it.

However, Simply Construct has now been granted permission to appeal the decision again to the Supreme Court. It is not yet clear when the appeal will be heard, but we will be sure to...