Collateral Warranties As Construction Contracts: A Cautionary Tale

In the case of Toppan Holdings Limited ("Toppan") and Abbey Healthcare (Mill Hill) Limited ("Abbey") v Simply Construct (UK) LLP ("Simply") the TCC held that a collateral warranty between Abbey and Simply was not a construction contract and therefore Abbey could not enforce an adjudication between the parties. For parties who may wish to pursue an adjudication on the basis of a collateral warranty, the judgment provides both a cautionary tale and a guide on how best to protect the right to do so.

Background

Simply entered into a design and build contract with Sapphire Building Services Limited ("Sapphire") for the construction of Aarandale Manor, a luxury care home in Mill Hill, London. Sapphire transferred its rights and obligations under the contract to Toppan, the owner of the home, and Toppan entered into a long lease with Abbey, which became the tenant and operator.