The question of whether a collateral warranty is a construction contract for the purposes of the Construction Act is a problem that for decades has challenged parties to disputes. Some guidance was given by the courts eight years ago in Parkwood Leisure Ltd vs Laing O’Rourke Wales and West Ltd [2013] EWHC 2665, but as that case turned on its facts and the terms of the warranty at issue, it was unclear whether the principles set out in that case would apply more generally.

The point did not trouble the courts again until this summer, when it came up in Toppan Holdings Ltd and Another vs Simply Construct (UK) LLP [2021] EWHC 2110. The original developer (whose interest was novated to Toppan) had entered into a contract with Simply Construct in 2015 to build a care home. Practical completion took place in 2016, but in 2018 various defects were identified. While Toppan requested Simply Construct to rectify the defects, in the end the remedial works were carried out by a different contractor and reached practical completion in February 2020. In October, after pressure from Toppan, Simply Construct executed a collateral warranty in favour of the second claimant, Abbey (the tenant and operator of the care home).

Toppan and Abbey commenced adjudications against Simply Construct – Toppan under the building contract novated to it and Abbey under its collateral warranty. The decisions were issued in April 2021, but Simply Construct did not comply so Toppan and Abbey commenced enforcement proceedings. Simply Construct resisted enforcement on various grounds, the key one (on Abbey) being, so Simply Construct said, that the adjudicator had no jurisdiction as the collateral warranty was not a construction contract for the purposes of the Construction Act so there was no right to adjudicate.

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