The Supreme Court has just handed down its judgment in the highly anticipated finale of the long running saga of Abbey Heathcare and Simply Construct. The Court of Appeal had granted summary judgment of an adjudication decision, finding that the collateral warranty in question was a construction contract for the purposes of the Housing Grants, Construction and Regeneration Act 1996. 

The Supreme Court disagreed, finding that a collateral warranty where the contractor is merely warranting its performance of obligations owed to the employer under the building contract is not an agreement “for the carrying out of construction obligations”. 

Burges Salmon comment:

This case provides clarity on the status of collateral warranties and returns the position to pre-Parkwood v Laing O'Rourke [2013]. That case had decided that a collateral warranty could be a construction contract, but the Supreme Court largely rejected that position. The Supreme Court decided that only warranties by which the contractor undertook to carry out construction operations for the beneficiary, distinct from those owed under the building contract, (which will likely be very rare in practice) would be construction contracts. 

It now appears that disputes under collateral warranties will need to be dealt with outside adjudication, unless specific contractual adjudication provisions are added to the warranty itself.