4) Right to Adjudicate– whether collateral warranty is construction contract – Toppan Holdings Ltd and Abbey Health Care (Mill Hill) Ltd v Simply Construct (UK) LLP [2021] EWHC 2110 (TCC) 27 July 2021 Martin Bowdery QC A Company called Sapphire contracted with Simply to design and build a residential care home in 2015. There was provision in the building contract for a collateral warranty to be provided to a future tenant. Completion took place after which defects were discovered and remedied pursuant to a settlement agreement in 2017. Thereafter, Sapphire novated the building contract to Toppan as the new owner. Toppan granted a lease to Abbey who then operated the care home. After being compelled to do so by court action, Simply executed a collateral warranty in favour of Abbey. In 2019 significant fire safety defects were discovered and subsequently rectified at considerable expense. Toppan claimed damages for the remedial costs and Abbey claimed damages for loss of income and the claims proceeded by way of two separate adjudications: the Toppan adjudication was brought under the provisions of the novated building contract and the Abbey adjudication pursuant to the Act on the basis that the collateral warranty was a construction contract. The same adjudicator was appointed in each case.
There are few ‘standard’ forms of warranty and the one in favour of Abbey was a bespoke form as provided for by the building contract in which Simply warranted as follows: the Contractor has performed and will continue to perform diligently its obligations under the Contract; “(a) (b) in carrying out and completing the Works the Contractor has exercised and will continue to exercise all the reasonable skill care and diligence to be expected of a, properly qualified competent and experienced contractor experienced in carrying out and completing works of a similar nature value complexity and timescale to the Works; (c) in carrying out and completing any design for the Works the Contractor has exercised and will continue to exercise all the reasonable skill care and diligence to be expected of a prudent, experienced competent and properly qualified architect or as the case may be other appropriate competent and qualified professional designer experienced in carrying out and completing the design for works of a similar nature value complexity and timescale to the Works.” On its claim, the adjudicator awarded Toppan £852,000 plus VAT plus interest of £16,668 plus his fees. In the Abbey adjudication, Simply challenged the adjudicator’s jurisdiction on the grounds that the collateral warranty was not a construction contract and there was no right to adjudicate the dispute arising under it. The adjudicator decided he had jurisdiction and awarded Abbey damages of £869,500 plus VAT and interest of over £17,000 plus his fees. Simply did not comply with the awards.
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