UK Supreme Court’s Decision In The Case Of Abbey V Simply
It is common practice in the United Kingdom construction industry to provide collateral warranties in favour of various categories of beneficiaries. The principles in the case of Abbey v Simply is as follows:
- A collateral warranty will be an agreement ‘for … the carrying out of construction operations’ if it falls within the interpretation of Section 104(1) of the Housing Grants, Construction & Regeneration Act 1996 ‘the HGCRA 1996’); and
- A collateral warranty will not be an agreement ‘for’ the carrying out of construction operations if it merely be seen as warranty and/or promise to carry out the works.
Facts of the case
Simply was engaged to build a care home and executed a collateral warranty in favour of the tenant of the care home, Abbey. One of the important terms of the collateral warranty, provides that, Simply ‘has performed and will continue to perform its obligations under the contract’ and that it ‘has exercised and will continue to exercise’ reasonable care in carrying out the works.
However, fire-safety defects were discovered in the care home several years after completion of the works. Abbey brought adjudication proceedings against Simply as they had failed to rectify such defects.
Adjudication Proceedings against Simply
The adjudication proceedings were a success in which Abbey was awarded costs for the fire-safety defects. However, Simply contested the application of summary judgement filed by Abbey to enforce the adjudicator’s decision.
Post Adjudication Proceedings
Abbey’s summary judgement application was not granted due to the collateral warranty was not a construction agreement within the meaning of the HGCRA 1996 and it could not be interpreted as ‘an agreement for the carrying out of construction operations’ as defined by HGCRA 1996 since it was executed several years ago after completion of the works.
Abbey has applied permission to appeal to the Court of Appeal in which Court of Appeal gave a majority and dissenting judgement as to the question on whether the collateral warranty could be a construction contract. Simply then applied for permission to appeal to the Supreme Court.
Conclusion
The Supreme Court has laid down the clarity of approach as well as guidelines for the construction industry in dealing with the obligations under collateral warranties. The questions to determine whether the collateral warranty will be regarded as construction contract remains as the to the interpretation of the collateral warranty.
