Collateral warranty held not to be a construction contract

Abbey Healthcare (Mill Hill) Ltd v Augusta 2008 LLP (formerly Simply Construct (UK) LLP) [2024] UKSC 23

In Abbey Healthcare (Mill Hill) Ltd v Augusta 2008 LLP (formerly Simply Construct (UK) LLP) [2024] UKSC 23, the Supreme Court held that a collateral warranty will not be an agreement "for" the carrying out of construction operations for the purposes of section 104(1) of the Housing Grants, Construction and Regeneration Act 1996, if it merely promises to perform obligations owed to someone else under the building contract. In order to come within the scope of section 104(1), the collateral warranty must contain a separate or distinct obligation to carry out construction operations for the beneficiary of the warranty. Given that most collateral warranties are likely to be derivative of, and therefore reflective of, obligations owed under the building contract, this conclusion will take most collateral warranties outside the scope of the 1996 Act. This being the case, they will not be subject to adjudication as a means of dispute resolution, at least in the absence of an express term in the collateral warranty that makes provision for adjudication as the chosen means of dispute resolution.