Toppan Holdings Ltd & Anr v Simply Construct (UK) LLP

[2021] EWHC 2110 (TCC)

THL sought summary enforcement of an adjudication decision. Simply said, the Adjudicator did not have jurisdiction to decide the dispute because the contract in question, a collateral warranty, was not a “construction contract”. 

In the case of  Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltd (Dispatch 159), Mr Justice Akenhead had said that the collateral warranty in question was to be treated as a construction contract. He noted that the recital to the warranty set out that the underlying construction contract was “for the design, carrying out and completion of the construction of a pool development” and that clause 1 of the warranty related expressly to carrying out and completing the Works. Further, clause 1 contained express wording whereby LOR “warrants, acknowledges and undertakes”:

“One should assume that the parties understood that these three verbs, whilst intended to be mutually complementary, have different meanings. A warranty often relates to a state of affairs (past or future); a warranty relating to a motor car will often be to the effect that it is fit for purpose. An acknowledgement usually seeks to confirm something. An undertaking often involves an obligation to do something. It is difficult to say that the parties simply meant that these three words were absolutely synonymous.”

The collateral warranty here did not include the verbs “acknowledges” or “undertakes”. Simply warranted that:

(1)     It “has performed and will continue to perform diligently its obligations under the Contract”;

(2)     In carrying out and completing the works, it “has exercised and will continue to exercise” reasonable skill, care, and diligence; and

(3)     In carrying out and completing any design for the works, it “has exercised and will continue to exercise” reasonable skill, care, and diligence.

Deputy Judge Bowdery QC, whilst noting that the collateral warranty referred to both a past state of affairs and future performance, did not consider that it could be construed as a “construction contract”.  It was not an agreement for “the carrying out of construction operations”.  Mr Justice Akenhead had accepted that not all collateral warranties would be agreements for the carrying out of construction operations. For example, in Parkwood, the warranty was executed before practical completion which meant it partly related to future works.  

Here, the collateral agreement was executed, 4 years after practical completion, 3 years 4 months after the Settlement Agreement, and 8 months after the remedial works had been completed by another contractor. The only matter left after the Settlement Agreement was any potential liability for latent defects. The only latent defects discovered after the date of the Settlement Agreement were defects which had been remedied months before the collateral warranty had been executed. 

Therefore, the Judge considered that, where a contractor agrees to carry out uncompleted works in the future, it will be a very strong pointer that the collateral warranty is a construction contract, and the parties will have a right to adjudicate. However, where the works have already been completed and, as in this case, even latent defects have been remedied by other contractors, a construction contract is unlikely to arise and there will be no right to adjudicate. The Judge could not see how “applying commercial common sense”, a collateral warranty executed four years after practical completion, and months after the disputed remedial works had been remedied by another contractor, could be construed as an agreement for carrying out of construction operations.

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