Abbey Healthcare (Mill Hill) Ltd v Augusta 2008 LLP (Court of Appeal judgment)

The Court of Appeal held that a collateral warranty can, depending on its terms, amount to a "construction contract" within the meaning of s.104(1) of the Housing Grants (Construction & Regeneration) Act 1996. The relevant statutory test is whether the agreement is "for" the carrying out (or arranging the carrying out) of construction operations; that requires construction of the warranty's operative words and the contractual context rather than reliance on labels.

Applying that approach, the majority (Coulson LJ and Peter Jackson LJ) concluded that the Abbey Collateral Warranty contained both past and future-facing obligations (it warranted that Simply Construct "has performed and will continue to perform" its obligations under the building contract and warranted skill and care), and that the warranty was retrospective in effect. The date of execution therefore was not determinative: because the warranty created actionable obligations coterminous with the underlying building contract, it was a construction contract for the purposes of s.104(1), the Scheme was implied under s.108(5) and the adjudicator had jurisdiction.

The judge at first instance was therefore wrong to refuse summary judgment on the ground that the warranty was merely a product‑style guarantee because it was executed after practical completion. The Respondent’s Notice advancing alternative submissions was dismissed. Stuart‑Smith LJ dissented, concluding on his construction of the warranty that the document was in substance a warranty (a promise about the contractor's past and future performance under the primary contract) rather than an undertaking by the contractor to carry out works for the beneficiary and so did not constitute a construction contract.

Background and procedural posture. Abbey Healthcare (Mill Hill) Limited (tenant/beneficiary) sought summary judgment to enforce an adjudicator's decision awarding £908,495.98 against Simply Construct (contractor) following an adjudication under a collateral warranty executed after practical completion of the works. At first instance the deputy High Court judge ([2021] EWHC 2110 (TCC)) refused summary judgment, concluding the collateral warranty was not a "construction contract" under s.104(1) of the Housing Grants (Construction & Regeneration) Act 1996 because it was executed years after the construction operations had been completed. Permission to appeal was granted and this appeal followed.

Nature of the claim and relief sought. Abbey sought summary judgment to enforce an adjudicator's decision made under the implied Scheme of Construction Contracts; Simply Construct resisted on the basis that the collateral warranty was not a construction contract under s.104(1) and therefore the adjudicator lacked jurisdiction.

Issues framed by the Court of Appeal. The court identified three issues: (1) whether a collateral warranty can ever be a construction contract under s.104(1); (2) if so, whether the terms of the Abbey Collateral Warranty made it a construction contract; and (3) whether the date of execution of the collateral warranty affected that conclusion.

Facts in brief. Simply Construct entered a JCT Design and Build contract with Sapphire to build a care home; the contract required the contractor to execute collateral warranties in the form set out in Schedule 5 if requested. Works began in May 2015 and practical completion occurred in October 2016. After defects and remedial works, Simply Construct did not execute the collateral warranty in favour of Abbey until September 2020. Toppan (employer) and Abbey each pursued adjudications. The same adjudicator decided both disputes on 30 April 2021; Simply Construct refused payment and resisted enforcement by arguing lack of jurisdiction.

Court’s reasoning and conclusion. The majority held (i) a collateral warranty can be a construction contract if, on its wording and context, it is an agreement "for" the carrying out of construction operations; (ii) the Abbey Collateral Warranty warranted that Simply Construct "has performed and will continue to perform" its obligations under the building contract and warranted skill and care, thereby creating obligations that were prospective and so capable of being characterised as an agreement for the carrying out of construction operations; (iii) the warranty was retrospective in effect (it made the contractor’s liability coterminous with its liability under the building contract), so the late execution did not prevent it being a construction contract; and (iv) Parkwood Leisure v Laing O'Rourke was persuasive authority that comparable collateral warranties can be construction contracts. Accordingly the Scheme was implied and the adjudicator had jurisdiction; the appeal was allowed and the respondent’s alternative submissions dismissed. Stuart‑Smith LJ dissented on construction of the warranty, concluding the document was properly read as a promise about the contractor’s performance under the building contract (a warranty) which did not create a direct obligation to carry out works for the beneficiary and thus did not fall within s.104(1).

Subsidiary findings and implications. The court emphasised that whether any given collateral warranty is a construction contract depends on its precise terms and factual matrix; labels are not determinative. The decision confirms that timing of execution is not decisive where the warranty is expressed (or intended) to be retrospective.

Appeal allowed. The Court of Appeal (majority) held that the Abbey Collateral Warranty was a construction contract within s.104(1) of the Housing Grants (Construction & Regeneration) Act 1996 because its terms warranted past and future performance ("has performed and will continue to perform"), it was retrospective in effect and therefore the Scheme was implied under s.108(5); the judge was wrong to treat the timing of execution as determinative and summary judgment to enforce the adjudicator's award should be allowed. The Respondent's Notice was dismissed. (Stuart‑Smith LJ dissented, preferring a construction that the document was a warranty rather than a construction contract.)

Appeal from the Technology and Construction Court (Business and Property Court) Deputy High Court Judge Martin Bowdery QC [2021] EWHC 2110 (TCC); permission to appeal granted 16 November 2021; this Court of Appeal judgment [2022] EWCA Civ 823 (21 June 2022). The adjudicator’s decisions in the related Toppan and Abbey adjudications were dated 30 April 2021; Toppan’s enforcement succeeded at first instance while the Abbey enforcement was refused and then appealed.