Abbey Healthcare (Mill Hill) Limited v Simply Construct (UK) LLP

A collateral warranty can be a construction contract under section 104(1) of the Housing Grants (Construction & Regeneration) Act 1996. The question depends on the wording, substantive rights and contractual context. A warranty containing a promise regulating ongoing or future construction operations may qualify. A promise confined to a past, static state of affairs may not. The legislation does not require a single primary construction contract or detailed remuneration provisions, provided the agreement complies with section 109. The date of execution is not determinative where the warranty has retrospective effect. Completion of the works before signature does not prevent the warranty from being a construction contract.

Simply Construct carried out construction works for Sapphire Building Services Limited. The building contract required collateral warranties for purchasers and tenants. Abbey, the tenant of the completed care home, later received a collateral warranty after construction and remedial works had finished.

Abbey referred a defects dispute to adjudication and obtained an award of £908,495.98. Simply Construct resisted enforcement, arguing that the warranty was not a construction contract under section 104 of the 1996 Act and therefore did not contain the statutory adjudication machinery. The Technology and Construction Court refused summary judgment: [2021] EWHC 2110 (TCC). The appeal concerned whether a collateral warranty could qualify, whether this warranty did qualify, and whether its late execution altered the answer.

Majority

1. Construction contracts. Coulson LJ, with whom Jackson LJ agreed on the result and the essential conclusions, held that a collateral warranty may be a construction contract under section 104(1) of the Housing Grants (Construction & Regeneration) Act 1996. The statutory expression is not confined to a traditional building contract. The relevant inquiry concerns the words used, the substantive rights created and the contractual and factual context. A product-style guarantee of a completed, static state may fall outside the provision, whereas a warranty regulating continuing construction operations may fall within it.
2. The warranty. Clause 4.1(a), read with clauses 4.1(b) and 4.1(c), promised both past and future performance of the construction obligations. It was a separately actionable promise connected with carrying out the works, not merely a guarantee of past quality. The absence of the words acknowledge or undertake was immaterial. Detailed payment obligations were unnecessary: compliance with section 109 was sufficient. The Act also imposed no limit of one primary construction contract for the same operations.
3. Timing. The warranty was retrospective and its future-facing terms remained relevant. The fact that the works had been completed before execution did not determine its statutory character. The judge had therefore erred by treating the execution date as decisive. The reasoning was consistent with Swansea Stadium Management Limited v City & County of Swansea and Another [2018] EWHC 2192 (TCC) and Northern & Shell PLC v John Laing Construction Ltd [2003] EWCA Civ 1035.
4. Dissent. Stuart-Smith LJ would have dismissed the appeal. He considered that section 104(1) ordinarily required a direct contractual obligation to carry out construction operations. A conventional warranty merely promised performance of obligations owed to another party and gave a damages remedy. In his view, the wording of this warranty did not create direct primary obligations, although Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltd [2013] EWHC 2665 (TCC) had been correctly decided on materially different wording.

The appeal was allowed, the Respondent’s Notice was dismissed, and summary judgment was entered for Abbey in the sum awarded by the adjudicator.

• Court of Appeal (Civil Division). Appeal allowed. The Respondent’s Notice was dismissed and summary judgment was entered for Abbey.
• Technology and Construction Court. Summary judgment to enforce the adjudicator’s award was refused in [2021] EWHC 2110 (TCC) because the collateral warranty was held not to be a construction contract under the 1996 Act.