Digital Satellite Warranty Company v The Financial Services Authority, [2013] UKSC 7
Citation:Digital Satellite Warranty Company v The Financial Services Authority, [2013] UKSC 7
Rule of thumb:If a person has a warranty for a product, what law applies? This is deemed to be a form of insurance product and laws from that can be used in making arguments that work should be done. If an organisation is offering then they should also be registered with the Financial Services Authority.
Background facts:
The facts of this case were that a company provided a warranty to repair or replace satellite dishes.
Parties argued:
They argued that an EU law directive provided a list of financial sectors in society that had to be regulated and their sector providing warranties for satellite breakdowns did not fall within this directive. They also argued that the UK regulation that supposedly covered them had ‘insurance’ written in its name at the top of it in its title, and by the technical definition of the word insurance they were not providing ‘insurance’ as such, rather they were providing a breakdown service rather than money/benefits – they argued that a purely purposive interpretation of this regulation had to be taken. The FSA however argued that taking a literal approach to these UK regulations, and taking all provisions in the underpinning Acts and regulations as whole, the regulations clearly, simply and undeniably stated that people providing satellite repair warranties like this had to be licensed with the FSA, and the satellite warranty company was in breach of this regulation by not being licensed with them.
Judgment:
The Court held that the EU law just provided a base of financial sectors that had to be licensed, and that the UK law-makers were free to add additional sectors to be licensed on top of this if they so desired. The Court agreed that by the technical legal meaning of ‘insurance’ of an ‘extended warranty’ did not technically constitute ‘insurance’ as such, although they held had according to all the laws of interpretation of regulations in the UK, the licensing regulations invoked by this matter had to be interpreted to include this sector as one to be licensed, meaning that the satellite warranty company had to get licensed and regulated by the FSA after this decision.
This case clarified that the use of the word ‘warranty’ can have 3 meanings – a broad legal meaning, a narrow legal meaning, and a meaning according to society at large, and although all 3 meanings are different, they are all roughly connected and similar. The broad legal meaning of warranty is that every single contract has warranties in it – professional services, carriage services, heritable property, insurance, patent license, share transfers, movable goods etc – and these warranties are the minor parts of all of these contracts, and every time someone breaches one of these minor warranty terms in these contracts there is a right of remedy against the person in breach for doing so, even although it does not give the other party a right to reduce/cancel the contract altogether. The narrow legal definition of warranty is that only every single movable property contract has warranties in it, and there is a ‘repair or replace’ obligation for minor malfunctions and imperfections in relation to this movable property. The meaning of warranty according to many people in society at large is that warranty agreements are extended agreements when a third party offers to repair or replace any minor malfunctions in movable property. None of these definitions are necessarily right or wrong, although possibly it could be said that the narrow legal meaning stated above is the ‘most right’ in the opinion of the author. In terms of the third definition above, the definition of warranty by society at large, the Court has held that where a third party offers to provide a ‘repair or replace’ extended ‘warranty’ service for movable forms of property this is deemed to be a financial service, and they must be regulated with the Financial Services Authority and obtain a license before doing so.
Ratio-decidendi:
‘... the extended warranty agreements... fall within ... Insurance Companies Regulation 1987, SI 1987/2130, Schedule 1, Part 1, Class 16(b)... the argument must therefore be (and is) that the common law on this point is displaced by the principle which requires an English Court to construe its own legislation... Appeal dismissed...’, Lord Mance
Warning: This is not professional legal advice. This is not professional legal education advice. Please obtain professional guidance before embarking on any legal course of action. This is just an interpretation of a Judgment by persons of legal insight & varying levels of legal specialism, experience & expertise. Please read the Judgment yourself and form your own interpretation of it with professional assistance.