Abbey Healthcare (Mill Hill) Ltd v Augusta 2008 LLP (formerly Simply Construct (UK) LLP) [2024] UKSC 23
Citation: Abbey Healthcare (Mill Hill) Ltd v Augusta 2008 LLP (formerly Simply Construct (UK) LLP) [2024] UKSC 23
Rule of thumb: If a builder provides a warranty for their work, and there is then a dispute over the enforcement of the warranty, is this a construction dispute? No, this is deemed to be a financial services dispute & not a construction dispute (construction arbitration has no jurisdiction to hear this & any decisions from it have no effect & are not enforceable).
Background facts: This case invoked the subjects of procedure, jurisprudence, construction, and warranties.
The basic facts were that Simply built a care for Abbey Healthcare. Simply provided a warranty to fix any problems that came up with (not wear & tear). There was fire safety problems that Abbey found. Simply did not fix these & Abbey got someone else to do the work. Abbey then sued Simply for breach of the warranty contract – Abbey did so in construction arbitration. Simply argued that this arbitrator did not have jurisdiction to hear this matter as it was technically not a construction.
Court held: The Court upheld that Abbey could not enforce the arbitrator award against Simply. The Arbitrator only had jurisdiction to consider construction disputes, and this was not a construction dispute but a warranty/financial services dispute. It was emphasised that it is a crucial first step in any legal dispute to identify the legal subject that is invoked in the matter.
Ratio-decidendi:
‘I agree with the majority of the Court of Appeal that Parkwood cannot be satisfactorily distinguished. The fact that a warranty was given rather than a warranty and an undertaking makes no difference. What matters is the substance of the promise made rather than its label. Further, the substance of the promise made in clause 4.1(a) of the Abbey Collateral Warranty is the same as that given in clause 1(1) of the collateral warranty in Parkwood. Although clause 4.1(a) does not refer to "completing" the works, a promise by the contractor to perform its obligations under the building contract includes completion of the works. Both the majority of the Court of Appeal and Akenhead J relied critically on the wording of these respective provisions. All the reasons given above as to why it was inappropriate for the majority of the Court of Appeal to do so apply equally to the approach and conclusion of Akenhead J. It follows that if, as I conclude, the decision of the majority of the Court of Appeal was wrong, so must be the decision of Akenhead J. Despite the respect due to a decision of such an experienced TCC judge, and the fact that it was decided some years ago, I am therefore compelled to conclude that the decision should be overruled.
Prior to Parkwood the general understanding in the construction industry appears to have been that the 1996 Act did not apply to collateral warranties and we have been shown no textbook or commentary at that time which suggested otherwise. This is why the decision is said to have been a surprise. The current release of the Manual of Construction Agreements summarises the position as follows:
"A14[8D] The decision in Parkwood Leisure was received with dismay by some commentators, one of whom has described it as simply wrong, substantially on the grounds canvassed in earlier editions of this title, and on the ground that it mistakes a derivative obligation for a separate construction contract, which plainly, he said, it was not." (Issue 43, May 2024)
Although Coulson LJ suggested that, despite that initial surprise, the construction industry may be taken to have broadly accepted that result, the litigation history of the present case suggests otherwise. In any event, for the reasons set out above, there are both principled and practical grounds for overruling the decision and reverting to the position as it was generally understood to be before Parkwood. This allows parties to contract into the adjudication regime where this is seen as desirable but not to be fixed with an inability to contract out’.
Lord Hamblen at 81-88
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.