Abbey Healthcare (Mill Hill) Ltd v Simply Construct (UK) LLP
| Jurisdiction | England & Wales |
| Judge | Lord Justice Coulson,Lord Justice Stuart-Smith,Lord Justice Peter Jackson |
| Judgment Date | 21 June 2022 |
| Neutral Citation | [2022] EWCA Civ 823 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2021-000741 |
[2022] EWCA Civ 823
Lord Justice Peter Jackson
Lord Justice Coulson
and
Lord Justice Stuart-Smith
Case No: CA-2021-000741
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BUSINESS AND PROPERTY COURT
TECHNOLOGY AND CONSTRUCTION COURT (QBD)
Mr Martin Bowdery QC (Sitting as a Deputy High Court Judge)
Royal Courts of Justice
Strand, London, WC2A 2LL
Tom Owen (instructed by Watson Farley & Williams LLP) for the Appellant
Michele De Gregorio & Sahana Jayakumar (instructed by Veale Wasbrough Vizards LLP) for the Respondent
Hearing Date: 16 March 2022
Approved Judgment
This judgment will be handed down remotely by circulation to the parties' representatives by email and released to the National Archives. The date and time for hand-down is deemed to be 10.30am on 21 June 2022
INTRODUCTION
The issue which arises on this appeal is whether or not the collateral warranty relied on by the appellant (“Abbey”) was a construction contract within the meaning of s.104(1) of the Housing Grants (Construction & Regeneration) Act 1996 (“the 1996 Act”). Abbey brought adjudication proceedings against the respondent (“Simply Construct”). The adjudicator awarded them £908,495.98 inclusive of VAT. Abbey's application for summary judgment to enforce that decision was refused by Mr Martin Bowdery QC (sitting as a deputy judge of the High Court) (“the judge”). He concluded ( [2021] EWHC 2110 (TCC)) that, because the collateral warranty was executed years after the construction operations had been completed, it was not a construction contract in accordance with s.104(1). I granted permission to appeal against that decision on 16 November 2021.
By way of a Respondent's Notice, Simply Construct seek to advance a new set of submissions – not made to the judge – to the effect that the collateral warranty, irrespective of when it was executed, was not capable of being a construction contract under the 1996 Act. On analysis, those new submissions gave rise to two separate questions: i) Can a collateral warranty ever be a construction contract? and ii) If it can, did the terms of this particular warranty (regardless of timing) make it a construction contract as defined? Logically, although these issues had not previously arisen, they should be taken first, particularly as Mr De Gregorio properly accepted that, if he was wrong on both, he could not say that the timing of the collateral warranty, although of relevance, was determinative of the question as to whether it was or was not a construction contract.
In one sense, it is a pity that these issues have arisen at all. I say that because this appeal is not about the merits of the underlying claim, but is instead a purely procedural debate about the applicability or otherwise of the adjudication process to this collateral warranty. However, as I pointed out when I granted permission to appeal, as long as adjudication remains a popular and cost-effective dispute resolution process for those concerned with defective or delayed buildings, parties who are at risk of having to pay money as a result of an adjudicator's decision will continue to argue, where they can, that the contract in question was not caught by the 1996 Act, and therefore did not contain the implied adjudication machinery.
THE FACTS
By a contract dated 29 June 2015, Sapphire Building Services Limited (“Sapphire”) engaged Simply Construct to carry out the construction of the Aarandale Manor care home (“the care home”). The contract was in the JCT Design and Build 2011 form, with bespoke amendments (“the building contract”).
It is unnecessary to set out very many of the terms of the building contract. However, the following should be noted:
a) Clause 2.1 set out Simply Construct's primary obligation to “carry out and complete the Works in a proper and workmanlike manner and in compliance with the Contract Documents…” There were a number of other obligations as to the quality of the design work, materials, goods and workmanship.
b) Clause 2.35 obliged Simply Construct to remedy defective work.
c) Clause 9.2 contained express adjudication provisions.
d) Clause 7.1.3 provided that Sapphire might at any time novate the building contract to Toppan Holdings Limited (“Toppan”), the freeholder. There was an agreed form of novation at Appendix 2 of the contract.
The building contract also contained detailed provisions in respect of warranties. The definition section referred to “P & T Rights”, which were the rights in favour of a Purchaser and Tenant set out in Part 1 of Schedule 5 in the form of a collateral warranty. Both ‘Purchaser’ and ‘Tenant’ were defined terms. In the event, Toppan became the Purchaser and Abbey became the Tenant. Clause 7C of the building contract was in the following terms (as amended):
“Where Clause 7C is stated in Part 2 of the Contract Particulars it will apply to a Purchaser or Tenant, the Employer may by notice to the Contractor, identifying the Purchaser or Tenant and his interest in the Works, require that the Contractor within 14 days from receipt of that notice enter into with such Purchaser or Tenant a Collateral Warranty of the P & T Rights in the relevant form appended at Schedule 5 of this Contract executed as a deed or signed underhand to reflect the manner of execution of this Contract”
Other references in the building contract indicate that Toppan was expressly identified as a potential beneficiary of a collateral warranty, as was the ‘Management Company’, which was essentially the role to be played by Abbey, the ultimate tenant of the care home.
Simply Construct commenced the building works on 11 May 2015. On 15 October 2015, they executed a collateral warranty in favour of Toppan pursuant to their obligations in clause 7C. Practical completion of the care home was achieved on 10 October 2016.
On 13 June 2017, Sapphire and Simply Construct entered into what was called a settlement agreement which, amongst other things, required the execution of a deed of novation in an agreed form by Simply Construct, Sapphire and Toppan. By a novation agreement dated 14 June 2017, Sapphire transferred all its rights and obligations under the building contract to Toppan. In this way, Toppan became the “substitute employer”, as they were referred to in the settlement agreement.
On 12 August 2017, Toppan granted a long lease holding of the care home to Abbey. The term was 21 years.
In or around August 2018, Toppan discovered fire-safety defects in the care home. It was Toppan's case that the discovery of these defects prevented a sale of the care home to another freeholder. Simply Construct were notified of the defects and requested to rectify them. They did not do so, so Toppan engaged a third party to carry out remedial works. Those works were commenced on around 25 September 2019 and were practically complete on 14 February 2020. It appears that Abbey paid for some or all of the remedial works.
Simply Construct, as contractor, had never entered into the collateral warranty with Abbey, as tenant, as required by Clause 7C of the building contract (paragraph 6 above). On 8 June 2020, Toppan requested Simply Construct to execute the collateral warranty in favour of Abbey. Simply Construct did not respond. On 30 June 2020 Toppan wrote to Simply Construct's then legal advisors to request that the collateral warranty be executed, but again there was no response. Neither was there any response to the pre-action correspondence. Toppan was obliged to issue proceedings for specific performance and, after further delays, on 23 September 2020, Simply Construct executed and delivered the collateral warranty to Abbey (“the Abbey Collateral Warranty”). Toppan and Abbey executed the same document on 23 October 2020.
THE TERMS OF THE ABBEY COLLATERAL WARRANTY
The Abbey Collateral Warranty is called on its face a ‘Collateral Agreement’, although Clause 9 refers to it as a collateral warranty. Nothing can turn on how the document describes itself. It contained the following material provisions:
“BACKGROUND
(A) The Developer [Toppan] has the benefit of the Contract entered into with the Contractor [Simply Construct].
(B) The Beneficiary [Abbey] has a leasehold interest in the Site.
(C) The Contractor has agreed to enter into this agreement with the Beneficiary.
OPERATIVE PROVISIONS
1 DEFINITIONS
…
“Contract” means the contract in the form of a JCT Design and Build Contract dated 29 June 2015 entered into by Sapphire Building Services Limited and the Contractor under which the Contractor is to carry out the Works and the design of the Works.
…
“Works” means the construction of the development at the Site as more particularly described in the Contract.
…
4 SKILL AND CARE
4.1 The Contractor warrants that:
(a) the Contractor has performed and will continue to perform diligently its obligations under the Contract;
(b) in carrying out and completing the Works the Contractor has exercised and will continue to exercise all the reasonable skill care and diligence to be expected of a, properly qualified competent and experienced contractor experienced in carrying out and completing works of a similar nature value complexity and timescale to the Works;
(c) in carrying out and completing any design for the Works the Contractor has exercised and will continue to exercise all the reasonable skill care and diligence to be expected of a prudent, experienced competent and properly qualified architect or as the case may be other appropriate competent and qualified professional designer experienced in carrying out and completing the design for works of a similar nature value complexity and timescale to the Works.
4.2 Insofar as the Contractor has performed a...
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