Case Note: Abbey Healthcare (Mill Hill) Ltd v Simply Construct (UK) LLP [2024] UKSC 23 / Lancashire Council v Brookhouse Group Limited [2024] EWCA Civ 717

Supreme Court Abbey Healthcare (Mill Hill) Ltd v Simply Construct (UK) LLP [2024] UKSC 23

Court of Appeal Lancashire Council v Brookhouse Group Limited [2024] EWCA Civ 717.

When will a collateral warranty be a ‘construction contract’ as defined by section 104(1) of the Housing Grants, Construction and Regeneration Act 1996 so as to give rise to a right to adjudication? That was the question for the Supreme Court in Abbey Healthcare (Mill Hill/ Ltd v Simply Construct (UK) LLP [2024] UKSC 23 on appeal from the judgment of the majority of the Court of Appeal (Coulson LJ and Pete Jackson LJ; Stuart-Smith LJ dissenting).

This is a significant decision on collateral warranties and the proper interpretation of section 104(1) of the Housing Grants, Construction and Regeneration Act 1996, Lord Hamblen stated that: –

• most Collateral Warranties will not be construction contracts.
• the dividing line is between Collateral Warranties which just replicate undertakings in the building contract and those which give rise to direct and separate undertakings for the carrying out of construction operations.  Only the later will fall within the Act.
• Parties may agree to a right to adjudication but adjudication in respect of most collateral warranties must be voluntary not mandatory.

Furthermore, in coming to its decision, the Court held at [83] that there were both “principled and practical” grounds for overruling the only other authority on this topic Parkwood Leisure Ltd v Laing O’Rourke Wales and West Ltf [2013] BLR 589 (TCC).

The Supreme Court’s decision upheld the first instance decision of Martin Bowdery KC (sitting as a Deputy High Court Judge in the TCC) that the relevant collateral warranty was not a construction contract.

In Lancashire County Council v Brookhouse Group Ltd [2024] EWCA Civ 717, the Court of Appeal (Newey, Coulson and Nicola Davies LJJ) has also upheld a decision of Martin Bowdery KC (sitting as a Deputy High Court Judge in the TCC, [2023] EWHC 2921 (TCC)). This is an important procurement dispute about the applicable limitation periods where a contracting authority has not published a contract award notice.

The Court of Appeal confirmed that there is a six month limit to challenge an award and seek a declaration of ineffectiveness where there is no competitive tender process which the contracting authority can reduce to 30 days if it publishes a contract award notice.

Martin Bowdery KC and the Court of Appeal both rejected Lancashire County Council’s case and held that the shorter 30-day limitation periods for a procurement challenge only apply where the contracting authority has notified the market of a contract award. Even where the authority provided reasons to one party explaining why no competition was held, that will not displace the usual 6 month limitation period under Regulation 93 of the Public Contract Regulations 2015.

The local authority’s case ignored the proper construction of Regulation 93 read in conjunction with Regulation 99.  Since there had been no competition, the second ground for a declaration of ineffectiveness could not arise. Only the first ground had been applicable. In those circumstances, the local authority could have reduced the long­stop period of six months to 30 days, but only if it had published a contract award notice. Since it had chosen not to do so, the six-month period was not reduced (para 41).

The local authority’s decision not to issue a contract award notice had been a flagrant  breach of its obligations under the Regulations in respect of transparency, fairness, and the requirement to treat each economic operator equally.  Although Brookhouse was told that the development agreement had been concluded, it did not appear that any other economic operators had been informed.

In those circumstances, it would be wrong to construe Regulation 93(5) and Regulation 93(6) in a way which would allow the local authority to avoid its obligations to all relevant economic operators, and particularly to do so by ignoring the fact that reg.55(2) presupposed that there had been a public competition in the first place (para.43).

This case will be of interest to all those interested in public procurement.

For economic operators the judgment is a reminder of the limitation periods for starting proceedings to challenge an award and seek a declaration of ineffectiveness.

For authorities the judgment sets out what must be done to reduce the limitation period from 6 months to 30 days and restates the importance of transparency and equal treatment when conducting a public procurement.

William Haslam and Nicholas Zeolla