The case of Providence Building Services Ltd v Hexagon Housing Association Ltd [2026] UKSC 1 concerns a critical point of contractual interpretation regarding termination clauses within the JCT Design and Build Contract (2016 edition). This standard form contract is widely used in the construction industry, and the specific wording on disputes remains unchanged in the subsequent 2024 edition.
Factual background
In February 2019, Hexagon Housing Association Ltd (the Employer) and Providence Building Services Ltd (the Contractor) entered into a contract for a construction project in Purley, London. In late 2022, the Employer failed to pay a sum of £264,242 by the final date for payment. On 16 December 2022, the Contractor served a notice of specified default under clause 8.9.1.
The Employer paid the full amount on 29 December 2022. Because this payment occurred within 28 days of the notice, the specified default did not continue long enough for the Contractor to acquire a right to terminate (following the specified default under clause 8.9.3.
Later, in May 2023, the Employer again failed to pay a required sum on time. The Contractor immediately issued a notice of termination under clause 8.9.4, arguing that this second late payment constituted a repetition of a specified default.
Judicial History: TCC and Court of Appeal
The Technology and Construction Court (TCC) ruled in favour of the Employer, concluding that for a notice of termination to be valid under clause 8.9.4, a clause 8.9.3 notice must have previously been an available option. Their view was that clause 8.9.4 requires that the contractor could have terminated previously but chose not to “for whatever reason”.
The Court of Appeal overturned this decision, focusing on the phrase “for any reason” in clause 8.9.4, finding it broad enough to include instances where no right to terminate had yet accrued. The Court of Appeal also relied on equivalence with clause 8.4, which governs termination by the Employer. Because clause 8.4.3 explicitly allows the Employer to terminate for repeated defaults “whether as a result of the ending of any specified default or otherwise”, the Court of Appeal considered that clause 8.9.4 should be interpreted with similar breadth.
They were not persuaded there was a “battery” of other remedies for a Contractor to counter cash flow difficulties created by an Employer making late payments. None of those remedies provides a satisfactory and immediate solution to the typical case of late payment – the Employer could make every interim payment up to 28 days late with no real consequence.
The Court of Appeal’s decision was met with some surprise by the construction industry – if there was a general understanding of this scenario, it was that the right to terminate would only arise after the Employer had fair warning for each late payment, rather than it being “two strikes and you’re out”. However, similar provisions in earlier JCT forms had twice been considered by the TCC previously on earlier JCT 1998 forms, describing an Employer making late payments as “skating on thin ice”.
The Supreme Court’s decision
The Supreme Court allowed the Employer's appeal, restoring the High Court's interpretation. Lord Burrows identified that clause 8.9.4 is parasitic on clause 8.9.3. If clause 8.9.4 was independent, its opening reference to the notice in clause 8.9.3 would be unnecessary.
For the “repetition” clause to apply, the Contractor must have first passed through the “gateway” of clause 8.9.3 – the original default must have gone uncured for the full 28-day period.
The Court emphasised commercial common sense, finding that the Contractor’s interpretation would lead to extreme outcomes. For example, if an Employer made two payments each just one day late, the Contractor could terminate the entire contract. He described this as using a “sledgehammer to crack a nut”.
The Court of Appeal's reliance on the symmetry of the Employer and Contractor’s rights to have equivalent termination grounds was rejected on three grounds:
- There is no inherent requirement for termination rights to be symmetrical between Employers and Contractors, as their obligations differ.
- The parties had already accepted asymmetry by using different cure periods (14 days for the Employer vs 28 days for the Contractor).
- Most importantly, the different wording used in clause 8.4.3 compared to clause 8.9.4 was likely intentional. The JCT standard form was described as a “carefully considered product” by experts; the absence of the clarifying phrase “or otherwise” in clause 8.9.4 indicated a narrower right for the Contractor.
Conclusion
The ruling clarifies that under the JCT 2016 (and 2024) forms, a Contractor cannot terminate for a repeated default unless the initial default was serious enough to have allowed for termination under clause 8.9.3.
If this balance of power is considered unjust for contractors facing cash-flow issues, given the wide use of standard form contracts the Court felt it was a matter for the JCT to consider in future drafts rather than for the courts to distort the language of the existing contract.
The parties are, of course, free to amend the JCT drafting to either clarify the drafting or alter the risk balance between the parties from that set out in the standard form.