Providence Building Services Ltd v Hexagon Housing Association Ltd
Citation: [2024] EWCA Civ 962
Background Facts​
-
The project involved the construction of residential buildings in Purley, under a JCT Design and Build 2016 contract (amended), with a contract sum of around £7.2 million.
-
Providence issued Payment Notice 27, requiring Hexagon to pay £264,242.55 by 15 December 2022. Hexagon paid late on 29 December 2022, avoiding the immediate right to terminate under clause 8.9.3.
-
Later, Hexagon again failed to pay Payment Notice 32 by the due date in May 2023. Providence issued a notice under clause 8.9.4, claiming this was a repetition of the earlier default and terminated the contract.
-
Hexagon disputed the validity of the termination, arguing that clause 8.9.4 could only be used if the right to terminate under clause 8.9.3 had accrued earlier (which it had not, since the first late payment was remedied within 28 days).
-
The High Court agreed with Hexagon. Providence appealed.
​Judgment
-
Court of Appeal decision:
-
The Court of Appeal allowed Providence’s appeal.
-
​
-
Key findings:
-
The plain wording of clause 8.9.4 allows a contractor to terminate for a repeated default even if no accrued right to terminate existed under clause 8.9.3 at the first occurrence.
-
The phrase “for any reason does not give the further notice referred to in clause 8.9.3” covers situations where no such right had yet accrued.
-
The structure and language of clause 8.9.4 (including “for any reason”) indicate that the contractor does not need to have had a prior right to terminate to use clause 8.9.4 after a repeated default.
-
The Court found commercial sense in this interpretation, as it discourages serial late payments and protects the contractor’s cash flow.
-
​
-
Outcome:
-
Providence’s termination was valid.
-
Appeal allowed; the High Court’s contrary decision overturned.
-
General Principles Developed
-
Strict but fair reading of contract language:
The court emphasised interpreting clauses according to their natural and ordinary meaning, avoiding unnecessary glosses or implied preconditions.
​
-
Repetition of defaults:
Clause 8.9.4 allows a contractor to terminate if the employer repeats a “specified default” (e.g., late payment), even if an accrued right to terminate never arose during the first default.
​
-
Protection against serial defaulters:
The decision supports the policy that employers who repeatedly default (even if cured initially) risk termination to incentivise consistent compliance with payment obligations.
​
-
Limited role of commercial context:
Commercial sense arguments can support but not override clear wording. Here, the balance of commercial considerations did not displace the textual analysis.
​
-
Consistency with employer termination rights:
The interpretation aligns with similar structural provisions for employer termination in clause 8.4, supporting a coherent overall scheme in the JCT contract.