In its first published case of the year Providence Building Services Ltd v Hexagon Housing Association Ltd [2026] UKSC 1, the Supreme Court has unanimously overturned the decision of the Court of Appeal and held that a Contractor’s right to terminate under clause 8.9.4 of JCT Design & Build Contract is subject to it first obtaining the right to terminate under clause 8.9.3.
Contractual Position
The claim focussed on the termination provisions of clause 8.9 of JCT Design & Build (2016 edition) which permits a Contractor to serve a ‘notice of specified default’ to the Employer if (amongst other matters), the Employer fails to pay a notified sum by the final date for payment (clause 8.9.1).
If that specified default continues for 28 days[1] from receipt of the notice, the Contractor may then on or within 21 days of expiry of that 28 day period serve a notice to terminate the Contract (the “Clause 8.9.3 Notice”)
Under clause 8.9.4, if the Clause 8.9.3 Notice is not served “for any reason”, but the Employer repeats a specified default, then the Contractor may serve a notice to terminate.
It was the wording “for any reason” which was a key component in this claim.
Background
Providence Building Services Ltd (“Providence”) was engaged by Hexagon Housing Association Ltd (“Hexagon”) under a JCT D&B (2016).
In December 2022, Hexagon failed to pay a notified sum by the final date for payment and Providence issued a notice of specified default under clause 8.9.1. Hexagon subsequently paid the notified sum on 29 December 2022 – fourteen days late but within 28 days of the notice of specified default.
In May 2023, Hexagon failed to pay a second notified sum by the final date for payment. One day later, on 18 May 2023, Providence purported to terminate the contract under clause 8.9.4, relying on the repeated default of failing to pay by the final date for payment. Hexagon subsequently paid the notified sum on 23 May and asserted that Providence had repudiated the contract.
The matter was referred to adjudication which found in Hexagon’s favour. Providence subsequently, and successfully, referred the matter to the TCC where Adrian Williamson KC held that in order to exercise the right to terminate under clause 8.9.4 Hexagon must have first obtained the right to terminate under clause 8.9.3 (whether or not a Clause 8.9.3 Notice had been served) i.e. the original specified default must have continued for 28 days from receipt of notice before remedy. Providence’s payment 13 days after receipt of the notice of specified default meant that Hexagon’s right to terminate under clause 8.9.3 had not arisen and therefore there was no entitlement under clause 8.9.4.
The Court of Appeal reversed this decision, expansively holding that a Contractor failing to serve a Clause 8.9.3 Notice “for any reason” extended to include a failure to serve because the right to do so had never accrued.
The Supreme Court
In welcome news for Employers, the Supreme Court has in turn reversed the decision of the Court of Appeal in finding that for a Contractor to have the right to terminate under clause 8.9.4 it must first have accrued the right to terminate under clause 8.9.3 – whether or not it chose to exercise that right. To determine otherwise would, the Court held, be an extreme outcome (a “sledgehammer to crack a nut”) theoretically entitling a Contractor to terminate when an Employer paid two or more payments one day late and if the Court of Appeal’s interpretation was correct, clause 8.9.4 would simply start with “if the Employer repeats a specified default…” rather than referring back to the Clause 8.9.3 Notice.
Hence on the facts, the original specified default (that is, the failure by Providence to pay a notified sum by the final date for payment of 15 December) must have continued for 28 days beyond Hexagon’s notice of specified default dated 16 December. Because Providence remedied the specified default by making payment 13 days after receipt of the notice, Hexagon had never accrued the right to issue a Clause 8.9.3 Notice at the time it purported to terminate under clause 8.9.4.
The Supreme Court dismissed arguments by Hexagon that reliance could be placed upon the wording of clause 8.4, whereby an Employer may terminate for a repeated Specified Default whether or not a previous right to terminate under equivalent 8.9.3 had accrued. The standard wording of the clauses is different with clause 8.4.3 explicitly providing that the equivalent Clause 8.9.3 Notice may not have been issued “…whether as a result of the ending of any specified default or otherwise)”, hence the Court considered it unlikely that JCT would have intended the two clauses to have the same meaning.
Comment
This decision will doubtless be welcomed more by Employers than Contractors. Whilst Contractors retain other remedies in the event of non payment (notably the statutory right to suspend works for non-payment of a notified sum or refer to adjudication for a ‘smash and grab’), at least in the matter of repeated Specified Defaults and, ultimately, entitlement to terminate a contract, the balance remains in favour of the Employer.
As the JCT Design & Build (2024) incorporates the same wording as the 2016 form, this remains a live issue. Whilst the Supreme Court noted that “if there is a problem for Contractors, which could be justifiably ameliorated by a differently worded termination clause, that is a matter for the JCT to consider, in the light of this judgment, in a future draft of the standard form contract”, given the recent publication of a new suite of contracts it is unlikely that a further edition of the JCT Design & Build will be published in the near future. It remains for parties negotiating a contract, particularly one based on a standard form, to ensure that the termination provisions as drafted fully reflect the parties’ intentions.
[1] This was a bespoke amendment to the Contract in question, and in the JCT D&B (2016) standard form the timeframe is 14 days.