Providence Building Services Limited v Hexagon Housing Association Limited

Under clause 8.9.4 of the 2016 JCT Design and Build Contract, a contractor may terminate for a repeated specified employer default even where no right to give the further notice under clause 8.9.3 previously accrued. The wording requiring that the contractor does not give the further notice is broad and is not limited to cases where the contractor could have given it. The phrase for any reason includes the absence of an accrued right. The corresponding structure of clauses 8.4 and 8.9 supports that construction. Commercial considerations did not justify adding a requirement absent from the wording.

Providence entered into a JCT design and build contract with Hexagon. Hexagon made two interim payments late. After the first default was cured before the 28-day period expired, Providence served a termination notice under clause 8.9.4 following the second late payment. An adjudicator found substantially for Hexagon. On Providence’s CPR Part 8 claim, the High Court held that clause 8.9.4 applied only where a right to give a clause 8.9.3 notice had accrued: [2023] EWHC 2965 (TCC). The issue on appeal was whether prior accrual of that right was necessary.

The Court of Appeal, in the judgment of Stuart-Smith LJ with which Popplewell and Coulson LJJ agreed, allowed the appeal.

1. Contractual construction. The 2016 JCT Form was a standard-form contract. Its interpretation required an intense focus on the words used, while taking account of the quality of the drafting and the agreement as a whole. The particular context in which the parties made the contract was unlikely to affect the construction of standard wording. Lamesa Investments Limited v Cynergy Bank Limited [2020] EWCA Civ 821 provided a suitable summary of those principles.
2. Meaning of clause 8.9.4. The words requiring that the contractor does not give the further notice under clause 8.9.3 covered every case other than one in which that notice was given. They did not imply that the contractor must previously have been able to give the notice. The words for any reason reinforced that conclusion.
3. Contractual context. Clauses 8.4 and 8.9 had materially congruent structures and used the same conditional wording. Clause 8.4.3 expressly covered a specified default ending either before or after the right to give a further notice accrued. The broader wording in clause 8.9.4 therefore also covered a case in which no such right had accrued.
4. Specified default and commercial consequences. The specified default was failure to pay by the final date for payment under clause 4.9, rather than failure relating only to the particular payment notice in which the first default occurred. Repetition of that default could therefore trigger clause 8.9.4. The commercial consequences of Providence’s construction were an acceptable allocation of contractual risk. Suspension, interest and adjudication did not provide an equivalent immediate remedy for repeated late payment.
5. The court was not assisted by comparing earlier JCT forms without evidence of the reason for the amendment. Such contractual archaeology should generally be discouraged, consistently with Seadrill Management Services Ltd v OAO Gazprom [2010] EWCA Civ 691 and The Rewa [2012] EWCA Civ 153.

• Court of Appeal (Civil Division): Allowed Providence’s appeal and held that clause 8.9.4 did not require a previously accrued right to give notice under clause 8.9.3.
• High Court, Technology and Construction Court: The Deputy Judge held that clause 8.9.4 required such a right to have accrued: [2023] EWHC 2965 (TCC).
• Adjudication: In July 2023, the adjudicator found substantially in favour of Hexagon.