Providence Building Services Limited v Hexagon Housing Association Limited

An industry-wide standard form contract is interpreted objectively and contextually, using the established principles of contractual interpretation. Its provisions should generally bear a consistent meaning for all users of the form.

Under clause 8.9.4 of the JCT Design and Build Contract 2016, a contractor may terminate for a repeated specified default only if a right to terminate under clause 8.9.3 previously accrued. The earlier default must therefore have remained uncured throughout the contractual cure period. Similar but differently worded employer and contractor termination provisions need not be construed symmetrically.

The parties entered into an amended JCT Design and Build Contract 2016. After the employer cured an initial late payment within the contractual 28-day period, it made another payment late. The contractor treated the second late payment as a repeated specified default and purported to terminate under clause 8.9.4.

The High Court held that clause 8.9.4 applied only where a right to terminate under clause 8.9.3 had previously accrued: [2023] EWHC 2965 (TCC). The Court of Appeal reversed that decision: [2024] EWCA Civ 962.

The issue before the Supreme Court was whether the contractor could terminate under clause 8.9.4 where the right to give the further termination notice mentioned in clause 8.9.3 had never accrued.

1. Appeal allowed unanimously. Lord Burrows delivered the judgment, with which Lord Reed, Lord Briggs, Lord Stephens and Lord Richards agreed. Clause 8.9.4 did not permit the contractor to terminate where no right to give a further notice under clause 8.9.3 had previously accrued.

2. The established objective and contextual approach to contractual interpretation applies to an industry-wide standard form. Such a form should usually receive a consistent interpretation for all users. The relevant context may include the background generally known within the industry and, in an appropriate case, the objective intentions of those responsible for drawing up the standard form. This remains an application of the parties’ objectively ascertained intentions, rather than a distinct interpretative regime.

3. The opening words of clause 8.9.4 made it parasitic on clause 8.9.3. Clause 8.9.3 was the gateway to clause 8.9.4. A contractor could therefore terminate for a repeated specified default only if the earlier default had remained uncured for 28 days, so that a right to terminate had accrued, but the contractor had not exercised that right. The words “for any reason” covered every reason for not exercising an accrued right; they did not extend the clause to a case in which no such right had arisen.

4. This construction gave operative meaning to the opening words and produced a rational result. The contrary construction would permit termination following two minor late payments, provided that notice had been given for the first. Clause 8.2.1, which prohibited unreasonable or vexatious termination, afforded insufficient protection against that extreme consequence.

5. The Court of Appeal had placed excessive weight on the similarly structured employer termination provision in clause 8.4.3. The employer’s and contractor’s rights need not be symmetrical because their obligations differed. The clauses also prescribed different periods and used materially different words. Clause 8.4.3 expressly covered an earlier default which had ended; clause 8.9.4 did not.

6. The contract guide, earlier JCT forms, decisions concerning those forms and the contractor’s other cash-flow remedies did not assist with the disputed construction. If wider contractor protection was desirable, alteration of the standard form was a matter for the JCT.

1. United Kingdom Supreme Court: By [2026] UKSC 1, unanimously allowed the employer’s appeal and restored the High Court’s interpretation of clause 8.9.4.

2. Court of Appeal: By [2024] EWCA Civ 962, allowed the contractor’s appeal. It held that clause 8.9.4 did not require a previously accrued right to terminate under clause 8.9.3.

3. High Court, Technology and Construction Court: By [2023] EWHC 2965 (TCC), held that termination under clause 8.9.4 required a right to terminate under clause 8.9.3 to have accrued previously.

4. Adjudication: Before the court proceedings, an adjudicator found largely in the employer’s favour.