Providence v Hexagon: Supreme Court clarifies specified default and accrued rights of termination under a JCT Contract

Yesterday, the Supreme Court handed down its judgment in the case of Providence Building Services Ltd v Hexagon Housing Association Ltd [2026] UKSC 1, reversing the Court of Appeal’s decision by concluding that, based on the objective and natural meaning of the clauses, a contractor cannot terminate its employment under clause 8.9.4 of the JCT Design and Build Contract (2016) unless it has accrued (but not exercised) a right to terminate their employment under clause 8.9.3.

Facts:

Hexagon (the Employer) and Providence (the Contractor) entered into an amended JCT Design and Build Contract (2016 edition) in February 2019, for the construction of a number of buildings in London (the Contract).

The Contract provided that if a specified default (including late payment of an amount due to the Contractor) continued for 28 days from the Employer’s receipt of a notice of specified default, the Contractor would be entitled to terminate their employment by further notice. Payment Notice 27 was due for payment on 15 December 2022. The Contractor served a notice of specified default (pursuant to clause 8.9.1 of the Contract), and the Employer paid in full on 29 December 2022.

Payment Notice 32 was due for payment on 17 May 2022.

The Employer did not make payment as required, and the Contractor issued a termination notice on the Employer on 18 May 2022, relying upon the Employer’s late payment of Payment Notice 27 as a repetition of a specified default. The Employer made full payment of Payment Notice 32 on 23 May 2022, and disputed the lawfulness of the Contractor’s termination notice.

The Employer referred the dispute to adjudication, after which the Contractor issued proceedings.

Submissions:

The Employer submitted that, as a condition of the Contractor issuing a termination notice under clause 8.9.4 of the Contract, the Contractor must first have accrued the right to serve such a notice under clause 8.9.3 (i.e. the Employer’s specified default must have remained ‘uncured’ within 28 days – that being the time period agreed between the parties in the Contract).

The Contractor argued that no such accrual was required, and that the Contractor was entitled to serve a valid termination notice following the Employer’s repetition of a specified default (and the Contractor’s valid serving of an earlier notice of specified default).

Judgment:

The Supreme Court found in favour of the Employer.

In reaching their unanimous decision, the Supreme Court considered:

• the objective and natural meaning of the clauses in question, concluding that the interpretation by the Contractor (ie that the Contractor was entitled to immediately terminate their employment if the Employer made two late payments) was ‘extreme’.
• that the direct reference in clause 8.9.4 to the Contractor not giving a termination notice under clause 8.9.3 made clause 8.9.4 ‘parasitic’, and clause 8.9.3 a ‘gateway’ to termination under clause 8.9.4.
• that it was irrelevant that the Employer did not need to accrue a right to terminate in the event of the Contractor repeating a specified breach; it was found that this asymmetry was clearly the intention of the JCT drafter and the parties, on the basis that the base time periods specified by the parties were different, the references to compliance with other clauses were amended by the parties, and the unamended wording in clauses 8.4 and 8.9 were different.

What does this judgment mean in practice?

For employers, the judgment highlights the importance of ‘curing’ specified defaults within the periods specified within the contract, to avoid a contractor accruing the right to terminate. In this case, had the Employer failed to pay Payment Notice 27 within 28 days following receipt of the Contractor’s notice of specified default, the Contractor would have been entitled to validly terminate their employment upon the Employer’s failure to pay Payment Notice 32.

Given the wide-ranging use of the JCT Design and Build Contract (2016), and the fact that the current 2024 Edition uses the same wording, all those involved in the negotiation of standard form contracts (employers, contractors, and practitioners) should think carefully about the objective and natural meaning of the draftsman, and the importance of usual principles of contractual interpretation.