Just because you are the victim of a late paying client, you cannot assume that right is on your side.
That鈥檚 the lesson from a Supreme Court judgment handed down yesterday in the dispute between Hexagon Housing Association (the client) and Providence Building Services (contractor).
Hexagon argued that Providence was not entitled to terminate its contract with the housing association despite late payment of invoices.
The dispute arose from a JCT contract between Providence and Hexagon for the construction of six blocks of social housing in Purley, South London, valued at 拢7.2m.
The key issue was whether Providence could terminate its contract after 21 late payments, even after Hexagon had amended the standard JCT 2016 contract by changing payment terms from 14 to 28 days.
Providence was accused of being 鈥渢rigger happy鈥�. But the contractor said that it had been left with no alternative but to 鈥済o nuclear鈥� and walk away.聽
In December 2022, the Hexagon paid Providence 14 days late. In May 2023 Hexagon failed to pay on time for a second time and the Contractor, on the next day, issued a notice to terminate the contract.
Providence argued that the contract entitled it to terminate if Hexagon paid late twice (provided a specified default notice had been served by Providence in respect of the first late payment, which was the case here). Hexagon rejected that interpretation. It argued that the contract only entitled Providence to terminate for a second late payment if the first late payment had not ultimately been made within 28 days of its due date and here the first late payment had been paid within 28 days.
In November 2023 the Technology & 色猫直播 Court (TCC) ruled that, under the terms of the amended JCT Design and Build Contract 2016, it was necessary that Providence had accrued the right to terminate its employment. The judge ruled in favour of Hexagon.
Providence鈥檚 application for permission to appeal was initially denied in August 2024 the case was finally ruled on by the appeal court 鈥� in Providence鈥檚 favour.
In December 2024 Hexagon was granted permission to appeal to the Supreme Court.
The Supreme Court judgment was handed down on 15th January 2026, determining that Providence was not entitled to terminate the contract. The five law lords were unanimous on the basis of their interpretation of clause 8.9 of the JCT contract.
Firstly, they decided that the opening words of clause 8.9.4 mean that a contractor must have had an accrued right to terminate under clause 8.9.3 before clause 8.9.4 applies. If clause 8.9.4 merely means that the contractor is entitled to terminate the contract if the employer twice fails to pay it on time, its reference back to the preceding clause is superfluous. Put another way, if all that is needed for the contractor to terminate is that the employer has repeated a specified default, the clause would simply start with the later words, 鈥渋f the Employer repeats a specified default鈥�.
Second, the Supreme Court decided that it would be an extreme outcome 鈥� a sledgehammer to crack a nut 鈥� if a Contractor were entitled to terminate the contract because it received each of two payments a single day late. It would be less extreme if a second delay entitles the contractor to terminate the contract only where the first late payment has been delayed beyond the specified 28 days and has therefore been particularly serious.
The Supreme Court also makes clear that 鈥渋t would be wrong to distort the correct interpretation of the disputed termination clause as a way of protecting contractors from cash-flow difficulties caused by late payments鈥�.
Commenting on the judgment, Hexagon鈥檚 solicitor Mark London, head of the construction, engineering and procurement team at Devonshires, said: 鈥淗aving been somewhat surprised by the decision of the Court of Appeal I am now delighted that the Supreme Court have clarified the correct way to interpret the clause in question. In doing so it has brought certainty back to an industry where the use of JCT standard form is common.
鈥淲hile the judgment is important to the construction industry give the prevalence with which the JCT forms are used, this judgment will impact a significant number of parties and projects across the country. In an industry where 鈥榗ash is King鈥�, and project costs creep ever upward, the reversal of the Court of Appeal鈥檚 decision has clarified a power protection for employers.鈥�
Jonathan Lewis and Nick Kaplan of 4 Pump Court barristers鈥� chambers, acted for Hexagon in court. They said of the Supreme Court judgment: 鈥淭he decision is extremely important to the construction industry given the very wide use that is made of this standard form and indeed the fact that the new edition of the JCT D&B contract published in 2024 uses the same wording in its termination clauses as the 2016 edition. It will no doubt be met with differing enthusiasm by employers and contractors respectively.
鈥淚t is striking (and a reflection of the importance of the point), that the meaning of less than 20 words [clause 8.4 of the JCT D&B contract 2016] 聽has occupied nine of this country鈥檚 most senior judicial minds as well as that of an adjudicator, and with different conclusions being reached by the Court of Appeal and Supreme Court. However, the position is now settled.