East Grinstead-based Providence Building Services appealed a ruling that declared it was not allowed to terminate a contract with its employer following repeated late payments.
In this case, the contractor had entered a JCT contract with Hexagon Housing Association Ltd to construct some buildings at a site in Purley.
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Hexagon was committed under this contract to paying a £260,000 bill in relation to this job by 15 December 2022, but failed to do so. Another invoice for £360,000 was also not paid on time. The issue escalated and Providence issued a notice of termination and walked off the job.
‘A battery of weapons available’
Hexagon eventually paid the outstanding bills but challenged Providence’s termination of the contract. The housing association referred the dispute to the adjudicator, who ruled in its favour in November 2023.
Adrian Williamson KC, sitting as deputy high court judge, agreed with Hexagon’s counsel who said the contractor had “a battery of weapons available to him to protect his cash flow position”, including the right to suspend the works, the payment of statutory interest and the right to refer disputes to adjudication.
Therefore, Williamson stated that it wasn’t “necessary or appropriate” to terminate the contract under those circumstances.
Providence appealed the decision, arguing that the JCT contract allowed it to terminate it if Hexagon repeated the same type of default, regardless of whether the first default had been fully rectified within the grace period.
The Court of Appeal considered Providence’s contractual right to terminate the JCT contract in circumstances of repeat late payment by the employer, in this case Hexagon, and ruled in the contractor’s favour.
Good news for contractors
Darren Tancred, managing director of Providence Building Services, said: “We are delighted with the unanimous decision handed down by the court.
“Not just for Providence and our supply chain who were caught up in Hexagon’s poor payment practices. We are also delighted for the construction industry which can now rely on the final date of payment being the final date without fear of when and if we would be paid. Frankly, 21 days late payments is unacceptable for any company to tolerate.
“The decision means that the business can continue to operate in providing a proactive and collaborative service.”
