The Providence Building Services Ltd v Hexagon Housing Association Ltd case was heard before the Court of Appeal in August 2024 where a complex point around issue of notices by a Contractor upon ‘specified default’ of an Employer and the lawfulness of subsequent termination of a contract was considered.
This case had been referred to the Court of Appeal following a decision at the High Court where the case was raised as a Part 8 claim for a declaration as to the correct construction of Clause 8.9.4 of the JCT 2016 Design and Build Form. A key point to note is that the wording of this clause had not been materially amended from the JCT standard form.
The Court considered the proper construction of Clause 8 of the standard form JCT. The issue was whether the Contractor was entitled to terminate under Clause 8.9.4 after the repetition of a ‘specified default’. In this case, there had been a ‘specified default’ by the Employer which had been rectified by the Employer within the ‘cure period’ following issue of notice by the Contractor. As the Employer had rectified the default there had been no right for Providence (the Contractor) to terminate. The ‘specified default’ being non payment by the Employer of a certified sum after the final date for payment. The ‘cure period’ being 28 days from the date of the notice. In this case, the Employer paid the certified sum within that specified cure period.
Clause 8.9.4 of the standard form JCT reads as follows: “If the Contractor for any reason does not give the further notice referred to in Clause 8.9.3, but (whether previously repeated or not) the Employer repeats a specified default … then …. the Contractor may by notice to the Employer terminate the Contractor’s employment under this Contract”. It would seem as though this implies that upon a repeated ‘specified default’ a Contractor would have to re-issue a fresh notice in order to trigger termination rights if the default is not remedied within the cure period.
The Court of Appeal unanimously decided that there was a right for a Contractor to terminate upon repetition of a specified default without serving a fresh notice. This decision means in practice that once a Contractor has served one noticed for a ‘specified default’, even when this default has been rectified, if an Employer makes another default there is no need for a Contractor to serve another notice and may terminate immediately. Essentially, once a notice has been served it stands forever.
This interpretation was the widespread understanding of the effect of the clause in the JCT standard forms up to 2005, however, this had not been considered by courts before this case with regards to the revised drafting in the 2016 or 2024 new standard form JCT contracts. This decision makes it clear that the revised drafting does not change the manner in which these termination rights operate.
This decision gives both Contractors and Employers clarity on the interpretation of the termination provisions under the standard form JCT contract. It also serves as a warning to Employers who repeat a default that the Contractor will have an automatic termination right and reminds Contractors that this is a right which they may wish to exercise.
Should you wish to discuss any of the issues raised in this article, please contact Anna Wood or Chloe Orledge.
