Termination by a contractor for a repeat default by an employer under the JCT Design and Build Contract

The Court of Appeal has handed down judgment in the case of Providence Building Services Limited v Hexagon Housing Association Limited. [2024] EWCA Civ 962. This case focuses on the interpretation of the JCT D&B 2016 termination provisions, in particular the meaning of clause 8.9.4, repeated specified default, by the Employer. Clause 8.9.4 says:

"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):

     .1    the Employer repeats a specified default; or

     .2     a specified suspension event is repeated for any period, such that regular progress of the Works is or is likely to be materially affected thereby, 

then, upon or within a reasonable time after such repetition, the Contractor may b notice to the Employer terminate the Contractor's employment under this Contract"

In summary, the Contractor, Providence, served a default notice under clause 8.9.1 when the Employer, Hexagon, did not pay on time. Hexagon rectified its default (by making payment within 14 days of receipt of the notice). Providence could not serve a termination notice under clause 8.9.3 as this can only be done if the failure to pay continues beyond 14 days after the Employer has received the notice under clause 8.9.1. 

Hexagon later failed to make a further payment within the time frame set out in the contract and Providence then served notice under clause 8.9.4 to terminate the contract.

Hexagon challenged the validity of the clause 8.9.4 termination notice, arguing that Providence could not do this because it had not served a notice under clause 8.9.1 for this particular missed payment.

The Court of Appeal confirmed that a clause 8.9.4 termination notice can be given in such circumstances and that Providence could rely on the initial failure to pay as the specified default required under clause 8.9.4, even though that failure was rectified within the 14 day period.

This decision means that under clause 8.9.4 of the JCT Design and Build 2016, which is also present in the JCT Design and Build 2024, if a Contractor serves a clause  8.9.1 notice for non-payment, even where that breach is rectified within 14 days, any delay to future further payments will leave the Employer at risk of an immediate termination notice under clause 8.9.4.