Hexagon granted permission to appeal Providence ruling

Throughout the contract Providence received 20 payments beyond the final date of payment. Despite receiving five suspension notices and specified default notices, Hexagon continued to pay late.
Throughout the contract Providence received 20 payments beyond the final date of payment. Despite receiving five suspension notices and specified default notices, Hexagon continued to pay late.

Hexagon and Providence have been engaged in a long running legal dispute about whether the contractor was wrong to terminate its contract with the housing association after enduring persistent late payment.

In the latest development Hexagon has been allowed to appeal a Court of Appeal ruling from August this year. The judgment overturned a High Court decision that found in Hexagon’s favour in 2023. [See previous report here.]

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 £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 “trigger happy”. But the contractor said that it had been left with no alternative but to “go nuclear” and walk away.  

Responding to being granted permission to appeal, Hexagon development & sales director Kerry Heath said: “We are pleased to have been granted permission to appeal by the Supreme Court and look forward to seeing a conclusion to this ongoing dispute. In the meantime, we remain focussed on completing the affected project which will provide 37 much needed affordable homes for rent.”

Mark London, senior partner at Devonshires,  who represents Hexagon, said: “We are grateful to the Supreme Court for granting permission to appeal on this important matter for the construction sector. We look forward to setting out our arguments in full in court.”

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Darren Tancred, managing director of Providence Building Services, said that Providence intends to contest the appeal.

He said: “The Court of Appeal decided unanimously that Providence’s termination of the JCT Design and Build Contract 2016 under clause 8.9.4 was correct. It found that Hexagon had repeated a specified default, and that Providence was entitled to terminate the contract accordingly.

“The dispute with Hexagon…arose after it had made in excess of 20 late payments beyond the agreed 28-day payment period. A number of payments were very late indeed. Providence’s decision to terminate followed various complaints, the service of five notices of intention to suspend and the issue of a specified default notice. The Court of Appeal’s decision followed its interpretation of the relevant words in clause 8.9.4, both in isolation and in the wider context of the other relevant provisions in the JCT Contract concerning termination.

“The Court of Appeal’s decision was made on the 2016 edition of the JCT Contract. The same wording is in the 2024 edition. The decision is the same as earlier High Court decisions on the 1998 edition of the JCT Contract which, although differently worded, imposed the same regime.

“Given the recent failures of Carillion and ISG, ensuring proper payment of contractors in the construction industry is obviously of vital importance, to preserve their cashflow and prevent them and their supply chains from falling into insolvency.”

No date has yet been set for the hearing, but it is expected to be held next year.

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