The UK Supreme Court has now handed down its decision in Providence Building Services Limited v Hexagon Housing Association Limited [2026] UKSC 1, resolving the question that divided the Technology and Construction Court and the Court of Appeal: Can a contractor terminate under clause 8.9.4 for repeated defaults if no prior right to terminate under clause 8.9.3 had accrued?
In summary, the Supreme Court reversed the Court of Appeal’s decision and confirmed that a contractor cannot rely on clause 8.9.4 to terminate for a repeated late payment unless it had previously acquired a right to terminate under clause 8.9.3.
Factual Background
Hexagon Housing Association Ltd (Hexagon), as Principal, and Providence Building Services Ltd (Providence), as Contractor, entered into a JCT Design and Build Contract in 2019 (Contract). The Contract provided mechanisms for interim payments and stipulated the conditions under which either party could terminate.
Clause 8.9 of the Contract allowed the contractor to terminate for defaults by the principal, including for non-payment. The relevant clauses are summarised below:
- Clause 8.9.1 allows the contractor to issue a notice specifying a principal’s default (e.g., non-payment) (Default Notice).
- Clause 8.9.3 permits termination by further notice if that specified default set out in the Default Notice continues unremedied for 28 days following issue of the Default Notice.
- Clause 8.9.4 allows termination if the contractor for any reason does not give the further notice referred to in clause 8.9.3, but the principal repeats the specified default.
The dispute arose when Hexagon made late payments on two occasions. Although Hexagon paid the sums due within 28 days of Providence issuing the Default Notice, Providence sought to terminate the Contract under clause 8.9.4, arguing that Hexagon had repeated a “specified default” i.e. non-payment by the final due date for payment.
The High Court initially found in favour of Hexagon, holding that termination under clause 8.9.4 could only occur if a right to terminate under clause 8.9.3 had previously arisen.
The Court of Appeal reversed this decision and held that clause 8.9.4 could be used even where no prior right to terminate had accrued. We have written about the Court of Appeal decision previously: Can Contractors Terminate for Repeated Late Payment?
Hexagon then appealed to the Supreme Court.
The Supreme Court’s decision
The Supreme Court unanimously allowed Hexagon’s appeal, confirming that a contractor cannot terminate where the principal has made a delayed payment within the contractual cure period.
It was held that clause 8.9.4 is not a free-standing right to terminate for repeated late payment. Rather, it is parasitic on clause 8.9.3 and only operates where a specified default has continued for the full contractual cure period, such that the contractor had an accrued right to terminate but chose not to exercise it. Where a principal cures the earlier default within the cure period, clause 8.9.4 is not engaged.
The Supreme Court placed particular emphasis on the opening words of clause 8.9.4, “If the Contractor for any reason does not give the further notice referred to in clause 8.9.3”, which it considered to presuppose the existence of an accrued termination right. It was found that Providence’s interpretation would have rendered those words redundant or unclear, and contrary to the standard principles of contractual interpretation.
The Supreme Court also rejected the Court of Appeal’s reliance on the similarity between clause 8.9 (termination by the contractor) and clause 8.4 (termination by the principal). Despite their structural resemblance, the clauses are not symmetrical as they address different obligations, provide for different cure periods, and use materially different wording. The Supreme Court considered those differences to be deliberate.
Finally, the Supreme Court was influenced by the practical consequences of the contractor’s position. If correct, even two minor late payments could justify termination of a substantial construction contract. That outcome was considered disproportionate, particularly given the range of other remedies available for late payment.
Relevance and Application in New Zealand
While this is a UK Supreme Court decision, it is likely to be of practical interest in New Zealand. NZS 3910:2023 (NZS 3910) contains detailed provisions governing payment obligations (primarily in clauses 12 and 13), default, and termination. Specifically, under NZS 3910 clause 14.3.1, a contractor may terminate if the principal fails to pay a certified amount by the due date and does not remedy the default within 10 working days of notice. However, NZS 3910 does not expressly provide a right to terminate for repeated payment defaults where each default is remedied within the applicable notice period.
The position under the JCT Design and Build Contract, as confirmed by the UK Supreme Court, is now broadly consistent with the position under NZS 3910. Termination for late payment will generally only be available where a payment default is sufficiently serious and remains unremedied so as to trigger an accrued right to terminate.
From a practical perspective, the Supreme Court decision reinforces that situations involving recurring late payments which are always remedied within the contractual notice period, even where they may reflect a persistent or wilful disregard of payment obligations, will not generally give rise to a contractual right to terminate. Where a contract includes a cure regime, compliance with that regime will usually prevent termination, regardless of how frequently the default occurs. That said, parties are not without protection. NZS3910 (unamended) provides for termination where a party has “persistently, flagrantly or wilfully neglect[ed] to carry out its obligation”. Termination where payment is not made in time (but is cured in response to a default notice) may be difficult to justify.
It remains open to parties to address persistent late payment through bespoke provisions, including good faith obligations or special conditions that provide for interest, compensation or damages where payment obligations are repeatedly breached. Contractors concerned about persistent cashflow issues should therefore ensure that their contractual protections are fit for purpose at the outset.
Finally, the Supreme Court also commented on the proper approach to interpreting industry standard form contracts. It emphasised that such contracts should be interpreted using orthodox principles of contractual interpretation, with primary focus on the objective meaning of the words used. Explanatory or guidance notes (such as those accompanying the NZS suite of contracts) may assist. This approach aligns closely with the New Zealand courts’ emphasis on certainty in the interpretation of standard form construction contracts and reinforces the need for clear and express drafting where parties wish to depart from the risk allocation reflected in those forms. The Supreme Court also noted that while court decisions on the specific standard form may assist, it discouraged reliance on or analysis of earlier iterations of such standard forms.
If you have any questions about construction contracts, please get in touch with our Construction Team or your usual contact at Hesketh Henry.
Disclaimer: The information contained in this article is current at the date of publishing and is of a general nature. It should be used as a guide only and not as a substitute for obtaining legal advice. Specific legal advice should be sought where required.
