The boss of a West Sussex contractor that won a Court of Appeal challenge over a late payments dispute with a housing association says he is “delighted for the construction industry” over the unanimous decision.
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.
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.”
Good to hear that Providence won. If a client wants work done they should expect to pay for it, and on time. The contractor will have already incurred significant costs in producing the certified work in good faith, rightly expecting the employer to honour the payment terms under the contract. Late payment can have a disastrous outcome for a contractor who could, consequentially, find themselves unable to pay their own due obligations which can very quickly damage real people with real families. If the employer can’t afford or won’t honour their due responsibilities they shouldn’t commission the work in the first place. The article doesn’t explain if the project was actually finished but if Providence terminated with work still to do then, presumably Hexagon would have had to face a claim by Providence for loss of margin on the value of the projected balance of outstanding works, along with all the additional costs and disruption involved in arranging for others to complete the project. Perhaps they’d learn a lesson from that. Do the right thing!