Housing association set for Supreme Court appeal in payments battle with contractor

The dispute arose from a £7.2m contract Providence signed in February 2019 to carry out building work for a 37-flat housing scheme in Purley, south London.

When Hexagon missed the deadline for a payment of £260,000 to the contractor on 15 December 2022, Providence served a default notice against the housing association.

After Hexagon missed another payment deadline on 17 May 2023 for £360,000, the contractor issued a notice of termination to end the contract. Hexagon subsequently paid the sum claimed and began legal action. The housing association is now working with other contractors to complete the works.

Kerry Heath, development and sales director at Hexagon, 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 focused on completing the affected project, which will provide 37 much-needed affordable homes for rent.”

Darren Tancred, managing director of Providence, told Inside Housing: “We intend to contest Hexagon’s appeal. It is vital that contractors are paid promptly. We complained about the late payments that we received from Hexagon, and gave five notices of intention to suspend.

“We also gave a notice of specified default. However, the late payments continued. We finally gave a termination notice. As the collapses of Carillion and ISG show, it is crucial for the cash flow and survival of contractors and their supply chains that they receive payments on time.”

Mark London, senior partner at Devonshires, the law firm which 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.”

In the 2023 Court of Appeal ruling, the judge said that West Sussex-based Providence had a “battery of weapons available” to protect its cash-flow position.

These included a right to suspend the works, the payment of statutory interest and the right to refer disputes to adjudication.

However, in the High Court appeal won by Providence in August, the judges said they were not “persuaded” by the battery of other remedies.

“None provides a satisfactory and immediate solution to the typical case of late payment,” the judgment said. “Each involves a measure of delay, and in the case of suspension or resorting to adjudication, additional cost and uncertainty for the contractor in pursuing them.”