Project Bank Accounts are meant to be one of construction’s safest protections for subcontractors, ring-fencing money in the event that the main contractor becomes insolvent. But what happens when the PBA promised in the contract is never set up? E & TL Jones (Civils) Ltd v Vale of Glamorgan Council [2026] tackles exactly this question.
What happened?
Vale of Glamorgan Council engaged ISG Construction to extend a school in Penarth, with the contract requiring a Project Bank Account to protect subcontractors. The PBA was never established—largely due to delays on the banking side—so the council continued paying ISG directly. When ISG went into administration owing E & TL Jones (“ETJ”), its groundworks sub-contractor, roughly £486,000, ETJ tried to recover the money directly from Vale of Glamorgan, arguing it was a protected beneficiary of the PBA arrangement.
What did the Court decide?
- ETJ had no enforceable rights against the council under the Contracts (Rights of Third Parties) Act 1999 because it had never formally joined the PBA by signing the required Joining Deed. Being a “PBA-eligible” subcontractor in principle was not enough.
- The council was not in breach of contract for paying ISG directly, outside of the PBA, since the PBA was never operational through no fault of its own.
- Even if there had been a breach, ISG’s own acceptance of the direct payments from the Vale of Glamorgan amounted to a waiver that ETJ inherited.
- ETJ’s claim was dismissed in full.
What can we learn from this?
This case shows how quickly the PBA mechanism can unravel if the PBA is not properly established, operated and joined from the outset. Subcontractors should actively confirm their PBA status in writing, particularly where a main contractor’s finances look shaky, rather than assuming contractual wording provides cover.
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This article contains information of general interest about current legal issues, but does not provide legal advice. It is prepared for the general information of our clients and other interested parties. This article should not be relied upon in any specific situation without appropriate legal advice. If you require legal advice on any of the issues raised in this article, please contact one of our specialist construction lawyers.
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