CA-2024-002472 - [2025] EWCA Civ 1407

What Mr Justice Leggatt described in Involnert as the unfairness of the rule that an election to affirm requires knowledge of the right to elect is mitigated in a number of ways. For example, when the election arises from an express contractual right, it may be possible to construe the right in question as having to be exercised within a reasonable time, so that if not exercised the right will lapse. That was the approach of Lord Wilberforce in The Laconia [1977] AC 850, 872D to a shipowner’s right to withdraw from a time charter for the charterer’s failure to make punctual payment of hire. But it has not been suggested in the present case that URE’s right to terminate the contract in the event of an amalgamation would lapse, as a matter of construction of clause 10.2(d), if not exercised within a reasonable time.

A further practical mitigation of any unfairness lies in the healthy scepticism of first instance judges. A landlord who says that he was not aware of his right of re-entry or a shipowner who says that he was not aware of a right to withdraw a ship for non-payment of hire is not likely to be believed. Other examples of common situations where a right of termination arises could no doubt be given. In my view that is what Lord Justice Stephenson had in mind when he said at 487C that ‘common sense’ prevents landlords from saying that when they demanded rent from a tenant in breach of covenant they did not know that they had a right to retake possession and at 482H when he said that every lessor must know or be taken to know of the right of re-entry given him by the express terms of his lease. I do not read these passages as accepting a special legal rule of deemed knowledge in landlord and tenant or other categories of contract case. To do so would be inconsistent with Lord Justice Stephenson’s insistence that the principles of waiver by election are of general application (see para 66 above).

But judicial scepticism will have rather less force in the case of a contractual right which can fairly be described as buried in the small print of a detailed contract. In the present case clause 10.2(d) was one of nine sub-clauses in which URE was given a right to terminate the contract. Even within the sub-clause, solvent amalgamation was only one of a number of events which would trigger the right. The judge found it unsurprising that Mr Ensor assumed that the clause was dealing with insolvency related matters and did not apply to a solvent amalgamation. Indeed, at one time it was NHG’s case that Mr Ensor’s understanding was correct and that the clause did not entitle URE to terminate the contract.

Moreover, as explained in Moore Large v Hermes Credit & Guarantee and Involnert, as well as in Peyman v Lanjani itself, it will be presumed that a party who has legal advice is aware of its rights. But this is a presumption of fact which is capable of being rebutted, albeit that to do so will generally require a waiver of privilege. Thus what matters is what the party actually knows. In the present case URE did waive privilege and succeeded in rebutting the presumption.

I would add that the existence of this rebuttable presumption is inconsistent with any rule that a party is deemed to know its contractual rights as a matter of law. If there were such a rule, the presumption would not be necessary.

Finally, even where there is no election to affirm because the electing party does not know of its right to elect, sufficiently unequivocal conduct (viewed objectively) will found an estoppel where there is detrimental reliance by the other party. Thus estoppel may step in to provide a just result even when there is no relevant knowledge to found a waiver by election. But that possibility has been excluded in the present case by the decision of Mrs Justice Moulder that there was no detrimental reliance by NHG.