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

Mrs Justice Dias identified the issues arising out of the amalgamation as follows, drawing on a list of issues which the parties had prepared:

‘66. Did URE waive by election its right under clause 10.2(d) to terminate the Contract?

i)

Was URE aware of its right to terminate and, if so, when?

ii)

Is it to be inferred that URE was advised and so aware of its right to terminate because it was in receipt of advice from Burges Salmon?

iii)

Did URE waive its right by continued performance?

iv)

Is URE to be deemed to have elected to continue with the Contract through lapse of time?’

She recorded that there was no material dispute between the parties as to the applicable principles for a waiver by election, which were derived from Lord Goff’s speech in The Kanchenjunga [1990] 1 Lloyd’s Rep. 391 at 397-399 and from the decision of this court in Peyman v Lanjani [1985] Ch 457 at 487, 494, 500. She summarised these as follows:

‘i) Where a party (A) becomes entitled to a terminate a contract, whether pursuant to a contractual right or a repudiatory breach by the other party or otherwise, it must elect whether to exercise that right or not;

ii)

In order to make that election, A must be aware both of the facts giving rise to the right to terminate and of the right itself;

iii)

A must actually make a decision. If it does not, the time may come when the law nonetheless deems an election to have been made;

iv)

If, with the requisite knowledge set out in ii) above, A acts in a manner which is consistent only with one or other of two inconsistent courses, it will be held to have elected accordingly;

v)

An election can be made by any words or conduct which communicates an intention to choose one or other course of action but, particularly where A has elected to abandon a right which it would otherwise possess, such election must be communicated in clear and unequivocal terms.’

Turning to the issue of knowledge, the judge found (and it has not been challenged) that the relevant knowledge was that of Mr Ensor. She found that although Mr Ensor was clearly aware that the amalgamation had taken place, and therefore had knowledge of ‘the facts giving rise to the right to terminate’, he did not know that the contract gave URE such a right. He had skim read the contract, including clause 10, at the time when it was concluded, so he was aware that the contract included termination rights and that termination by URE would trigger a termination payment, but he did not give the clause much attention and thought that clause 10.2(d) was dealing with the position on an insolvency. Until his conversation with Mr Burnette on 5^th November 2018, it had not occurred to him that URE would have a right to terminate in the event of a solvent amalgamation and he had never received any legal advice about this provision of the contract. Thus, although there was an evidential presumption that a party in receipt of legal advice has been appropriately advised and is aware of its rights, for which the judge cited the decision of Mr Justice Colman in Moore Large & Co Ltd v Hermes Credit & Guarantee Plc [2003] EWHC 26 (Comm), paras 105-106, [2003] Lloyd’s Rep IR 315, having waived privilege in the advice given by Burges Salmon, URE had successfully rebutted that presumption. Nor was it a case of ‘blind eye’ knowledge: there could be no question of Mr Ensor making a deliberate decision to avoid discovering whether the amalgamation would give URE a right to terminate in the absence of any suspicion by him that there might be some relevant provision in the contract having that effect.

These are findings of fact which NHG does not have permission to challenge on this appeal. The appeal must therefore be decided on the basis that URE did not know of its right to terminate the contract as a result of the amalgamation until 5^th November 2018 and that it made no decision to avoid acquiring such knowledge such that it should be treated as having done so.

On that basis the judge found that NHG’s defence of waiver by election failed. She went on to conclude that if URE had known of its right, its conduct in continuing to supply energy and submit monthly invoices to NHG, combined with its efforts to achieve the AMR rollout and continuing negotiations for the long-term contract, would have been sufficiently clear and unequivocal, on an objective basis, to amount to a waiver. She held also that URE should not be deemed to have elected to continue with the contract as a result of the lapse of time before exercising the right to terminate.

Accordingly URE had not lost the right to terminate the contract as a result of any election, despite the fact that if it had been asked in advance to give its approval, it would probably have done so. It had validly terminated the contract by its notice of 14^th November 2018 and was entitled to a termination payment. The judge commented that this was not an unjust result because NHG would have been able to rely on a defence of estoppel if it had been able to prove any detrimental reliance.

URE also advanced a case based on a right to terminate for a material breach of the contract as a result of NHG’s failure to provide access to electricity meters, but the judge rejected this case and it has not been pursued on appeal. It is therefore unnecessary to say anything further about it.

Finally, the judge dealt with the quantum of the termination payment. She accepted URE’s case that it was entitled to 50% of the anticipated future income over the remaining life of the contract, which was agreed as a figure to be £3,946,861.56, and rejected NHG’s case that URE was limited to the net profit that it would have made over the remaining term.