URE Energy Limited v Notting Hill Genesis

This appeal is concerned with the principle of waiver by election. Specifically, does the decision in Peyman v Lanjani [1985] Ch 457, that a party entitled to rescind or avoid a contract will not be held to have elected to affirm it unless it knows that it has such a right, apply when the right in question is contained in an express term of the contract? Put another way, is a party with an express contractual right to terminate the contract in certain events, who continues to perform for a period of months after such an event has occurred, entitled to say that its conduct does not amount to an election to affirm the contract because it did not know that the contract entitled it to terminate?

The judge, Mrs Justice Dias, held that the right to terminate the contract was not lost as a result of an election to affirm in such circumstances and, although for my part the result seems counter-intuitive, and indeed unmeritorious on the particular facts of this case, I have concluded that she was right to do so.

The claimant, URE Energy Ltd, is a start-up company purchased by Mr Gary Ensor with the aim of supplying electricity to the Genesis Housing Association on a long-term basis. His idea, developed in discussions with Mr Paul Jameson, then the Procurement Director at Genesis, involved the installation of LEDs across Genesis’s entire estate and the construction by URE of a solar farm to generate electricity which URE could then supply to Genesis along with energy from other renewable sources. This would involve substantial capital outlay funded by borrowing, which would be recovered over a period of 25 years, while simultaneously delivering savings to Genesis through reduced consumption and lower energy charges than would be payable to a conventional supplier. It was therefore critical to the success of this scheme that URE would be able to conclude a long-term contract with Genesis, although such contracts were uncommon in the industry.

While these discussions were at an early stage, on 25^th July 2017 Genesis launched a tender process for a fixed term supply contract for the supply of electricity over a three or four year period. However, this tender process was cancelled and replaced, on 31^st August 2017, by a second tender process which included the opportunity to bid for a 25 year contract. On 11^th September 2017 URE submitted a bid for the 25 year contract which included the installation of LED lighting in the communal areas of the entire Genesis estate, the construction of a 5 megawatt solar farm, and the upgrade of all existing electricity meters to smart meters with automated meter reading (or ‘AMR’).

URE’s bid was successful, but the parties were not in a position to conclude a 25 year contract at that point, not least because URE still needed to obtain funding for the construction of the solar farm. It was therefore agreed that they would start negotiations for such a contract, but in the meanwhile would enter into a four year short-term contract as a ‘placeholder’, to be superseded by the long-term contract in due course. However, as Genesis had made clear in its tender documents, it was not committed to any long-term contract and was at liberty to withdraw from negotiations at any stage, although it appears that Mr Ensor had not appreciated this.

Genesis’s contract with its existing electricity supplier was due to expire on 1^st October 2017, after which it would be moved to much higher ‘deemed rates’ for the continuing supply of electricity to its estate. As a result there was an element of urgency in entering into the new contract. In the event the new contract with URE was concluded on 29^th September 2017. It was a detailed contract for the supply of electricity to Genesis’s housing estate, for a four year period from 1^st October 2017, in the negotiation of which both parties had specialist assistance: in URE’s case from its solicitors, Burges Salmon; and in Genesis’s case from a specialist broker, Fidelity Energy Ltd. The contract was drafted by Burges Salmon, based on a precedent which was suitably adapted to reflect the parties’ agreement.

The contract provided for payment of ‘Charges’ based on meter readings where available, and otherwise on the basis of estimates made by URE, with payments being made monthly in arrears. However, because URE was a start-up company without resources of its own and with no other customer, and because funding had not yet been obtained, it was agreed that initially URE would be paid quarterly and subsequently, from March 2018, monthly, in advance. It was common ground between the parties that there was such a collateral agreement, apparently not recorded in writing, and that it was to be temporary, but an issue was to arise as to how long it was intended to last.

The contract contained provisions requiring Genesis to allow reasonable access to read, install, remove, and replace meters, and permitted URE to replace existing meters with meters which could be read remotely.

It also included a term entitling URE (‘the Supplier’) to terminate the contract in certain events, including the passing of a resolution by Genesis for its amalgamation:

‘10.2 The Supplier may terminate this Contract at any time for all or any Supply Premises if: …

(d)

the Customer passes a resolution for its winding up which shall include amalgamation, reconstruction, reorganisation, administration, dissolution, liquidation, merger or consolidation (other than a solvent amalgamation, reorganisation, merger or consolidation approved in advance by the Supplier) or a petition is presented for, or a court of competent jurisdiction makes an order for, its winding up for dissolution, or an administration order is made in relation to it or a receiver is appointed over, or an encumbrance takes possession of or sells, one or more of its assets or the Customer makes an arrangement or composition with its creditors generally or ceases to carry on business; …’

This was one of nine grounds for termination set out in clause 10.2. Some of these grounds involved a breach of its obligations by Genesis, while others did not. One of the grounds for termination, in clause 10.2(b), was the commission of a ‘material breach’ of the contract by Genesis which, where capable of remedy, was not remedied within 10 days from the giving of a notice by URE requiring such remedy. Clause 10.2 entitled URE either to terminate the contract in its entirety if any of these termination events occurred or to limit the termination to specified ‘Supply Premises’, that is to say premises to which URE was supplying electricity.

The clause went on to provide for a payment to URE in the event of a termination pursuant to clause 10.2:

‘10.5 Where, in relation to any Supply Premises, this Contract is terminated by the Supplier pursuant to clause 10.2, the Customer shall within 10 days of the termination date pay to the Supplier the [sic.] 50 percent of the remaining value of this Contract to the Supplier in respect of the relevant Supply Premises (as determined by the Supplier acting reasonably) as notified by the Supplier.’

The contract also identified circumstances in which Genesis would be entitled to terminate the contract, but contained no provision for a termination payment in that event.

It also contained the following term:

‘13.1 No delay or omission by either party in exercising any right, power or remedy under this Contract shall be construed as a waiver of such right, power or remedy and any single or partial exercise shall not prevent any other or further exercise of the same or the exercise of any other right, power or remedy.’

Although URE supplied electricity from the start date of 1^st October 2017, the start of the planned rollout of AMR meters was delayed while URE put funding in place for their purchase and while decisions were made as to the type of meters which should be installed. In the event the rollout did not begin in earnest until June 2018. When it did, URE encountered significant problems because Genesis’s site managers did not engage with the process, which meant that it proved impossible to arrange appointments for the installation of the new meters.

Meanwhile, on 1^st February 2018, Genesis passed a special resolution providing for a merger with another housing association, Notting Hill Housing Trust. The merged entity would become Notting Hill Genesis (‘NHG’), a publicly funded charitable organisation which is the defendant and appellant in these proceedings. It is common ground that NHG succeeded to the rights and obligations of Genesis under the contract with URE.

Notice of the forthcoming amalgamation was sent to existing suppliers of Genesis, including URE, on 22^nd March 2018 in the following terms:

‘Notice of amalgamation between Notting Hill Housing Trust and Genesis Housing Association

As you are a supplier to Genesis Housing Association I am writing about the contract(s) we have with you and the proposed merger. Genesis Housing Association Limited (Genesis) and Notting Hill Housing Trust (Trust) are proposing to merge. The merger will be completed through the amalgamation of Genesis and the Trust under section 109 of the Co-operative and Community Benefit Societies Act 2014 (Amalgamation). The Amalgamation will create one new “combined” society which has a new legal identity which will be called Notting Hill Genesis (NHG). We have been progressing toward the Amalgamation for some time and are aiming to complete the Amalgamation around Easter.

The effect of the Amalgamation is that all of our properties and other assets, including our Contract(s) with you, will automatically vest in NHG. Consequently, there is no novation or assignment of any Contract required. NHG will assume responsibility for the performance of our obligations from the date of completion of the Amalgamation.

Our amalgamation date is planned for early April 2018; when completed you will be dealing with Notting Hill Genesis (NHG), a new legal entity. We will contact you again in April, once the amalgamation is complete, to tell you about our new address and other legal identifiers, such as our new VAT number.

For the moment it continues to be “business as usual” with respect to invoicing, payment terms, receipt of payment and contact details. Please continue to send all communications to the current address and individual/department with whom you deal at the moment. You can find more information on our websites …, but please let me know if you have further questions or if you’d like to discuss in more detail how our plans might affect how we work with you. You can send any queries to me via …

Yours sincerely,

Paul Jameson’

URE did not reply to this letter. It had not been expressly asked for its approval, as it might have been pursuant to clause 10.2(d), but it is clear that URE in the person of Mr Ensor neither had nor expressed any objection to the amalgamation. If anything, Mr Ensor regarded it as a positive development because of the increased customer base to which URE would have access. But he did not express this view to NHG.

The amalgamation was formally registered on 3^rd April 2018. On 4^th April 2018, NHG wrote to the suppliers of the former Genesis and Notting Hill housing associations informing them that they would need to amend their records to reflect the new name of NHG but that this was the only action they needed to take. On 6^th April 2018, Mr Ensor emailed a copy of the 22^nd March notice to Mr Andrew Meaden, an associate at Burges Salmon, informing him that ‘the merger completion was confirmed to me yesterday so we will need to mark all of the contracts/schedules with the new entitles [sic.] name.’

At about the same time, on 12^th April 2018, the first draft of the proposed long-term contract was sent to Mr Ensor.

On 20^th April 2018, Mr Ensor asked Mr Jameson for details of the new organisation for invoicing purposes. In his response, Mr Jameson confirmed that the invoicing remained the same save for the change in name. Otherwise, business continued between the parties as normal both as regards the operation of the contract and the negotiations for the long-term contract.

By October 2018 the parties’ relationship was beginning to cool. NHG was concerned about what it regarded as overcharging of its residents by URE, while URE was complaining about the lack of access to sites, which meant that bills had to be estimated and AMR meters enabling accurate billing could not be installed. It was at this stage also that the issue about the payment terms arose. While Mr Ensor believed that the agreement for payment in advance was to last until the long-term contract was in place, NHG’s understanding was that it was only to last for one year, after which the parties would revert to payment in arrears.

Matters came to a head at the beginning of October 2018 when URE submitted its invoice for November’s estimated supplies. This was queried by NHG on the basis that payment in advance had only been agreed for one year, after which invoices would revert to being settled in arrears. In an email dated 8^th October 2018, NHG informed Mr Ensor that the matter had been referred to its directors and that it could be a real problem.

The parties met on 9^th October 2018 to discuss both the long-term contract (which was still under negotiation) and NHG’s proposed change to the payment arrangement. Mr Ensor asked whether NHG would be prepared to allow a three-month notice period before reverting to billing in arrears in order to allow URE to put funding in place. However, this request was refused by NHG. On 17^th October 2018 NHG informed Mr Ensor by telephone that the payment terms were to revert to the contractual position with immediate effect. Mr Ensor’s response was that this would likely result in URE being wound up.

In an attempt to resolve the issue over payment terms, Mr Ensor emailed NHG on 23^rd October 2018 making clear that it had not been his understanding that the advance payment agreement was only to last for one year and proposing a short-term factoring arrangement whereby URE would get paid in advance but NHG would only pay in arrears. However, NHG did not accept this proposal.

In fact, NHG had decided by this time that it wanted to end its relationship with URE, and on 29^th October 2018 gave written notice (as it was entitled to do) that it no longer intended to proceed with the long-term contract. This was devastating news for URE, for whom this contract was critical. It had no other customers and the long-term contract, which it thought it had effectively secured, was critical to generating the income which it needed to sustain the business and also to clear Mr Ensor’s personal debts. He had not appreciated that NHG was under no binding obligation to proceed with the long-term contract.

On receipt of this message, Mr Ensor sought advice from Burges Salmon whether URE could argue that NHG was bound to continue with the long-term contract, alternatively that it had constructively terminated the four year contract by restricting URE’s ability to trade through changing the payment terms. He was acutely aware of the real possibility that URE might have to be placed in administration. He followed this with requests for advice as to URE’s rights if NHG had not provided access for the purpose of taking meter readings and enabling the installation of AMR meters, but did not at this stage refer to the amalgamation or clause 10.2(d).

Having received some advice from Burges Salmon, Mr Ensor drafted a letter (without the solicitors’ input) which was hand-delivered to NHG on 31^st October 2018. After complaining about the termination of negotiations for the long-term contract, the letter gave notice of termination of the four year contract on the ground of NHG’s failure to provide access for the replacement of electricity meters, which it alleged was a breach of clause 10.2(b). URE claimed a termination payment of £3,999,457.38, being 50% of the estimated charges which would be payable to URE over the remaining term of the contract. The letter’s only mention of the amalgamation was a complaint that NHG’s assurance that the amalgamation ‘would have no impact on our ongoing interactions with you’ and was ‘merely a name change’ was ‘patently not true’.

However, after Burges Salmon had queried with Mr Ensor whether URE had given 10 days’ notice to remedy the breach as required by clause 10.2(b), URE decided to revoke its termination of the contract and did so by a letter dated 2^nd November 2018 which maintained that NHG was in material breach of the contract for failing to provide access and requested it to remedy the situation within 10 days.

On 5^th November 2018 a telephone conversation took place between Mr Ensor and Mr Andrew Burnette, a litigation partner in Burges Salmon, during the course of which Mr Burnette advised that URE could have a right to terminate without notice on the basis that NHG had not sought URE’s approval for the amalgamation. This was the first occasion on which Mr Ensor became aware that URE might have such a right.

This led to a second termination letter, this time from Burges Salmon and dated 7^th November 2018. After demanding payment of outstanding invoices on the basis that the advance payment arrangement was still in operation, the letter continued as follows:

‘OTHER BREACHES OF CONTRACT

The amalgamation of Notting Hill Housing and Genesis Housing Association in April 2018 without approval in advance by our client entitles our client to terminate the Contract pursuant to clause 10.2(d). Giving our client notice of the amalgamation shortly beforehand does not amount to the seeking of approval.

Accordingly, our client hereby gives notice pursuant to clause 10.4 that the Contract will terminate at 4pm on 14 November 2018. If NHGHA has not put in place a replacement supplier by this date, then clauses 10.9 and 2.3 shall apply, such that our client will continue supply under a deemed contract at the Deemed Tariff Rates as notified to you in our client's letter dated 31 October 2018.

Further, NHGHA has been in persistent, long-standing and material breach of clause 6.3 of the Contract by failing to allow our client's representatives to have reasonable access to Metering (as defined). This is a matter which has been drawn to your attention by our client on a number of occasions and, we understand, is acknowledged by you. The denial of access to Metering amounts to a fundamental obstruction to our client's effective performance of the Contract. It means that our client cannot acquire accurate data for billing purposes nor exchange meters for smart meters to enable collation of accurate consumption data for estimating purposes.

Our client has already given you notice to remedy this breach of the Contract within 10 days (by 14 November 2018). We further consider that your client's clear breaches of clause 6.3 inevitably amount to breaches of clause 5.1.

CONSEQUENCES OF TERMINATION

In accordance with clause 10.5 of the Contract, upon a termination by our client pursuant to clause 10.2, NHGHA is obliged to pay our client 50% of the remaining value of the Contract within 10 days. Our client calculates the relevant sum to be £3,946,861.78 based on the annual consumption of the Supply Premises extrapolated from termination of the Contract on 14 November 2018 until its intended End Date of 30 September 2021. Please pay this sum into our client's account provided on its invoices by 24 November 2018, failing which we anticipate instructions to commence further High Court proceedings for its recovery immediately thereafter without further notice to you…’

It is perfectly clear that the amalgamation, which URE had known about for more than seven months and to which it had never had any objection, was seized on as a justification for termination of the contract with a view to claiming a termination payment, once it became clear that there would be no long-term contract, that NHG was no longer willing to pay for electricity in advance, and that URE was facing insolvency.

On 13^th November 2018, NHG paid URE’s October invoice under protest, no doubt to avoid any possibility of URE terminating for non-payment. At 16:10 on 14 November 2018 (10 minutes after expiry of the 16:00 deadline set by Burges Salmon), NHG hand-delivered its own letter to URE addressing only the amalgamation issue and asserting that the amalgamation did not give rise to any right to terminate under clause 10.2(d) of the contract and that the second termination letter was therefore a repudiatory breach of contract:

‘The purported termination of the Agreement by you, as set out in the letter from your solicitors, is wrongful and constitutes a repudiatory breach by you of the Agreement between us. By this letter we hereby give notice of our election to accept that repudiatory breach, which means that the Agreement comes to an immediate end.

Our acceptance of your repudiatory breach entitles us to claim damages in respect of our losses arising from your breach. Our solicitors will correspond with your solicitors to set out the basis of our claim for these damages and to seek to agree a mechanism for a final reconciliation of the amount owed between the parties for electricity used (both before the termination of the Agreement and on the basis of the deemed contract that now arises). This reconciliation will take account of the credit balance which you hold in our name.’

In a second letter of the same date, NHG denied any breach in failing to provide access to meters, albeit noting that this was purely for the record as the contract had already been terminated.

Following the termination of the Contract, URE effectively ceased to operate. Without the prospect of the long-term contract, it was unable to secure funding with the result that it ultimately failed to meet its regulatory obligations. Its energy supply licence was accordingly revoked by Ofgem on 14^th September 2019. Its sole asset is the present claim against NHG.

This action was commenced by the issue of a claim form on 19^th October 2020. URE claimed a termination payment under clause 10.5 on the basis that it was entitled to terminate the contract (1) as a result of the amalgamation and (2) because of NHG’s repeated and persistent failures to provide access to electricity meters, which were not capable of being remedied; alternatively URE claimed common law damages for repudiation of the contract.

URE sought summary judgment of its claim based on the amalgamation and that application came before Mrs Justice Moulder in July 2022. One of the issues on that application was whether URE had given approval in advance to the amalgamation within the meaning of clause 10.2(d). Mrs Justice Moulder held that there was no real prospect of NHG succeeding in its defence that the amalgamation was approved in advance (URE Energy v Notting Hill Genesis [2022] EWHC 1809 (Comm), para 77).

Another issue was whether URE had elected to affirm the contract by continuing to perform it or was estopped from terminating the contract because NHG had relied to its detriment on an implied representation by conduct that URE was not treating the amalgamation as a termination event. As to this, it was common ground that there would only be an election if URE was aware of its right to terminate the contract, but that this was not necessary for an estoppel to arise (para 116). Mrs Justice Moulder held that the issue of election could only be determined at trial, in part because there was a factual issue whether URE in the person of Mr Ensor had been aware of URE’s right to terminate the contract as a result of the amalgamation (paras 112 to 114), but that there was no evidence of any detrimental reliance by NHG and therefore no arguable estoppel defence (para 122).

There was no appeal from Mrs Justice Moulder’s judgment and the trial was conducted before Mrs Justice Dias on the basis that (1) URE had not given consent to the amalgamation in advance, so that a right to terminate had arisen under clause 10.2(d) and (2) no defence of estoppel was available to NHG. As a result, we have heard no submissions on these issues and must proceed on the basis of Mrs Justice Moulder’s decision. So far as the amalgamation was concerned, the only issue at the trial was whether URE had lost the right to terminate the contract as a result of waiver by election.

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.

NHG has permission to appeal against the judge’s decision on three grounds, but is not entitled to challenge the judge’s findings of fact as to Mr Ensor’s knowledge or understanding. These are as follows:

Developing ground 1(a) in writing and orally, Mr Jamie Riley KC accepted that an election to affirm requires knowledge by the electing party that it has a right to elect, but explained that NHG’s case is that a contracting party must be deemed, as a matter of law, to have knowledge of the express terms of a contract to which it has agreed. On this basis he submitted that the decision of this court in Peyman v Lanjani should be distinguished. He submitted, relying on L’Estrange v F. Graucob Ltd [1934] 2 KB 394, that it is a basic principle that a party cannot contend that it did not know or understand the contract terms to which it had agreed, and that any other conclusion would be contrary to the fundamental importance of certainty and predictability in commercial transactions of which Lord Bingham spoke in his dissenting judgment in The Golden Victory [2007] UKHL 12, [2007] 2 AC 353, para 23. This has been repeatedly emphasised by the Supreme Court, most recently by Lord Hamblen and Lord Burrows in MUR Shipping BV v RTI Ltd [2024] UKSC 18, [2025] AC 675:

‘47. As was recently observed by Lord Hamblen, giving the sole judgment of this court, in JTI Polska sp z oo v Jakubowski [2023] UKSC 19, [2023] 3 WLR 50, at para 39: “Certainty and predictability are of particular importance in the context of English commercial law, all the more so given the frequent choice of English law as the governing law in international commercial transactions”. There have been many other authoritative statements to the same effect. For example, in Golden Strait Corpn v Nippon Yusen Kubishika Kaisha (The Golden Victory) [2007] 2 UKHL 12, [2007] 2 AC 353, Lord Bingham of Cornhill said as follows at para 23:

“The importance of certainty and predictability in commercial transactions has been a constant theme of English commercial law at any rate since the judgment of Lord Mansfield CJ in Vallejo v Wheeler (1774) 1 Cowp 143, 153, and has been strongly asserted in recent years in cases such as Scandinavian Trading Tanker Co AB v Flota Petrolera Ecuatoriana (The Scaptrade) [1983] QB 529, 540–541, [1983] 2 AC 694, 703–704; Homburg Houtimport BV v Agrosin Private Ltd (The Starsin) [2004] 1 AC 715, 738; Jindal Iron and Steel Co Ltd v Islamic Solidarity Shipping Co Jordan Inc (The Jordan II) [2005] 1 WLR 1363, 1370”.’

In response Mr Hugh Sims KC for URE objected that this way of putting the case is not open to URE on the pleadings and was not the way in which NHG argued its case in the court below. It should not, therefore, be open to NHG on appeal, but in any event is wrong because the decision in Peyman v Lanjani that an election to affirm requires knowledge of the right in question was of general application and cannot be distinguished in the case of contractual termination rights. He submitted that the judge’s finding that URE did not in fact know that it had a right to terminate was fatal to all the ways in which NHG sought to put its liability case on appeal.

Mr Sims submitted also, by way of a Respondent’s Notice, that the judge was wrong to conclude that if, contrary to her primary findings, URE had been aware of its right to terminate the contract, its conduct following the amalgamation would have been sufficiently clear and unequivocal, on an objective basis, to amount to a waiver.

It seems to me that the first question for determination must be whether the way in which NHG now seeks to put its case (i.e. that URE is deemed to have knowledge of its contractual right to terminate in the event of an amalgamation) is open to it on appeal. As to this, I would accept that the point is, albeit only just, open to NHG on the pleadings. NHG pleaded that URE lost the right to terminate the contract on the basis of the amalgamation by affirming the contract on numerous occasions and that:

‘At all material times, URE was (or ought to have been) aware of its right to terminate under clause 10.2(d). This is because:

(i)

it was an express clause in the Contract to which URE was a party; …’

That said, NHG does not appear to have advanced any submission in the court below (or on the summary judgment application) that, as a matter of law, a contracting party must be deemed to have knowledge of the express terms of a contract to which it has agreed and that on this basis the decision of this court in Peyman v Lanjani should be distinguished. The judge therefore cannot be criticised for not having dealt with any such submission in her judgment.

The circumstances in which a party will be allowed to take a new point on appeal have been considered in a number of recent cases, including Prudential Assurance Co Ltd v Revenue and Customs Commissioners [2016] EWCA Civ 376, [2017] 1 WLR 4031, Singh v Dass [2019] EWCA Civ 360 and Notting Hill Finance Ltd v Sheikh [2019] EWCA Civ 1337. In the first of these cases, Prudential Assurance, Lord Justice Lewison said that:

‘25. If the point is a pure point of law, and especially where the point of law goes to the jurisdiction of the court, an appeal court may permit it to be taken for the first time on appeal. But where the point, if successful, would require further findings of fact to be made it is a very rare case indeed in which an appeal court would permit the point to be taken. In addition before an appeal court permits a new point to be taken, it will require a cogent explanation of the omission to take the point below.’

The later cases, however, have not insisted on ‘a cogent explanation’ as an inevitable requirement of permitting a point of law to be taken. Thus in Singh v Dass Lord Justice Haddon-Cave set out the applicable legal principles in the following terms:

‘15. The following legal principles apply where a party seeks to raise a new point on appeal which was not raised below.

16.

First, an appellate court will be cautious about allowing a new point to be raised on appeal that was not raised before the first instance court.

17.

Second, an appellate court will not, generally, permit a new point to be raised on appeal if that point is such that either (a) it would necessitate new evidence or (b), had it been run below, it would have resulted in the trial being conducted differently with regards to the evidence at the trial (Mullarkey v Broad [2009] EWCA Civ 2 at [30] and [49]).

18.

Third, even where the point might be considered a “pure point of law”, the appellate court will only allow it to be raised if three criteria are satisfied: (a) the other party has had adequate time to deal with the point; (b) the other party has not acted to his detriment on the faith of the earlier omission to raise it; and (c) the other party can be adequately protected in costs. (R (on the application of Humphreys) v Parking and Traffic Appeals Service [2017] EWCA Civ 24; [2017] R.T.R. 22 at [29]).’

The judgment of Mr Justice Snowden in Notting Hill Finance Ltd v Sheikh, paras 21 to 28, is to the same effect.

Accordingly, an appellate court has a discretion to permit a new point to be taken on appeal. This discretion is more likely to be exercised if the point is one of law which would not require further evidence or factual findings, would not have affected the conduct of the proceedings below, and does not prejudice the other party in a way which cannot be compensated in costs. The absence of an explanation why the point was not taken below is a factor to be considered, but is not necessarily fatal.

In the present case the point which NHG seeks to advance is a point of law and it was not suggested that any further evidence or factual findings would be necessary. Mr Sims suggested that the proceedings below might have been conducted differently if the point had been taken, but that seems to me to be very doubtful. URE would still have needed to make good its factual case that Mr Ensor did not know about the right to terminate and that would have required the same evidence and waiver of privilege which in fact occurred. Mr Sims submitted also that the point would or might have been relevant to the way in which URE had funded the litigation, including the terms of its ATE (after the event) insurance policy, but there was no evidence about this (despite the fact that the point which NHG seeks to run has been clear since service of its skeleton argument for the appeal on 6^th November 2024) and this submission seems to me to be highly speculative.

I am satisfied that allowing NHG to run this point would not cause prejudice to URE which cannot (if appropriate) be compensated in costs and I would permit it to do so. It is true that there has been no explanation of why the point was not run below, although the simple explanation seems likely to be that NHG’s legal team had not thought of this way of putting the case. Be that as it may, I would permit NHG to advance the argument which it wishes to make.

The differences between election and estoppel have been explained in a number of cases, for example by Lord Goff in The Kanchenjunga [1990] 1 Lloyd’s Rep 391. In summary, he said that election arises when a party has a choice between two alternative courses of action (typically, but not necessarily, whether to terminate a contract or continue performance) and, with knowledge of the facts giving rise to that choice, acts in a way which is only consistent with having made a choice between them. The election, once made, is final, and does not depend on any reliance by the other party. Indeed, the electing party may not realise that it is making an election, but if it acts unequivocally one way or the other, it will be held to have done so.

Lord Leggatt drew together the leading authorities on election in Delta Petroleum (Caribbean) Ltd v British Virgin Islands Electricity Corpn [2020] UKPC 23, [2021] 1 WLR 5741:

‘18. There is no dispute about the legal principle. As stated by Lord Diplock in Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850, 883, waiver by election arises:

“in a situation where a person is entitled to alternative rights inconsistent with one another. If he has knowledge of the facts which give rise in law to these alternative rights and acts in a manner which is consistent only with his having chosen to rely on one of them, the law holds him to his choice even though he was unaware that this would be the legal consequence of what he did.”

19.

Lord Goff of Chieveley further explained the principle in Motor Oil Hellas (Corinth) Refineries SA v Shipping Corpn of India (The Kanchenjunga) [1990] 1 Lloyd’s Rep 391, 398, where he said:

“Election itself is a concept which may be relevant in more than one context. In the present case, we are concerned with an election which may arise in the context of a binding contract, when a state of affairs comes into existence in which one party becomes entitled, either under the terms of the contract or by the general law, to exercise a right, and he has to decide whether or not to do so. His decision, being a matter of choice for him, is called in law an election. … In particular, where with knowledge of the relevant facts a party has acted in a manner which is consistent only with his having chosen one of the two alternative and inconsistent courses of action then open to him - for example, to determine a contract or alternatively to affirm it - he is held to have made his election accordingly … [An election] can be communicated to the other party by words or conduct; though, perhaps because a party who elects not to exercise a right which has become available to him is abandoning that right, he will only be held to have done so if he has so communicated his election to the other party in clear and unequivocal terms … Once an election is made, however, it is final and binding.” (citations omitted)

20.

More recently, in Kosmar Villa Holidays Plc v Trustees of Syndicate 1243 [2008] EWCA Civ 147; [2008] Bus LR 931, para 38, Rix LJ said:

“[Election] generally requires knowledge of the facts giving rise to the choice on the part of the party electing, and knowledge of the choice having been made on the part of the other party. Those are the conditions which make the doctrine mutually fair. It typically arises where the parties to a contract have to know where they stand. Thus the choice has either to be communicated unequivocally by the party electing to the other party or else the objective circumstances have to be such that the effluxion of time by itself constitutes that communication. Since the election is the choice of the party electing, it is his conduct which is decisive. Once made the election is final and irrevocable.”

21.

The principle of waiver by election is not needed to explain why a decision to terminate a contract, once communicated, is final and irrevocable. A valid termination has the legal effect of discharging both parties (from then on) from their obligations under the contract. Those obligations could only be reinstated by making a new contract. But the principle is needed to explain why a party who communicates unequivocally an intention to continue with performance thereby loses the right to terminate the contract (in so far as the right was based on facts then in existence and known to the electing party). What is fundamental to the principle of waiver by election and crucial for present purposes is that it is only capable of applying where a choice must be made between two alternative and inconsistent (in the sense of mutually exclusive) courses of action, such that adopting one of them necessarily entails forsaking the other.’

Estoppel, on the other hand, arises where a party makes an unequivocal representation by words or conduct, whether or not it realises that it is doing so, on which the other party relies to its detriment. As Lord Goff explained in The Kanchenjunga at 399 col 2:

‘Election is to be contrasted with equitable estoppel, a principle associated with the leading case of Hughes v Metropolitan Railway Co (1877) 2 App Case 439. Equitable estoppel occurs where a person, having legal rights against another, unequivocally represents (by words or conduct) that he does not intend to enforce those legal rights; if in such circumstances the other party acts, or desist from acting, in reliance upon that representation, with the effect that it would be inequitable for the representor thereafter to enforce his legal rights inconsistently with his representation, he will to that extent be precluded from doing so.

There is an important similarity between the two principles, election and equitable estoppel, in that each requires an unequivocal representation, perhaps because each may involve a loss, permanent or temporary, of the relevant party’s rights. But there are important differences as well. In the context of a contract, the principle of election applies when a state of affairs comes into existence in which one party becomes entitled to exercise a right, and has to choose whether to exercise the right or not. His election has generally to be an informed choice, made with knowledge of the facts giving rise to the right. His election once made his final; it is not dependent upon reliance on it by the other party. On the other hand, equitable estoppel requires an unequivocal representation by one party that he will not insist upon his legal rights against the other party, and such reliance by the representing as will render it inequitable for the representor to go back upon his representation. No question arises of any particular knowledge on the part of the representor, and the estoppel may be suspensory only. Furthermore, the representation itself is different in character in the two cases. The party making his election is communicating his choice whether or not to exercise a right which has become available to him. The party to equitable estoppel is representing that he will not in future enforces legal rights. His representation is therefore in the nature of a promise which, though unsupported by consideration, can have legal consequences; hence it is sometimes referred to as promissory estoppel.’

Peyman v Lanjani [1985] Ch 457 is a decision of this court which takes the knowledge required for an election to affirm one stage further. It holds that a party entitled to rescind or avoid a contract will not be held to have affirmed it unless it knows not only the facts which give rise to the right, but also that it has the right to rescind or avoid. The case concerned the transfer of a lease from the defendant to the claimant, which therefore required the defendant to transfer a good title. The lease contained a tenant’s covenant not to assign without the landlord’s consent. However, the defendant had only acquired his interest in the lease by what was in effect a fraud on the landlord’s agent. Because it was thought to be doubtful whether the landlord would consent to the assignment to the defendant, who spoke no English and was said to be of ‘scruffy appearance’, the defendant had been impersonated by an associate who did speak English. The same impersonation had then been repeated in order to obtain the landlord’s consent to the defendant assigning the lease to the claimant.

The claimant knew about the second impersonation, to which he had been a party, but the trial judge found that he did not know about the first impersonation. Importantly, he did not know the legal consequences of what had occurred, i.e. that the first impersonation meant that the licence to assign the lease to the defendant was voidable and the lease was subject to forfeiture, so that the defendant’s title was defective, and that as a result the claimant was entitled to rescind his agreement with the defendant for the transfer of the lease. In these circumstances, as Lord Justice Stephenson explained at 482A, the right which the claimant sought to exercise was the right to rescind an agreement made in ignorance of an irremovable defect of title. It was, therefore, a right which arose under the general law of landlord and tenant, and not an express contractual right.

Lord Justice Stephenson posed the question at 482D:

‘Is knowledge of the facts which give rise to the right enough? Or must there also be knowledge that they give rise to the right and hence to a right of choice?’

After an extensive review of the authorities, including three cases in the House of Lords (Evans v Bartlam [1937] AC 473, Young v Bristol Aeroplane Co Ltd [1946] AC 163 and Kammins Ballrooms Co Ltd v Zenith Investments (Torquay) Ltd [1971] AC 850), Lord Justice Stephenson stated his conclusion at 487G that:

‘knowledge of the facts which give rise to the right to rescind is not enough to prevent the plaintiff from exercising that right, but he must also know that the law gives him that right yet choose with that knowledge not to exercise it.’

It is apparent that this was intended as a statement of general principle. Lord Justice Stephenson acknowledged that there would be some cases where statute requires a different rule (e.g. sections 11(4) and 53(1) of the Sale of Goods Act 1979) but otherwise made the point at 487D-E that the principles on which one party to a contract is held to affirm it are not peculiar to forfeiture of leases or even contract law.

One of the cases which Lord Justice Stephenson found particularly helpful in reaching his conclusion was the decision of the Supreme Court of Victoria in Coastal Estates Pty Ltd v Melevende [1965] VR 433. In that case it was held, after a review of English authority, that if the defrauded party does not know that it has a legal right to rescind, it is not bound by acts which on their face are referable only to an intention to affirm the contract, unless those acts involve something to the other party’s prejudice or detriment. It is important to distinguish here, as the court did, between election and estoppel. Ignorance of the legal right to rescind will mean that there is no election, even if the innocent party acts in a way which appears to amount to an unequivocal affirmation. However, those same acts, even if done in ignorance of the right to rescind, may nevertheless give rise to an estoppel if there is detrimental reliance by the other party.

Coastal Estates v Melevende was a case where the conclusion of the contract had been induced by the fraud of an employee of the defendant. Like Peyman v Lanjani itself, therefore, it was not a case of an express contractual right to terminate. Nevertheless, Chief Justice Herring suggested that in such a case, there may be a rule that a party is deemed to know the terms of its contract:

‘Now it may be that there are cases where it is proper to assume that a party to a contract, who has in the circumstances are right to disaffirm the contract, knows that he has such a right or at any rate to attribute such knowledge to him. Forfeiture clauses in leases may be cited as an example. Support for such a view may be found in the extract from the late Mr JS Ewart’s book entitled Waiver Distributed among the Departments Election, Estoppel, Contract, Release, at p.72 … In such cases, if the learned author’s view is correct, it would seem that the parties to a contract are to be deemed aware of the elections that the terms of their contract give them or at any rate are to be precluded from denying knowledge of them.’

Mr Riley relied upon this passage, but in my view it does not assist NHG for two reasons. First, as I read the passage, Chief Justice Herring was not endorsing the existence of such a rule. Rather, he was saying that even if there were such a rule, it would not assist the defendant in the Coastal Estates case because that was not a case of an express contractual right. Second, and of more significance for present purposes, there is nothing in the judgment of Lord Justice Stephenson in Peyman v Lanjani to suggest that he had this distinction in mind or intended to approve this qualification of the general rule that knowledge of the right to rescind is necessary for an election to affirm.

Having concluded that an election to affirm requires knowledge of the right to elect, Lord Justice Stephenson went on to pose a second question:

‘Where there is in fact no intention to waive or abandon the right because there is no knowledge of it, will that intention be presumed from conduct? This raises, in my opinion, two questions: (a) Does his conduct amount to affirmation of his contract, and abandonment of his right to rescind it? (b) Is he precluded, or estopped, by his conduct from denying that he has abandoned his contract? And in answering each question, the position of the other party to the contract must be considered.’

Lord Justice Stephenson’s answer was that there was no affirmation by the claimant, despite the fact that the claimant went into possession of the property and paid £10,000 to the defendant after he knew the facts of the impersonation, because there had been no detrimental reliance by the defendant. That is an analysis, premised on the decision already made that there had been no election, that there was no estoppel either.

Lord Justice May emphasised the need to avoid blurring the distinction between election and estoppel, which need to be considered in sequence. Dealing first with election, his conclusion was that:

‘The next feature of the doctrine of election in these cases which in my opinion is important is that when the person entitled to make the choice does so one way or the other, and this has been communicated to the other party to the contract, then the choice becomes irrevocable even though, if and when the first person seeks to change his mind, the second cannot show that he has altered his position in any way. This being so, I do not think that a party to a contract can realistically or sensibly be held to have made this irrevocable choice between rescission and affirmation unless he has actual knowledge not only of the facts of the serious breach of the contract by the other party which is the pre-condition of his right to choose, but also of the fact that in the circumstances which exist he does have that right to make that choice which the law gives him. To hold otherwise, subject to the considerations to which I shall refer in a moment, would in my opinion not only be unjust, it would be contrary to the principles of law which one can extract from the decided cases.’

Lord Justice Slade emphasised at 498B that although the issue arose in the context of a conveyancing transaction, it fell to be answered in accordance with the ordinary principles of contract law. He too was careful to distinguish between election and estoppel and, dealing with the former principle, concluded at 500G-H that:

‘With Stephenson and May LJJ, I do not think that a person (such as the plaintiff in the present case) can be held to have made the irrevocable choice between rescission and affirmation which election involves unless he had knowledge of his legal right to choose and actually chose with that knowledge.’

As a result (at 501D-E):

‘Since the plaintiff had no knowledge of his legal right to rescind the restaurant agreement, until he consulted new solicitors, his conduct in entering into possession of the restaurant and paying £10,000 to the first defendant, for this reason if no other, cannot in my opinion have amounted to an election to affirm the contract; the only remaining question can be whether the plaintiff by that conduct has estopped himself from relying on his right to rescind.’

It was, therefore, the clear conclusion of all three members of the court that where a party has a right to elect to rescind or terminate a contract, it will not be taken to have elected to affirm the contract if it did not know that it had such a right.

It is fair to say that the decision in Peyman v Lanjani has not been met with universal acclaim. Andrews, Tettenborn & Virgo, Contractual Duties: Performance, Breach Termination and Remedies, 4^th Ed (2023), para 3-028 describes it as ‘difficult to defend’, saying that:

‘It is inconsistent with general principles of the law, particularly that ignorance of the law is no defence, and also with the objective test of affirmation. It also makes it much more difficult for the defendant to discharge the burden of proving that the contract has been affirmed by the claimant, since the defendant would be required to prove that the claimant knew of the right to rescind. It follows that the preferable view is that it is enough that the claimant knows of the facts which trigger the ground of rescission without it being necessary to prove that the claimant was aware whether or not to affirm the contract.’

Wilken & Ghaly, The Law of Waiver, Variation & Estoppel, 3^rd Ed (2012), para 4.22, says that the decision is ‘not without difficulty’, albeit concluding that ‘the better view’ is that it is correctly decided. The Hon Kenneth Handley goes further, asserting bluntly that in so far as Peyman v Lanjani held that there can be no election without knowledge of the right to elect, it was wrongly decided (Exploring Election (2006) LQR 82)):

‘Are there reasons, in principle, why knowledge of the right to elect should not be required? The common law favours objective standards. In the criminal law a mistake of fact may excuse, but not a mistake of law. Ignorance of the law is generally treated as a misfortune, not an advantage. In Hourigan v Trustees Executors & Agency Co Ltd (1934) 51 CLR 619 at 651 Dixon J quoted Knight Bruce LJ saying in 1857 “generally when the facts are known … the right is presumed to be known”.

Disputes about an election normally arise because the other party relies on an earlier election to defeat a later attempt to elect the other way. Legal professional privilege would make it difficult for that party to prove that the elector was aware of his right at the earlier time. A rule that knowledge of the right had to be proved would encourage perjury and reward those who do not seek advice. The preference of the common law for objective standards is reflected in the tests for contract formation, repudiation and estoppel by representation, and in the imputation of an agent’s knowledge to his principal. It would not be surprising if it did not allow a person who knows the facts to have his cake and eat it.’

Mr Justice Leggatt made similar criticisms in Involnert Management Inc v Aprilgrange Ltd [2015] EWHC 2225 (Comm) in the context of affirmation of an insurance contract after the insurer has learned of a non-disclosure of material facts:

‘The need for knowledge of the legal right, although established by authority, is difficult to justify in principle. The requirement is inconsistent both with the principle that ignorance of the law is no defence and with the principle that in the field of commerce the existence and exercise of legal rights should depend on objective manifestations of intent and not on a party’s private understanding. It is also potentially extremely difficult for the other party to prove such knowledge – all the more so since any relevant legal advice which may have been received will be protected from disclosure by legal professional privilege. The unfairness of the rule is mitigated, however, by a presumption that a party which had a legal adviser at the relevant time received appropriate advice. That presumption can only be rebutted by waiving privilege and proving otherwise: see Moore Large & Co Ltd v Hermes Credit & Guarantee plc [2003] Lloyd’s Rep IR 315, 334-6, paras 92-100.’

It is notable, and perhaps not surprising, that in his later summary of the principle of waiver by election in the Delta Petroleum case which I have set out at para 60 above, Lord Leggatt made no mention of the need for the electing party to have knowledge of the right to elect.

It seems to me that the decision in Peyman v Lanjani is not unprincipled. It rests on the principle of fairness that a person who has a right to choose between alternative courses of action should not lose that right if they do not even know that they have it. Rather, the problem is that this principle comes into conflict with other legal principles. In particular (to quote from Involnert) it conflicts with the principle ‘that in the field of commerce the existence and exercise of legal rights should depend on objective manifestations of intent and not on a party’s private understanding’. That latter principle promotes the certainty and predictability which are important in enabling commercial parties to know where they stand (although even critics of Peyman v Lanjani acknowledge that waiver by election includes an element of subjective knowledge because it is essential that the electing party actually knows the facts). The decision also gives rise to the practical problems of proof to which its critics have referred.

Nevertheless, despite the powerful criticisms of Peyman v Lanjani which have been made both academically and judicially, the decision has stood for 40 years. In The Kanchenjunga in the House of Lords its correctness was expressly left open, and Lord Goff’s summary of the principles of election must be viewed in that light, but in this court we are bound by it. Lord Goff said (p.398 col 2):

‘I add in parenthesis that, for present purposes, it is not necessary for me to consider certain cases in which it has been held that, as a prerequisite of election, the party must be aware not only of the facts giving rise to his rights but also of the rights themselves, because it is not in dispute here that the owners were aware both of the relevant facts and of their relevant rights.’

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.

In these circumstances the question arises whether Peyman v Lanjani can be distinguished on the basis that it does not apply where the right in question is an express contractual right (or, more specifically, an express contractual right to terminate the contract). I would accept that this is a factual difference. The right to rescind in Peyman v Lanjani arose because the defendant’s title was defective, while the right to terminate in the present case is an express right contained in clause 10.2(d). But I do not think that this is a principled ground of distinction. Peyman v Lanjani was expressly decided as an application of the general law of waiver by election and it is hard to see any principled basis for distinguishing between an express contractual right and other principles of the law of contract, such as the right to rescind a contract for misrepresentation, or to terminate further performance in the event of an anticipatory repudiation, which can fairly be expected to be within the experience and expectation of those engaging in business.

Mr Riley suggested that one basis for drawing such a distinction is that a party can be assumed to be aware of the terms to which it has expressly agreed. But that is unrealistic as a matter of fact. While some contracts may be reasonably straightforward, and parties may in fact be familiar with their terms, others contain detailed (and sometimes indigestible) provisions which it would be unrealistic to expect the parties to carry in their heads. The fact that there was, at an earlier stage of these proceedings, a dispute as to whether clause 10.2(d) did entitle URE to terminate the contract in the event of a solvent amalgamation illustrates the artificiality of such a rule. The fact that the decision in Peyman v Lanjani leads to an unsatisfactory result on facts such as those of the present case is not a sufficient reason for inventing a rule that a party is deemed as a matter of law (and contrary to the fact) to be aware of all the rights given to it by the terms of its contract.

Contrary to Mr Riley’s submission, no such rule can be derived from the well-known case of L’Estrange v Graucob. That case decided that Miss L’Estrange was bound by an exclusion clause in a contract which she had signed regardless of whether she had read it or knew its contents. Whether she knew about the clause or had read the contract was (in Lord Justice Scrutton’s words) ‘wholly immaterial’. In the present case there is no doubt that the parties are bound by the terms of their contract. The issue is whether URE elected to affirm the contract when it had a contractual right to terminate it. L’Estrange v Graucob has nothing to do with that issue.

Mr Riley pointed to the Australian cases as supporting the rule of deemed knowledge of contract terms for which he contended. One of these, the Victoria case of Coastal Estates v Melevende, I have already addressed (see paras 66 to 68 above). A later Australian case was Sargent v ASL Developments Ltd [1974] HCA 40, (1974) 131 CLR 634, a decision of the High Court of Australia, which was not cited in Peyman v Lanjani. In Sargent Justice Stephen held that cases of an express contractual right were in a special category so far as election is confirmed:

‘26. Not only is this distinction, with respect, well-founded but it provides a measure of reconciliation of conflicting authority as well as resolving the matter so far as concerns the present appeals. Where election is in question between contracting parties and, as in these appeals, the contract itself confers the inconsistent rights there can be no question whether a party had knowledge of his choice of rights. He is deemed to know the terms of his own contract and the rights it confers, at all events he cannot take advantage of his own ignorance (L’Estrange v F. Graucob Ltd [1946] 2 KB 394, at pp 403, 406); moreover he must take his contract as bearing whatever meaning the court will assign to it when it is called upon to interpret it, he is bound by “the interpretation which a court of law may put upon the language of the instrument” (Stewart v Kennedy, per Lord Watson (1890) 15 App Cas 108, at p 123).’

As I have explained, I do not agree that L’Estrange v Graucob supports this rule of deemed knowledge. Justice McTiernan agreed ‘substantially’ with Justice Stephen, but it appears that Justice Mason did not. He said that:

‘35. Whether any distinction should be drawn between this class of case and fraudulent misrepresentation as Herring CJ suggested [i.e. in Coastal Estates v Melevende], need not be determined. However, it should be kept firmly in mind that the doctrine of election is of general application and that no good purpose is to be served by drawing distinctions in its various applications unless considerations of justice make it necessary or expedient so to do.’

The Australian cases therefore provide some, but hardly resounding, support for a special rule of deemed knowledge of express contractual terms. We were not taken to cases from other Commonwealth or common law jurisdictions in oral argument, but it does not appear that there is any consensus in favour of the view expressed by Justice Stephen in Sargent. In any event, so far as the position in this jurisdiction is concerned, it remains notable that there was no qualification in Peyman v Lanjani, by which this court is bound, of the general language in which the court held that knowledge of the right to elect is necessary before a party will be held to have affirmed.

I would add that a rule that a party is deemed as a matter of law to know the terms of its contract for the purpose of the doctrine of waiver by election is really another way of saying that knowledge of the right to elect in such a case is unnecessary. But Peyman v Lanjani holds otherwise.

For these reasons I would reject ground 1(a) of this appeal. There is no rule of law that, for the purpose of the principle of waiver by election, a party is deemed to know the terms of its contract. Whether it has the relevant knowledge is a question of fact.

Mr Riley submitted that the judge was wrong to hold that it was necessary that URE should not only know of clause 10.2(d), but should understand that the clause gave it the right to terminate the contract in the event of a solvent amalgamation which had not been approved in advance. In my judgment this submission sets up a false distinction. What matters is whether a party knows that it has a right to choose between inconsistent courses. On the judge’s findings, URE in the person of Mr Ensor did not have that knowledge. For this straightforward reason, I would reject ground 1(b).

Mr Riley submitted that, irrespective of whether URE actually knew or should be taken to know its express contractual rights, the judge was wrong to find that it did not have such knowledge through an ‘obviously available’ means, that is to say by looking at the terms of the contract and/or seeking legal advice. He relied on Lord Justice Rix’s reference to knowledge being ‘obviously available’ in Kosmar Villa Holidays Plc v Trustees of Syndicate 1243 [2008] EWCA Civ 147, [2008] Bus LR 931. After referring to the judgment of Mr Justice Mance in Insurance Corpn of the Channel Islands v Royal Hotel Ltd [1998] Lloyd’s Rep IR 151, 162-3, Lord Justice Rix continued (emphasis added):

‘74. That was said in a case concerned with an established area of true election, the affirmation of an insurance contract which an insurer is entitled to avoid for non-disclosure. I take this analysis as relating to what in that context needs to be objectively available to the non-electing party. I do not think that it is saying that in cases of election the party with the choice will be bound by sufficiently clear appearances even in the absence of any informed choice. That is a potentially difficult subject: on the whole it is necessary for the election to be exercised and to be exercised with sufficient knowledge. It is only in the case of estoppel that the representee is entitled to rely on an apparent promise or choice conveyed by the representation irrespective of the actual knowledge and decision of the party with the choice: see Chitty on Contracts, 29^th ed, 2004, Vol I at para 24-008. However, there will be some circumstances where, even in the absence of an actual election, the party with the choice created by relevant knowledge, actual or obviously available, will be regarded as having exercised it after a reasonable time has passed: see Lord Goff in The Kanchenjunga at 398 LHC, and Clough v. L & N W Ry (1871) LR 7 Ex 26 at 34/35. This is, I think, part of the rationale of a doctrine which seeks to give a pragmatic response to parties in contractual relations who need to know where they stand. …’

I do not think that the words ‘obviously available’ provide any support for the submission that something less than actual or ‘blind eye’ knowledge will suffice. They refer more naturally to ‘blind eye’ knowledge, where a party deliberately chooses not to discover something which is obviously available to it. In the present case the judge rejected NHG’s case that Mr Ensor had ‘blind eye’ knowledge of URE’s contractual right to terminate the contract in the event of an amalgamation.

In fact, on the judge’s findings, Mr Ensor had no reason to investigate whether the amalgamation of Notting Hill and Genesis gave URE any right to terminate the contract until the parties’ relationship deteriorated in October and early November 2018. At the time when the amalgamation occurred, Mr Ensor did not in fact know that it gave URE any right to terminate and, as he was quite content to deal with the amalgamated entity, would have had no reason to scrutinise the contract or ask for legal advice about it to find out whether URE had any such right. That meant that, unknown to Mr Ensor, there was a risk that URE’s continued performance would give rise to an estoppel, if there was detrimental reliance by NHG, but means that there could be no election by URE as it did not have the necessary knowledge of its rights.

I would therefore reject ground 1(c).

Mr Riley submitted that URE should be deemed to have made an election to affirm the contract by reason of its conduct in continuing performance after knowing of the amalgamation. He submitted that this was not a mere lapse of time, but represented positive conduct by URE, which continued to supply electricity, invoiced the merged entity NHG, pressed for access for the fitting of AMR meters, and continued to negotiate for the long-term contract which would have been pointless if it was not prepared to deal with the amalgamated entity.

I would accept that this represents positive conduct which goes beyond the mere lapse of time and I agree with the judge, despite Mr Sims’ submissions in support of the Respondent’s Notice, that URE’s conduct following the amalgamation would have been sufficiently clear and unequivocal, on an objective basis, to demonstrate that URE intended to affirm the contract. But it remains the case that there can be no waiver by election without the relevant knowledge which, on the authority of Peyman v Lanjani, includes knowledge of the right to elect.

Mr Riley relied on the statement by Lord Goff in The Kanchenjunga at 398 col 1 that if a party does not make its election, ‘the time may come when the law takes the decision out of his hands, either by holding him to have elected not to exercise the right which has become available to him, or sometimes by holding him to have elected to exercise it’. But this was said in a context where the electing party did have knowledge, not only of the facts, but also of its right to elect. It does not provide any support for the existence of a separate doctrine of election, or a principle of deemed election, whereby an election is deemed to be made as a result of the lapse of time regardless of knowledge. This is clear from the way in which Lord Justice Rix put the matter in the passage from his judgment in the Kosmar Villa Holidays case which I have quoted at para 97 above (emphasis added):

‘74. … However, there will be some circumstances where, even in the absence of an actual election, the party with the choice created by relevant knowledge, actual or obviously available, will be regarded as having exercised it after a reasonable time has passed. …’

Thus a party will not be deemed to have made an election to affirm the contract unless it has the relevant knowledge (which includes ‘blind-eye’ knowledge). I would therefore reject ground 2.

It is therefore unnecessary to consider whether, if there would otherwise have been such a deemed election, clause 13.1 would have operated to preclude such a conclusion. That clause provides, in short, that delay or omission in exercising any right will not be construed as a waiver of that right. I would have held however, that if URE had had the relevant knowledge, its positive conduct in continuing to perform as summarised above would have meant that this was not a case of mere delay or omission, and that clause 13.1 would not have prevented a waiver by election from having occurred.

It is similarly unnecessary to consider at any length the other point raised by the Respondent’s Notice, which is whether the opening words of clause 10.2 (‘The Supplier may terminate this contract at any time …’) had the effect of excluding the doctrine of waiver. Mr Sims focused here on the words ‘at any time’. On the view which I take, the point does not arise unless URE had the relevant knowledge for a waiver by election and, if it had such knowledge, its conduct would have amounted to an election to affirm. That being so, the words ‘at any time’ could not have preserved a right to terminate after the election to affirm had been made.

The final issue concerns the quantum of the termination payment. For ease of reference I set out again the terms of clause 10.5:

‘10.5 Where, in relation to any Supply Premises, this Contract is terminated by the Supplier pursuant to clause 10.2, the Customer shall within 10 days of the termination date pay to the Supplier the [sic.] 50 percent of the remaining value of this Contract to the Supplier in respect of the relevant Supply Premises (as determined by the Supplier acting reasonably) as notified by the Supplier.’

The issue is whether ‘the remaining value of this Contract to the Supplier in respect of the relevant Supply Premises’ refers to the income which URE would receive, or the profit which URE would make, in respect of those premises over the remaining term of the contract.

Mr Riley submitted that the natural meaning of these words is that they refer to the income which URE would receive over the remaining term of the contract, less the expenditure which it would incur over that remaining term, and that this interpretation is supported by the requirement for URE to carry out a calculation (‘as determined by the Supplier acting reasonably’), which would not be necessary if the words referred only to future income. He submitted that if URE were entitled to receive 50% of future income without giving credit for expenditure, it would obtain a windfall.

I would accept the submission of Mr James Wibberley, who dealt with this aspect of the case on behalf of URE, that the judge’s interpretation of clause 10.5 was correct. The words ‘the remaining value of this Contract to the Supplier’ are capable of referring to the future income which URE would receive and, when considered in their context, should be understood in this way. It is significant, as Mr Wibberley submitted, that URE was entitled to terminate the contract in respect of only some of the Supply Premises and, in that event, the remaining value of the contract had to be calculated only in respect of those premises for which the supply had been terminated. Anticipated income could readily be calculated for each set of premises based on their likely consumption, whereas costs might be incurred globally rather than attributable to separate premises. Moreover, if costs have to be taken into account, the problem arises that costs would not necessarily be incurred evenly over the life of the contract. For example, it was likely that there would be significant start-up costs, so that no profit might be made until the later stages of the contract, while the timing and pricing of any forward purchases of electricity would be adventitious. A calculation which took account only of future costs would be likely to present a distorted picture of the value of the contract to URE.

In my judgment clause 10.5 represents a compromise which was intended to provide a straightforward and easily calculated measure of compensation for termination of the contract, regardless of whether the termination was the result of a breach of contract by NHG or (as in this case) a specified event which did not constitute a breach. That compensation was to consist of 50% of the future income which URE would receive for any premises in respect of which the contract was terminated, without needing what could be complex calculations of profit to be carried out within the short period (10 days) referred to in the clause. It might involve an element of ‘swings and roundabouts’, but the parties were entitled to choose the certainty and prompt closing of accounts which such a compromise provided.

In my judgment we are bound by Peyman v Lanjani to hold that there was no election to affirm in this case because Mr Ensor did not know that URE had a right to elect before his conversation with Burges Salmon on 5^th November 2018. Once he knew, the contract was promptly terminated.

URE is entitled to recover the termination payment of £3,946,861.56 which the judge awarded.

I would therefore dismiss the appeal.

I agree.

I also agree.