Click here to read the full article: 82651_FIRE_Magazine_Issue_24v17.pdf
Karin’s ‘60 Seconds With’ profile (page 19) is also featured in the February edition of TL4 Fire Magazine. This separate Q&A piece offers a brief snapshot of Karin’s career in dispute resolution, and the developments she sees shaping the future of the field: 82651_FIRE_Magazine_Issue_24v17.pdf
The full article has been reproduced below with kind permission.
In URE Energy Ltd v Notting Hill Genesis the Court of Appeal (Lord Justice Males delivering the leading judgment) dismissed NHG’s appeal and upheld URE’s entitlement to a substantial contractual termination payment, holding that a party does not waive a right to terminate if it carries on performing without realising that the contract actually gives it that termination right. The decision is a useful modern restatement of the doctrine of waiver by election and its limits. It also offers a practical warning for commercial parties: in complex agreements with multiple termination triggers, “continuing to perform” may look like affirmation, but looks can be deceiving where the decision-maker did not appreciate the legal right that had arisen.
The Dispute in Outline
The dispute arose out of a four-year electricity supply agreement in the social housing sector. URE Energy Ltd (“URE”) was the supplier. Genesis Housing Association (“Genesis”) was the customer. The contract contained a number of termination rights, one of which permitted termination by URE if Genesis passed “a resolution for its winding up”, expressly including amalgamation, unless a solvent amalgamation had been approved in advance by URE.
In April 2018, Genesis proceeded with an amalgamation which resulted in Notting Hill Genesis (“NHG”). URE was notified and aware of the amalgamation but not that it gave it the right to terminate. For seven months, URE continued to supply. Only later, after taking legal advice, did URE give notice terminating and claiming a termination payment under the contract, which was ultimately assessed at about £3.95m.
NHG defended the claim on, among other bases, the proposition that URE had waived its termination right by continuing to perform with knowledge of the amalgamation and in doing so had elected to keep the contract alive, and could not later terminate.
The Doctrinal Battleground: What Knowledge is Required?
Election is a doctrine that polices a choice between inconsistent rights: broadly, once a party chooses one of two inconsistent positions (for example, to affirm rather than to terminate), the other is lost. But election has been tied to knowledge. The question in URE Energy was not whether URE knew about the amalgamation but whether, for an election to arise, URE also had to know that the amalgamation gave it a contractual right to terminate.
The High Court applied the principles of waiver by election set out in Peyman v Lanjani [1985] Ch 457, which establish that a party is not deemed to have elected unless it is aware of both the relevant facts and its right to choose. On the evidence, the Court concluded that URE’s decision-maker, Mr Ensor, was unaware of the contractual right to terminate following the amalgamation, until he obtained legal advice in November 2018.
On appeal, NHG was unable to overturn that finding of fact. Its challenge was instead framed as a legal one: it contended that where a termination right is expressly set out in a contract, a party should be taken to have knowledge of it. NHG argued that parties should be held to their contractual agreements; that commercial certainty requires such rights not to be obscured by assertions of ignorance; and that, in any event, the wording was clear and unequivocal.
The Court of Appeal’s Approach
The Court of Appeal treated the required knowledge as a matter of principle and precedent, not instinct. It accepted that URE’s post-amalgamation conduct, viewed objectively, might have looked like affirmation. But the trial judge had found that Mr Ensor only realised in November 2018 that the amalgamation triggered a termination right.
That finding was decisive. Applying Peyman, the court held that there was no election in law before URE acquired actual awareness of the termination right. The appeal therefore failed on the principal point that waiver by election requires knowledge of the legal right, and that requirement applies even where the right arises under an express contractual clause and not just at common law.
Importantly, the Court rejected the proposed rule of “deemed knowledge” for election. While parties are bound by the contracts they sign, the Court held it is a step too far to treat commercial actors as knowing every termination trigger in a sophisticated agreement. Its reasoning was both doctrinal and practical: complex contracts evolve and are administered by different people over time, so a fiction of universal awareness is not a sound basis for stripping accrued rights.
That said, the Court did not suggest that pleas of ignorance will always be easy to run. It recognised that where a party has legal advice, there can be a rebuttable presumption that it is aware of its rights. But it treated that as a factual inference, not an inflexible rule, and, on the evidence, the presumption was rebutted.
Likewise, the Court distinguished genuine ignorance from “blind eye” conduct, noting that the trial judge had made findings inconsistent with any deliberate avoidance.
Finally, the judgment also underlines the practical distinction between election and estoppel. Election turns on knowledge and unequivocal conduct. Estoppel, by contrast, turns on representation and detrimental reliance, which NHG had not been able to prove.
Key Takeaways
The judgment offers some practical lessons. When a corporate restructuring or similar event occurs, parties should identify any termination triggers promptly and not assume that continued performance amounts to a waiver; the key question is what the relevant decision-maker knew, and when. Knowledge will often turn on the evidence and internal documents such as board minutes and correspondence, and the existence and handling of legal advice (including any privilege issues), may be decisive as any presumption of knowledge can be rebutted. Finally, it is important to keep the doctrines separate: if election cannot be made out because knowledge is missing, estoppel will still require proof of detrimental reliance, which may be difficult where the counterparty’s position would have been unaffected.
To many lawyers, URE Energy may feel counter-intuitive; a party that knows of an amalgamation, supplies for months, and then terminates could be perceived as opportunistic. The Court of Appeal’s message is that election is not a moral instinct; it is a structured doctrine with defined pre-conditions. If the law is to deprive a party of valuable contractual rights, it will insist on proof that the party made a knowing choice. In complex commercial agreements, that difference between “knew the facts” and “knew the right” can be worth close to £4 million.
To seek advice on commercial litigation, please contact Lucas Moore or Karin Troiani, or alternatively, telephone on 020 7465 4300
