Atlas Residential Solutions Management UK Ltd & Anor v Greengate S.A.R.L.

Where a contract provides for termination after a specified period following notification of a proposed replacement, the provision must be construed as a whole. The period may run from an oral notification where the parties acted upon it and waived any contractual requirement for written notices. Participation in meetings without objection does not necessarily amount to acceptance of a replacement office-holder, representation that there is no right to terminate, or affirmation of the contract. An estoppel by silence requires circumstances in which an honest and responsible party would be expected to correct the other party’s mistake. Affirmation requires an unequivocal election to continue the contract with knowledge of the relevant facts and right.

The claim concerned two agreements under which Atlas provided asset-management and consultancy services for a residential development. The agreements identified a Key Person, required the Defendant’s consent to a replacement, and permitted termination if the relevant conditions remained unsatisfied for six months.

The original Key Person resigned. Atlas contended that another individual had been accepted as his replacement, or that the Defendant was estopped from relying on the contractual termination provisions. It also alleged affirmation and argued that the six-month period began only when a written replacement notice was sent. The Defendant terminated the agreements on 2 September 2019. The central issue was whether that termination was valid.

1. Validity of termination. The termination was valid. There had been no agreement, express or inferred, that Mr Malli replaced Mr Ivory as Key Person. His attendance at management meetings was explained by his responsibility for mobilisation and did not establish contractual acceptance of him as the replacement.
2. Agreement by conduct. An agreement may in principle be inferred from conduct, including conduct following an oral proposal. However, the evidence did not justify that inference. The Defendant’s failure to object to Mr Malli’s attendance did not amount to acceptance of him as Key Person.
3. Estoppel. The Defendant had not represented that Mr Malli had assumed the role or that it had no right to terminate. Silence or acquiescence gives rise to an estoppel only where an honest and responsible person would be expected to correct the other party’s mistake. The Defendant was not obliged to alert Atlas that it intended to exercise the contractual right under clause 4.4 once that right arose.
4. Affirmation. Affirmation requires knowledge of the facts giving rise to the right to terminate and of the right to choose between termination and continuation, together with an unequivocal act showing an election to continue. Participation in the 31 July 2019 meeting did not amount to affirmation. The Defendant was entitled to a reasonable time to obtain board approval before terminating.
5. Construction of clause 4.4. Clauses 4.3 and 4.4 were to be read together. The six-month period ran from notification of the proposed change, which occurred orally on 9 January 2019, and the right to terminate arose on 9 July 2019. Although clause 13.1 required notices in writing, the parties had acted on the oral notification and the Defendant had waived that requirement. The later written notice of 27 August 2019 therefore did not postpone the commencement of the six-month period.

The claim for declaratory relief accordingly failed. Damages, if any, were to be assessed only if the claimants had succeeded.

The judgment records that the claimants initially sought interim injunctive relief on 14 October 2019. That relief was refused on 16 October 2019 and an expedited trial was ordered. The present judgment determined the merits at first instance.