Ure Energy Limited v Notting Hill Genesis

A contractual right to terminate may be waived by election only where the terminating party knows both the facts giving rise to the right and the right itself. Actual knowledge is required, although blind-eye knowledge may suffice. A presumption that a legally represented party knew its rights is rebuttable by evidence of the advice actually given.

Non-waiver wording does not necessarily exclude waiver. It forms part of the contractual context and may require clear positive conduct before waiver is established. Contractual obligations to provide assistance and access must be construed realistically and may require active co-operation. Materiality is fact-sensitive and requires a serious and substantial breach. A termination payment clause must first be construed before its enforceability as a penalty is considered.

URE supplied electricity to Genesis under a four-year contract. Genesis subsequently amalgamated with Notting Hill Housing Trust to form NHG. The contract permitted URE to terminate where the customer underwent an amalgamation not approved in advance by URE.

URE continued performing the contract after the amalgamation. It later sought termination, relying on the amalgamation and, alternatively, NHG’s alleged failures to provide access and assistance for a smart-meter rollout. The principal issues were waiver by election, breach and materiality, the validity and timing of the termination notices, and the proper construction of the contractual termination payment.

1. Amalgamation and waiver. URE had a contractual right to terminate under clause 10.2(d). NHG failed to prove that URE knew of that right before 5 November 2018. Knowledge for waiver purposes means actual knowledge; constructive knowledge is insufficient, although blind-eye knowledge may suffice. The evidential presumption arising from receipt of legal advice was rebutted by the disclosed file and the evidence of the advice actually given.
2. Clauses 10.2 and 13.1 did not exclude waiver. Clause 10.2 was not construed as permitting an undisclosed termination decision to be kept alive indefinitely. Clause 13.1 principally addressed delay or omission, although it had to be taken into account when assessing whether positive conduct amounted to waiver. If URE had known of the right, its positive requests for co-operation with the meter rollout and continued negotiations for the long-term contract would in principle have affirmed the contract. On the facts, however, waiver could not arise without the requisite knowledge.
3. Material breaches. NHG was obliged under clauses 5.1 and 6.3 to provide reasonable access and all assistance and information reasonably required to enable URE to obtain readings and install smart meters in accordance with the agreed programme. The word necessary in clause 5.1 qualified the relevant licence or industry agreement, not URE’s obligations under it. NHG breached both clauses by failing to provide effective assistance and access.
4. The breaches were not material. Materiality required a serious and substantial breach assessed in context, including the contract’s terms, duration, circumstances, nature and consequences. The rollout remained capable of being progressed and the parties had agreed an action plan. The breaches therefore did not confer a right to terminate under clause 10.2(b). Any breaches were in principle remediable, and a 10-day notice was required where the breach was capable of remedy; the clause did not require the court to decide whether remedy could be completed within 10 days before notice was served.
5. Termination and payment. The 31 October notice was repudiatory because it purported to terminate under clause 10.2(b) without material breach or the required notice. It was withdrawn before acceptance. The 2 November letter was not itself repudiatory. The 7 November letter validly exercised the clause 10.2(d) right, with termination at 4 pm on 14 November 2018. NHG’s later letter was ineffective because the contract had already terminated.
6. Clause 10.5 referred to 50 per cent of the anticipated income or amount payable to URE over the remaining contractual period, not anticipated net profit. The agreed payment was therefore £3,946,861.56. The court did not need to decide whether clause 10.5 would be penal in other termination scenarios. Judgment was entered for URE, with contractual interest. NHG’s agreed credit counterclaim of £156,000 was reflected, but the remainder of its counterclaim failed.

First-instance judgment in the High Court (Commercial Court). The judgment records an earlier summary judgment decision by Moulder J, who held that clause 10.2(d) could confer a termination right and struck out the estoppel defence, while permitting the waiver issue to proceed to trial.