Actinon PTE Limited v Char Biocarbon Inc

A party with a right to rescind for misrepresentation may affirm the contract by making a clear and unequivocal election between inconsistent courses of action. In the circumstances considered, accepting the counterparty’s termination of the contract necessarily affirmed that the contract had been in force immediately beforehand, even though the affirming party’s knowledge of the particular right to rescind remained disputed. A general reservation of rights did not undo that unequivocal election. A waiver by estoppel requires reliance causing detriment. On construction, a minimum royalty which accrued and became payable before a contractual renewal date remained payable after the agreement determined for non-renewal or was terminated. A party could not rely on its own non-payment to obtain an earlier termination and avoid that accrued liability.

The claimant, a Singapore company, licensed technology and branding to the Canadian defendant under an English-law exclusive licence agreement. The defendant fell into arrears and the claimant later terminated the agreement for non-payment. The defendant had previously given 36 months’ notice of termination and, after proceedings were issued, pleaded misrepresentation, sought rescission, and disputed liability for the minimum royalty relating to the fourth year.

The claimant sought summary judgment for USD 635,810, which the defendant had acknowledged as contractually due. The defendant sought reverse summary judgment declaring that no Year 4 minimum royalty was payable. The central issues were whether the defendant had affirmed the agreement or was estopped from seeking rescission, and whether the agreement required payment of the Year 4 minimum royalty despite non-renewal or termination.

1. Claimant’s application. Summary judgment was granted for USD 635,810. The defendant’s admission was freely made and rationally calculated. There was no real prospect of successfully defending that liability.
2. Affirmation. Waiver by election requires a choice between inconsistent courses of action and an unequivocal communication of that choice. The defendant’s acceptance, in the letter of 30 June 2023, of the claimant’s termination with effect from 1 July 2023 was an unequivocal election. It accepted that the agreement had been in force immediately before termination and sought the advantage of ending it earlier than the 36-month notice period. That election affirmed the agreement. A general reservation of rights did not make the earlier acceptance equivocal.
3. The court declined to infer, on a summary judgment application, that the defendant knew of a right to rescind when it took the earlier alleged affirmatory steps. Where a party acts with legal advisers, a rebuttable presumption arises that appropriate advice was received. However, only actual knowledge suffices; advisers’ knowledge cannot simply be attributed as constructive knowledge. The evidence did not establish that the defendant had no real prospect of rebutting that presumption.
4. Estoppel. Waiver by estoppel or estoppel by convention required an unequivocal representation and reliance causing detriment. The claimant’s evidence did not show reliance on the defendant’s letter as a representation that it would not seek rescission. Summary judgment could not therefore be granted on that alternative basis. The defendant’s rescission claim nevertheless had no real prospect of success because of affirmation, and damages in lieu of rescission were likewise unavailable: SK Shipping Europe Ltd v Capital VLCC 3 Corp [2022] EWCA Civ 231 at [86].
5. Construction. The Year 4 minimum royalty accrued and became payable during Year 2 under Clause 8.2(b). Clause 5 governed renewal; non-payment could prevent renewal but did not itself constitute notice terminating the agreement or extinguish an accrued payment obligation. Clause 15.4(c) required payment of all amounts due on expiry or earlier termination. The defendant’s construction would allow it to benefit from its own breach and was rejected.
6. The reverse summary judgment application was dismissed. The Year 4 issue remained subject to the defendant’s unresolved case concerning the legal effect of its August 2022 email. The parties were invited to agree the consequential order and costs, failing which a short hearing would be listed.