Energy company wins £4m termination payment dispute with social landlord

One of the country’s largest social landlords has lost a High Court case over whether it owes an energy supplier almost £4m.

Notting Hill Genesis was taken to court by URE Energy, which claimed a contractual termination payment of £3,946,861.56.

The company is owned by Gary Ensor, who bought it specifically to enter into a contract to supply electricity and apply energy saving measures to homes owned by the original Genesis Housing Association.

Mrs Justice Dias said the claim was advanced on two bases. URE's primary case was that the amalgamation of Genesis with Notting Hill Housing to form Notting Hill Genesis (NHG) in 2018 gave rise to a right to terminate the contract at which it became entitled to a payment.

Alternatively, URE contended that NHG was in breach of contract for failing to provide URE with reasonable access to take meter readings and install smart meters, and for failing to provide all assistance and information reasonably required.

URE said these breaches were material and incapable of remedy, or alternatively were not remedied within the time required by the contract such that URE became entitled to terminate it and claim the termination payment as liquidated damages, or as common law damages.

The judge said NHG's responses were that URE's right to terminate the contract as a result of the amalgamation was waived by election and its purported termination was itself a repudiatory breach of the contract giving rise to a counterclaim for damages.

NHG argued that on its proper construction, the termination payment should be calculated by reference to URE's anticipated net profits such that nothing was payable.

The landlord said it was not in breach of the provisions relied upon, and no right to terminate had accrued at the time URE sought to terminate the contract.

It said URE had no entitlement to terminate at common law and had not suffered the losses claimed.

Mr Ensor had proposed to instal LEDs across the Genesis estate and to build a solar farm to generate electricity which URE could then supply to Genesis along with energy from other renewable sources. At that stage, URE had no customers or other source of income.

In July 2017, Genesis launched a tender process for a three or four year fixed term supply contract and URE submitted a “deliberately disruptive” 25-year bid after which Genesis cancelled the original tender process and began another in which URE's bid was successful. It was granted a short-term contract with a view to a longer-term one.

The judge said it was unclear why relations between URE and NHG deteriorated but that by late 2018 NHG was actively discussing internally how to terminate its relationship with URE, including by putting it under financial pressure so as to force it into administration.

It sent Mr Ensor written notice that NHG no longer intended to proceed with the long-term contract, which “came as a complete bombshell to URE, whose very raison d'être was the long-term contract with NHG,” the judge said.

“Indeed, it had no other customers and its entire business strategy was focused on the long-term contract which it thought it had effectively secured, albeit the terms had not yet been finalised.”

She said that following the termination of the contract, URE effectively ceased to operate and its sole asset became its claim against NHG.

Dias J said she had been asked to decide 22 issues arising from the claims and counter claim.

On the amalgamation claim she concluded URE had not waived its termination right before it sought to exercise it and so was entitled to terminate on this ground.

She said this conclusion meant URE's alternative case based on material breach was moot, but found URE did not have any right to terminate the contract on this basis.

Valid termination meant URE was entitled to a termination payment but there was a dispute over whether this should be based on anticipated future income over the remaining life of the contract or the net profit that URE would have made over the remaining term.

URE's case was that it meant the former and NHG’s the latter.

Dias J said: “Ultimately, however, I have concluded that URE's construction is to be preferred, essentially for the reasons it advanced. The natural and ordinary meaning of the words suggests that ‘value' signifies the amount payable to the supplier over the remaining life of the contract.

“NHG's argument that the parties could have used the defined term ‘charges’ if they had meant income runs into the difficulty that ‘charges’ is defined as a rate rather than as a sum of money and also includes more than simply income, being defined as everything owed under the contract.”

Dias J said URE was due £3,946,861.56 and NHG credits of £156,000 though the rest of its counter claim fell.

Mark Smulian