When to raise rescission for misrepresentation (Actinon PTE Ltd v Char Biocarbon Inc)

Dispute Resolution analysis: Successful summary judgment application in the Commercial Court concerning an exclusive licence agreement under which minimum royalties were payable. The claimant licensor sought judgment for a discrete US$635,810 sum said to have been acknowledged as payable following termination for non-payment. The defendant licensee resisted on the basis of a misrepresentation/rescission case advanced in its Defence and Counterclaim, also bringing a reverse summary judgment application seeking declaratory relief on the construction of the renewal/term and minimum royalty provisions. The court entered judgment for the claimant and dismissed the defendant’s reverse summary judgment application.

Actinon PTE Ltd v Char Biocarbon Inc [2026] EWHC 94 (Comm)

What are the practical implications of this case?

This case provides clear guidance on (i) how and when misrepresentation rescission arguments can be lost through affirmation/waiver and (ii) the court’s approach to construing commercially drafted payment and extension provisions where one party’s interpretation would allow it to benefit from its own breach.

Rescission: affirmation requires knowledge of the right

Where a party seeks to rescind for misrepresentation, the decision reinforces that an affirmation/election analysis turns on more than continuing performance: the affirming party must, among other things, know it has the right to rescind at the time of the alleged affirmation. Practitioners assessing a late-breaking rescission case should therefore focus pleading and evidence gathering on when the relevant decision-makers acquired, or should be taken to have acquired, constructive or actual knowledge of the rescission right, not merely when they learned the underlying facts said to make the representations untrue.

Election vs estoppel: do not elide distinct doctrines and their requirements

The judgment underlines the importance of distinguishing waiver by election from waiver by estoppel. Election is framed as a choice between inconsistent rights, fixed once made by unequivocal conduct with the requisite knowledge; whereas estoppel-based arguments are conceptually adjacent but analytically different. In practical terms, litigators should avoid pleading these interchangeably: plead each route distinctly, identify the building blocks for each, and advise clearly about what the counterparty must show.

Late misrepresentation counterclaims: credibility and case theory risk

On the facts here, the defendant advanced misrepresentation/rescission only after proceedings were issued. Even where a party can point to documents suggesting concerns existed earlier, a rescission case raised for the first time in a Defence and Counterclaim invites obvious forensic scrutiny: why it was not raised contemporaneously, whether the contract was treated as operative in the meantime, and whether the rescission position was contemporaneously accurate or simply a retrospective strategy. The practical lesson is that rescission arguments should be advised on and assessed as early as possible, or the responding party must be ready with a coherent explanation for delay and continued performance.

Contract construction: courts resist readings that let a party profit from its own breach

On the construction dispute, the court rejected an interpretation which would have allowed the defendant, by failing to pay minimum royalties, to accelerate an outcome more favourable to it and/or avoid payment consequences altogether. For drafting and disputes teams, the point is twofold:

• when construing extension/rollover mechanisms and termination payment machinery, courts will read clauses together and test whether the proposed reading produces an outcome inconsistent with the contract’s commercial architecture, and
• arguments which depend on a party’s non-performance as the trigger for a better contractual position are likely to face a high uphill climb unless the language compels that result

Privilege waiver: strategic disclosure may cut both ways

The judgment illustrates a specific ‘waiver risk’ in disputes turning on affirmation/election and knowledge. The defendant’s position was that it lacked actual knowledge of any right to rescind at the time of the key pre-action correspondence. It then chose to waive privilege, at least in part, over communications connected with preparing that correspondence, prompting disclosure disputes including redactions and allowing the court to consider contemporaneous lawyer-client materials.

Those documents were relevant to what the defendant and its advisers understood the contractual position to be when the termination response was crafted including the practical consequences of the ‘no set-off’ clause and the likelihood that any recovery would have to be pursued as a separate claim.

The lesson for litigators is not ‘never waive privilege’, but that a waiver deployed to answer a summary judgment application may supply the court with powerful contemporaneous evidence on knowledge and election, potentially undermining later pleaded characterisations.

Summary judgment tactics: plead early, plead cleanly, and set boundaries

Finally, the procedural posture matters. The court dealt with competing summary judgment applications, one based on an alleged acknowledgement of debt and the other seeking to dispose of a contractual head of claim; and the misrepresentation case emerged only after the claimant had applied. The practical implications are:

• if a party intends to rely on misrepresentation/rescission as a case theory, or as a shield to an ‘admitted sum’ application, it needs to be articulated clearly and supported with contemporaneous evidence as early as possible, and
• when pursuing summary judgment, practitioners should identify precisely which issue is truly apt for summary determination: construction points that can be resolved textually; or discrete acknowledged sums. Avoid overloading the application with matters better suited to trial.

What was the background?

The claimant (Actinon Pte Ltd) and the defendant (CHAR Biocarbon Inc) entered into an Exclusive Licence Agreement dated 18 August 2021 (the ‘Agreement’). The defendant began to fall behind with payments due under the Agreement in January 2022. After a period of negotiations, the claimant terminated the Agreement in June 2023.

A key aspect of the parties’ pre-action correspondence concerned what, if anything, remained payable following termination. In late June 2023, the defendant’s CEO provided a ledger to its solicitors calculating that, strictly based on contract, a net sum of US$635,810.00 would be due being, in summary, the minimum royalty for Years 1–3 plus interest, less payments already made.

Proceedings were issued on 10 July 2024. In the Particulars of Claim, the claimant sought payment of a liquidated sum pleaded at US$3,742,759.05 said to arise from failures to pay minimum royalties (including inflation adjustments and contractual interest). The claimant also advanced a separate claim for damages for lost profits, which was not relevant to the applications.

There were then two applications:

• the claimant’s summary judgment application

The claimant applied for summary judgment only in respect of US$635,810, on the basis that this was a sum the defendant had acknowledged was payable under the Agreement (and that, in any event, the Agreement required sums due to be paid without set-off).

• the defendant’s reverse summary judgment application

On 24 October 2024, the defendant filed a Defence and Counterclaim. It pleaded, for the first time, a misrepresentation case seeking rescission, and it also sought declaratory relief on a point of construction going to part of the claimant’s contractual debt claim-namely a declaration that no sum in respect of the minimum royalty for ‘Year 4’ was due or payable on the proper construction of the renewal/term provisions (Clause 5) and the royalty provisions (Clause 8). That declaratory claim formed the basis of the defendant’s reverse summary judgment application.

In short, the claimant’s application sought immediate judgment on a discrete acknowledged sum, whereas the defendant’s application sought to dispose, by declaration, of an entire contractual head of claim, the pleaded Year 4 minimum royalty component, by way of construction.

What did the court decide?

Summary judgment: granted for US$635,810.00

The court held that:

• the defendant had admitted it was prima facie liable to pay US$635,810; the admission was ‘freely made’ and calculated on ‘a rational basis’
• there was no real prospect of the defendant successfully defending liability for at least that sum at trial

On the rescission defence/counterclaim, the claimant argued affirmation/election and estoppel concepts. The court’s key conclusion was that the defendant had affirmed (or, more precisely in the court’s framing, made an election inconsistent with rescission) by accepting the claimant’s termination in the DLA Letter. Accordingly, the defendant had no real prospect of obtaining rescission, or damages in lieu, at trial as an answer to liability for the admitted debt.

The court also addressed, but did not ultimately rest its decision on, waiver by estoppel/estoppel by convention, noting in particular the requirement of reliance—and that on the evidence the claimant would have struggled to show it relied on the DLA Letter as a promise not to pursue misrepresentation arguments.

Reverse summary judgment on construction: dismissed

The defendant sought reverse summary judgment on a contractual construction issue—broadly contending that if the agreement did not renew at the end of Year 3 due to non-payment of the Year minimum royalty, then no minimum royalty could be due for Year 4 because it would fall ‘outside the Term’.

The court rejected that construction. In short:

• •Clause 5 operated to renew annually after the initial three years
• •the obligation to pay the minimum royalty for a renewal year accrued two years prior
• •if the minimum royalty was not paid in full before the renewal year began, the contract might not renew but that did not mean the minimum royalty for that year was not payable—rather, it remained payable even though the agreement did not renew

The court considered this to reflect commercial common sense in a licensing deal with a long contractual notice regime: the structure ensured the licensee had, in effect, paid in advance for the period of benefit it was contractually entitled to enjoy.

Accordingly, the defendant’s reverse summary judgment application was dismissed.

Case details

• Court: High Court, KBD
• Judges: Paul Mitchell KC
• Date of Judgment: 21 January 2026

Article by Alexander Whatley – first published by LexisNexis