Ee Ltd v Virgin Mobile Telecoms Ltd

Hearing date: 18 November 2024

Approved Judgment

This judgment was handed down remotely at 10.30am on 4 February 2025 by circulation to the parties or their representatives by e-mail and by release to the National Archives (see eg ).

The question in this appeal is whether the claim brought by EE Limited (“EE”) against Virgin Mobile Telecoms Limited (“VM”) is excluded as being one “in respect of … anticipated profits”, on the proper interpretation of that phrase in clause 34.5(a) of the contract between them.

On VM's application to strike out the claim, or for reverse summary judgment, Mrs Justice Joanna Smith held that the claim fell within the exclusion clause. EE appeals with the permission of Coulson LJ granted on 5 December 2023. For the reasons set out below, I consider the judge's conclusion was correct.

Background

EE's claim arises out of a Telecommunications Supply Agreement dated 28 August 2013 (the “TSA”).

I take the following summary of the background from paragraphs 2 to 19 of the judge's careful and considered judgment.

EE is one of four Mobile Network Operators (“MNOs”) in the UK. It owns and operates its own physical radio access network. VM, being a Mobile Virtual Network Operator, did not have its own radio access network so had to contract with one or more of the MNOs to make use of their networks.

Pursuant to the TSA, EE was required to provide VM with various services, essentially comprising access to its mobile network, to enable VM's customers to be provided with 2G, 3G and 4G mobile services.

Pursuant to clause 10 of the TSA, VM agreed that, for the duration of the “Exclusive Period” (which initially ran until 31 March 2018, but was later amended to run until 31 December 2021 or, in the event of an extension of the term of the TSA, until 31 December 2026), it would use EE's radio access network exclusively for the provision of such services to its customers. In consideration for the services provided by EE, VM agreed to pay the charges set out in schedule 3 to the TSA. These depended on the level of usage of the EE network by VM's customers. The TSA contained a Minimum Revenue Commitment (which VM had exceeded at all material times).

In its original form, the TSA did not make provision for 5G services. An amendment dated 9 December 2016 provided for potential agreement between EE and VM in relation to the provision of 5G services using EE's network. In the absence of agreement, VM would be entitled to provide 5G services to its customers from a network owned by another MNO. Clause 5B.2 provides that, where a customer of VM is provided with 5G services sourced from an alternative MNO, then “VM shall also be entitled to provide such customers of VM with 2G, 3G and 4G/LTE services sourced from such alternative supplier”. At the same time, the exclusivity provision was varied, so that it became subject to the exception in clause 5B.2.

EE launched its 5G service in May 2019. In the absence of agreement with EE, VM subsequently entered into an agreement with Vodafone for the supply of 5G services and, from around January 2021, began migrating customers from the EE network to the Vodafone network.

VM was entitled to do this, provided it acted in accordance with clause 5B.2. EE contends, however, that VM has acted in breach of the exclusivity obligation in clause 10, by migrating customers to Vodafone outside the parameters of clause 5B.2 and/or adding new non-5G customers to the Vodafone network, even though those customers were only provided with 2G-4G mobile services.

EE's claim for loss and damage, according to its particulars of claim, is represented by: “the revenue [EE] would have received from [VM] under the terms of the TSA for the 2G-4G services that each of [VM's] customers would have consumed had they remained or been added to the EE network rather than migrated or added to the Vodafone network or O2 or VOLT network”. It estimates its loss in this respect at around £24,635,684.

VM denies that it acted in breach of the exclusivity obligation, but in any event contends that the loss and damage claimed is in truth a claim in respect of “anticipated profits”, and as such falls within the exclusion contained in clause 34.5(a) of the TSA. The construction of this clause lies at the heart of the appeal, and it is helpful to set it out in the context of the rest of clause 34, which is headed “Limitations of Liability”:

“34.1 Except as set out in Clauses 34. 2 or 34.6, the Parties agree and acknowledge that neither Party shall be liable to the other under this Agreement (including any liability of a Party arising out of any indemnification of the other Party specifically provided for under this Agreement) to the extent that the aggregate liability of that Party (for all claims made under this Agreement), in any Annual Period would exceed the lesser of:

(a) fifteen per cent (15%) of the total Customer Network Spend paid or payable by VM in the twelve month period preceding the event giving rise to liability (and in the first year of the Term, fifteen per cent (15%) of the total charges (excluding interconnect charges) paid under the Telecommunications Supply Agreement in the twelve (12) month period prior to the Effective Date); or

(b) ten million pounds (£10 million).

34.2 In addition to any other exceptions or exclusions set out in this Clause 34, the Parties agree that the limitation of liability set out in Clause 34.1 shall not apply to:

(a) VM's liability to pay any Charges and any other sums payable under Clauses 17 and 39;

(b) EE's liability to pay any revenue that EE is obliged to pass through to VM under this Agreement or other amounts which have been agreed to be payable by EE to VM from time to time pursuant to the Agreement Change Control Process and documented in accordance with that process; or

(c) any liability for damage or loss arising from reckless or wilful misconduct or gross negligence of either Party, its employees, agents or permitted sub-contractors (or any other person for which it is responsible for performance or conduct).

34.3 For the purposes of Clause 34.2(c); and in the case of acts or omissions of EE, “wilful misconduct” will include any intentional act by EE resulting in any discontinuance, withdrawal or refusal to supply any Service to VM contrary to EE's obligations under this Agreement, subject to the following additional requirements:

(a) VM promptly notifies EE in writing of the Service which it believes has been discontinued, withdrawn or not supplied, its reasons for its belief, its objection to the discontinuance, withdrawal or refusal to supply that Service and of VM's intention to pursue remedies pursuant to this Clause 34.3;

(b) the discontinuance, withdrawal or refusal to supply relates to a Service that is used by VM to deliver services to Customers that result in Customer revenues in excess of seven and one half per cent (7.5%) of VM's total Customer Revenues…for the twelve (12) month period preceding the discontinuance, withdrawal or refusal to supply the Service in question…;

(c) VM applies at the first practicable time for interim or other urgent equitable relief in response to the discontinuance, withdrawal or refusal to supply the Service in question, and provides notice of such application to EE without undue delay; and in any action claiming damages continues to claim equitable relief and the re-instatement of the affected Service as its primary remedy, with damages claimed only to the extent that equitable relief is not granted or only in respect of losses suffered by VM in the period from the initial discontinuance, withdrawal or refusal to supply the Service in question until re-instatement of the affected Service pursuant to the equitable relief actually obtained.

34.4 Neither Party shall be liable to the other for any loss which is not directly foreseeable or which does not arise directly from the performance of this Agreement and thus neither Party shall be liable for any indirect or consequential or special or incidental loss whatsoever.

34.5 Except for any damages claims by VM pursuant to Clause 34.2(c), to which Clause 34.3 applies (which EE acknowledges may include claims of damages for loss of profits), and for no other damage claims whatsoever, neither Party shall have liability to the other in respect of:

(a) anticipated profits; or

(b) anticipated savings.

34.6 Neither Party excludes or limits liability:

(a) to the extent that such liability arises from death or personal injury of any person…; or

(b) for a fraudulent misrepresentation by a Party or its employees; or

(c) for direct physical damage to or physical loss of the property of the other…

34.7 Except as expressly stipulated in this Agreement, any representations, warranties, terms and conditions (whether implied by law, custom or otherwise) are hereby expressly excluded to the extent permitted by law and the provisions of this Clause 34 specify the entire liability of either Party under or in connection with this Agreement whether arising in contract, tort (including negligence) or otherwise.”

The judge's judgment

The judge first recited the test to be applied on a strike out/summary...