EE v Virgin Media – Interpretation of Exclusion Clauses

In the case of EE Ltd v Virgin Telecoms Ltd [2023] EWHC 1989 (TCC), the High Court dismissed EE’s £24.6million breach of contract claim against Virgin Media.

This case serves as a costly reminder of the Court’s approach to enforcing exclusion clauses which, as in this case, can leave a party barred from bringing a claim for damages. The facts and judgment are as follows:

Facts

Virgin Media does not operate its own mobile network, therefore, to provide mobile services to its customers, it used EE’s network. This was provided as part of a wider telecommunications supply agreement (the “Agreement”). Specifically, in the Agreement, EE agreed to provide Virgin Media customers with access to its 2G, 3G and 4G mobile services. In return, Virgin Media agreed to use EE’s network exclusively.

An exclusion clause of the Agreement expressly excluded liability for anticipated profits.

The Agreement was amended on three separate occasions. The amendment at the heart of this dispute made provision for Virgin Media to engage other mobile networks’ 5G mobile services to provide to Virgin Media customers. Where the 5G services provided to a customer were sourced from an alternative supplier, the 2G, 3G, and 4G services may also be provided by the alternative supplier to that customer. As such, this amendment created a cave out to the exclusivity clause as originally drafted.

Virgin Media subsequently reached an agreement with Vodaphone for the provision of 5G mobile services and began to migrate its customers.

EE’s Position: “Charges unlawfully avoided”

EE argued that Virgin Media diverted non-5G customers away from EE and onto the Vodaphone network, and therefore, Virgin Media was in breach of the exclusivity clause. As a result, EE sought to recover the profit it would have made if the non-5G Virgin Media customers diverted had used EE’s network.

Although an exclusion clause provided that liability for “anticipated profits” was excluded, EE submitted that their claim was, instead, essentially for “charges unlawfully avoided”. By this, EE sought to draw a distinction from profits, to fall outside of the exclusion. It argued it was neither a loss of profits claim, nor was it a claim for wasted expenditure. Rather, it was a “different beast” entirely.

Virgin Media’s Position: Liability was excluded

Virgin Media argued it was not in breach of the exclusivity clause, and that EE’s claim for losses fell within the clear and natural meaning of “anticipated profits” and the claim was therefore excluded by the exclusion clause in the Agreement.

Judgment

The Court held that EE’s claim for damages against Virgin Media was excluded by the terms of the exclusion clause of the Agreement.

The Court held that EE’s claim for “charges unlawfully avoided” could only be a claim for loss of profit. The Court then turned to whether loss of profits in this context was caught by the exclusion clause.

The Court held that any liability on the part of Virgin Media for damages for the diverting customers to an alternative network did fall within the exclusion clause. As such, EE was unable to claim damages and a summary judgment was granted in Virgin Media’s favour.

Comment/reasoning

The Judge noted that, when considering exclusion clauses, the starting point is a presumption that neither party intends to abandon the legal remedies available to them. Here, the Judge held that the language of the exclusion clause was clear and unambiguous, which was sufficient to rebut the presumption that the parties did not intend to abandon their claims for loss of profit.

The Court gave the words “anticipated profits”, as drafted in the exclusion clause, their natural meaning and noted the clause was seeking to exclude damage claims for loss of profit of any kind. Accordingly, the court held there was no distinction between “lost profits” and “anticipated profits” in this context.

The Judge place weight on various factors, including that the matter concerned a “bespoke, lengthy and detailed contract” which had been negotiated by “sophisticated parties” and, with that, detailed consideration of the risks and the rewards for each party has been considered. Moreover, the Court noted the clause did not seek to benefit one party alone.

Should you require any support in drafting or reviewing exclusion clauses (or even, interpreting them), please get in touch with our Commercial Team who would be happy to assist.