The Court of Appeal agreed with the first instance decision that the exclusion clause excluded EE’s entire £24.6m loss of profit claim against Virgin Mobile.
EE claimed that it had suffered loss and damage in the amount of £24.6m as a result of Virgin Mobile breaching an exclusivity obligation in the telecommunications supply agreement, because EE had lost the revenue that it would have received from Virgin Mobile under the terms of the agreement had the exclusivity obligation not been breached.
Virgin Mobile denied breaching the agreement as alleged but argued that, in any event, EE’s claim was precluded because it was, in substance, a claim for anticipated profits. It therefore fell within the scope of the exclusion clause in the agreement which provided that “Neither Party shall be liable to the other in respect of … anticipated profits”.
EE argued that this interpretation could not be correct because (amongst other things), on the facts which occurred, EE did not have a wasted expenditure claim or a good argument for an injunction, so excluding the loss of profits claim would leave EE without an effective remedy, creating commercial absurdity and defeating the main purpose of the agreement.
The majority of the Court of Appeal rejected this argument because the specific facts which occurred, where no alternative remedy was viable, were not known to the parties when they entered into the agreement and therefore should not affect its interpretation. It was held that, applying the proper legal principles, the exclusion clause did preclude EE’s entire claim.
However, the Court of Appeal did not reach this conclusion easily, and indeed Phillips LJ dissented, noting that “it would be surprising if the parties intended that [Virgin Media] could breach the key exclusivity provision, unlawfully diverting its customers to a third party supplier, without incurring liability to pay EE damages reflecting the loss of revenue resulting from that breach”.
This case provides a further example of the unpredictability of the interpretation of exclusion clauses and the importance of clear, future-proof, contract drafting.
Lizzie has a diverse commercial disputes practice and wide-ranging experience of litigation and arbitration including urgent injunctions, appeals and group litigation. Lizzie acts for a wide range of clients, from high net worth individuals to large corporates, including technology companies, established brands across a broad range of industries, public sector entities and startups.
Lizzie has particular expertise in commercial disputes with a technology angle. Lizzie advises on traditional IT disputes (involving hardware, software development, outsourcing and licensing) and disputes involving emerging technologies (including artificial intelligence, digital assets and blockchain). In addition, Lizzie advises on disputes arising out of cyber-attacks and online payment frauds, disputes involving investments into technology companies, disputes about technology procurement processes and the management and resetting of distressed digital transformation projects.
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Lizzie graduated from the University of Cambridge with a First Class degree in Law in 2010 before training and qualifying at Herbert Smith Freehills, where she worked on a variety of complex litigation and arbitration matters for a number of years, before joining Harbottle & Lewis in 2017. Lizzie is a member of the Society for Computers & Law, the Tech Disputes Network, the Cyber Fraud and Asset Recovery Network and the Silicon Valley Arbitration & Mediation Center.