On 4 February 2025, the Court of Appeal delivered a judgment in the case concerning EE Limited and Virgin Mobile Telecoms Limited which provided important guidance on the interpretation of exclusion clauses within commercial agreements, principally those which exclude liability for “anticipated profits”.
Mrs Justice Joanna Smith had originally granted summary judgment in favour of Virgin Mobile on the basis that EE’s claim was barred by an exclusion clause within the parties’ contract. This was appealed by EE, but the Court subsequently dismissed the appeal. The Court of Appeal confirmed, by majority, that the clause existed to exclude the type of loss claimed by EE, even where that loss represented the value of the contractual performance that was supposedly denied by the breach.
Background to the Dispute
The dispute originated from a contract between EE and Virgin Mobile; under which EE was obligated to provide Virgin Mobile with 2G – 4G (not 5G) mobile network services. According to EE, an exclusivity obligation was breached by Virgin Mobile as a result of it transferring customers to another network. Consequently, EE claimed substantial damages for the charges it claimed to have lost as a result. Virgin Mobile denied any breach and relied, in any event, on an exclusion clause contained in the contract.
The Court of Appeal’s decision
The case was heard in the High Court in the first instance and summary judgment was granted in Virgin Mobile’s favour, concluding that EE’s claim fell within the contractual exclusion clause. The case was appealed but the Court of Appeal subsequently upheld this decision.
Zacaroli LJ gave the leading judgment and held that a claim for “loss of anticipated profits” meant, on the true construction of the exclusion clause, to be something other than the loss that consists in the value to EE of the contractual performance which would have been provided by Virgin Mobile but for the breach of contract- otherwise known as EE’s expectation loss. EE’s argument was the wording only excluded more remote or speculative profits, but this idea was rejected by the Court.
When reaching his conclusion, Zacaroli LJ made the following observations:-
- Exclusion of liability clauses for loss of profits had to be interpreted in context and there was little to gain from relying on existing case law;
- In this case, it was deemed wrong to focus too narrowly on the specific breach in question. Again, emphasising the need to consider the wider context of the contract;
- In this instance, the word “anticipated” did not change the meaning of the clause and had the same meaning as “claim for lost profits”;
- Virgin Mobile’s interpretation of the exclusion clause was further supported by other clauses in the contract concerning indirect or consequential losses; and
- The Court held that by interpreting the clause in this way, it did not lead to an uncommercial result. The reasoning being that the parties had carefully drafted an agreement which allocated risk between them and, despite this judgment, EE were left with further remedies to consider by way of specific performance or injunction or damages based on wasted expenditure.
What does this mean for contracting parties?
The decision in this case is a reminder to parties entering into a contract that the courts will give effect to clearly drafted exclusion clauses. As such, parties should carefully consider how exclusion clauses for loss of profit and damages are drafted, particularly in high value commercial and technology contracts.
If you would like advice on contractual exclusion clauses, limitation clauses or managing risk in commercial agreements, our Commercial Dispute Resolution team would be happy to help.