Key takeaways
Court enforces exclusion of anticipated profits
Court confirms lost revenue falls within exclusion.
Majority supports broad clause interpretation
Losses tied to contract performance are excluded.
Case highlights importance of clear drafting
Well-defined terms strengthen contractual protection.
In the recent decision in EE Ltd -v- Virgin Mobile Telecoms Ltd [2025] EWCA Civ 70, the Court of Appeal upheld a decision of the High Court to strike out a claim by EE for charges it lost as a result of Virgin’s breach of an exclusivity clause. The Court of Appeal concluded by majority decision that the claim was one for “anticipated profits” and therefore fell within the wording of the relevant contractual exclusion clause.
Relevant facts
In summary, the parties entered into a supply agreement under which Virgin committed to use EE’s network to provide customers with 2G, 3G and 4G mobile services on an exclusive basis. EE claimed Virgin breached this exclusivity provision by diverting customers to other networks. EE claimed damages representing the lost revenue it would have received had such customers remained on its network.
Exclusion clause
The supply agreement contained a clause under which each party excluded its liability to the other for “anticipated profits”. Virgin denied breaching the contract and also relied upon this exclusion, applying to strike out the claim.
First instance decision
EE maintained before the High Court that the exclusion of anticipated profits should not preclude its claim. It characterised its claim as one for “charges unlawfully avoided” and not as one for lost profits. The first instance court rejected these submissions and concluded that EE’s claim sought to recover the profits EE would otherwise have made but for the breach of exclusivity by Virgin. The court went on to conclude that “loss of anticipated profits” covered any claim for loss of profits of any kind which it was foreseeable would be made by either party. Virgin was granted summary judgement.
EE’s appeal
EE argued on appeal that the High Court erred in characterising its claim as one for loss of profits. It asserted instead that it was a claim for diminution in price. It asserted it had incurred the costs of providing the services to Virgin and that the lost revenues diminished the value of the contract because EE was paid less than it should have been.
EE said also that “anticipated profits” should be interpreted to mean profits that might arise outside of the contract (as distinct from profits it was to earn within the contract – the charges payable less the costs of the service).
It asserted also that if it could not recover the revenues it lost as a result of the breach by Virgin of the exclusivity provision, this would undermine that provision and reduce it to a mere statement of intent.
EE maintained that the claim should not be excluded.
Court of Appeal decision
The Court of Appeal dismissed EE’s appeal by majority decision.
The lead judgment of Zacaroli LJ identified the key issue as having been whether “anticipated profits” should be interpreted to encompass the loss by EE of the charges which would have been paid to it by Virgin had Virgin not breached the contract, or whether that wording was intended to mean something different.
The Judge concluded as follows:
there is no overarching principle of law that dictates that a diminution in value of a contract is not or cannot be loss of profits;
the cases which EE relied upon in support of its arguments in that regard could be distinguished on their own facts;
the wording of the exclusion clause in this case was clear and unambiguous:
on reading the clause it was clear that liability for anticipated profits was intended to cover losses additional to loss that did not arise directly from the performance of the contract;
had the parties intended “anticipated profits” to cover only direct loss of profit claims that did not fall within the scope of the loss of bargain, the wording would have stated this expressly and with greater specificity - it did not;
“anticipated profits” in this contract equated to profits that it was anticipated would be, or would have been, made, but which would not be, or were not, made because of the breach of contract;
EE would not be denied a remedy as a result of this interpretation because for example the agreement provided for injunctive relief and it might also have a claim for wasted expenditure which would not be excluded;
the Court of Appeal noted that the contract in question was a long detailed document drafted by lawyers which sought to allocate risk between the parties.
Minority view
Phillips LJ took the contrary view in his minority judgment, allowing the appeal.
He concluded that it would be contrary to business common sense for the parties to have intended that Virgin could breach the exclusivity obligation by sending customers to other networks without incurring liability in damages to EE. The Judge opined that to do so would undermine the bargain struck between the parties. His view was that the claim by EE should properly be regarded as being for loss which was readily ascertainable by way of the sums EE would have been paid if customers had not been diverted elsewhere by Virgin. “Anticipated profits”, the Judge opined, meant profits that were hoped for but uncertain and would arise outside of the performance of the contract as opposed to sums which would be payable under the contract itself.
Comment
This decision is of interest for a number of reasons:
The fact that the Court of Appeal was split in its decision shows that the arguments were finely balanced and reflects the challenges when interpreting exclusions of this nature on particular facts.
The judgment serves to remind us that when it comes to interpreting exclusion clauses, the court will very carefully scrutinise language of the particular contract in question and the relevant facts of the particular case. Previous authorities and decisions can and will be distinguished on the facts wherever appropriate and will not necessarily be determinative as a result.
The decision also illustrates the vital importance of clear unambiguous drafting. It is essential to consider carefully what is intended when drafting exclusion clauses to cover “anticipated profits” and set this out unequivocally.
The courts are quite clearly cognisant where lawyers are instructed by the contracting parties and the negotiated contract is lengthy and detailed and attempts to allocate risk between them, of the fact that they ought on the face of it to be taken to have said what they meant.
It remains to be seen whether this decision will be appealed to the Supreme Court for further consideration.
If you require any further information about the issues raised above please contact Paul Walsh.
How our dispute resolution lawyers can support you
If you’re experiencing any issues in relation to the issues raised in this article, our experienced dispute resolution lawyers can provide invaluable guidance and ongoing support.
From addressing complex legal issues, to providing clear and practical advice, our team will be by your side, wherever you are, to guide you toward the best outcome for your business. Contact us today to get started.
