T. Mobile(UK) (A Partnership) v Bluebottle Investments SA & Ors

A contractual mechanism may be construed by reference to its language, commercial purpose and factual matrix. Where an agreement fixes a contribution by reference to a specified mathematical formula, that formula may replace an earlier performance-based calculation. A party cannot trigger contractual termination by proposing a calculation which the amended agreement makes ineffective. A calculation affecting termination must, at minimum, satisfy an objective standard of reasonableness. An estoppel by convention may also prevent a party resiling from a shared contractual assumption on which the other party relied in obtaining substantial financing.

The claimant, a telecommunications partnership formerly known as One 2 One, jointly owned the third defendant with the first and second defendants. The parties’ joint venture and telecommunications supply agreements provided for a Marketing Support Contribution, calculated by reference to a Customer Contribution, and linked specified shortfalls to default or no-fault termination.

The parties later signed a letter agreement fixing the Customer Contribution at £4.56 until 31 March 2001 and providing that thereafter the contribution and Marketing Support Contribution would be calculated using the formula in the supply agreement. The claimant subsequently proposed a performance-based Customer Contribution of £1.71, contending that this triggered no-fault termination. The issues included the proper construction of the letter agreement, estoppel, the validity of the proposed calculation, customer dormancy, and whether a notice of termination had been given.

1. Construction. The letter agreement, read as a whole and against its commercial background, replaced the uncertain performance-based Customer Contribution calculation with the Minimum Customer Contribution formula. The reference to the formula in the supply agreement could only mean the mathematical formula in Appendix F. The Customer Contribution was fixed at £4.56 until 31 March 2001 and then declined according to that formula.
2. The amended regime meant that no Customer Contribution could be calculated below the applicable Minimum Customer Contribution. A performance-based proposal below that figure was therefore contractually ineffective and could not constitute, or trigger, an Event of No Fault Termination. The claimant’s letter of 30 September 2002 had no legal effect.
3. The court also held, alternatively, that the parties had established a shared convention that the formula-based calculation would underpin the joint venture’s five-year bank facility. The claimant had participated in and encouraged reliance on that basis. It would be unjust and unconscionable to permit it to resile from the convention.
4. Even under the original agreement, the £1.71 calculation was invalid. It was premature, used figures from periods other than the preceding review period, omitted text revenue, and included an unjustified deduction for the Capacity Utilisation Fee. There could be only one operative Customer Contribution at a time; the later calculation of £3.8794 was ineffective while the first remained unwithdrawn.
5. A simple 365-day dormancy rule was not justified. Customers who had abandoned their rights could be excluded, but non-use alone did not establish abandonment in every case. A 180-day disconnection direction was reasonable where inbound data could not be retrieved, but not where recorded inbound use existed.
6. The fax acknowledging receipt of the claimant’s letter was not a notice by the joint venture under clause 16.1(b). The auction mechanism was therefore not triggered in any event. The claimant was not entitled to its declarations; the third defendant was entitled to contrary declarations and payment of sums due for Marketing Support Contribution, to be quantified.