O2 (UK) Ltd. v Dimension Data Network Services Ltd

A contractual term requiring charges to be paid without deduction or set-off excludes set-off against those charges. A later agreement may suspend that term; when the agreement ends, the original term revives. On an interim payment application, the court must consider any relevant set-off or counterclaim when assessing the likely final judgment and reasonable proportion. An argument inconsistent with the pleaded case, and not pleaded as a set-off against the invoices in issue, does not prevent an interim payment. The appeal was therefore dismissed, although permission to appeal was granted.

O2 claimed approximately £554,000 from Dimension Data for invoices issued between February and May 2005. O2 applied for summary judgment. Gloster J found that the defence had a real, though extremely tenuous, prospect of success based on alleged overcharging, but ordered interim payments of approximately £387,000 with interest under Part 25.7 of the Civil Procedure Rules 1998. Dimension Data renewed its application for permission to appeal, arguing that historic overcharging should be considered by way of set-off or counterclaim. The central issue was whether the contractual exclusion of set-off and the pleaded case prevented that argument.

Permission to appeal was granted, but the appeal was dismissed. Ward LJ delivered the judgment, with Laws LJ agreeing.

1. Under Part 25.7 of the Civil Procedure Rules 1998, an interim payment could be ordered only if the claimant would obtain judgment for a substantial sum. The payment could not exceed a reasonable proportion of the likely final judgment, and the court had to take account of any relevant set-off or counterclaim.
2. Clause 7.2 of the Airtime Agreement required payment of charges in full without deduction or set-off. On its ordinary meaning, it operated as a pay-now-and-grumble-later provision. It therefore excluded set-off against the charges in issue.
3. The Letter Agreement had placed clause 7.2 into suspense while the parties worked towards resolving the billing dispute. Once that agreement was terminated, the moratorium and any consequential modification of clause 7.2 ended. Clause 7.2 revived and precluded set-off.
4. Dimension Data’s pleaded case did not plead set-off in respect of the February to May 2005 invoices. Its only pleaded set-off related to O2’s claim concerning the earlier credits. Its reservation of a possible counterclaim did not make historic overcharging a relevant set-off for the interim payment application.
5. Gloster J was entitled to find that a substantial judgment was likely and to order 70 per cent of the sum claimed. The 30 per cent reduction was not challenged. The Court of Appeal could not identify any error in her conclusion.

1. Court of Appeal (Civil Division) On 6 November 2007, permission to appeal was granted, but Dimension Data’s appeal was dismissed: [2007] EWCA Civ 1551.
2. High Court of Justice, Queen’s Bench Division Gloster J dismissed O2’s application for summary judgment on the February to May 2005 invoices, but ordered interim payments of approximately £387,000 with interest on account of the claim. The judgment date was 20 April; no citation is stated in the judgment.