Tele2 International Card Company SA & Ors v Post Office Ltd

A contractual anti-waiver clause does not prevent a party from affirming a contract by election. Where the party knows of its right to terminate, its continued performance and acceptance of performance may amount to a clear and unequivocal election to abandon that right.

Damages for repudiation compensate the value of the contractual benefit actually lost. The court may consider post-breach events when they establish that the claimant would not in fact have received the contractual benefit. A claimant seeking lost profit must prove its own net loss.

Under a clause requiring parties to share the remaining value of an expired prepaid card equally, the remaining value is the unused face value, not the supplier’s saved costs.

Tele2 appealed from an order of HHJ Seymour QC dated 25 February 2008 concerning a phonecard supply agreement with Post Office Ltd.

Post Office purported to terminate after Tele2 failed to provide parent-company guarantee letters by the contractual deadline. The judge held that an anti-waiver clause preserved Post Office’s termination right despite its subsequent performance of the agreement. He also held that Tele2 Ireland had suffered no recoverable loss, construed the expiry-revenue provision in Post Office’s favour, and declined to entertain Post Office’s late proposed amendment to its defence.

The appeal concerned affirmation by election, the effect of the anti-waiver clause, damages for wrongful repudiation, the construction and alleged variation of the expiry-revenue clause, and the refusal of the late amendment.

1. Appeal dismissed; cross-appeal dismissed. The judge was wrong to hold that clause 16 prevented affirmation by election. Post Office knew both the facts giving rise to its termination right and the right itself. Its continued performance for nearly a year, without protest or reservation, was conduct consistent only with an election to affirm the agreement.

2. Applying the principles in Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India (The “Kanchenjunga”) [1990] 1 Lloyd’s Rep 391, an election may be communicated by conduct, but an election not to exercise a termination right must be clear and unequivocal. Clause 16 dealt with waiver by delay, neglect or forbearance. It did not exclude, and could not prevent the factual existence of, an election to abandon a contractual right to terminate.

3. Post Office’s notices of 1 December 2004 were therefore an anticipatory renunciation, and its non-performance after 31 March 2005 was repudiatory. Tele2 Ireland was the only contracting claimant able to seek substantial damages. However, the compensatory assessment could take account of later events. The evidence established that, had the agreement continued, other group companies would have supplied the cards and services, while Tele2 Ireland would neither have received the fees nor incurred the associated costs. It therefore suffered no substantial loss and was entitled only to nominal damages.

4. The court also upheld the alternative finding that Tele2 Ireland had not proved a net loss of profit. Historical group-cost evidence did not compel a finding that Tele2 Ireland itself would have incurred equivalent costs during the remaining contractual period.

5. Under Schedule 4, Part III, paragraph 1, the remaining value of an expired phonecard was its unspent face value. Tele2 and Post Office were each entitled to 50%. The evidence did not establish an objectively intended variation by conduct reducing Post Office’s share to 25%.

6. The judge was entitled, as a case-management decision, to refuse Post Office permission to advance a new unpleaded termination point after the trial by correspondence.

• Court of Appeal (Civil Division): Tele2 succeeded on the issue of wrongful termination, but its appeal was dismissed because Tele2 Ireland proved no substantial loss. Post Office’s cross-appeal concerning its proposed amendment was also dismissed: [2009] EWCA Civ 9 .
• High Court: HHJ Seymour QC held that Post Office had validly terminated the agreement, that Tele2 Ireland had suffered no recoverable substantial loss, and that the expiry revenues were to be shared equally.