Easyair Ltd (t/a Openair) v Opal Telecom Ltd

On summary judgment, a claimant must show a realistic, rather than fanciful, prospect of success. The case must carry some degree of conviction and be more than merely arguable. The court must avoid a mini-trial, but should decide a short point of law or contractual construction where the necessary material and argument are available.

Contracts forming one commercial package are construed together. A positive covenant in a sale agreement may operate only as an indemnity where that construction reflects the transfer of ownership and the package’s allocation of risk. Fiduciary duties may coexist with contract, but must be moulded by it and cannot contradict agreed ownership and freedom of action. A security deposit may leave the payer with an arguable beneficial interest and support an equitable account, permitting that claim to proceed to trial.

The claimant sold its mobile telecommunications subscriber contracts and subscriber database to the defendant under a sale and purchase agreement. A related dealer agreement appointed the claimant as an agent and provided for commission. After O2 disconnected approximately 7,000 SIM cards used in commercial multi-user GSM gateways, the claimant sought lost-profit damages. It alleged breach of the sale agreement and breach of fiduciary duty based on the defendant’s failure to resist the disconnections or register the users.

The defendant applied to strike out the claim or obtain summary judgment. Following Office of Communications v Floe Telecom Ltd [2009] EWCA Civ 47, the proposed proceedings against O2 could not have succeeded. Separate issues concerned repayment and accounting for a £200,000 security deposit and commission. The central question was which claims had a real prospect of success and should proceed to trial.

1. Application granted in part. The defendant obtained judgment on the claim for damages based on breach of contract and fiduciary duty. The claims for repayment and an account of the security deposit, an account of commission, and ancillary relief were permitted to proceed to trial. The related amendments were allowed only to that extent.

2. A claimant resisting summary judgment must demonstrate a realistic, rather than fanciful, prospect of success. The claim must carry some degree of conviction and be more than merely arguable. Although the court must avoid a mini-trial and consider evidence reasonably expected at trial, it may analyse unsupported assertions. It should decide a short point of law or construction where the necessary evidence is available and the parties have had an adequate opportunity to address it.

3. The sale and purchase agreement and dealer agreement formed one commercial package and had to be construed together. Clause 7.1 of the sale agreement operated only as an indemnity protecting the claimant against residual obligations under transferred subscriber contracts. It did not require the defendant to preserve those contracts or support damages equivalent to profits excluded under the dealer agreement. That construction reflected the outright sale, the absence of any continuing proprietary interest, the claimant’s ability to earn the same commission under new defendant contracts, and the agreed exclusion of loss-of-profit liability.

4. The fiduciary-duty claim also had no real prospect of success. Fiduciary duties may exist alongside contractual obligations, but must be moulded by the contractual setting. A duty requiring the defendant to act solely in the claimant’s interests was inconsistent with the outright purchase, the defendant’s entitlement but lack of obligation to protect the assets, and the claimant’s obligation to procure new contracts on the defendant’s terms.

   The Court of Appeal in Office of Communications v Floe Telecom Ltd [2009] EWCA Civ 47 had held that the relevant licence did not permit GSM gateways and that European law did not alter its construction. Proceedings against O2 were consequently bound to fail. Failing to commence such proceedings could not constitute a fiduciary breach or, absent the clearest words, a contractual breach. Registration would also have revealed the users as prohibited commercial multi-user gateways and resulted in disconnection.

5. The dealer agreement’s disputed-payment time bar did not govern the separate claim for return of the security deposit because it was not incorporated into the collateral agreement. The deposit’s description as security made a retained beneficial interest and an equitable duty to account reasonably arguable. The defendant also possessed the information required to calculate the deposit deductions and commission. The possible accounting obligations were not obvious and had not been fully explored, so those claims had a real prospect of success and required trial.

not stated in the judgment.