Mainline Digital Communications Ltd v Chaddah (t/a '2-Way Communications')

A serious and sustained failure by a dealer to provide proper customer service may amount to a repudiatory breach, particularly where it follows warnings and a probationary action plan. Earlier misconduct may be relevant to the seriousness of a later breach, although a previous breach may have been waived for limited purposes without being waived generally. Interlocking dealership agreements should be construed by reference to their common commercial purpose. Contractual provisions allowing recovery of advances do not ordinarily permit the innocent party to profit from the breach. Recovery is limited to the contractual loss established on an objective reading of the agreements.

The claimant telecommunications distributor terminated its interlocking dealership agreements with the defendant after Everything Everywhere issued a Do Not Deal Notice. The notice followed repeated customer-service problems, including abusive and threatening communications to a customer after an earlier incident had led to warnings and a probationary action plan.

The defendant accepted that his conduct constituted a breach but contended that it was not repudiatory and that the earlier incident had been waived. He counterclaimed for wrongful termination. The claimant also sought recovery of outstanding advance payments, set against value-share payments.

1. Liability. The defendant’s conduct towards Parkhurst was a serious and sustained breach of the contractual customer-service obligations. Bombarding a customer with offensive texts, following warnings and a period of probation, justified the Do Not Deal Notice and made the breach repudiatory.
2. The interlocking agreements had a common purpose: the promotion of EE products through the dealership. It would be commercially perverse to treat the admitted breach as repudiatory for the Orange Terms and Data Share Agreement but not for the Revenue Share Agreement. The contracts were therefore lawfully terminated.
3. The earlier White incident was, to the limited extent that it was treated as “water under the bridge” if nothing further occurred, waived. It was not an unequivocal waiver of the breach for all purposes. The earlier incident, subsequent warnings and other complaints remained relevant context when assessing the seriousness of the later Parkhurst breach.
4. In assessing evidence, the court followed the guidance in Gestmin SGPS S.A. v Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm), Onassis v Vergottis [1968] 2 Lloyds Rep 403 and Wetton (as Liquidator of Mumtaz Properties) v Ahmed [2011] EWCA Civ 61. Contemporary documents, electronic evidence and the absence of expected documentation were given substantial weight.
5. Damages. The Revenue Share Agreement provided that value-share payments ceased on termination, while the Advance Payments Agreement permitted recoupment of advances in the circumstances specified. On an objective reading, clause 3 entitled the claimant to recoup advances where insufficient connections or payments left it facing a loss. It did not entitle the claimant to profit from the defendant’s breach or penalise him. The claimant therefore proved no contractual loss or damage as claimed.
6. The claim succeeded on liability. The counterclaim for £473,608.19 failed.