EE Limited v Virgin Mobile Telecoms Limited

An exclusion of liability for anticipated profits is construed by ordinary principles of contractual interpretation and according to the contract’s wording and context. There is no general rule confining such an exclusion to profits outside the contract or to losses other than expectation loss. Where the clause is clear, anticipated profits may include profits that would have been earned from contractual performance but for the breach, including damages measured by lost contractual charges less saved costs. Commercial consequences must be assessed at the time of contracting and across the range of likely breaches. The availability of other contractual, damages or equitable remedies may support the exclusion, even where the claimant has no effective damages claim for the particular breach in issue.

EE supplied mobile-network services to VM under a Telecommunications Supply Agreement containing an exclusivity obligation and a liability exclusion for anticipated profits. VM later migrated customers to another network. EE claimed damages measured by the charges it would have received had the customers remained on its network.

On VM’s application to strike out the claim or obtain reverse summary judgment, Mrs Justice Joanna Smith held that the claim fell within the exclusion. EE appealed, arguing that its claim was for diminution in the contractual price rather than lost profits, and that the exclusion would undermine the exclusivity bargain. The central issue was the proper construction and application of clause 34.5(a).

Appeal dismissed by a majority. Zacaroli LJ gave the principal judgment and Coulson LJ agreed with the result and reasoning in substance. Phillips LJ dissented and would have allowed the appeal.

1. Characterisation. EE’s claim was a claim for damages, not a debt claim for unpaid Charges. It represented expectation loss, calculated by reference to the contractual charges that would have been received, less any costs of providing the services. The distinction between lost profits and diminution in price was therefore not determinative. The salvage decisions in Alexander C Tsavliris & Sons Maritime Company v OSA Marine Limited (The Herdentor) and Ease Faith Ltd v Leonis Marine Management Ltd, and the sale-of-goods decisions in Glencore Energy v Cirrus Oil and Galtrade Ltd v BP Oil International Ltd (The Pioneer), were decisions on different contractual wording and contexts. They established no general rule.
2. Construction. Clause 34.5(a) used anticipated profits interchangeably with loss of profits. It covered profits that were anticipated to be made, but were not made because of breach, including expectation loss. Clauses 34.4 and 34.5 operated cumulatively. If the parties had intended to exclude only direct profit claims outside expectation loss, they would have used more specific language.
3. Commercial consequences. The clause formed part of a carefully negotiated allocation of risk. Its effect had to be assessed at the time of contracting and across the range of breaches contemplated by the agreement, rather than by focusing only on the alleged customer migration. Contractual payments, wasted-expenditure damages and equitable remedies remained available in appropriate cases. The carve-out for VM’s claims under clause 34.3(c) reinforced the conclusion because its paradigm claim was itself an expectation-loss claim.
4. Dissent. Phillips LJ considered that excluding damages for breach of the central exclusivity obligation would undermine the commercial bargain. In his view, anticipated profits denoted uncertain profits arising outside contractual performance, not readily ascertainable sums payable as the contractual price.

EE’s claim was therefore excluded by clause 34.5(a), and the appeal was dismissed.

1. Court of Appeal (Civil Division) — By a majority, dismissed EE’s appeal. Zacaroli LJ and Coulson LJ concluded that the claim was excluded by clause 34.5(a); Phillips LJ would have allowed the appeal. See [2025] EWCA Civ 70.
2. High Court of Justice, Technology and Construction Court — Mrs Justice Joanna Smith granted VM’s application for strike out or reverse summary judgment, holding that EE’s claim fell within the anticipated-profits exclusion.