Exclusion clauses can serve as a vital tool in preventing future legal disputes or may result in considerable financial losses. The case of EE Limited v Virgin Mobile Telecoms Limited (2025) underscores the necessity of drafting strong contracts and clearly defining exclusion clauses.

BACKGROUND OFTHE CASE

Virgin Mobile is a Mobile Virtual Network Operator which does not have its own physical radio access network. For this reason, EE and Virgin Mobile entered into a Telecommunications Supply Agreement (TSA), according to which EE would provide 2G, 3G and 4G services to Virgin Mobile's customers. Originally, the TSA did not include a clause for 5G services; however, in 2016, an amendment was made indicating a potential agreement. It is important to note that the TSA did not prohibit Virgin Mobile from using the services of another provider for5G.

In 2019, EE began offering 5G services to its customers, but the anticipated agreement with Virgin Mobile had yet to be concluded. In 2021, Virgin Mobile entered into an agreement with Vodafone and began the gradual transition of its customers from EE to Vodafone. Notably, the agreement permitted Virgin Mobile to transfer only 5G customers. However, EE raised concerns that Virgin Mobile had also started moving 2G-4G customers to Vodafone, which constituted a breach of the existing contract and resulted in a significant financial loss of profit for EE, amounting to Ł24,635,684.

As a result, EE filed a claim against Virgin Mobile for loss of profits. The defendant responded by asserting that it could not be held responsible for the loss of expected profits, as stated in the exclusion clause. EE clarified that it was pursuing compensation for actual lost profits rather than anticipated loss of profits. However, Mrs. Justice Joanna Smith dismissed EE's application to the High Court, emphasising that there is no distinction between anticipated profits and actual lost profits, describing the matter as merely an interpretation issue. This led EE to appeal to the Court of Appeal.

COURT OFAPPEAL JUDGEMENT

EE's appeal was based on 2 grounds that the judicial decision regarding the lost profits was wrong; and that the judicial interpretation of the clause was preventing EE from claiming damages.

It is easy to see that the primary focus of the discussion revolved around the interpretation of the exclusion clause. EE argued that if the exclusion clause was understood to include expected loss, it could effectively eliminate nearly all claims for breach of contract in cases where the claimant aims to recover anticipated profits from the agreement. Thus undermining the fundamental intent of the contract and disproportionately favouring Virgin Mobile. EE also argued that anticipated profit should refer only to the profits expected to be earned outside of the contract.

The final ruling in this case was delivered by Zacaroli LJ. While EE sought to interpret anticipated profits more broadly, the judge did not necessarily agree with this viewpoint. He emphasised that if the parties wish to exclude certain elements in the exclusion clauses, they must do so with utmost clarity rather than relying on a broader interpretation. In this instance, it was evident that the clause aimed to exclude anticipated profits, and this interpretation cannot be contested. Additionally, the judge rejected the argument that EE had no remaining remedies, noting that options such as injunctive relief or a claim for wasted expenditure were still viable.

This case highlights the importance of drafting clear and precise exclusion clauses to ensure that your intentions and wishes are articulated correctly, thereby minimising the risk of potential litigation and financial repercussions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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