Court of Appeal confirms financial claim caught by clause excluding liability for loss of anticipated profits

EE Ltd v Virgin Mobile Telecoms Ltd [2025] EWCA Civ 70

The question

How did the Court of Appeal approach the construction of an exclusion clause to determine whether the Claimant’s financial claim for breach of an exclusivity provision was properly described as a claim for “anticipated profits” and as such was excluded by that clause?

The key takeaway

In line with the ruling in the High Court and a number of recent cases, the Court of Appeal decision shows that parties cannot avoid express wording contained in exclusion clauses to recover losses expressly excluded. The language of the contract and the context are key for the construction. A party wishing to narrow the meaning of an exclusion clause should do so explicitly.

The background

Virgin Mobile Telecoms (Virgin Mobile) contracted with EE to use, exclusively, the EE network to provide Virgin Mobile’s customers with 2G 3G and 4G mobile services. Other than in certain limited circumstances, the liability clauses in the contract expressly excluded liability for “anticipated profits”.

The initial arrangement did not make provision for 5G services, but it was added subsequently, and the contract was amended. The amendment provided for potential agreement between EE and Virgin Mobile for provision of 5G services using EE networks. In the absence of an agreement regarding 5G services, Virgin Mobile would be entitled to provide 5G services to its customers sourced from an alternative supplier, and could also then switch that customer’s 2G, 3G, and 4G services to that alternative operator.

Following the absence of an agreement for 5G services with EE (ie only the potential to agree), Virgin Mobile entered into an agreement with Vodafone for the supply of 5G services. It then migrated non-5G customers (ie with only 2G, 3G and 4G/LTE services) over. EE considered that by doing so Virgin Mobile had breached the exclusivity clause and issued proceedings, claiming damages representing the revenue that EE would otherwise have received from Virgin Mobile for the 2G-4G services that each of Virgin Mobile’s customers would have consumed had they remained or been added to the EE network rather than migrated or added to the Vodafone network.

Virgin Mobile subsequently applied for strike out and/or reverse summary judgment of EE’s claim in the High Court (which we previously reported on here). Their main argument was that, regardless of whether a breach occurred (which Virgin Mobile denied), the claimed losses fell within the clear and natural meaning of the words “anticipated profits” in the exclusion clause:

34.4 Neither Party shall be liable to the other for any loss which is not directly foreseeable or which does not arise directly from the performance of this Agreement and thus neither Party shall be liable for any indirect or consequential or special or incidental loss whatsoever.

34.5 Except for any damages claims by VM pursuant to Clause 34.2(c), to which Clause 34.3 applies (which EE acknowledges may include claims of damages for loss of profits), and for no other damage claims whatsoever, neither Party shall have liability to the other in respect of:
(a) anticipated profits, or

(b) anticipated savings.

The High Court decided that given the clear and unambiguous language, EE’s damages claim for the unlawful diversion of its customers to alternative networks fell within the exclusion clause. The meaning of “anticipated profits” operated to exclude damages claims for loss of profits of any kind which it was foreseeable would be made by either party. There was no difference between “anticipated profits” and “lost profits” – reinforced by the fact that clause 34.5 used the phrases interchangeably, in carving out claims by Virgin Mobile brought under clause 34.2(c).

The judge had looked at the natural meaning of the words and based her reasoning on the fact that: the agreement was a bespoke, lengthy and detailed contract; detailed consideration had gone into the risks and rewards of each party; clause 34 itself was a detailed regime including a liability cap and various exclusions of liability, clearly intended to form part of the risk allocation exercise between the parties; and the clause applied equally to both parties, except for specific carve-outs in relation to the specific claims by VM identified within clause 34.

On appeal, EE asked the court to reverse the High Court decision, claiming that the judge had mischaracterised the claim as one for lost profits. Instead, the clause was one for diminution in price and in any event the judge had wrongly construed the clause so as to exclude EE’s claim.

The decision

The key issue for the Court of Appeal was whether a claim for loss of anticipated profits meant, under the exclusion clause, a claim for something other than expectation loss ie a claim for profits earned outside the contract.

The court stated that there was no general legal principle limiting the exclusion of liability for loss of anticipated profits to losses other than expectation loss or diminution in price. While some case law found that such claims were excluded, others did not. Therefore, the court held that existing case law provided little assistance and each exclusion clause should be constructed on its own terms and context.

On its construction of the clause, the court found that:

• the wording of the exclusion in this case was clear and unequivocal; the phrase “anticipated profits” was used interchangeably with loss of profits, and the clause was part of a lengthy contract drafted with the assistance of legal advice on both sides, involving a careful allocation of risk for both parties
• clauses 34.4 and 34.5 were intended to be read cumulatively, with the result that liability for anticipated profits was intended to mean something wider than loss that did not arise directly from the performance of the agreement. If the parties had intended “anticipated profits” to cover only direct loss of profit claims that did not fall within the ambit of expectation loss, they would have stated this specifically
• clause 34.5 had to be read with regards to the range of its possible applications at the time the agreement was made. Other potential remedies were not excluded, including injunctive relief, though they might not be available based on these particular facts/claim, and any claim EE might have had for wasted expenditure was not excluded.

The Court of Appeal dismissed the appeal on the basis that EE’s claim fell within the exclusion clause.

Why is this important?

The Court approached the interpretation of the contract by taking a relatively forensic approach to the exclusion clause wording decided on by the parties in the context of the wider agreement. This shows the importance of using precise words and consistent terminology when drafting exclusion clauses.

Any practical tips?

In light of the courts’ continuing willingness to construe the words of an exclusion clause so as to recognise that commercial parties are free to make their own bargains and allocate risks as they think fit, ensure clear wording and consistent terminology is used in drafting exclusions, taking into account the context of the wider agreement and background facts.

Consider using explicit wording to reflect whether the exclusion clause excludes liability for losses that go to the heart of the contract.

In this case the court decided that “anticipated profits” was used within clause 34.5 interchangeably with “loss of profits.” Aim for consistency across the contract when using these, or similar, phrases.

If it is intended that certain losses should not be excluded, the inclusion of a non-exhaustive list of recoverable losses could provide guidance and avoid uncertainty.

Spring 2025