Excluding anticipated profits and savings: EE v Virgin Mobile

As businesses increasingly look to their tech providers to deliver costs savings, it is important to ensure that the exclusions and limitations of liability in those service contracts don’t inadvertently undermine the key commercial drivers underpinning the arrangement.

When it comes to interpreting liability clauses, the Court of Appeal judgment in EE v Virgin Mobile [2025] EWCA Civ 70, handed down on 4 February 2025, is a reminder that cases turn on their facts and that, when trying to interpret a phrase like “loss of profit, revenue or savings” or “wasted expenditure”, previous judgments made in different contexts do not create an established meaning or definition that applies to all contracts. As ever, the case is a reminder of the importance of clear and consistent drafting.

Background

EE entered into a contract with Virgin Mobile to be its exclusive supplier of mobile network access. In its original form, the contract did not make provision for 5G services, but the parties later amended the contract to provide for potential agreement on 5G services and to allow Virgin Mobile, in the absence of agreement with EE on 5G, to use an alternative mobile network operator for all services where a customer used 5G. The contract excluded each party’s liability to the other in respect of anticipated profits or anticipated savings.

Virgin Mobile subsequently entered into an agreement for 5G services with another mobile network operator.

EE claimed that Virgin Mobile migrated non-5G customers to other operators (in breach of exclusivity provisions) and sought damages for the so-called “charges unlawfully avoided” EE would have received had Virgin Mobile not moved its non-5G customers elsewhere.

The issue in EE v Virgin Mobile was whether a claim for “charges unlawfully avoided” amounts to a claim for anticipated profits (such that liability for such charges was excluded by the limitation of liability regime).

Unlawfully avoided charges or loss of profits?

Last year, the case of TCS v DBS discussed the distinction between speculative losses (like profit and anticipated savings) and wasted expenditure (see our blog on TCS v DBS) – an innocent party can choose which to claim, but that choice is between different substantive claims rather than a choice about how the claim is articulated.

In this case, the High Court had decided that, however described, EE’s claim was for loss of profits. There was no difference in the agreement between “anticipated profits” and “lost profits”, and so EE’s claim was excluded by an exclusion of liability for anticipated profits. By a majority (just about), the Court of Appeal agreed.

The claim could be described as one for foregone charges, but EE has no debt claim for such charges – its claim was for damages resulting from breach of exclusivity, and the underlying legal basis is a claim for lost profits.

The court noted that, in interpreting a liability clause with a wide scope of application, it is important not to focus too narrowly on the point in issue – the exclusion applies to damages for any number of breaches and it must have the same meaning whichever breach gives rise to a relevant claim.

The court considered that “anticipated profits” and “loss of profits” were used interchangeably in the relevant clause and held that the exclusion of anticipated profits didn’t simply cover indirect or consequential loss. In a bespoke, lengthy and detailed contract, if EE and Virgin Mobile intended the exclusion to be limited to certain profits, the drafting would have said so.

Previous cases of limited value

The Court of Appeal held that previous cases in other contexts established no overarching principle of law that limits the scope of an exclusion of liability for loss of anticipated profits to certain losses. The court considered that those cases concerned clauses which were materially different to the clause in issue here and appeared in different contexts, concluding that little assistance is gained from (what Lord Justice Coulson described as):

“something of a ragbag of particular results in particular types of cases.”

The court, therefore, held that previous cases are of limited value when interpreting phrases used in a particular contract because the words used get their colour from the contract as a whole, set against the commercial background. Loss of profits is not a term of art – it takes its meaning from context – and previous judgments had not sought to identify an established meaning or definition.

Avoiding commercially surprising results

The Court of Appeal was divided, and the pendulum was swung in Virgin Mobile’s favour with some reluctance. (Off to the Supreme Court?) Dissenting, Lord Justice Phillips considered it far from clear that the exclusion for anticipated profits covers a claim for loss of revenue under the contract – in his view, the term really indicates hoped for but uncertain profits that would arise outside the contract, not sums payable under it. He thought it would be surprising if the parties intended that Virgin Mobile could breach the key exclusivity provision without liability to EE for its loss of revenue as a result. 

To put the matter beyond doubt, negotiating parties may seek to clarify that a liability clause is not intended to exclude sums that would have been payable under the contract itself with express drafting. Be consistent when using phrases like loss of profit, revenue or savings and consider expressly including liability for losses that go to the heart of the arrangement.

Exclusions of liability for loss of profit, revenue or savings and wasted expenditure are pervasive, but we’ve seen courts grapple with the meaning of those exclusions time and time again. When negotiating, make sure exclusions or limitations of liability don’t undermine the very thing you’re bargaining for.