PHONES 4U LTD (IN ADMINISTRATION) V EE LTD

[2018] EWHC 49 (Comm), Queen's Bench Division, Commercial Court, Mr Justice Andrew Baker, 16 January 2018

Contract - Loss of bargain - One party to trading agreement entering into administration - Other party terminating agreement and seeking damages for loss of bargain - Exercise of contractual right of termination preventing right to damages for loss of bargain from accruing - Repudiatory breach - Condition - Sufficiently serious breach - Renunciation - Whether cessation of trading temporary or permanent - Summary judgment

The claimant was a seller of mobile phone contracts, and entered into administration on 15 September 2014. From that day onwards its retail shops remained closed. The defendant was a mobile network operator. At the time the claimant entered into administration, the parties' relationship was governed by a written agreement relating to consumer pay monthly acquisition, retention and in-life management dated 8 October 2012 which EE had given notice it would not extend upon its expiry at the end of September 2015. It contained the terms of business between Phones 4U and EE relating to pay monthly contracts. Additional terms governed pay as you go (PAYG) connections and were to terminate at the end of 2014. Following the appointment of administrators, EE terminated the agreement with immediate effect by a letter emailed around midday on 17 September 2014. Payments would continue to be due from EE to Phones4U until 2021 in respect of consumer contracts made, subject to this counterclaim by EE, on which Phones4U sought summary judgment. EE asserted a right to damages for loss of bargain resulting from the termination of the contract. EE's allegation was that from the time of it entering into administration until the termination letter was sent, two-and-a-half days later, Phones 4U had not undertaken any of the key obligations under the trading agreement such as sales or customer service. That was a serious breach which had caused significant damage to EE's business. The breaches were likely to continue for the foreseeable future and cause further significant damage to EE's business. There was, EE asserted, therefore a repudiatory breach. In the alternative, there was a renunciation on the basis that the material available to a reasonable person in the position of EE at the time would have conveyed to that person that Phones 4U did not intend to perform its obligations.