Tele2 International Card Company SA & Ors v Post Office Ltd [2009] EWCA Civ 9

[2009] EWCA Civ 9Case No A2/2008/0595
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
HHJ SEYMOUR QC
(sitting as a Judge of the High Court)
HQ06X00067
Venue Royal Courts of Justice, Strand, London, WC2A 2LLDate 21/01/2009
Before
LORD JUSTICE WARDLORD JUSTICE RICHARDSLORD JUSTICE AIKENS
Between
(1) TELE2 INTERNATIONAL CARD COMPANY SAAppellants/(2) KUB 2 TECHNOLOGY LIMITED (formerly known as C3 CALLING CARD COMPANY (IRELAND) LIMITED)Claimants(3) KUB 7 TECHNOLOGY LIMITED (formerly known as CALLING CARD COMPANY (UK) LIMITED)AppellantPOST OFFICE LIMITEDRespondent/Defendant
(Transcript of the Handed Down Judgment ofWordWave International LimitedA Merrill Communications Company190 Fleet Street, London EC4A 2AGTel No: 020 7404 1400, Fax No: 020 7831 8838Official Shorthand Writers to the Court)
Mr John McCaughran QC and Mr Matthew Cook (instructed by Fox Williams, LLP, London) for AppellantsMr Jeffery Onions QC and Mr Ben Strong (instructed by Lovells, LLP, London) for RespondentHearing Hearing dates : 1 st, 2 nd, 3 rd and 4 th December 2008
JudgmentLord Justice Aikens :
[1]This appeal, from an Order of HHJ Seymour QC dated 25 February 2008, arises out of a written agreement dated 9 November 2001(“the Agreement”) between companies in the “Tele 2” group, the parent company of which is based in Sweden, and Post Office Limited (“POL”). POL runs Post Offices in the United Kingdom, where it is possible to purchase items such as pre – paid phonecards. Permission to appeal was refused by the judge but granted, on a paper application, by Pill LJ.[2]The parties to the Agreement on the Tele2 group side were Tele2 UK Communications, (“Tele2 UK”), which was not a party to the litigation giving rise to this appeal, Tele2 UK provided fixed line services only, not pre – paid phonecards. It was sold by the Tele2 group to the Carphone Warehouse Group plc on 16 December 2005 and renamed Old TalkTalk UK Communications Services Ltd: see judgment para 31. Tele2 International Card Company SA, (“Tele2 International”), a Luxembourg company, the First Claimant and First Appellant, and C3 Calling Card Company (Ireland) Limited, (“Tele2 Ireland”), which subsequently became KUB2 Technology Limited. It is an Irish company. It was the Second Claimant and is the Second Appellant.[3]The Third Claimant and Third Appellant is KUB 7 Technology Limited, an English company, which was formerly called Calling Card Company (UK) Limited, (“C3 UK”). It was not a party to the Agreement. It was the Claimants’ case at the trial that there had been a novation of the Agreement, by conduct, so that C3 UK became a party to it. The judge rejected that claim. See para 41 of the judgment.[4]For convenience I shall refer to the companies in the Tele2 Group collectively as “Tele2”.[5]Tele2 makes and supplies phonecards and phonecard services to companies, such as POL, who wish to sell phonecards and phonecard services to the public. A purchaser of a phonecard will pay a certain amount, eg. £5, £10 or £20, when buying the card, which entitles the user to make either national or international calls from a landline or a mobile telephone, either until the credit on the phonecard has been used up or until the expiry of the period for which the phonecard is valid. In this case the period of validity was usually 6 months.[6]The advantage to the user of buying and making telephone calls through a phonecard is that the costs of calls will be below those charged by providers of landline or mobile telephone network services. All the phonecard user has to do is dial the telephone number and the PIN given to him when he purchased the phonecard. The user will then be connected to the telephone number he wants to call and will be charged at the appropriate rate fixed by the phonecard supplier. Under the Agreement with POL, the Tele2 group provided both the physical cards and also the telecommunications connections between the telephone of the purchaser or user of the phonecard and the number which the phonecard user wished to call. Tele2 bore the costs of producing the phonecards and the cost of providing the telephone connections through telecommunications suppliers, such as BT or mobile phone network suppliers. Those costs are called “interconnect costs”.[7]There are two central issues that arise on this appeal. The first is whether the judge was correct to hold that POL was entitled to give a written notice to the Tele2 parties on 1 December 2004 terminating the Agreement as from 1 April 2005. POL said that it was entitled to do so because the Tele2 parties had failed in due time to provide Parent Company guarantee letters for the year 2004, in accordance with clause 3.10.2 of the Agreement and this entitled POL to terminate in accordance with clause 11.4.1 of the Agreement. The Tele2 parties said that POL had delayed so long in giving notice (by nearly a year after it could have done so) that it had affirmed the Agreement by election. The judge held that POL was entitled to give the notice and that it had not elected to affirm the contract. See para 89 of the judgment. The Tele2 Appellants challenge that conclusion.[8]The second central issue only arises if we reverse the judge’s conclusion on POL’s right to terminate the Agreement. POL would accept that if it was not entitled to give the termination notices, then that would constitute an anticipatory renunciation of the Agreement and its failure to continue to perform after 1 April 2005 would be an actual repudiatory breach of the contract. The issue then is whether any of the Tele2 parties is entitled to claim substantial damages for the repudiatory breach by POL. The judge concluded that the only Tele2 company that would have been entitled to claim damages was Tele2 Ireland. But he also concluded that it had suffered no loss and so could not recover substantial damages. See paras 300 and 301 of the judgment. The appellants accept that Tele2 Ireland is the only Tele2 company that can claim substantial damages, but they challenge the judge’s conclusion that Tele2 Ireland suffered no loss. If this court concludes that Tele2 Ireland is entitled to substantial damages, a host of other issues on damages will require consideration.[9]There are three further issues on the appeal. The first concerns the correct construction of provisions in Schedule 4, Part III, paragraph 1 of the Agreement on how “Expiry Revenues” are to be apportioned between the POL and Tele2 parties to the Agreement. “Expiry Revenues” consist of any unused credit on a phonecard at the end of its period of validity. The judge held that, on the true construction of the provision, the “Expiry Revenues” are to be divided so that POL and the Tele2 parties would each receive half of the remaining face value of the phonecard. See para 191 of the judgment. The Appellants say that this construction is wrong and the true effect of the provision is that POL should receive only 25% of the remaining face value of the phonecards.[10]The second of these issues concerns the judge’s conclusion See paras 207 – 208 of the judgment. that there had been no subsequent variation of the Agreement whereby POL agreed to accept only 25% and then 12.5% of the Expiry Revenue. The Tele2 Appellants challenge those conclusions.[11]The last issue arises from a Respondent’s Notice by POL. After the trial had finished, POL made an application to amend its defence. POL wished to plead that no substantial loss could be claimed by any Tele2 party because POL would have been, in any event, entitled to terminate the Agreement on 31 March 2005 because the Tele2 parties failed to provide POL with certified copies of Parent Company guarantee letters for 2005 by the relevant date, viz. 23 December 2004. The judge declined to entertain this application, which was in any case an unnecessary one, given his conclusions. POL submits that the judge was wrong to refuse the amendment. If it is allowed, then POL argues that Tele2 has no answer to the point, so that no Tele2 party can recover substantial damages in any event. B. The terms of the Agreement[12]I have set out the relevant clauses to the Agreement, which is governed by English law (clause 30.3) in an Annex to this judgment. However, I can summarise the essential structure of the Agreement here. By clause 3.1, Tele2 Ireland agreed to provide pre – paid phonecards and pre – paid phonecard telecommunications services. By clause 3.2, Tele2 UK agreed to provide fixed line services to customers in the UK. No issue arises in these proceedings concerning those services. By clause 2.1 of the Agreement, POL agreed to promote the phonecards and the services that Tele2 provided “to no lesser extent than it promotes similar products and services from time to time through” its Post Office Outlets, internal marketing publications and through other suitable communication channels.[13]By clause 4.1, a party to the Agreement that had contracted to provide a particular service to another was entitled to invoice the other for the fees due under the Agreement. Thus, as Tele2 Ireland had contracted to provide the pre-paid phonecards and associated services, it was the Tele2 company that was entitled to payment of fees in respect of those phonecards sold by POL. But POL had to account to Tele2 Ireland only in respect of the pre – paid phonecards that had actually been bought by members of the public. 79% of the cost of the pre – paid phonecards sold to the public was to be remitted to Tele2 Ireland and 21% of the cost was retained by POL: see Schedule 4, Part II, paragraph 1 of the Agreement.[14]The Agreement provided (effectively) that it would run from 15 October 2001 until the expiry of the “Initial Term” on 31 March 2005. After that, the Agreement was terminable upon 24 months written notice from either side, unless the Agreement had been terminated earlier in accordance with the terms of the Agreement, in particular those set out in clause 11: see clause 11.1.[15]As I have noted already, the provision which precipitated the present litigation concerned the provision of parent company guarantees of the Tele2 contracting companies. By clause 3.10.1, each of the Tele2 contractors was obliged to provide to POL, within 20 days of the execution of the Agreement, a certified copy of a Parent Company Letter for the calendar year from January 2001: see clause 3.10.1. The Parent Company Letter was a guarantee by Tele2 AB that it would provide the relevant contracting Tele2 company with sufficient capital to continue its operations under the Agreement. The letter had to be in a form set out in Schedule 6 of the Agreement. Each of the Tele2 contractors also had to forward to POL a certified copy of a new relevant Parent Company Letter “7 days prior to the commencement of each calendar year” after 2001: see clause 3.10.2. This meant that the Parent Company Letters for the following year had to be provided, at the latest, by the end of 24 December each year.[16]The judge found that the provision of Parent Company Letters of guarantee was standard procedure within the Tele2 group. It was considered as important for securing the approval of the auditors of the group. See paras 75 – 76 of the judgment. He also found that POL regarded the letters as important because, at the date of the Agreement, it had concerns about the financial viability of the Tele2 parties, which the provisions of clause 3.10 were intended to assuage. See para 77 of the judgment.[17]It was common ground at the trial that none of the Tele2 contracting parties had, by 24 December 2003, provided a certified copy of a Parent Company Letter to POL for the calendar year 2004. Before us, it was accepted by the Appellants that this failure would give POL a prima facie right to terminate the Agreement in accordance with clause 11.4.1. by giving written notice to the Tele2 parties that it would do so. On 1 December 2004, POL purported to give such written notice, announcing that the Agreement would terminate on 1 April 2005.[18]The other terms of the Agreement that are relevant to the principal issues on this appeal are clauses 16, 13.4 and clause 27. Clause 16 is so important to the first major issue that I will set it out here: “Waiver In no event shall any delay, neglect or forbearance on the part of any party in enforcing (in whole or in part) any provision of this Agreement be or be deemed to be a waiver thereof or a waiver of any other provision or shall in any way prejudice any right of that party under this Agreement”.[19]At the trial, the Tele2 Claimants alleged that POL’s delay in giving written notice of termination of the Agreement until nearly one year after the Parent Company Letters for 2004 were due (ie. on 24 December 2003 at the latest), and its performance of the contract in the meantime without any protest as to the lack of the letters, meant that POL had affirmed the Agreement by election. Tele2 argued that POL was therefore not entitled to give notice to terminate for the failure to provide the letters, so that the termination notice was a wrongful anticipatory renunciation of the Agreement. POL riposted by relying on clause 16, arguing that its effect was that any delay by POL to give notice to enforce its rights to terminate could not be used to found an affirmation by election.[20]The judge upheld Tele2’s argument on affirmation by election, holding that, but for clause 16, he would have held that POL had elected to affirm the Agreement. But he held that the effect of clause 16 of the Agreement was that the delay of POL in giving notice could not be held against it, so that there was no effective affirmation by election. See para 89 of the judgment.[21]The final provisions I should note here are clause 13.4 and clause 27. These are relevant to the question of whether any Tele2 party can claim substantial damages. Clause 13.4 provides that no party to the Agreement shall bring an action against any other party “in relation to loss of profits, loss of business, loss of revenue or anticipated savings suffered by third parties whatsoever and howsoever arising whether from contract, tort, breach of statutory duty or otherwise”. By clause 27 the parties acknowledge and agree that nothing in the Agreement shall confer on any third party any benefits, nor the right to enforce any of its provisions. C. The Relevant Facts[22]On the appeal there is very little dispute as to the principal facts on liability issues, although there were many disputes on facts concerning quantum issues.[23]From the commencement date of the Agreement, Tele2 Ireland itself provided the pre – paid phonecards and the associated phonecard services. There was a financial advantage for the Tele2 group by arranging for Tele2 Ireland to do so. This was because during the period October 2001 to April 2004, as Tele2 Ireland was an Irish company, and so a non – UK supplier, no VAT was payable on the sale of phonecards supplied by it.[24]However, the UK’s VAT regime changed from 1 April 2004, so that VAT became payable on the purchase of phonecards supplied by Tele2 Ireland. Now, there was no advantage in the phonecards being supplied by Tele2 Ireland. This had two consequences. First, Tele2 Ireland ceased to provide the pre – paid phonecards or the phonecard services. Instead, during the period from 1 April 2004 until June 2005, the phonecards were provided by C3 (UK), the Third Claimant, which was not a party to the Agreement. The telecommunications services for the pre – paid phonecards (which were of two types) were supplied by Tele2 UK, a party to the Agreement, but not a party to the action. See paras 47 and 48 of the judgment, although the judge stated that the evidence of Mr Nouman Hashmi, the former chief executive of each of the Claimants, had the effect, if anything, of making “the situation even more obscure”: para 48.[25]The second consequence concerned the way the phonecard revenues were divided between the parties. It was agreed by the parties that POL would continue to receive 21% of the face value of the pre – paid phonecards sold to the public, net of VAT. This meant that POL’s gross share of the revenue from each such phonecard sale increased to 24.7%. See para 274 of the judgment. This obviously reduced the sum to be received by Tele2 Ireland. Thus, in April 2004 the parties agreed in principle that there should be an increase in the call rates to be charged to the public, so Tele2 Ireland could, indirectly, recoup its lost margin. Tele2 proposed increases in call rates and there were negotiations between the parties from April 2004 concerning these. Tele2 put forward a revised tariff dated 20 May 2004 and introduced these rates on 1 June 2004. However, the judge concluded that POL never actually agreed to the rates that were operated by Tele2 from 1 June 2004. See paras 278 and 290 of the judgment. There was continuing correspondence between the two sides on this topic until September 2004. During that time, POL never finally agreed the proposed rates of Tele2.[26]By September 2004, POL had become very dissatisfied with the way that Tele2 was operating the phonecard business. From late summer 2004, POL began to sell and promote phonecards provided by another supplier, named Nomi – Call. It continued to do so until the termination of the Agreement became effective on 1 April 2005 and it carried on doing so until 31 March 2007. See para 270 of the judgment. From October 2004, POL promoted Nomi – Call phonecards as well as Tele2 pre – paid phonecards.[27]In September 2004 POL took advice from the City solicitors, Lovells, on whether it could legitimately terminate the Agreement with Tele2. Lovells gave its advice and subsequently, on 1 December 2004, POL sent written notices to the three Tele2 companies that were party to the Agreement. The notices purported to terminate the Agreement with effect from 31 March 2005 because of the failure to provide the Parent Company Letters for 2004 by the due date, ie. 24 December 2003. At para 61 of his judgment, the judge records that two POL witnesses frankly admitted in evidence that the commercial reasons for POL wishing to terminate the Agreement with effect from 31 March 2005 had nothing to do with the failure to provide the Parent Company Letters. But, as the judge also pointed out, the motive for terminating the Agreement is immaterial to the question of whether POL was entitled to terminate or not. POL ceased to perform the Agreement from 31 March 2005 (subject to making any outstanding payments due to Tele2, although there was argument on what was due between the parties). If the Agreement had run its course, then (subject to two points mentioned below), the earliest date that it could have been ended would have been 31 March 2007. D. The Proceedings[28]The proceedings were started by Tele2 when it issued a Claim Form on 11 January 2006. The Particulars of Claim sought damages on behalf of the three Tele2 claimants collectively against POL, for wrongful termination of the Agreement. It was part of Tele2’s pleaded case that there had been a novation of the Agreement, with the effect that C3 (UK) had replaced Tele2 Ireland as a party to it. As I have mentioned, the judge rejected that plea.[29]Tele2 (collectively) sought as damages the profits which it was said that Tele2 would have made from performing the Agreement in the two years 1 April 2005 to 31 March 2007. In its Amended Particulars of Claim Tele2 claimed the precise sum of £8,042,000, which it said was calculated “as set out in paragraph 3.1.1 of Mr Riddiough’s Supplemental Report and based upon the VAT adjusted Scenario 1 referred to in Mr Riddiough’s Reports”. Mr James Riddiough was Tele2’s expert accountant at the trial. POL’s expert accountant was Mr Philip Haberman. POL’s principal responses to this claim were, first, that they were entitled to terminate the Agreement and, secondly, that Tele2 Ireland, which was the only Tele2 party that could claim substantial damages for the alleged breach, had suffered no loss.[30]As an alternative defence on quantum, POL also argued that the increase in call rates which Tele2 had imposed on purchasers of the phonecards from 1 June 2004 had not been submitted and approved by POL in accordance with the provisions for “Tariff change” set out in Schedule 7 of the Agreement. Therefore, POL argued, if the notices of 1 December 2004 were wrongful, it would have been entitled to have served valid notices to terminate the Agreement under clause 11.2, either on 1 December 2004 or 31 March 2005, by virtue of Schedule 9 and clause 11.2 of the Agreement. POL relied on the principle that if a party terminates a contract for a bad reason but he subsequently discovers facts which would have constituted a good reason for terminating the contract, he is entitled to rely on those facts: Boston Deep Sea and Ice Company v Ansell (1888) 39 Ch D 339; British and Benningtons Ltd v North Western Cachar Tea Co Ltd [1923] AC 48, particularly at 72 per Lord Sumner. As to how the allegation works on the contractual clauses, see footnote 26 below. Accordingly, POL argued that, assuming Tele2 Ireland was entitled to recover any substantial damages at all, these were limited to either 8 months profit or 12 months profit.[31]As already noted, after the end of the trial POL applied to amend its Defence to contend that it would also have been entitled to terminate the Agreement as at 31 March 2005 because of the failure of the Tele2 companies to provide Parent Company Letters in respect of the year 2005, which should have been provided on 24 December 2004 at the latest. The judge made no specific ruling on whether this would have been a good point had he been prepared to entertain the proposed amendment, which he was not. See para 278 of the judgment.[32]In addition to its main claim, Tele2 alleged that POL had been in breach of clause 2.1 of the Agreement. Tele2 alleged that POL had promoted Nomi – Call’s phonecards over those of Tele2 in the period October 2004 to April 2005. Although originally Tele2 had claimed damages of £21,000 for this breach, that claim was not pursued. The judge found that, in one respect, POL had been in breach of clause 2.1, but held that the breach had caused no identifiable loss to Tele2. See para 167 of the judgment.[33]POL brought two counterclaims. The first was for a balance of “Expiry Revenues” that it claimed was owing to it from Tele2. POL claimed £833,151. This sum was based on POL’s construction of paragraph 1 of Part III of Schedule 4 of the Agreement, which deals with “Expiry Revenues”. Tele2 alleged that, on the proper construction of the provision, POL was only due £232,818. It also alleged, in the alternative, that there had been variations in the Agreement between the parties, to the effect that POL agreed that it was entitled to 25% and then 12.5% of the unused face value of the phonecards that had expired without customers using the full available credit.[34]The second counterclaim concerned “additional fees”. This dispute was not the subject of any part of the appeal. E. The conclusions of the judge.[35]So far as this appeal is concerned, I have already mentioned most of the material conclusions of the judge, so I will only summarise them here. First, he concluded that the failure to provide the Parent Company Letters for 2004, on or before 24 December 2003, constituted a “material breach” of the Agreement, within the terms of clause 11.4.1 of the Agreement, which entitled POL to give a notice of termination of the Agreement under clause 11.4. See paras 79 – 80 of the judgment. Secondly, he concluded that he would have held that, but for clause 16 of the Agreement, POL had affirmed the Agreement by election by its conduct in carrying on with performance of the Agreement from 25 December 2003 until the termination notices were sent on 1 December 2004. Thirdly, however, he held that clause 16 of the Agreement prevented POL losing the right to terminate the Agreement so long after the failure of the Tele2 companies to provide the Parent Company Letters. See paras 88 – 89 of the judgment for both these conclusions. Therefore, fourthly, POL was entitled to give the termination notices of 1 December 2004, so that none of the Tele2 companies had a claim for repudiatory breach of the Agreement. See paras 89 and 344 of the judgment. Tele2 had an alternative claim for wrongful termination based on events in December 2004 to February 2005, but that is not the subject of appeal.[36]The judge nonetheless made certain findings in relation to damages, on the assumption that, (contrary to his conclusion), there had been a wrongful termination of the Agreement by POL. On the questions of whether any Tele2 party was entitled to claim substantial damages he held: (1) Tele2 Ireland would have been the relevant party to claim damages in relation to any repudiatory breach. He also held, (2), that Tele2 Ireland was not prevented from claiming damages simply by virtue of the fact that, from April 2004, another company in the Tele2 group had provided the phonecards and associated services. See paras 42 – 43 of the judgment. (3) However, Tele2 Ireland had not proved that it had suffered any loss, because it had not put forward the evidence necessary to show loss. See para 300 of the judgment. (4) Further, on the evidence of Mr Hashmi, any loss was suffered by C3 (UK) and Tele2 Ireland received no benefit from the Agreement after 31 March 2004. Therefore, Tele2 Ireland had not, in fact, suffered any loss as a result of the termination of the Agreement. See para 301 of the judgment.[37]The judge also made some findings on damages issues on the assumption that his conclusion that no Tele2 company could claim substantial damages was wrong. On that basis, he held:(1) POL would have been entitled to terminate the Agreement, at the latest on 31 March 2005, because Tele2’s attempts to increase the cost of calls (from 1 June 2004) had not been agreed, so that it was in breach of the terms of Schedule 7, which would have entitled POL to give 12 months notice of termination, by virtue of Schedule 9 and clause 11.2 of the Agreement. By Schedule 7, any change request relating to Tariffs had to follow a “Change Control” process. By Schedule 9, the “Conformance (sic) to agreed Change Control” processes in accordance with Sch. 7 was stated to be a “Key Performance Indicator” (“KPI”) Type 1. Clause 11.2 permitted either side to give not less than 12 months notice in writing to terminate the Agreement if a Type 1 KPI had not been met “to a material extent”.(2) POL did not lose this right by electing to affirm the Agreement, because of the effect of clause 16.(3) Therefore, the Agreement would have only continued for a further 12 months (ie. until 31 March 2006) at the most, and so damages would have had to be assessed on that basis. See para 293 of the judgment.(4) Had the Agreement continued, as a matter of fact Tele2 would not have been the sole supplier of phonecards to POL. POL would have continued to obtain supplies of phonecards from both Tele2 and Nomi – Call. See para 340 of the judgment.(5) If the Agreement had continued, the sale of pre – paid phonecards by Tele2 would not have exceeded those sold by Nomi – Call through POL during the period 1 April 2005 to 31 March 2007. See paras 319 – 320 of the judgment.(6) If the Agreement had been continued, Tele2 would have achieved a gross margin of 50.5%. See paras 326 – 327 of the judgment.(7) If the Agreement had continued, POL would have continued to receive, (net of VAT), 21% of the sums received from phonecards sold to the public. See para 341 of the judgment.[38]I have already noted that, on the issue of Expiry Revenue, the judge found that POL was entitled, on the true construction of Schedule 4, Part III, paragraph 1 of the Agreement, to 50% of the unused face value of the phonecards. See para 191 of the judgment. He also held that there was no variation reducing POL’s entitlement to 25%. See para 208 of the judgment. F. The issues raised on appeal by Tele2 and the arguments of the parties in outline.[39]On behalf of Tele2, Mr John McCaughran QC challenges the judge’s conclusions on three main issues. First, he submits the judge was wrong to conclude that clause 16 has the effect of preventing POL from affirming the Agreement by election. Therefore, given the judge’s conclusion that, but for clause 16, he would have held that POL had elected to affirm the Agreement, the judge should have held that POL’s notices of termination of 1 December 2004 constituted a wrongful anticipatory renunciation of the Agreement.[40]In response to this, Mr Jeffery Onions QC, for POL, accepts that would be a correct conclusion, if the premise (ie. that clause 16 does not prevent Tele2 from relying on affirmation) were correct. But Mr Onions argues that the judge’s conclusion on clause 16 was right. He further argues that, on the facts, the judge was wrong to conclude that POL had affirmed the Agreement by its conduct between December 2003 and 1 December 2004, when it sent out the termination notices. He submits that POL’s continued performance of the Agreement between December 2003 and 2004 did not amount to the communication, in clear and unequivocal terms, of its election not to exercise its right to terminate the Agreement.[41]Mr Onions accepts that if there had been a wrongful renunciation by POL, then by the time Tele2 issued proceedings, at the latest, it had accepted what is assumed to be, on this basis, POL’s wrongful renunciation/repudiation of the Agreement. He also accepts the principle that a Tele2 company that was a party to the Agreement would be entitled to damages for repudiatory breach of contract, if any could be proved.[42]The second main topic on which Mr McCaughran challenges the judge’s conclusions concerns damages, on the assumption that the judge was correct on the issue of affirmation, but wrong on the effect of clause 16. Mr McCaughran accepts that Tele2 Ireland is the only Tele2 company that could claim damages for the wrongful repudiation of the Agreement. But he submits that Tele2 Ireland had proved it had suffered a loss, namely its right to be remunerated for providing (albeit through another Tele2 company) the pre – paid phonecards and associated services for the remaining period of the currency of the Agreement, ie. until 31 March 2007, alternatively until 31 March 2006. Mr McCaughran relies on the calculation of Tele2 Ireland’s lost profits set out in Appendix 3 to the written Outline Argument submitted by the Appellants for the purposes of this appeal. On that basis the maximum loss of profit claimed would be £2,289,135. He submits that this calculation is very similar to the calculation of POL’s expert accountant, Mr Haberman, which he produced at the trial. Mr Haberman’s calculation of “Tele2’s lost profit” was set out in a Table at para 4.38 of his Amended Expert Report: Appeal Bundle 11/page 3324.[43]Mr McCaughran accepts that Tele2 Ireland had to give credit, as against the sums it would have been entitled to receive from POL, for the cost of providing the phonecards and telecommunications services that it would have had to incur if Tele2 Ireland had provided its services under the Agreement. The judge effectively made a finding on the costs of calls made, having found that Tele2’s gross margin would have been 50.5%, thus making the cost of calls 49.5% of the revenue from sales of the phonecards. The judge also held that POL would have continued to receive 21% of the revenue from the sale of pre – paid phonecards, net of VAT. Mr McCaughran accepts those findings, subject to making adjustments for a lower amount of “Expiry Revenues” to which POL would be entitled, if Tele2’s arguments on that issue are accepted.[44]Mr McCaughran submits that this court should reach a number of further conclusions of fact in relation to damages. These are:(1) contrary to the finding of the judge, Tele2 would have been the sole supplier of pre – paid phonecards to POL for the remainder of the Agreement, that is until 31 March 2007. Mr McCaughran had a fall – back case of “two suppliers” as well.(2) On that basis, (and contrary to the judge’s finding), the level of pre – paid phonecards that Tele2 would have sold to the public during that period would have been at least the same as those actually sold by Nomi – Call (through Post Offices) during that period.(3) On the cost of marketing expenses, general and administrative expenses, the cost of the phonecards and the commission payable to Mr Scot Young (who had brokered the Agreement), on which the judge made no findings, this court should follow the joint evidence of the experts instructed by the parties.[45]Mr Onions challenges all of these submissions on damages. He submits that the judge was correct to conclude that Tele2 Ireland had failed to prove it had suffered any loss and that it had not, in fact, suffered any loss. If that was wrong, his principal submission is that, in relying on Appendix 3 of its Outline Argument in the Court of Appeal, Tele2 is now attempting to raise a new case on damages, which it should not be permitted to pursue in this court. Furthermore, this court should not engage on a wide – ranging fact finding expedition on aspects of damages. If this court concluded that Tele2 Ireland was entitled to claim substantial damages, then the matter should be remitted to the judge to make the necessary further findings of fact to deal with damages. If this court did consider those matters, Mr Onions challenged the points made by Mr McCaughran.[46]The third main topic on which Mr McCaughran challenges the judge’s conclusion is the correct construction of the provisions in Schedule 4, Part III, paragraph 1 of the Agreement, concerning “Expiry Revenues”. He submits that the judge should have held that the proper construction of the provision meant that POL was only entitled to receive 25% of any remaining value of the phonecards that had expired without being entirely used by the purchaser. Mr McCaughran also submits that the judge was wrong to conclude that there was no variation of the Agreement to reach the same result.[47]Mr Onions submits that the judge reached the correct conclusions for the right reasons on both aspects of Expiry Revenue. G. The Issues for Decision on the appeal.[48]On the basis of the arguments advanced, the following issues arise for decision: i) Was the judge correct to conclude that there was an affirmation of the Agreement by POL during the period between the occurrence of the breach of clause 10.3.1 (ie. 25 December 2003) and when POL purported to terminate the Agreement under clause 11.4, (with effect from 1 April 2005), by the termination letters dated 1 December 2004? ii) If so, does clause 16 of the Agreement make any difference? If the answer is “yes”, as the judge concluded, then Tele2’s appeal on its principal claim fails. iii) Assuming that the Agreement was affirmed and that clause 16 does not avoid that conclusion, then it is conceded by POL that the letters of 1 December 2004 would be an anticipatory renunciation of the contract, which Tele2 has accepted at some stage. Therefore, the next issue is whether, on the facts, Tele2 Ireland has proved that it has suffered substantial damages as a result of POL’s repudiation of the Agreement? If the answer is “no”, then Tele2’s appeal on its principal claim fails. iv) If the answer is “yes”, then the next question is whether it is open to Tele2 Ireland to claim damages on the basis of Appendix 3 to the written Outline Argument of Tele2 Ireland presented in the Court of Appeal? Or is that a “new” basis on which Tele2 Ireland is attempting to claim damages, which is impermissible in the Court of Appeal? v) If this way of putting the damages claim is new or otherwise cannot be advanced in the Court of Appeal, then it appears that Tele2 Ireland accepts that it has no other basis to advance and that is the end of its appeal on its principal claim. If it is not new, or it is otherwise permissible to advance the claim on this basis, then the following issues on quantum arise: a) should the matter be remitted to the judge to make further findings of fact? If not, b) should damages be assessed on the basis that Tele2 Ireland would have been the sole supplier of phonecards to POL, or, either(i) on the facts, or(ii) as a matter of legal assumption, should damages be assessed on the basis that both Tele2 Ireland and Nomi Call would both have provided phonecards to POL? c) If the latter, in what proportions? Tele2 submits it should be 75/25 in Tele2 Ireland’s favour. POL says it should be 50/50. d) Over what period can damages be claimed? Tele2 submits it should be until 1 April 2007. POL says that the court must, as a matter of law, take account of the fact that Tele2 was in breach of the provisions about notification/agreement of price increases, so that POL couldhave given notification of termination on 12 months notice as at 31 March 2005, so that damages can only be recovered for a period of 12 months. e) How is the quantum claim to be calculated if Tele2 is allowed to advance its present case and this court is to determine the matter? This involves the further issues of: (1) what would Tele2’s gross margin have been? (2) what would its marketing expenses have been? (3) what commission would it have paid to POL – 21%, or 35% as POL submits? (4) what commission would it have paid to Mr Scot Young? (5) what other expenses would Tele2 have incurred, such as the costs of production of the cards and other administrative expenses? vi) Expiry Revenues: On the correct construction of Schedule 4, Part III paragraph 1 of the contract, what sum is due to POL by way of “expiry revenue” in respect of phonecards whose life has expired but whose value was not exhausted during their period of validity? vii) If, upon the correct construction of Schedule 4, Part III, paragraph 1 of the Agreement, POL and the Tele2 parties were each entitled to 50% of the unused face value of the pre – paid phonecards, was there a subsequent variation of the Agreement between the parties to the effect that POL was only entitled to 25% of the unused face value of phonecards that had expired without customers using the full available credit? viii) Was the judge wrong to refuse to entertain POL’s application to amend its defence, after the end of the trial, so as to allege that POL would have been entitled to terminate the Agreement as of 31 March 2005 because of the failure of the Tele2 parties to provide Parent Company letters of guarantee for 2005 on or before 23 December 2004? H. Affirmation of the Agreement and the effect of clause 16.[49]There is no dispute that the Tele2 parties were in breach of the Agreement in failing to provide Parent Company Letters for 2004 by 24 December 2003 at the latest. That breach was a “material breach” within the meaning of clause 11.4.1 of the Agreement, thus giving POL the right, pursuant to clause 11.4 of the Agreement, to terminate it “at any time by giving notice in writing” to the Tele2 parties. That right arose on 25 December 2003. Mr Onions accepts that POL knew of the facts that gave rise to the right to terminate and of its right to choose between terminating and carrying on with the Agreement.[50]There is also no dispute, as the judge found, that POL continued to perform the Agreement until it served the termination notices on 1 December 2004 and it also accepted performance from the Tele2 parties during that time. See paras 81 and 89 of the judgment. So does that amount to an election to affirm the Agreement?[51]The principles of affirmation by election are settled and were not in dispute before us. They were authoritatively stated by Lord Goff of Chieveley in Motor Oil Hellas (Corinth) Refineries SA v Shipping Corporation of India (The “Kanchenjunga”). [1990] 1 Lloyd’s Rep 391 at 397 – 399. In that case a very large crude oil carrier had been chartered to load a cargo of crude oil at “one/two safe ports Arabian Gulf excluding Fao and Abadan”. The charterers nominated a port, Kharg Island, which was the subject of Iraqi air raids during the Iran – Iraq war. The master proceeded there and gave notice of readiness to load. Whilst the vessel was waiting for a berth at Kharg Island, there was another Iraqi air raid on the port and bombs were dropped. The master weighed anchor and proceeded 25 miles out to sea. The owners informed the charterers of what had happened and called on them to nominate another, safe, port. The charterers repeated their orders to load at Kharg Island, which the master refused to do. Ultimately, the owners said that the conduct of the charterers was a repudiation of the charter. The charterers alleged that the owners had repudiated.[52]The arbitrators found that Kharg Island was not a “safe port”, so that the charterers were not entitled to nominate it as a load port and the owners were entitled to reject the nomination. The issue before the House of Lords was whether, before the vessel sailed away from Kharg Island, the owners had, by their words or conduct, precluded themselves from rejecting the charterers’ wrongfully nominated load port. That depended on whether the owners had abandoned their right to reject the load port by making an election not to do so.[53]Lord Goff’s analysis of the doctrine of affirmation of a contract by election can be summarised, for the purposes of the present case, as follows:(1) if a contract gives a party a right to terminate upon the occurrence of defined actions or inactions of the other party and those actions or inactions occur, the innocent party is entitled to exercise that right. The innocent party has to decide whether or not to do so. Its decision is, in law, an election.(2) It is a prerequisite to the exercise of the election that the party concerned is aware of the facts giving rise to its right and the right itself.(3) The innocent party has to make a decision, because if it does not do so then “the time may come when the law takes the decision out if [its] hands, either by holding [it] to have elected not to exercise the right which has become available to [it], or sometimes by holding [it] to have elected to exercise it”. See page 398 left hand side of the report.(4) Where, with knowledge of the relevant facts, the party that has the right to terminate the contract acts in a manner which is consistent only with it having chosen one or other of two alternative and inconsistent courses of action open to it (ie. to terminate or affirm the contract), then it will be held to have made its election accordingly.(5) An election can be communicated to the other party by words or conduct. However, in cases where it is alleged that a party has elected not to exercise a right, such as a right to terminate a contract on the happening of defined events, it will only be held to have elected not to exercise that right if the party “has so communicated [its] election to the other party in clear and unequivocal terms”. See page 398 right hand side of the report.[54]It is clear from Lord Goff’s analysis that when a party to a contract is put in a position where it has to decide whether or not to exercise a right to terminate that it is given by the terms of a contract and it is disputed whether that party has terminated or has elected to abandon the right to terminate, then a court has to make a finding one way or the other. Whether a party has elected to terminate or to affirm the contract is a question of fact: either a party has affirmed the contract or it has not. If the innocent party has not affirmed the contract, then the right to terminate will be exercisable still.[55]Therefore, it seems to me, clause 16 of the Agreement is of no particular help to POL, except perhaps in terms of emphasising the requirement that an election to abandon a right will only be shown if there was a clear and unequivocal communication of an election to abandon the right to terminate and to continue the Agreement. As a matter of fact, either POL elected to abandon its right to terminate the Agreement for Tele2’s breach of clause 3.10.2 or it did not. If POL did elect to abandon its right to terminate for breach, then the whole contract, including clause 16, would continue in existence. (Of course, the continuation of the Agreement would not stop POL from claiming damages against Tele2 for breach of clause 3.10.2, but that is not in issue here).[56]In short, clause 16 cannot prevent the fact of an election to abandon the right to terminate from existing: either it does or it does not. This conclusion is reinforced, I think, by the terms of clause 16 itself. Although it stipulates that “in no event shall any delay, neglect or forbearance” on the part of any party in enforcing a provision of the Agreement “…be or be deemed to be a waiver” of the provision or “….shall in any way prejudice any right of that party under this Agreement”, it does not deal at all with the issue of election of whether or not to exercise a contractual right. The general law demands that a party which has a contractual right to terminate a contract must elect whether or not to do so. This clause does not attempt to say that the doctrine of election shall not apply – even assuming that any contractual provision could exclude the operation of the doctrine.[57]The judge found that POL’s continued performance of the Agreement between 24 December 2003 and 1 December 2004 and its agreement to the Tele2 parties performing the Agreement, without any protest concerning the breach of clause 3.10.2 or any reservation of rights, was consistent only with it having elected to abandon its right to terminate under clause 11.4. Alternatively, that conduct of POL constituted the communication of its election to the Tele2 parties in clear and unequivocal terms. I agree with both those conclusions. Mr Onions could not point to any positive fact that could detract from the validity of those conclusions. The continued performance by POL of the Agreement for nearly a year without any protest or reserve of any kind in relation to the failure to provide the Parent Company Letters is, in my view, only consistent with an election to abandon the right to terminate for that breach. It is a clear and unequivocal communication, by conduct, of POL’s election to affirm the Agreement and to abandon its right to terminate it for breach of clause 3.10.2.[58]Accordingly, POL was not entitled on 1 December 2004 to give to the Tele2 parties the notices to terminate the Agreement with effect from 31 March 2005. POL’s action was an anticipatory renunciation of the Agreement; anticipatory because the notices said that POL would cease to perform the Agreement as from 1 April 2005. When POL ceased to perform the Agreement from 1 April 2005, this was a repudiatory breach of contract by POL. It is accepted that this repudiation was subsequently accepted by Tele2. Therefore, in principle, Tele2 is entitled to claim damages for POL’s repudiation of the Agreement. This leads on to the next question: has Tele2 Ireland proved that it has suffered any substantial damages as a result of POL’s repudiation? I. Has Tele2 Ireland proved it has suffered substantial loss as a result of the repudiation of the Agreement by POL?[59]I will deal first with the facts as found by the judge at paragraphs 29 – 48 of the judgment. The principal findings are not challenged on appeal. They are as follows:(1) When the VAT rules changed as from 1 April 2004, the provision of services by Tele2 Ireland under the contract with POL was “transferred” to Tele2 UK. See Note 16 to the Directors’ Report and Financial Statements of Tele2 Ireland, referred to at para 30 of the judgment.(2) The case of Tele2 was that, in fact, the provision of the services was transferred to C3 (UK), the Third Claimant, and that the contract with POL was novated to that company. The judge held that there was no novation of the contract to substitute C3 (UK) for Tele2 Ireland as a party to the Agreement. See para 41 of judgment.(3) It is not alleged that the First Claimant suffered any direct loss as a result of the renunciation/repudiation of the Agreement by POL. See para 43 of the judgment.(4) On the two types of phonecard in use after 1 April 2004 (the “generic card” and the “holiday card”), there were different statements as to which company provided the “service” of the phonecard. On the “generic card” it said that the card and services were provided by Tele2 UK; on the “holiday card” it said that the phonecard was provided by C3 (UK). See para 47 of the judgment.(5) The evidence of Mr Hashmi, the former chief executive of each of the three claimants, was that the air time for the generic card had always been provided by Tele2 UK, which was not a party to the action, because it did not supply phonecards. The judge said that this evidence “if anything…seemed to make the situation even more obscure”. But he added that it “did not, as it seemed to me, impact either on the issue of title to sue or on the quantum of damages.” See para 48 of the judgment. But he thought that the withdrawal of C3 (UK) (third claimant) from the UK market from June 2005 SeeDirectors’ Report for year ended 31 Dec 2004 , referred to inpara 46 of the judgment. , was potentially more material. After that date, the phonecards for POL were provided by Tele2 Spain. See para 48 of the judgment.(6) Inferentially, therefore, the judge seems to have accepted that the cards and services were provided by Tele2 UK and C3 (UK) until the end of March 2005 – depending on which type of phonecard was being considered. He appears to accept that, had the contract continued, the phonecards would have been supplied by Tele2 Spain. Ibid.[60]After dealing with many other issues that had been argued, the judge turned to the question of what, if any, damages, Tele2 Ireland can recover, on the assumption that POL renounced the contract. Dealt with from para 220 of the judgment onwards. For present purposes, the most important point he decides on the law, before dealing with the facts, concerns “after breach events”. He concludes that although damages must generally be assessed at the date of the breach of contract, the court is entitled, in making the assessment of damages, to take account of matters that have occurred after the breach date. It will do so when they “impact upon the question [of] how valuable the contractual rights lost or broken would have proved to be, but for the breach of contract complained of”. See para 258 of the judgment. The judge had quoted extensively from and relied on the House of Lords’ decision in Golden Strait Corporation v Nippon Yusen Kubishaka Kaisha (The “Golden Victory”) [2007] 2 AC 353. That principle of law is not challenged; only its application to the facts of this case.[61]The judge comes back to the issue of “what loss, if any, was suffered, and by whom?” at paragraph 294 of the judgment. He reiterates that the proper party to the contract to sue for damages, if any, is Tele2 Ireland. See para 295 of the judgment.

The judge accepts the principle to be applied to damages in this case is as follows:

“Prima facie any damages to which Tele2 Ireland was entitled fell to be assessed as the amount which, but for the termination of the Agreement, would have been payable to it under the agreement until it could lawfully have been terminated, less the amount saved by not having to perform its own contractual obligations. If it sought to sub – contract the contractual obligations in question, one would suppose that the sum which would have been saved by not having to perform those obligations would have been whatever amount did not have to be paid to the sub – contractor”
. See para 296 of the judgment.[63]The judge then notes that no evidence was led as to the terms on which Tele2 Ireland obtained any services from any other company in the Tele2 group. See para 299 of the judgment. He states, correctly, that as only Tele2 Ireland can claim damages, it is its loss that must be calculated. He points out that the first part of the equation is to calculate what sums “would have been payable to Tele2 Ireland under the Agreement if it had not been determined”. See para 300 of the judgment.

The judge then makes this further statement of principle at paragraph 300:

[64]“However, once it was accepted, as it had to be, that costs saved needed to be deducted from the amounts which would have been payable to Tele2 Ireland under the Agreement but for the termination, the assessment of damages just could not be undertaken without evidence of what the costs to Tele2 Ireland would have been. Thus the conclusion has to be that Tele2 Ireland had not proved that it had suffered any loss because it had not put before the court the evidence necessary to show loss”.[65]The judge appears to be saying that a claimant can only succeed in obtaining substantial damages if it proves its net loss. To do that, it must satisfy the court, on a balance of probabilities, that if the contract had not been repudiated by the contract – breaker, then the income the innocent party would have received would have been greater than the costs incurred to generate the income. In this case, because there was no evidence of the costs incurred by Tele2 Ireland, it therefore could not, on a balance of probabilities, show what its net loss was. Therefore, it failed to prove any damages.[66]The judge then went on to make what both sides before us agreed is an alternative finding against Tele2 Ireland. He finds as a fact, in paragraph 301, that Tele2 Ireland “received no benefit from the Agreement after 31 March 2004”. He appears to conclude from that finding of fact that Tele2 Ireland therefore suffered no loss from the renunciation/repudiation by POL.[67]Logically, in my view, the point decided by the judge in paragraph 301 comes first. The judge was there deciding that Tele2 Ireland had suffered no loss of contractual benefit at all and no substantial damage. The question of whether Tele2 Ireland had successfully proved the amount of its net loss assumes that it had suffered some loss in the first place. I will therefore deal first with the issue of whether Tele2 Ireland had suffered any loss at all as a result of the repudiation by POL, ie. the judge’s decision at paragraph 301 of the judgment.[68]I start by recalling some basic principles. If party A has wrongfully repudiated its contract with party B and that repudiation is accepted by B, then party B is entitled to recover a money sum by way of damages so as to put it in the same situation as if the contract had been performed. This is the so – called “compensatory principle” of damages in English law. Although there are exceptions to the principle, it is of general application and has been established at least since Parke B’s well – known statement in Robinson v Harman. (1848) 1 Exch. 850 at 855. See also, eg: Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 at 39 per Lord Blackburn; McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518 at 581 per Lord Millett; Golden Strait Corporation v Nippon Yusen Kubisha Kaisha: (The “Golden Victory”) [2007] 2 AC353 at para 29 per Lord Scott of Foscote.[69]The Agreement was a contract by the Tele2 parties to provide goods and services to POL. For present purposes the relevant goods and services were the provision by Tele2 Ireland of pre - paid phonecards for sale by POL and telephone connection services for the purchasers of those cards. For these services, Tele2 Ireland was entitled to remuneration in the form of a fee, ie. 79% of the value of the phonecards sold to the public. POL wrongfully renounced/repudiated the contract. It was accepted by Mr Onions that this wrongful repudiation deprived Tele2 Ireland of the right to earn its fees under the contract for the provision of goods and services.[70]Characteristically, if an innocent party is deprived of the right to earn a fee under a contract to provide goods and services, the measure of damages will be the lost fees (for the period that the contract would have continued), less any fees obtained in performing substitute work which could have been sought and undertaken in order to mitigate the loss suffered. In that case there would normally be no need to consider “expenses saved”, because that exercise does not figure in the calculation of the measure of damages in such a case.[71]In this case there was no evidence that Tele2 Ireland had entered into alternative fee – making contracts, for which it had to give credit. It could be said, therefore, that it had not mitigated its loss. In those circumstances, it was, I think, inevitable that Tele2 Ireland’s counsel had to argue that it could only claim net fees lost. It plainly could not claim the gross fees that Tele2 Ireland would have been entitled to earn, even assuming that it could establish how many pre – paid phonecards would have been sold during the remaining term of the Agreement if it had run its course. Tele2 Ireland’s loss of profit had to be its net loss of profit. To obtain any substantial damages, therefore, it had to prove that it would have made a profit on the contract during the relevant period it ran.[72]However, although this will generally be the correct approach, it is important to recall that the assessment of damages is not a mechanistic exercise where a pre – ordained formula has to be rigorously applied to whatever facts are at hand. As Viscount Haldane LC stated in British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railway Co of London Ltd [1912] AC 673 at 688. :
“The quantum of damages is a question of fact and the only guidance that the law can give is to lay down general principles which afford at times but scanty assistance in dealing with particular cases”
. The undesirability of the application of rigid rules or practice in the area of damages was emphasised by the House of Lords in The Susquehanna [1926] AC 655 at 662 per Viscount Dunedin. and in The Chekiang [1926] AC 637 at 643 – 4, per Lord Sumner. . It was also emphasised, in an entirely different context, by Oliver J in Radford v De Froberville. [1977] 1 WLR 1262 at 1270.[73]The judge was therefore correct to approach pragmatically the issue of whether Tele2 Ireland had suffered any loss. He was certainly entitled to look at what would have happened had POL not wrongfully repudiated the Agreement: see Golden Strait Corporation v Nipon Yusen Kubishika Kaisha (The “Golden Victory”). [2007] 2 AC 353, in particular at paras 35 – 36 per Lord Scott of Foscote, paras 65 – 66 per Lord Carswell and para 83 per Lord Brown of Eaton – under – Heywood. The evidence and the findings of fact of the judge are clear: C3 (UK) and then Tele2 (Spain) would have done the work and Tele2 Ireland would not have received any fee. There was no evidence of any cost to Tele2 Ireland for any other Tele2 company providing the pre – paid phonecards or the telecommunications connection services under the Agreement. So, if the Agreement had been performed, Tele2 Ireland would not have received any money benefit in fact and it would not have incurred any costs.[74]It is, in my view, beside the point for Mr McCaughran to urge (albeit most attractively) that Tele2 Ireland lost its right to earn its fee under the contract. As Lord Scott of Foscote pointed out in The “Golden Victory” case (at paragraph 30), if it is certain that events will happen in the future (ie. after the renunciation or repudiation of the contract), then the damages must be assessed on that basis. Or as Megaw LJ put it in his judgment in Maredelanto Cia Naviera SA v Bergbau – Handel GmbH (The “Mihalis Angelos”) [1971] 1 QB 164 at 210. : “If it can be shown that those events were, at the date of acceptance of the repudiation, predestined to happen, then….the damages which [the claimant] can recover are not more than the true value, if any, of the rights which he has lost, having regard to those predestined events”.[75]Even if an event in the future is simply more probable than not, it is to be taken into account when assessing the loss that a claimant has suffered. See The “Golden Victory” case, in particular at para 78 per Lord Brown of Eaton – under – Heywood, with whom Lords Scott and Carswell agreed. Thus in deciding whether Tele2 Ireland would have earned a fee and taken it itself if the contract had been performed, or incurred any costs in providing the services under the Agreement, the judge was entitled to look at what happened in fact after the anticipatory renunciation of the Agreement by POL on 1 December 2004.[76]In this case the judge has found, effectively, that it was certain that Tele2 Ireland would neither have received the fee nor incurred any costs if the Agreement had continued to be performed. Therefore, applying the “compensatory principle”, the judge was right to conclude that Tele2 Ireland had suffered no substantial loss.[77]Having reached this conclusion, it may be somewhat illogical to consider the judge’s first decision, at paragraph 300 of the judgment, which appears to assume that Tele2 Ireland would have received some gross benefit if the Agreement had continued. As I have already stated, the effect of the judge’s conclusion in paragraph 300 is that Tele2 Ireland had failed to prove that it had suffered a net loss of profit because the assessment of its loss could not be undertaken without evidence of what the costs to Tele2 Ireland for providing the pre – paid phonecards and telecommunications services would have been. However, as we heard full submissions from counsel on this and all issues on damages, I will deal with this point, albeit on the artificial assumption that Tele2 Ireland had demonstrated that it would have received some gross benefit if the Agreement had continued.[78]First of all, I agree with the judge that the burden must be upon Tele2 Ireland to satisfy the court that it has suffered a loss of net profit.[79]Tele2 Ireland relied on certain evidence, (which included the evidence of its accountancy expert, Mr Riddiough, or, in default, that of the accountancy expert of POL, Mr Haberman) on the actual costs of the Tele2 group during the period when the Agreement operated. Tele2 Ireland wished to show, on a balance of probabilities, what costs Tele2 Ireland would have incurred for the balance of the contract if it had continued. The effect of the judge’s conclusion in paragraph 300 of the judgment is that he was not satisfied that this evidence proved what it set out to do. Therefore, Tele2 Ireland had failed to prove that it would have made a net profit from the Agreement if it had continued.[80]Mr McCaughran submits before us was that the judge was wrong to reach this conclusion. He argues that the evidence adduced at the trial of the costs that had been incurred by the Tele2 group as a whole in the past (ie. up to 1 April 2004), was good and sufficient evidence to show what costs Tele2 Ireland would have incurred in the future had the Agreement not been renounced/repudiated by POL and had continued until 31 March 2007.[81]That approach was certainly reflected in the revised report of Mr Riddiough, (submitted on behalf of Tele2 Ireland), which was in evidence at the trial. POL’s expert, Mr Haberman, in the table at paragraph 4.38 of his report, Bundle 11/page 3324. uses figures for calculating the costs to produce “Tele2’s loss of profits arising from the termination of the Agreement”. The Joint Statement of the two experts, at paragraph 3.1, Bundle 12/page 3822. states that the experts are agreed “on the categories of revenues and costs to be taken into account in assessing any lost profits”.[82]The written closing submissions of POL at the trial Bundle 2/Tab 28/para 208 onwards on “the Issues”. deal with all the various topics on damages, such as sole or dual supply of phonecards; gross margin of Tele2; commission payable to POL; marketing costs of Tele2; period for which damages should be allowed and so forth. Theydo not submit that Tele2 Ireland has failed to demonstrate that it is entitled to substantial damages because it has not proved that it would have made a net profit on sales if the contract had continued: see in particular the “Conclusion” paragraph in the damages section of POL’s Closing Submissions at trial, paragraph 295. Bundle 2/page 726 – 7. This is in the section under Issue 5: Quantum of Damages. There are two lines in the oral closing argument of Mr Onions QC (17 Dec 2007/page 61, lines 11 – 13 (Bundle 8/Tab 41/page 2622) which glances the issue, but only just. It concentrates on revenues. That appears to be the basis on which paragraph 296 of POL’s Closing Submissions argues that: “there is no evidence that Tele2 My emphasis – ie. the Tele2 group as a whole, rather than Tele2 Ireland specifically. would have made any profit at all and certainly insufficient evidence to enable the court to quantify Tele2’s claim: see Senate Electrical. This is a reference to the Court of Appeal decision of Senate Electrical Wholesalers Ltd v Alcatel Submarine Networks Ltd [1999] 2 Lloyd’s Rep 423, particularly paras 50 – 54 in the judgment of Stuart – Smith LJ, where he emphasised the need of a claimant to plead and prove the particular basis on which it claims damages. Accordingly, if the court finds that POL was in breach of contract, POL submits that any award of damages should be no more than nominal”.[83]The relevant part of the POL’s Outline for the appeal, (paragraphs 59 – 91) really concentrates on the argument that any losses suffered were, in reality, incurred by C3 (UK) because Tele2 Ireland was not making the cards and not receiving the revenue and that that position would have continued if the contract had gone on. But I accept that there is, (at paragraph 82), an unelaborated submission that Tele2 Ireland would have received no damages if its costs of providing phonecards would have been equal to its revenue under the Agreement.[84]The position on the issue of whether Tele2 Ireland could prove a loss of net profit and so can recover substantial damages is therefore somewhat unsatisfactory.(1) The experts below did not concentrate on the question of which company’s costs (during the period when the Agreement would have been continuing) were relevant for the purpose of calculating the value of the lost net profits to “Tele2” and so “Tele2’s” damages if POL had repudiated the contract.(2) Both experts therefore approached the question by looking at the historical costs of Tele2 Ireland (prior to 1 April 2004), in order give an opinion on what the costs for “Tele2” (ie. the group as a whole) would have been in the period of 1 April 2005 to 1 April 2006 or 2007 – whichever was the correct period.(3) It does not appear to have been specifically argued below by POL that this was, as a matter of fact or law, an impermissible exercise in relation to costsso that, on a balance of probabilities, Tele 2 Ireland had failed to prove that it had suffered a loss of net profit. That would have been a difficult argument when both experts had done the same type of exercise concerning costs.[85]The ultimate question, however, is whether the judge was wrong, as a matter of law, to hold that he was not satisfied on the evidence that Tele2 Ireland had proved a loss of net profit because Tele2 Ireland “had not put before the Court the evidence necessary to show loss”. Paragraph 300 of the judgment, last sentence. In my view the judge was entitled to hold that evidence of what costs had been incurred in the past by the Tele2 group was insufficient to prove, on a balance of probabilities, that Tele2 Ireland would have incurred those costs in the period from 1 April 2005 to 1 April 2006 or 2007. Logically, the analysis of the experts of past costs of the Tele2 Ireland (or the Tele2 group) does not necessarily prove that Tele2 Ireland would have incurred equivalent costs post 1 April 2005. The judge was entitled to decide whether it did or not. He was therefore entitled to conclude on the evidence that Tele2 Ireland had not proved its net loss of profit.[86]So, on the premise that the judge needed to consider this aspect at all (which I doubt, given his conclusion that Tele2 Ireland had not proved it would have suffered any loss of benefit at all), there is no basis on which the judge’s conclusion can be impugned successfully. It must be upheld.[87]Mr McCaughran submits that if Tele2 Ireland cannot recover substantial damages in this case, then a meritorious claim for damages will have “disappeared down a legal black hole”. The term was used by Steyn LJ in DarlingtonBC v Wiltshier Northern Ltd [1995] 68 at 79, to describe the argument of a defendant construction company, which had successfully resisted a claim for substantial damages by an assignee of a building contract. The CA reversed the Official Referee, although not the laws of physics, under which matter cannot escape the pull of a “Black Hole” once past its “event horizon”. I do not accept this characterisation of Tele2 Ireland’s position. In the first place, unlike Darlington BC v Wiltshier Northern Ltd and similar decisions, Such as Linden Gardens Trust Ltd v Lenesta Sludge Disposals Ltd [1994] AC 85 and Alfred McAlpine Construction Ltd v Panatown Ltd [2001] 1 AC 518 at 529. this case is not, on its facts, one of a party to a contract attempting to claim damages in respect of the losses by a third party which is connected to a contract but not a party to it. Mr McCaughran accepts that is so. Secondly, any attempt by Tele2 Ireland to claim damages against POL on behalf of another party would be precluded by clauses 13.4 and 27 of the Agreement. Thirdly, on the assumption that Tele2 Ireland is claiming damages for its own loss, the “Black Hole” argument must presuppose that Tele2 Ireland itself has a good claim for substantial damages. As I have attempted to show, it has not. If it has not, there is nothing to disappear down a “Black Hole”.[88]The consequence of these conclusions is that Tele2 Ireland succeeds on its appeal on the question of whether POL was entitled to terminate the Agreement on 1 December 2004; but it fails on its appeal on the question of whether it can claim substantial damages.[89]In the light of my conclusion that Tele2 Ireland has failed to prove that it has suffered substantial damages (with which I understand Ward and Richards LJJ agree) and without intending any disrespect to leading counsel who argued the other issues on quantum of damages fully and with eloquence, I shall not consider those other aspects. It would be a fruitless exercise. J. Expiry Revenues: construction of Schedule 4, Part III, paragraph 1 and the issue of the alleged variation.[90]For convenience I will set out here the provisions of Schedule 4, Part III, paragraph 1 which give rise to the construction dispute on how “Expiry Revenues” should be divided between POL and Tele 2. The provision states: “If a Phonecard…account expires without its full face value or the amount credited having been spent, the Relevant contractor and Post Office Limited will share the remaining value equally. The Relevant Contractor will account for such monies to Post Office Limited on a monthly basis for all amounts so accrued in the previous month, notwithstanding termination of this Agreement”.[91]Mr McCaughran relies on the well – known principles of the construction of contracts which state that the words must be put in their context and construed against the purpose of the provision concerned. See Arbuthnot v Fagan [1996] Lloyd’s Reinsurance LR 135, particularly at 140 per Steyn LJ. He reminds us of two further principles. First, the rule of construction that if a particular construction leads to an unreasonable result, it is unlikely that the parties intended that result, unless that intention is abundantly clear. Secondly, that if a detailed semantic and syntactical analysis of words in a commercial contract leads to a conclusion that flouts business commonsense, then the analysis must be made to yield to business commonsense. See FLSchuler AG v Wickman Machine Tools Sales Ltd [1974] AC 235 at 241 per Lord Reid; Antaios Compania Naviera SA v Salen Rederierna AB (The “Antaios”) [1985] AC 191 at 201 per Lord Diplock.[92]Mr McCaughran reminds us that a phonecard will usually be valid for 6 months. During that time, the relevant Tele2 company will incur the costs of making the telephone connections of the various telecommunications systems between the phonecard user to the ultimate receiver of each call. Moreover, as soon as the phonecard has been sold to a member of the public, POL is entitled to receive 21% (net of VAT) of the purchase price of the card.[93]He also points out that it is clear from the wording of Schedule 4, Part III, paragraph 1 that:(1) the parties contemplated that where there had been an expiry of the card, it will still have value, hence the use of the term “remaining value”;(2) it is agreed in the clause that this “value” will be shared between the parties; and(3) the “remaining value” will lie with Tele2, because it is the party that has to account to POL for this amount.[94]Mr McCaughran submits that the key question is what is meant by “remaining value”. He argues that the judge was wrong to conclude that this means the amount of the unused credit, because the phonecard itself has no “remaining value” to the customer, once its period of validity has expired. Instead, he submits, “remaining value” should take into account what each side had gained upon the purchase of the phonecard by a member of the public and also what costs have been incurred in providing the services that had been used by the purchaser during the validity of the phonecard. The costs would be incurred exclusively by Tele2, which had to provide the phonecard and the connection services. Therefore, “remaining value” must mean the value of the costs saved by Tele2 when a phonecard expires without the credit being fully used. It is those saved costs that should be split “equally” between the parties in accordance with Schedule 4, Part III, paragraph 1 of the Agreement.[95]Mr McCaughran accepted that there was no evidence before the judge that there had been any understanding between the parties, before or at the time the Agreement was concluded, as to the likely level of usage of phonecards by purchasers. Neither side knew whether it was likely that the purchaser would use the phonecard up to 10% or 90% of the purchase price, or something in between those figures.[96]The starting point for the construction of a commercial contract must be the words that the parties use. It is likely that they intended that the words should mean what they appear to say, in the absence of some trade meaning or special meaning agreed between the parties themselves. On that basis, in this case the words “face value” in Schedule 4, Part III, paragraph 1 must mean the price paid by the member of the public that has bought the phonecard. That is the value on its face. “The remaining value” must therefore mean that part of the “face value” of the phonecard that has not been spent by the customer in making telephone calls using the phonecard. It is that part of the “face value” of the phonecard which remains. The words “such monies” must refer back to “the remaining value”. Therefore, the “Relevant Contractor” has to account to POL, for that part of the “face value” of the phonecard that has not been spent by the customer in making phone calls using the phonecard. The “Relevant Contractor” must ensure that this “remaining value” is split equally between it and POL.[97]This appears to me to be the obvious and sensible construction of the wording in the provision. It does not lack commonsense and it does not produce perverse results for either side.[98]Mr McCaughran produced some worked examples in an attempt to demonstrate that this construction would produce unreasonable financial results for Tele2 in certain cases. I do not accept that the results would be unfair, looking at the whole spectrum of possible usages of the pre – paid phonecards. At the time the Agreement was concluded, no one knew whether purchasers of the phonecards would use them to their full value or to a lesser percentage. Nor did anyone know the precise level of Tele2’s costs in providing services to particular users. It would depend on what kinds of call the user wished to make, which would not be known when the phonecard was bought. The provision in Schedule 4, Part III, paragraph 1 was a robust way of dividing the windfall if a customer did not take full advantage of the credit that he had bought. Given that Tele2 would always obtain 79% of the purchase price of a phonecard immediately a customer bought one, even if he did not use it all, it does not strike me that the provision is unfair or unjust to either side; quite the opposite.[99]Therefore I agree with the conclusion of the judge that, upon the proper construction of Schedule 4, Part III, paragraph 1 of the Agreement, it requires that Tele2 account to POL for 50% of the value of any unused credit of phonecards upon their expiry.[100]Mr McCaughran’s alternative submission is that during the period from December 2002 to May 2003 the “Expiry Revenues” paid over by Tele2 to POL amounted to 25% of the value of the unused credit on phonecards at their expiry. He submits that POL accepted those payments and so there was a variation of the terms of the Agreement and POL agreed to accept only 25% of the value of the unused credits on phonecards. He submits that there was consideration for this variation, even though POL agreed to accept less than it was entitled to under the Agreement, because it agreed to compromise differences between the parties on this issue.[101]The judge considered the evidence on which Tele2 relied to demonstrate that POL had agreed to a variation in the effect of the provision of the “Expiry Revenue” provision in Schedule 4, Part III, paragraph 1 of the Agreement. Mr McCaughran does not challenge the findings of fact of the judge at paragraphs 193 – 208 of the judgment. But he submits that the judge reached the wrong conclusion in law on the facts as found by him.[102]Mr McCaughran’s argument is that Tele2 made an offer to POL which was repeated both orally (in meetings in July, August and November 2002) and in writing (in the letter of 29 November 2002 and e-mail of 16 January 2004), to the effect that POL’s entitlement to Expiry Revenue should be 25% of the unused face – value. He submits that POL staff (Mrs Samantha Conway, Mr Jim Green and Mr David Cromwell) were aware that this offer was being made, although he accepts that Mr Iain Gilbert, POL’s Senior Products Manager from July 2002, may not have personally understood this. Mr McCaughran submits that POL accepted this offer by conduct, by issuing invoices in January 2003 and January 2004 which sought payment of sums by Tele2 to POL which Tele2 had expressly stated were calculated on the 25% basis. Yet these invoices were without any indication that POL considered that an increased amount of Expiry Revenue was due. Viewed objectively, therefore, he submits that there was thus, by conduct, a contract on the 25% basis.[103]The upshot of the judge’s consideration of the documents and the oral evidence of a number of POL witnesses, in particular that of Mr Iain Gilbert, the Senior Product Manager of POL, was that there was no variation. The judge was particularly impressed with the evidence of Mr Gilbert, who was emphatic that there was never any agreement that POL would accept the 25% basis for Expiry Revenue.[104]The judge summarised his conclusions on the facts in paragraph 208 of the judgment as follows: “The high point of the Claimants’ case….was really the letter of 29 November 2002 written by Mr England [of Tele2] to Mr Gilbert, and the enclosure thereto, coupled with the rendering on the part of the Post office of an invoice in the sum which Mr England had contended was due. In the light of my acceptance of the evidence of Mr Gilbert to which I have referred, it follows that I am not satisfied that the agreement contended for was ever made. All that happened, as it seems to me, was that the Post Office was presented from time to time with a calculation of what the Tele2 parties, which alone had the means of knowing what the amount of the Expiry Revenue was, said was due, and invoiced the amounts so stated. The representatives of the Post Office merely failed to notice that what was alleged to be due had been calculated on the basis that the Post Office was entitled to 25% of Expiry Revenue, rather than 50%”.[105]In my view it is clear that the judge held that, objectively considered, there was never any intention on the part of “the representatives of the Post Office” to create, by conduct, a variation of the contract of the type sought by Tele 2. Without any objective intention to create legal relations on the part of both parties, there could not have been a variation to the Agreement by conduct, as alleged by Tele2. The burden of proving a variation by conduct was upon Tele2. The judge was entitled to reach that view on all the evidence, particularly as he heard and assessed the oral evidence of the POL witnesses. It is noteworthy that no Tele2 witnesses gave oral evidence on the question of whether such a variation to the Agreement by conduct had been concluded. Noted by the judge at para 193 of the judgment. In my view the conclusion of the judge, on the evidence, cannot be successfully impugned.[106]Therefore, I conclude that both aspects of Tele2’s appeal on the Expiry Revenue issue must fail. K. POL’s application to amend the Defence.[107]This issue is raised in a Respondent’s Notice by POL. It arises as follows: if the Agreement was going to continue into 2005 in the normal way, then under clause 3.10.2, the Tele2 parties to the Agreement were obliged, by 24 December 2004, to provide Parent Company Letters for the calendar year 2005 to POL, in the form set out in Schedule 6 of the Agreement. They did not do so. During the early part of 2005 there were discussions between the parties about the possibility of a new contract to replace the Agreement after 31 March 2005. The judge concluded that POL did not give any commitment that the Agreement would continue in force until any new contract was agreed. See para 153 of the judgment. That finding is not appealed.[108]On 5 March 2005, POL wrote to Tele2 and stated that it would let the termination of the Agreement under the 1 December 2004 notices take its course and that POL would cease to sell Tele2 products after 31 March 2005. On 18 March 2005, Tele2 sent to POL Parent Company Letters in respect of Tele2 UK, Tele2 Ireland and C3 UK, but not Tele2 International.[109]The absence of Parent Company Letters for 2005 was not pleaded by POL in its Defence. But it was noted in POL’s Outline Argument served before the trial. This fact was apparently to be used as the basis of a submission that the consequence was that this absence meant that Tele2 was in further breach of clause 3.10.2 from 24 December 2004, so that POL would have been entitled to give notice of termination of the Agreement on 31 March 2005 under clause 11.1. Therefore, the argument would be, even if the termination notices on 1 December 2004 were wrongful, Tele2 could not prove that it had suffered any substantial loss. POL intended to rely again on the principles set out in the BostonDeepSea case and the British and Benningtons case; see footnote 17 above. The absence of the Parent Company Letters was mentioned in Mr Onions’ opening and he cross – examined Mr Hashmi on the topic. Mr McCaughran did not object to this at that time.[110]In POL’s closing submissions it was stated that it would have been entitled to terminate the Agreement on 31 March 2005 because of the lack of Parent Company Letters for 2005. Mr McCaughran objected to this point being taken in his oral closing speeches. Mr Onions said that if a pleading point was being taken against him he would make an application to amend. None was made at the trial, however.[111]The day after the trial had finished, 18 December 2007, Mr Strong, junior counsel for POL, wrote to the judge and set out the proposed amendment of POL’s defence. The letter contained no submissions on the topic. On 20 December 2007, Mr Cook, Tele2’s junior counsel, wrote to the judge with submissions objecting to the proposed amendment, repeating the points made by Mr McCaughran at the trial. Mr Strong responded on 21 December 2007. The judge did not enter into the correspondence.[112]When the judge handed down his judgment on 25 February 2008, he dealt with this issue at paragraph 272, under the heading “Over what period should damages be assessed”. He set out the history of how the issue had been dealt with at the trial. He pointed out that, given his conclusion on the right of POL to terminate the Agreement, it was unnecessary for POL to rely on the alleged failure of Tele2 to provide the Parent Company Letters for 2005. He continues:
“Had it been a matter of importance I should have needed to consider at the trial a draft amended statement of case on behalf of the Post Office and heard Mr McCaughran on the application for permission”
. The judge then referred to the correspondence sent by junior counsel to him after the trial. He continued: “That way of proceeding did not seem to me to be satisfactory. In my judgment, if an application for permission to amend further the Re-Amended Defence was to be made, it should have been made during the trial, or at any rate at a hearing”.[113]Effectively, the judge rejected the application. He did so as a matter of case management, exercising his discretion. In my view he was entitled to do so. Given the somewhat crab - like manner in which the issue was raised by POL, the judge’s refusal to entertain an application to amend the pleadings (after the trial) to take a point that POL had not pleaded out before, was reasonable. In any event, I am not convinced that the merits of the argument that POL wishes to raise are quite as straightforward as it suggests in its Outline Argument on appeal. I do not intend to go into them now, but I see force in the judge’s remark that he would have wanted to hear proper argument from both sides, either at the trial or at a hearing, before he allowed the amendment to be pleaded and the point taken by POL.[114]Given my conclusion that Tele2 Ireland did not suffer any substantial damages as a result of POL’s wrongful termination of the Agreement by the notices of 1 December 2004, the issue of POL’s proposed amendment is not strictly relevant. But if it had been, I would have refused POL’s application to amend its defence for the reasons I have given. L. Conclusions[115]I can summarise my conclusions on the issues raised on these appeals as follows: i) POL was not entitled to terminate the Agreement by the notices sent to the Tele2 parties on 1 December 2004. POL had elected to affirm the Agreement by continuing to perform it and permitting the Tele2 parties to perform it during the period 25 December 2003 to 1 December 2004, when POL knew of Tele2’s breach of clause 3.10.2 from 25 December 2003 and it knew of its right to terminate the Agreement for that breach. ii) Clause 16 of the Agreement does not prevent the Tele2 parties from relying on the doctrine of affirmation of the contract by election and it does not prevent POL from affirming the Agreement by election. As a matter of fact it did so. iii) POL’s wrongful termination on 1 December 2004 was an anticipatory renunciation of the Agreement. POL’s refusal to perform the Agreement after 31 March 2005 constituted an actual repudiation of the Agreement. At some time after 1 April 2005 the Tele2 parties accepted this. Therefore POL was in repudiatory breach of the Agreement for which Tele2 Ireland was, in principle, entitled to sue POL for damages. iv) However, Tele2 Ireland, which was the only Tele2 party entitled to sue for substantial damages, did not suffer any loss as a result of the repudiatory breach of the Agreement by POL. Therefore it is entitled to nominal damages only. v) The judge’s conclusion on the construction of Schedule 4, Part III, paragraph 1 on the division of “Expiry Revenues” was correct. POL and the Tele2 parties are entitled to 50% each of the remaining, unused, face value of expired pre – paid phonecards. vi) The judge was correct to refuse POL permission to amend its Defence to allege a failure by Tele2, on or before 23 December 2004, to provide POL with Parent Company Letters for the calendar year 2005. vii) Accordingly, I would dismiss the appeal of Tele2 and POL’s cross – appeal on the issue of the proposed amendment. Lord Justice Richards :[116]I agree.

Lord Justice Ward :

[117]I also agree. A N N E X 130. RELEVANT CLAUSES OF THE AGREEMENT “……. 1. Interpretation ……… Agreement means the agreement made between Post Office Limited and each of Tele2 Ireland, Tele2 International and Tele2 UK, as appropriate, including these terms and conditions, the attached Schedules and any other documentation specifically identified or referred to in this Agreement. ………. Change Control means the agreed process and procedures for making changes to this Agreement using the forms and procedure set out in Schedule 7. Change of Control means, if “control”, (as defined in the Income and Corporation Taxes Act 1988, Section 416 (2) –(6)) of either party is acquired by any person or company or group of connected persons (as defined in the Income and Corporation Taxes Act 1988, Section 839), not having control of that party at the Commencement Date. ……… Tele2 International means Tele2 International Card Company SA (formerly Ccube Luxembourg SA) ) registered in Luxembourg under registered number 8544-08 whose registered office is at 75 Route de Longwy L8080, Bertrange, Luxembourg. Tele2 UK means Tele2 UK Communications Limited registered in England and Wales under registered number 3565220 whose registered office is situated at Kingston House, 15 Coombe Road, Kingston upon Thames, Surrey, KT2 7AD …….. Contractors means, together, Tele2 Ireland, Tele2 International and Tele2 UK, and, as appropriate, their respective employees, agents, assignees, and sub-contractors and Relevant Contractor means the Contractor supplying the relevant Phonecards and/or Services, as appropriate. …………. Parent Company Letter means a letter from Tele2AB to each of the Contractors materially in the form set out in Schedule 6. Pre-paid Phonecards means the POL branded pre-paid phonecards to be supplied by Tele2 Ireland to POL. ……….. 2. Obligations of Post Office Limited2.1 Post Office Limited agrees to promote the Phonecards and Services to no lesser extent than it promotes similar products and services from time to time through the POL Outlets, in its internal marketing publications and through other suitable communication channels. The nature, method and extent of such communications shall be discussed and agreed by the Client Relationship Team or their duly authorised representatives. The Relevant Contractor recognises that Post Office Limited’s support for the Phonecards and Services will be subject to the Marketing Guidelines, permissions and media availability.2.2 If the parties wish to vary, change, add to, or delete particular Phonecards and/or Services, as appropriate, this shall be carried out using Change Control. …….. 3. Obligations of the Contractors 3.1 Tele2 Ireland shall provide the Pre-Paid Phonecards and PTS, Tele2 International shall provide the International Phonecards and ITS, and Tele2 UK shall provide the FTS, in accordance in all material respects with the relevant Schedules and as otherwise provided for in this Agreement. …….3.10.1 Within 20 days of the execution of this Agreement, each of the Relevant Contractors shall forward to POL a certified copy of the relevant Parent Company Letter for the calendar year commencing 1 January 2001.3.10.2 7 days prior to the commencement of each subsequent calendar year, each of the Relevant Contractors shall forward to POL a certified copy of the relevant Parent Company Letter for such subsequent calendar year. …….. 4. Price and Payment4.1 In consideration of the parties performing their respective obligations under this Agreement each shall be entitled to invoice the other and to be paid its respective Fees as provided by this Agreement. All Fees shall be exclusive of VAT, unless otherwise specified. Furthermore, any Additional Fees will be invoiced and paid as set out in Part III of Schedule 4. VAT shall be added where appropriate.4.2 If requested to do so by any of the other parties, each party shall accept payment under this Clause by electronic funds transfer through BACS Limited or such other electronic payment system as Post Office Limited reasonably deems appropriate in the circumstances. ……… 6. Variations All variations to this Agreement shall only be made using Change Control. ……… 11. Duration and Termination11.1 This Agreement shall commence on the Commencement Date and shall continue in force until the expiry of the Initial Term and thereafter until terminated by either POL or any of the Contractors giving not less than 24 months’ written notice to the other parties, as the case may be, unless terminated earlier in accordance with the provisions set out below.11.2 Each Contractor or POL may terminate this Agreement by giving POL or each Contractor, as the case may be, not less than 12 months’ notice in writing to that effect if any of the Type 1 KPIs have not been met to a material extent. Provided that no party shall be entitled to give notice as above on the basis the party giving notice has itself failed to meet such KPIs to a material extent and further that no Contractor shall be entitled to give notice as above on the basis that another Contractor has failed to meet such KPIs to material extent. POL may terminate this Agreement by giving each Contractor not less than 12 months’ notice in writing to that effect if any of the Type 2 KPIs have not been met to a material extent. ……. 11.4 Each Contractor or POL may terminate this Agreement at any time by giving notice in writing to POL or each of the Contractors, as the case may be, if:- 11.4.1 any of the other parties, unless such other party is another Contractor in the case of a Contractor giving notice, is in material breach of any of its obligations under this Agreement, including without limitation if any Contractor is in breach of any of Clauses 3.10.1, 3.10.2 and3.10.3 (and in the case of a breach capable of remedy fails to remedy the breach within three months of receipt of a written notice requiring it to do so, the parties acknowledging that a breach of any of Clauses 3.10.1, 3.10.2 and 3.10.3 is a breach incapable of remedy therefore entitling POL to terminate this Agreement); or ........... 11.6 Any termination of this Agreement will not prejudice the accrued rights and remedies of any of the other parties, and shall not affect the coming into force or the continuance in force of any provision of this Agreement which is expressly or by implication intended to come into or continue in force on or after termination. ……... 13. Limitation of Liability 13.4 Without prejudice to the provisions of Clause 12, no party shall bring an action against any of the others in relation to loss of profits, loss of business, loss of revenue or anticipated savings suffered by third parties whatsoever and howsoever arising whether from contract, tort, breach of statutory duty or otherwise. ……… 16. Waiver In no event shall any delay, neglect or forbearance on the part of any party in enforcing (in whole or in part) any provision of this Agreement be or be deemed to be a waiver thereof or a waiver of any other provision or shall in any way prejudice any right of that party under this Agreement. 26. Entire Agreement and Conflict 26.1 This Agreement sets out the entire agreement and understanding between the parties relating to this Agreement. 26.3 The Schedules to this Agreement form part of it and to the extent that there is any conflict between the Clauses of this Agreement and the provisions of any Schedule, the Clauses of this Agreement shall prevail. 27. Contracts (Rights of Third Parties) Act 1999 The parties acknowledge and agree that nothing in this Agreement shall confer on any third party any benefit, nor the right to enforce any of its provisions. ………. 30. Governing Law …….. 30.3 This Agreement shall be governed by English law and the parties submit to non-exclusive jurisdiction of the English Courts.” 131. SCHEDULE 2 “Section 5 – In POL Outlet Purchase In accordance with POL’s normal commercial practice, Post Office Limited will ensure that the Phonecards and Services will be available through all POL Outlets, providing suitable quantities of Phonecards and/or Services have been made available by the Relevant Contractor as appropriate. Sales statements of Phonecards will be provided to the Relevant Contractor as detailed in Schedule 4. On a daily basis, details of new Customers registering for FTS will be forwarded to Tele2 UK. Tele2 UK will fulfil these registrations within seven days. ………. SCHEDULE 4 ……… PART II – TRANSACTIONAL PAYMENTS 1. Phonecards The purchase price of a Phonecard sold to POL by the Relevant Contractor is 79% of the face value of the Phonecard. Post Office Limited will account to the Contractor for Phonecards it has purchased and appropriated to Customers, within 30 days after the end of the Post Office Limited monthly accounting period during which the sale to the Customer was made. Post Office Limited does not have to pay for any Phonecards that are not purchased by Customers. …….. PART III – ADDITIONAL FEES 1. Expiry If a Phonecard or FTS account expires without its full face value or the amount credited having been spent, the Relevant Contractor and Post Office Limited will share the remaining value equally. The Relevant Contractor will account for such monies to Post Office Limited on a monthly basis for all amounts so accrued in the previous month, notwithstanding termination of this Agreement. …….. SCHEDULE 7 Change Control .......... Tariff change control process If any change request will impact on tariffs, the following additional processes shall apply. In respect of Phonecards, it should be noted that the processes below only apply to complete batches of Phonecards, for which there are no active Customers. Any batches, of which one or more Phonecard has been used by a Customer, price increases shall not be effected. …….. SCHEDULE 9 Key Performance Indicators (KPIs) Type 1 ……... 5. Conformance to agreed Change Control process as per Schedule 7. ………” SCHEDULE 4 PART II – TRANSACTIONAL PAYMENTS PART III – ADDITIONAL FEES SCHEDULE 7 Change Control Tariff change control process SCHEDULE 9 Key Performance Indicators (KPIs) Type 1

Cited in 19 later judgments

and 10 more of the most senior