Svella Connect Limited v Virgin Media Limited [2026] EWHC 2223 (TCC)

[2026] EWHC 2223 (TCC)

Case No HT-2024-000414

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

TECHNOLOGY AND CONSTRUCTION COURT (KBD)

Venue Rolls Building, Fetter Lane, London EC4A 1NL

Date 26 August 2026

Before

THE HONOURABLE MR JUSTICE PEPPERALL

Between

SVELLA CONNECT LIMITEDClaimant

VIRGIN MEDIA LIMITEDDefendant

David Berkley KC and Rob Dawson instructed by and for Claimant

Sanjay Patel KC and Daniel Churcher (instructed by Mantle Law (UK) LLP) for Defendant

Hearing Hearing dates: 19 and 20 May 2026

Approved Judgment

This judgment was handed down remotely at 3pm on 26 August 2026

by circulation to the parties by email and by release to the National Archives.

THE HONOURABLE MR JUSTICE PEPPERALL:

[1]By an application made on 9 December 2025, Virgin Media Ltd sought summary judgment in respect of the claims made by Svella Connect Ltd for fraudulent misrepresentation; intimidation; causing loss by unlawful means; breaches of alleged implied terms of good faith in three Framework Agreements and in a later Exit & Settlement Agreement; aggravated and exemplary damages; and disgorgement, equitable compensation or an account of profits. In the alternative, Virgin Media sought to strike out such claims as showing no reasonable cause of action. In addition, Virgin Media applied to strike out the entirety of Svella’s 187-page Reply.

[2]Virgin Media’s application was largely conceded when Svella served its evidence in response to the application on 12 March 2026. Holly Loudon, Svella’s general counsel and company secretary, exhibited a draft of proposed amendments to the Particulars of Claim in which Svella proposed to abandon all of the impugned claims save for its claim for breaches of the alleged implied terms of good faith. In addition, the draft proposed wholesale amendment of the good faith case pleaded at Appendix 2 to the Particulars of Claim. Further, Ms Loudon conceded that the company’s Reply had been unnecessarily prolix and indicated that Svella intended to file a replacement Reply following any amendments to the Defence consequential on the reformulation of the Particulars of Claim.

[3]By Svella’s cross-application dated 8 May 2026, the company formally sought permission to amend and provided a second draft of its proposed Amended Particulars of Claim.

[4]Accordingly the position at the hearing of these cross-applications is that Svella had agreed to abandon a substantial number of pleaded claims and its original formulation of its good faith case while also withdrawing in its entirety a 187-page Reply. The only remaining issue on Virgin Media’s application is whether the court should grant summary judgment or strike out Svella’s good faith case. While academic if Virgin Media succeeds on either basis, there is also a live issue as to whether Svella should be given permission to plead its new good faith case at Appendix 2 to its draft Amended Particulars of Claim.

[5]The cross-applications are supported by witness statements from Gurbinder Singh Grewal, a partner at Mantle Law (UK) LLP, on behalf of Virgin Media and from Ms Loudon on behalf of Svella. Much of their evidence actually consists of legal argument although both witnesses helpfully explain the background to these proceedings and the way in which Nexfibre Networks Ltd (which trades as nexfibre) plans and awards work to contractors through Virgin Media. Further, Ms Loudon puts in evidence the transcript of a telephone call on 3 October 2024 that features heavily in Svella’s good faith case. BACKGROUND

[6]Virgin Media creates and expands fibre optic data networks throughout the UK using a series of contractors operating pursuant to framework agreements. Initially, it did so on its own account and for the benefit of its retail customers but, from 2023, Virgin Media has provided network services to its single customer, nexfibre.

[7]Virgin Media entered into three framework agreements with NMCN plc:7.1 On 7 May 2019, Virgin Media entered into the Lightning Framework Agreement in respect of works to be done by NMCN to expand the network to new areas.

7.2 On 14 February 2020, Virgin Media entered into two Morpheus Framework Agreements in respect of works to be done by NMCN to extend existing networks to particular streets and users. One agreement covered the North West and the other Yorkshire and the East Midlands.

[8]In October 2021, NMCN was placed into administration and the Framework Agreements were novated to Svella.

[9]Prior to the start of each financial year, nexfibre publishes an “Opportunity Plan” setting out its planned volume and location of work for the following year. Virgin Media then enters into negotiations with its framework contractors to allocate the anticipated work between them. Key considerations for Virgin Media in allocating work include the price offered by contractors; the contractor’s past performance measured against delivery rate, installation quality, and health and safety compliance; and the contractor’s capacity for the work.

[10]The allocation of work at that stage is provisional in that ultimately it depends on whether nexfibre calls down the work. Before any work can be commissioned, nexfibre has to give Virgin Media approval to carry out detailed design work for the installation and seek the necessary approvals from the relevant local authority. Framework contractors are then invited to produce a formal proposal for the installation work under the terms of their individual framework agreements. Once agreed in principle with Virgin Media, such proposals are submitted to nexfibre for its approval. It is only at that stage that the framework contractor is given approval to build.

[11]While historically work was typically allocated to contractors in accordance with the Opportunity Plan, the actual volume of work carried out was often lower than that originally anticipated. In some years, plans materially changed with the result that contractors such as Svella did not obtain all of the work that had been provisionally allocated under the annual planning process.

[12]Svella pleads its case as to an implied term of good faith in respect of the Framework Agreements at paras 7-9 of its Particulars of Claim:

“7. Further the Framework Agreements were relational contracts, in that they required a high degree of communication, co-operation and predictable performance based on mutual trust and confidence and involved expectations of loyalty. 8. Further there was an expectation that the relationship would be long term, requiring substantial financial commitment by the parties so as to give rise to a mutual intention that the parties perform with integrity and fidelity to their bargain. 9. There was therefore an implied term of each of the Framework Agreement[s] and/or duty of good faith which was (a) implicit in the parties’ understanding and (b) necessary to give business efficacy to the arrangements to the effect that each party:- (1) would act honestly towards the other party; and (2) not conduct itself in a way which was calculated to frustrate the purpose of the contract; and (3) not act in a manner which would be regarded as commercially unacceptable by reasonable and honest people.”

[13]Svella then pleads that, following management changes, Virgin Media started putting pressure on it from about March 2024 and thereby acted in breach of both the express terms of the Framework Agreements and the implied term or duty of good faith. Its complaints can be broadly summarised as follows:13.1 In April 2024, Virgin Media removed a rate for work conducted from a mobile elevating work platform and proposed that Svella should use ladders in order to achieve financial savings thereby putting employees at an unacceptable risk of injury: Particulars of Claim, paras 20-27.

13.2 Because of Svella’s objections and in response to the contractor seeking to bill for aborted visits made to customers’ premises, Virgin Media began “victimising” Svella by reducing the build volumes so as to make the Framework Agreements less profitable for Svella: Particulars of Claim, para. 28.

13.3 In an attempt to force Svella to agree the unilateral change to the rates, Virgin Media threatened not to renew or extend the Morpheus Framework Agreements when they came to an end in March 2025 and placed Svella under pressure to itself give notice of termination of such agreements: Particulars of Claim, paras 29-30.

13.4 Senior representatives of Virgin Media insisted during a call on 20 May 2024 that overhead working would be paid at the imposed standardised rate and that, if Svella chose to carry out work using mobile platforms instead of ladders, that would be at the company’s own cost. Alternatively, they would conclude that Svella no longer wished to work for Virgin Media: Particulars of Claim, para. 31.

[14]In the first quarter of 2024, Virgin Media entered into negotiations with Svella as to the provisional allocation of work for the 2025 fiscal year (“FY25”). Relations became strained with Svella arguing for a greater allocation of work and asserting claims in respect of past work carried out under the Morpheus Framework Agreements while Virgin Media rejected the claims and sought improvements in Svella’s performance and reductions in its rates. Ultimately the parties discussed the terms under which Svella would exit the Morpheus Framework Agreements while retaining some work under the Lightning Framework Agreement.

[15]By an Exit & Settlement Agreement dated 24 July 2024, the parties agreed that Svella would waive the claims that it had intimated under the Morpheus agreements while Virgin Media would award further work under the Lightning agreement as set out in Schedules 1 and 2 of the Exit & Settlement Agreement.

[16]Svella pleads at para. 40:

“Further the Exit & Settlement Agreement was itself a relational contract, in that it required a high degree of communication, co-operation and predictable performance based on mutual trust and confidence and involved expectations of loyalty and so that the Implied Term and Duty of Good Faith applied to that agreement.”

[17]In November 2024, nexfibre notified Virgin Media that it was scaling back its plans for FY25. This materially affected Svella in that only around 26,000 of the 96,372 installations identified in Schedule 2 to the Exit & Settlement Agreement were now planned for the year.

[18]Further particulars of Svella’s good faith case are pleaded at Appendix 2. In the draft Amended Particulars of Claim, the original particulars in Appendix 2 are replaced in their entirety. The new particulars are said to be instances where Virgin Media “acted in disregard of [Svella’s] rights and/or in a commercially unacceptable manner and/or in a manner calculated to frustrate the purpose of the Framework Agreements and/or the Exit & Settlement Agreement”. They can be summarised as follows:18.1 confirming Virgin Media’s intention to “de-scope committed works” and “to exit” Svella regardless of whether there was any legal basis for doing so: Appendix 2, para. 1(a);

18.2 confirming Virgin Media’s intention to “starve” Svella of work in the event that there was no legal basis to de-scope committed works in order “to drive [Svella] into financial difficulty”: Appendix 2, para. 1(b);

18.3 failing to pay sums due under the Exit & Settlement Agreement and the Morpheus Framework Agreements: Appendix 2, para. 1(c);

18.4 confirming Virgin Media’s intention not to be bound by its contractual obligations: Appendix 2, para. 1(d);

18.5 “embarking on a campaign to attempt to find fault for the purpose of terminating its contractual obligations to [Svella] and/or suspending [Svella’s] works without lawful or reasonable basis”: Appendix 2, para. 1(e);

18.6 encouraging third parties to bid for Svella’s committed build volumes with the purpose of awarding such work elsewhere: Appendix 2, para. 1(f);

18.7 issuing performance improvement plans without any lawful or reasonable cause: Appendix 2, para. 1(g);

18.8 failing to grant the committed build volumes as set out in the Exit & Settlement Agreement without any lawful cause: Appendix 2, para. 1(h); and

18.9 acting in a commercially unacceptable manner in concealing Virgin Media’s intention in respect of its contractual obligations: Appendix 2, para. 1(i).

[19]Virgin Media relies on the express terms of the Framework Agreements and denies that there is any basis for implying terms of good faith. Such terms were neither necessary to give business efficacy to the parties’ agreements nor consistent with the express terms of their agreements.

[20]Virgin Media denies in any event breach of any implied term of good faith. Specifically, it contends that the use of mobile platforms rather than ladders was not necessarily safer in all circumstances, that it did not unilaterally change any job rates, and that it remained open to contractors to use mobile platforms and then to bill at a higher rate. Where, however, a contractor sought payment at the higher rate it would have to justify the use of a mobile platform on a case-by-case basis: Defence, paras 77-89. More generally, it asserts that it was under no obligation under the Framework Agreements to place any work with Svella and that it retained the right to place work with alternative contractors. Further, it pleads that the Framework Agreements were terminable at will and that Virgin Media was under no obligation to extend or renew such contracts.

[21]Virgin Media’s case on breach is neatly encapsulated in the plea, at para. 8 of its Defence:

“Svella’s allegations of bad faith against Virgin Media seek to cast perfectly ordinary conduct as nefarious.”

THE AGREEMENTS THE FRAMEWORK AGREEMENTS

[22]While the Exit & Settlement Agreement compromised claims under the Morpheus Framework Agreements, Svella contends that Virgin Media was in repudiatory breach of the Exit & Settlement Agreement. Further, it pleads that it has accepted such repudiation with the consequence that it seeks to pursue, among other claims, the settled claims under the Morpheus agreements.

[23]The Framework Agreements governed the terms on which Svella provided network services to Virgin Media’s order. Each agreement contained an express term at clause 10.2 that the parties would “act in a spirit of mutual trust and co-operation”.

[24]Clause 11.2(5) of the Framework Agreements provided that the agreements were for an initial term of 3 years. By clause 26.1, Virgin Media had the option to extend the agreements on two occasions for, on each occasion, an additional term of 12 months. Accordingly, the Framework Agreements were for an initial term of 3 years that was extendable at Virgin Media’s election to a maximum term of 5 years.

[25]Termination was dealt with at clauses 26.2-26.5. The material provisions were as follows:25.1 Clause 26.2 provided: “The Client [Virgin Media] may terminate the Contractor’s [Svella’s] employment under this Framework Agreement at any time by notifying the Contractor if: - the Client no longer requires the Contractor to carry out any work in connection with the Project, - the Contractor has failed to comply with his obligations, or - the Contractor commits a Corrupt Act.”

25.2 Clause 26.2A provided: “The Contractor’s employment under this Framework Agreement may be terminated for convenience upon a Party providing at least twelve (12) months’ prior written notice to the other Party.”

25.3 Clause 26.3 provided that Svella could terminate the Framework Agreement for cause.

[26]Clause 30 of the Morpheus Framework Agreements required Svella to submit a work resource plan as reasonably required by Virgin Media. The parties also agreed to use reasonable endeavours to agree a work forecasting mechanism and an incentive schedule. Clause 30 of the Lightning Framework Agreement was slightly different but again required the parties to use reasonable endeavours to agree a work forecasting mechanism.

[27]Recital 3 to each of the Framework Agreements noted:

“Subject to clause 30 of this Framework Agreement, the Client [Virgin Media] and the Contractor [Svella] accept and agree that under this Framework Agreement no guarantee is given nor representation made by the Client to the Contractor that the Contractor will be appointed to carry out any works.”

[28]Annexure 1 to the Lightning Framework Agreement provided: Similar provisions were made in the Morpheus Framework Agreements although such agreements used the language of Package Orders. “The Client may, from time to time, wish to consult with the Contractor in relation to future work. The Contractor agrees to provide any reasonable co-operation and advice which the Client seeks prior to entering into a Work Order, acknowledging that unless and until the Client and the Contractor enter into a Work Order, the Contractor shall not be entitled to any reimbursement in connection with the Framework Agreement.”

[29]Paragraph 5.1 of Annexure 2 to the Lightning Framework Agreements provided:

“In undertaking a Work Order the Contractor shall work in a collaborative manner with the Client, other contractors and consultants engaged by the Client, to the extent and in the manner described within the Work Order Scope.”

[30]Annexure 4 set out the quotation procedure. In the Lightning Framework Agreement, it provided:

“Subject to the parties’ obligations under any forecasting mechanism agreed between the parties pursuant to clause 30 of this Framework Agreement, there is no contractual obligation on the Contractor to enter into any Work Order because each Work Order is a separate contract and will require agreement between the parties before the Work Order can be entered into.”

[31]After setting out the quotation procedure, Annexure 4 explained in each of the Framework Agreements:

“The Client will inform all framework contractors who were selected and instructed / the Contractor to submit [quotations or proposals] of its decision relating to the award of the [Work Order or Package Order]. The final decision is the Client’s decision alone and may not be contested by the framework contractors / the Contractor.”

[32]At Annexure 6, the Morpheus Framework Agreements provided the detailed conditions of any Work Order. Such conditions included, at clause Z22.1:

“Nothing in this contract constitutes, or is deemed to constitute, a partnership or joint venture of any kind between the Parties nor does it constitute, or is it deemed to constitute, authority for one Party to act as agent for the other Party.”

THE EXIT & SETTLEMENT AGREEMENT

[33]The Exit & Settlement Agreement set out the terms on which(a) Svella was to cease to provide services under the Morpheus Framework Agreements on 31 March 2025, and

(b) the parties resolved Svella’s disputed claims for payment. By clauses 2.2 and 2.3, there were mutual obligations to use reasonable endeavours to facilitate a seamless handover of services and upon Svella in respect of transferring employees to the incoming service provider. There was a further obligation to use reasonable endeavours to agree the value of any partially completed works at clause 2.4.

[34]By Schedule 1, the parties agreed that the “build allocation under the Lightning Agreement earmarked for the Contractor for FY25 is 74,000 plus 22,000 brought forward (‘FY25 Allocation’)” as further particularised in Schedule 2.

[35]By para. 2 of Schedule 1, the parties agreed:

“Virgin Media will grant to the Contractor: - 50% of the FY25 Allocation, and the parties acknowledge that projects that provide this volume have already been allocated, however is (sic) subject to the necessary governance process and quality/delivery KPI performance; - postcode exclusivity across all of the Central Area for the remainder of the FY25 Allocation, to the extent that build projects do go ahead in this area; and - a minimum of 15% of the full Central Area volume in FY26. This volume will be subject to the necessary governance process at Virgin Media around the [cost per premises]. Should nexfibre reject a build, Virgin Media will use reasonable endeavours to replace this with additional volume.”

[36]Unlike the position under the Framework Agreements, Virgin Media agreed therefore to grant a guaranteed volume of work to Svella in settlement of the contractor’s claims. Such grant was, however, subject to caveats:36.1 The grant of 50% of the FY25 Allocation was subject to “the necessary governance process” and Svella’s performance against certain KPIs.

36.2 Postcode exclusivity was expressly subject to whether build projects went ahead in the Central Area.

36.3 The allocation of 15% of the Central Area volume in FY26 was again subject to necessary governance procedures. In the event that nexfibre “rejected” a build, Virgin Media agreed to use “reasonable endeavours” to replace the lost build with additional volume. THE ARGUMENT

[37]Sanjay Patel KC, who appears with Daniel Churcher for Virgin Media, argues by reference to BP Gas Marketing Ltd v. La Societe Sonatrach

[2016] EWHC 2461 (Comm)

and my costs decision in Essex County Council v. UBB Waste (Essex) Ltd (No. 3)

[2020] EWHC 2387 (TCC)

, 192 ConLR 143 that allegations of breach of a duty of good faith are serious and that it is particularly important that they are properly pleaded. He argues that a claimant must plead why the contract is said to be relational, the precise duties that they say need to be implied and why such duty is necessary. Mr Patel argues that the time has come for there to be settled rules of pleading in this area so that untenable good faith claims do not come on for trial.

[38]Mr Patel submits that para. 9 of the Particulars of Claim appears to proceed on the basis that a term of good faith is implied because the contract was relational. That, he submits, is wrong in law, and some case on necessity was required. Mr Patel acknowledges, however, that para. 9(b) pleads a case in necessity and so appears to contend for an implied term in fact. Mr Patel further criticises the formulation of the implied term as simply taking judicial statements as to the typical content of a duty of good faith and applying it broadly without making any attempt to formulate precise and coherent implied terms.

[39]Relying on Yam Seng Pte Ltd v. International Trade Corporation Ltd

[2013] EWHC 111 (QB)

, [2013] 1 Lloyd’s Rep. 526, Sheikh Al Nehayan v. Kent

[2018] EWHC 333 (Comm)

, UTB LLC v. Sheffield United Ltd

[2019] EWHC 2322 (Ch)

, Cathay Pacific Airways Ltd v. Lufthansa Technik AG

[2020] EWHC 1789 (Ch)

, Astor Management AG v. Atalaya Mining plc

[2017] EWHC 425 (Comm)

, [2018] 1 All E.R. (Comm) 547and Candey Ltd v. Bosheh

[2022] EWCA Civ 1103

, [2022] 4 W.L.R. 84,Mr Patel argues that the proper approach is to consider the question of implication on orthodox Marks & Spencer principles. He cautions against treating the passage in Bates v. Post Office (No. 3)

[2019] EWHC 606 (QB)

, [2019] All E.R. (D) 100, at [725], as being the sole and determinative test of whether a termof good faith should be implied and stresses the centrality of the consideration of the express terms of the contract and what he describes as the threshold question of whether the contract was complete. He stresses that terms were implied in Yam Seng and Al Nehayan to fill a gap in the express terms of the parties’ contract. Likewise, terms were implied in law in Liverpool City Council v. Irwin

[1977] AC 239

to fill a contractual lacuna.

[40]Mr Patel submits that there is no basis for implying the pleaded terms in fact or in law. Specifically, he argues that such terms are neither necessary nor obvious. In any event, he makes detailed submissions by reference to the Bates criteria and contends that the agreements were not relational contracts.

[41]As to the Exit & Settlement Agreement, Mr Patel argues that, far from being a relational contract, its purpose was to bring whatever relationship there was to an end. He argues that if Virgin Media is right to argue that the Framework Agreements were not themselves relational contracts, it makes no sense to suggest that an agreement bringing the parties’ dealings to a close could itself be relational. Further, he argues that settlement agreements do not provide fertile ground for the implication of terms.

[42]Following on, Mr Churcher analysed the pleaded breaches of the disputed implied terms at Appendix 2 to the draft Amended Particulars of Claim. He argued that Svella’s new case was objectionable for one of three reasons:42.1 Some allegations of breach of the implied terms add nothing to Svella’s pleaded case for breach of express terms.

42.2 On other occasions, there is no completed cause of action pleaded in that no relief is sought in respect of the allegations of breach of contract.

42.3 While accepting that the court must not conduct a mini-trial, he argues that some further allegations are so weak when viewed through the lens of commercially unacceptable conduct that they can be dismissed at this summary stage.

[43]David Berkley KC, who appears with Rob Dawson for Svella, stresses that this case concerns an area of developing jurisprudence and urges caution at the interim stage. He reminds me that the court must not only consider the evidence before the court but also what other evidence might be available at trial. He submits that I am not being asked so much as to grasp the nettle in a clear case, but to get entangled in the nettles.

[44]Mr Berkley relies heavily on Yam Seng and complains that Mr Patel seeks to invert matters by failing to focus on the question of whether the contracts in this case are relational. Rather, he submits, Virgin Media seeks to play on the common law’s traditional hostility to implied terms of good faith. He argues that such approach is, as Leggatt J put it in Yam Seng, to swim against the tide. Mr Berkley submits that the implied terms in this case arise as a matter of law from the nature of the contract. He relies on Crossley v. Faithful & Gould Holdings Ltd

[2004] ICR 1614

, and a passage in Chitty on Contracts (36th Ed.) at para. 17-007.

[45]Mr Berkley asks rhetorically what the point of the Framework Agreements and their geographical and temporal limitations are if the court is to construe them as imposing no obligations in respect of work. There was, he argues, plainly an expectation on both sides that work would be awarded. He relies on clause 10.2 and submits that these are agreements in which the parties failed to legislate how they would go about their collaboration.

[46]Mr Berkley also made detailed submissions by reference to the Bates criteria and argues that implied good faith terms arise as a matter of law from the nature of the parties’ relationship.

[47]Mr Berkley argues that there is a breach of a duty of good faith even if no action is actually taken in breach of other terms of the contracts: forming an intention to act in a manner calculated to frustrate the purpose of the bargain is itself a breach of the term. Mr Berkley contends that even if no damages directly flow from the pleaded breaches of the implied term of good faith of the Exit & Settlement Agreement, such breaches add weight to Svella’s argument that Virgin Media acted in repudiatory breach of such agreement. THE LAW THE APPLICABLE PROCEDURAL LAW

[48]Rule 24.2 provides that the court may give summary judgment against a claimant on part of its claim or on a particular issue if it considers that(a) the claimant has no real prospect of succeeding on the claim or issue, and

(b) there is no other compelling reason why the case or issue should be disposed of at trial.

[49]The test is whether the claim has a “realistic” as opposed to a “fanciful” prospect of success: Swain v. Hillman [2001] 1 All E.R. 91. A realistic claim is one that “carries some degree of conviction” and is more than merely arguable: ED & F Man Liquid Products v. Patel

[2003] EWCA Civ 472

, at [8]. The court must avoid conducting a mini-trial on the papers (Swain) but is not required to take at face value and without analysis everything that the claimant says in its evidence (ED & F Man). The court should take into account not just the evidence that is actually placed before it on the application for summary judgment but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v. Hammond (No. 5)

[2001] EWCA Civ 550

. The court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to the trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Ltd v. Bolton Pharmaceutical Co 100 Ltd [2007] F.S.R. 3. On the other hand, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should “grasp the nettle” and decide any short point of law or construction. It is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of law: ICI Chemicals & Polymers Ltd v. TTETraining Ltd

[2007] EWCA Civ 725

[50]Rule 3.4(2)(a) provides that the court may strike out Particulars of Claim if it appears that they disclose no reasonable grounds for bringing the claim. In assessing whether the statement of case has disclosed reasonable grounds for bringing the claim, the court is usually bound to accept the accuracy of the pleaded facts, unless they are contradictory or demonstrably untrue or unsupportable: Okpabi v. Royal Dutch Shell plc

[2021] UKSC 3

, at [107].

[51]To obtain permission to amend a statement of case pursuant to Part 17 of the Civil Procedure Rules 1998, the proposed amendments must contain sufficient detail to enable the other party to understand the case being advanced and must disclose reasonable grounds on which to bring or defend the claim: Habibsons Bank Ltd v. Standard Chartered Bank (HK) Ltd

[2011] EWCA Civ 1335

[2011] QB 943

, at [12]. It is appropriate to consider whether the proposed pleading is coherent and contains properly particularised elements of the cause of action or defence relied upon: Elite Property Holdings Ltd v. Barclays Bank plc

[2019] EWCA Civ 204

, at [42]. In an area of law that is developing, and where its boundaries are drawn incrementally based on decided cases, it is not normally appropriate summarily to dispose of the claim or defence since the development of the law should proceed on the basis of actual facts found at trial and not on the basis of hypothetical facts assumed to be true: Farah v. British Airways plc

[1999] EWCA Civ 3052

, at [42]-[43]. The threshold test for permission is therefore the same as that applied in summary judgment applications: Elite, at [40]-[42]. See also generally Amersi v. Leslie

[2023] EWHC 1368 (KB)

, at [140].

[52]There is an obvious overlap between the power to give summary judgment against a claimant and the power to strike out a claim or a head of claim. That said, the focus on an application under rule 3.4(2)(a) is upon the statement of case which is said to disclose no reasonable grounds for bringing the claim whereas in considering whether there is a real prospect of success under Part 24, the court must also consider the evidence.

[53]Although Virgin Media’s application was made on both bases, the reality is that the argument requires careful examination of the contracts against the background evidence of the way in which nexfibre plans and allocates its work. Accordingly, the application is more appropriately made under Part 24.

[54]Equally, there is an obvious overlap between the principles applicable on amendment and summary judgment in that permission to amend should be refused to plead a new case that does not have a real prospect of success.

[55]Svella does not argue that there is any compelling reason why its good faith claim should be disposed of at trial in the event that I were to conclude that it has no real prospect of success on its claim. Accordingly, the focus of the parties’ arguments is rightly upon the application of the summary judgment principles and the real issues are whether:55.1 Svella has no real prospect of establishing that terms imposing obligations of good faith should be implied into the Framework Agreements and into the Exit & Settlement Agreement; and

55.2 Svella has no real prospect of establishing its new claim for breach of such implied terms. THE IMPLICATION OF TERMS GENERALLY

[56]As Lord Neuberger observed in Marks & Spencer plc v. BNP Paribas Securities Services Trust Co. (Jersey) Ltd

[2015] UKSC 72

, [2016] A.C. 742, at [28], it is only after the process of construing the express words of a contract is complete that the court can consider the issue of the implication of terms. Here, the court is concerned with what Sir Thomas Bingham M.R. (as he then was) described in Philips Electronique Grand Public SA v. British Sky Broadcasting Ltd [1995] E.M.L.R. 472 (CA), at page 481, as “a different and altogether more ambitious undertaking: the interpolation of terms to deal with matters for which, ex hypothesi, the parties themselves have made no provision.”

[57]A contractual term may be implied either as a matter of fact in the circumstances of the particular case or as a matter of law whether by statute or as a necessary incident of a particular type of contractual relationship. As Baroness Hale explained in Société Générale v. Geys

[2012] UKSC 63

, [2013] 1 A.C. 523, at [55]:

“… it is important to distinguish between two different kinds of implied terms. First, there are those terms which are implied into a particular contract because, on its proper construction, the parties must have intended to include them: see Attorney General of Belize v. Belize Telecom Ltd [2009] 1 W.L.R. 1988. Such terms are only implied where it is necessary to give business efficacy to the particular contract in question. Second, there are those terms which are implied into a class of contractual relationship, such as that between landlord and tenant or between employer and employee, where the parties may have left a good deal unsaid, but the courts have implied the term as a necessary incident of the relationship concerned, unless the parties have expressly excluded it: see Lister v. Romford Ice and Cold Storage Co Ltd [1957] AC 555, Liverpool City Council v. Irwin [1977] AC 239.”

Implication in law

[58]In the Liverpool case, the informal tenancy agreement of a maisonette on the ninth and tenth floors of a tower block was incomplete and imposed express obligations only on the tenants. The House of Lords found that there were implied easements for the tenants and their licensees to use the common parts of the building and to use the rubbish chutes. Further, that where the essential means of access to the let property was retained in the landlord’s occupation then, subject to contrary provision, the nature of the agreement required the law to imply a term that the landlord should take reasonable care to keep the means of access in reasonable repair and usability. Lord Wilberforce explained, at page 254F, that “such obligation should be read into the contract as the nature of the contract itself requires, no more, no less: a test, in other words, of necessity”.

[59]Other examples of terms to be implied as a matter of law as necessary incidents of a contractual relationship can be taken from the field of employment where terms that the employer should provide a safe system of work and that the parties should not act so as to damage the mutual trust and confidence between employer and employee: see Geys, at [56]. As Dyson LJ observed in Crossley, at [36], the search for necessity in such terms can be elusive and they may be better regarded simply as established incidents of the relevant contractual relationship.

[60]The editors of Chitty on Contracts (36th Ed.) note at para. 17-007:

“Thus, when deciding whether or not to imply a term as a matter of law into a contract of a particular type, the courts do not conﬁne themselves to a narrow test of necessity but instead can draw upon a broader range of factors, such as the reasonableness of the term, its fairness and a range of competing policy considerations, when deciding whether the proposed term is a necessary incident of the type of contractual relationship in question.”

Implication in fact

[61]In BP Refinery (Westernport) Pty Ltd v. Shire of Hastings

(1977) 180 CLR 266

(PC), Lord Simon said, at page 283:

“for a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that ‘it goes without saying’; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.”

[62]In Philips, Sir Thomas Bingham M.R. said, at page 481, that this passage “distils the essence of much learning on implied terms. But its simplicity could be almost misleading.” He wisely cautioned judges, at page 482:

“The question of whether a term should be implied, and if so what, almost inevitably arises after a crisis has been reached in the performance of the contract. So the court comes to the task of implication with the benefit of hindsight, and it is tempting for the court then to fashion a term which will reflect the merits of the situation as they then appear. Tempting, but wrong … … it is not enough to show that had the parties foreseen the eventuality which in fact occurred they would have wished to make provision for it, unless it can also be shown either that there was only one contractual solution or that one of several possible solutions would without doubt have been preferred.”

[63]In Marks & Spencer, Lord Neuberger added six comments to this summary of the law, at [21]:

“First, in Equitable Life Assurance Society v. Hyman [2002] 1 A.C. 408, 459, Lord Steyn rightly observed that the implication of a term was ‘not critically dependent on proof of an actual intention of the parties’ when negotiating the contract. If one approaches the question by reference to what the parties would have agreed, one is not strictly concerned with the hypothetical answer of the actual parties, but with that of notional reasonable people in the position of the parties at the time at which they were contracting. Secondly, a term should not be implied into a detailed commercial contract merely because it appears fair or merely because one considers that the parties would have agreed it if it had been suggested to them. Those are necessary but not sufficient grounds for including a term. However, and thirdly, it is questionable whether Lord Simon’s first requirement, reasonableness and equitableness, will usually, if ever, add anything: if a term satisfies the other requirements, it is hard to think that it would not be reasonable and equitable. Fourthly, …. although Lord Simon’s requirements are otherwise cumulative, I would accept that business necessity and obviousness, his second and third requirements, can be alternatives in the sense that only one of them needs to be satisfied, although I suspect that in practice it would be a rare case where only one of those two requirements would be satisfied. Fifthly, if one approaches the issue by reference to the officious bystander, it is ‘vital to formulate the question to be posed by [him] with the utmost care’, to quote from Lewison, The Interpretation of Contracts … Sixthly, necessity for business efficacy involves a value judgment. It is rightly common ground on this appeal that the test is not one of ‘absolute necessity’, not least because the necessity is judged by reference to business efficacy. It may well be that a more helpful way of putting Lord Simon’s second requirement is, as suggested by Lord Sumption JSC in argument, that a term can only be implied if, without the term, the contract would lack commercial or practical coherence.”

[64]The test was recently and helpfully restated by Coulson LJ in Candey, at [29].

[65]In Ali v. Petroleum Co. of Trinidad & Tobago

[2017] UKPC 2

, [2017] I.C.R. 531, Lord Hughes stressed, at [7], that:

“…the process of implying a term into the contract must not become the rewriting of the contract in a way which the court believes to be reasonable, or which the court prefers to the agreement which the parties have negotiated. A term is to be implied only if it is necessary to make the contract work, and this it may be if (i) it is so obvious that it goes without saying (and the parties, although they did not, ex hypothesi, apply their minds to the point, would have rounded on the notional officious bystander to say, and with one voice, ‘Oh, of course’, and/or (ii) it is necessary to give the contract business efficacy. Usually the outcome of either approach will be the same. The concept of necessity must not be watered down. Necessity is not established by showing that the contract would be improved by the addition. The fairness or equity of a suggested implied term is an essential but not a sufficient precondition for inclusion. And if there is an express term in the contract which is inconsistent with the proposed implied term, the latter cannot, by definition, meet these tests, since the parties have demonstrated that it is not their agreement.”

[66]In Torre Asset Funding Ltd v. The Royal Bank of Scotland plc

[2013] EWHC 2670 (Ch)

, Sales J (as he then was) observed, at [152], that “where parties have entered into a lengthy and carefully drafted contract but have omitted to make provision for the matter in issue, it is difficult to infer with confidence what the parties must have intended” and that “where there is a variety of proposed terms or where a proposed term could be expressed in different ways, that may be a good indicator that it is not sufficiently certain”. IMPLIED TERMS OF GOOD FAITH

[67]In Yam Seng, Leggatt J, as he then was, carried out an important review of the question as to whether the English law of contract recognises an implied term of good faith. He observed, at [131]:

“Under English law a duty of good faith is implied by law as an incident of certain categories of contract, for example contracts of employment and contracts between partners or others whose relationship is characterised as a fiduciary one. I doubt that English law has reached the stage, however, where it is ready to recognise a requirement of good faith as a duty implied by law, even as a default rule, into all commercial contracts. Nevertheless, there seems to me to be no difficulty, following the established methodology of English law for the implication of terms in fact, in implying such a duty in any ordinary commercial contract based on the presumed intention of the parties.”

[68]Lamenting the simplicity of the conventional dichotomy between ordinary contracts and relationships such as partnership, trusteeship and other fiduciary relationships, Leggatt J said, at [142]:

“While it seems unlikely that any duty to disclose information in performance of the contract would be implied where the contract involves a simple exchange, many contracts do not fit this model and involve a longer term relationship between the parties which they make a substantial commitment. Such ‘relational’ contracts, as they are sometimes called, may require a high degree of communication, co-operation and predictable performance based on mutual trust and confidence and involve expectations of loyalty which are not legislated for in the express terms of the contract but are implicit in the parties’ understanding and necessary to give business efficacy to the arrangements. Examples of such relational contracts might include some joint venture agreements, franchise agreements and long-term distributorship agreements.”

[69]Yam Seng was briefly considered by the Court of Appeal in Mid Essex Hospital Services NHS Trust v. Compass Group UK & Ireland Ltd

[2013] EWCA Civ 200

, in which Jackson LJ cited the case as authority for the proposition, at [105]:

“… there is no general doctrine of ‘good faith’ in English contract law, although a duty of good faith is implied by law as an incident of certain categories of contract”

[70]In Al Nehayan, Leggatt LJ (as he had then become) considered again whether the implied term arises in law as a necessary incident of a relational contract or in fact upon the particular circumstances of the case. He held in that case that the implied term arose in fact but added, obiter, at [174], that he would reach the same conclusion by applying the test adumbrated by Lord Wilberforce in the Liverpool case for the implication of a term in law “on the basis that the nature of the contract as a relational contract implicitly requires (in the absence of contrary indication) treating it as involving an obligation of good faith”.

[71]In Ellis v. John Benson Ltd

[2025] EWHC 2096 (KB)

, Freedman J analysed the caselaw as to implied terms of good faith and rightly concluded, at [298], that “the general drift is in favour of an implied term in fact”.

[72]The concept of a relational contract was further explained by Leggatt LJ in Al Nehayan, at [167]:

“[In Yam Seng], I drew attention to a category of contract in which the parties are committed to collaborating with each other, typically on a long-term basis, in ways which respect the spirit and objectives of their venture but which they have not tried to specify, and which it may be impossible to specify, exhaustively in a written contract. Such ‘relational’ contracts involve trust and confidence but of a different kind from that involved in fiduciary relationships. The trust is not in the loyal subordination of one party of its own interests to those of another. It is trust that the other party will act with integrity and in a spirit of co-operation. The legitimate expectations which the law should protect in relationships of this kind are embodied in the normative standard of good faith.”

[73]In Bates, Fraser J (as he then was) analysed the characteristics of a relational contract. He concluded, at [725]-[726]:

“725. I consider the following characteristics are relevant as to whether a contract is a relational one or not: 1. There must be no specific express terms in the contract that prevents a duty of good faith being implied into the contract. 2. The contract will be a long-term one, with the mutual intention of the parties being that there will be a long-term relationship. 3. The parties must intend that their respective roles be performed with integrity, and with fidelity to their bargain. 4. The parties will be committed to collaborating with one another in the performance of the contract. 5. The spirits and objectives of their venture may not be capable of being expressed exhaustively in a written contract. 6. They will each repose trust and confidence in one another, but of a different kind to that involved in fiduciary relationships. 7. The contract in question will involve a high degree of communication, co-operation and predictable performance based on mutual trust and confidence, and expectations of loyalty. 8. There may be a degree of significant investment by one party (or both) in the venture. This significant investment may be, in some cases, more accurately described as substantial financial commitment. 9. Exclusivity of the relationship may also be present. 726. I hesitate to describe this as an exhaustive list. No single one of the above list is determinative, with the exception of the first one. This is because if the express terms prevent the implication of a duty of good faith, then that will be the end of the matter. However, many of these characteristics will be found to be present where a contract is a relational one. In other cases on entirely different facts, it may be that there are other features which I have not identified above which are relevant to those cases.”

[74]Both Virgin Media and Svella addressed me by reference to Fraser J’s analysis. There are, however, dangers in analysing the case purely by reference to the Bates criteria. In Candey, Coulson LJ described Bates, at [31], as containing “a useful checklist of the possible indicators of a relational contract”. He conducted what he described, at [41], as a “run-through of the checklist” using it as “merely a sense check rather than as a series of statutory requirements”. That said, he stressed, at [32], that it is important not to “veer” from the traditional tests for the implication of terms, adding that “the elusive concept of good faith should not be used to avoid orthodox and clear principles of English contract law”.

[75]In Essex County Council v. UBB Waste (Essex) Ltd (No. 2)

[2020] EWHC 1581 (TCC)

, 191 ConLR 77, I also noted, at [106], that Bates provides a useful approach but cautioned that “it must be kept firmly in mind that these nine factors do not fall to be construed like the words of a statute, rather they are helpful indicia of a relational contract”. Indeed, Fraser J recognised that himself in Bates at [726].

[76]In Candey, Coulson LJ observed, at [31], that there has been “something of an avalanche of claimants in recent years trying to show that the contract into which they seek to imply the term is a relational contract” but only “relatively few” have succeeded.

[77]In UTB, Fancourt J referred to Yam Seng and Al Nehayan, and observed, at [201]-[203]: “201. In other recent cases, there has been a tendency to substitute for the question whether a reasonable reader of the contract would consider a term to be necessary or obvious the question of whether the contract is a ‘relational’ contract: see, e.g., the decision of Fraser J in [Bates]. At [725], Fraser J asked what the characteristics are that are expected to be present that will determine whether a commercial contract ought to be considered a ‘relational contract’. The judge set out nine relevant factors, of which only the first was determinative, namely that there must be no express term of the contract that prevents a duty of good faith being implied.202. If by ‘relational contract’ it is clear that one means a relational contract of the kind described by Leggatt LJ in [Al Nehayan] and not all relational contracts in a broader sense, then there is no difficulty and the characteristics identified by Fraser J may assist to identify such a contract. But there is a danger in using the term ‘relational contract’ that one is not clear about what exactly is meant by it. There is a great range of different types of contract that involve the parties in long-term relationships of varying types, with different terms and varying degrees of detail and use of language, and to characterise them all as ‘relational contracts’ may be in one sense accurate and yet in other ways liable to mislead. It is self-evidently not all long-term contracts that involve an enduring but undefined, co-operative relationship between the parties that will, as a matter of law, involve an obligation of good faith. As Beatson LJ said (obiter) in Globe Motors Inc. v. TRW Lucas Varity Electric Steering Ltd

[2016] EWCA Civ 396

at [68]:

203. Rather than seek to identify and weigh likely indicia of a ‘relational contract’ in the narrower sense used by Leggatt LJ, it is, I consider, preferable to ask oneself first – as Leggatt LJ did in [Al Nehayan] – whether a reasonable reader of the contract would consider that an obligation of good faith was obviously meant or whether the obligation is necessary to the proper working of the contract. The overall character of the contract in issue will of course be highly material in answering that question but so will its particular terms, as recognised by the principle that (as restated in the Marks & Spencer case) no term may be implied into a contract if it would be inconsistent with an express term.” ‘… an implication of a duty of good faith will only be possible where the language of the contract, viewed against its context, permits it. It is thus not a reflection of a special rule of interpretation for this category of contract.’

[78]Falk J (as she then was) endorsed that approach in Russell v. Cartwright

[2020] EWHC 41 (Ch)

, at [87].

[79]In Cathay Pacific, John Kimbell QC sitting as a Deputy High Court Judge added, at [201], that a good faith obligation might be implied where “the parties have not only entered into a long-term collaborative relationship but crucially where they have not specified (or have been unable to specify) in detail the terms governing their relationship”. He then said, at [202]:

“By contrast, if contracting parties (in particular sophisticated commercial companies) have reduced the terms of their agreement to well-defined obligations, the contract is not relational in the sense in which Leggatt LJ used the term in [Al Nehayan]. The underlying rationale is clear. If the parties have specified with precision what they are obliged to do in particular circumstances, they are not in respect of those matters or circumstances trusting each other to act in good faith. The legitimate expectation that each has of the other is not they will act in good faith [but] that they will do what the contract stipulates they must do.”

[80]Summarising the principles, Mr Kimbell concluded, at [218], that:

“A good faith term may be implied as a matter of fact in a relational contract but there is [no] special rule for incorporation in a relational contract. Each term must be considered against the usual test for implied terms …”

[81]The Astor decision is also instructive. In that case, there was no need to imply a term requiring the defendants to act in good faith in obtaining senior debt finance because there was already an express term requiring them to use all reasonable endeavours to that end. Leggatt J therefore rejected the implied term, at [99], not by analysing whether the contract was relational but simply on the conventional basis that there was no need or scope to imply the term. Conclusions

[82]While Leggatt LJ referred to the concept of a relational contract in Al Nehayan as a long-term agreement in which the parties have agreed to collaborate in ways which respect the spirit and objectives of their venture “but which they have not tried to specify, and which it may be impossible to specify, exhaustively in a written contract”, I respectfully consider that it is curious to categorise a contract as relational or not by reference to whether there is a gap in the drafting. In my judgment, a long-term collaborative agreement that contains express obligations of good faith might be properly described as relational although of course no question of implication would arise. I should therefore prefer to use the label relational to describe the quality of the agreed relationship provided – as Fancourt J warned in UTB – that is not seen as determinative of the argument as to implication of terms.

[83]The critical enquiry is not then whether the contract is relational but whether the parties’ agreement has been fully set out in their contract and, if it has not, whether the pleaded terms should be implied. That was the approach taken by Fancourt J in UTB, Coulson LJ in Candey, and by His Honour Judge Pelling QC in TAQA Bratani Ltd v. Rockrose UKCS8 LLC

[2020] EWHC 58 (Comm)

, [2020] 2 Lloyd’s Rep. 64, at [56].

[84]In my judgment, the correct starting point is that the court should analyse the parties’ express bargain and consider whether on conventional Marks & Spencer principles any pleaded implied term of good faith is made out. In doing so, the court should in particular consider the true nature of the contract and the extent to which the parties have themselves regulated the terms of their relationship.

[85]A term cannot of course be implied in respect of a matter that the parties have already provided for in their agreement. That is because the purpose of the implication of terms is to fill in the gaps left by the parties and not to rewrite their contract. Indeed, a proposed implied term cannot be necessary to give business efficacy to an agreement nor could one conclude that it was obvious that such term was intended to be included if the parties have themselves already made contrary provision. So it was in Astor, by way of example, that a duty of good faith could not be implied; not because of something about the quality of that long-term collaborative agreement but because the parties had expressly provided that the parties should use all reasonable endeavours to achieve a particular outcome.

[86]In considering a proposed implied term of good faith in the case of a long-term collaborative agreement, the court may well be assisted by considering, as a sense-check, the Bates indicia. As Fancourt J rightly stressed in UTB, the Bates test is not, however, an alternative to proper application of the orthodox rules for the implication of a term in fact.

[87]There is much to be said for the views expressed by Leggatt J in Yam Seng that English law has not recognised a requirement of good faith as a duty implied by law into all commercial contracts, and by Freedman J in Ellis that the “general drift” of the cases since Yam Seng has been to consider the implication of any duty of good faith in fact rather than in law. That said, the issue at this interim stage is (under Parts 17 and 24) whether the claim has a real prospect of success and (under Part 3) whether Svella has disclosed reasonable grounds for bringing this claim. Accordingly, I consider that Mr Patel was right to concede that the court should require Virgin Media to address both the tests for implication in fact and in law.

[88]That said, and notwithstanding the observations of Dyson LJ in Crossley and in the passage cited in Chitty in respect of more established and fixed categories of contractual relationship, necessity must remain at the heart of the approach on either basis. THE PLEADED TERMS IN THIS CASE THE FRAMEWORK AGREEMENTS

[89]In my judgment, the implication of terms must be answered at the time that each contract was made. Since the Framework Agreements were novated, that must be the point at which I consider the question although it seems to me that if the original contracts between Virgin Media and NMCN were not subject to implied terms or relational, it would be difficult to see how the novated contracts would be.

[90]The Framework Agreements were each detailed commercial agreements that were based upon NEC standard terms. Each agreement ran to over 200 pages. The agreements provided for how the parties were to collaborate in that each contained a bespoke obligation at clause 10.2 to act “in a spirit of mutual trust and co-operation”. There were also some limited and one-sided express obligations of co-operation within Annexure 1 and, in the case of the Lightning Agreement, Annexure 2.

[91]While the agreements ran for 3 years and were extendable up to 5 years, Virgin Media had an apparently unfettered right to terminate the Framework Agreements under clause 26.2. In addition, both parties had the right to terminate for convenience on notice under clause 26.2A. Since the question of whether the pleaded terms can be implied is to be answered at the time of the novations, I do not consider that I can take into account any longer period over which the agreements in fact subsisted.

[92]The Framework Agreements established the detailed terms on which Svella might be awarded individual binding contracts, referred to as Work or Package Orders, for the extension of the fibre network. Such agreements were expressly not joint ventures and the Framework Agreements did not guarantee the award of any particular orders. Indeed, although the Morpheus Framework Agreements covered certain geographical areas, no exclusivity was granted. Anticipated work was provisionally allocated to individual framework contractors but Virgin Media did not, and indeed could not, guarantee that the allocated work would proceed. Not only was there no express contractual obligation to award the work to any particular framework contractor, but the terms of the Framework Agreements expressly provided that there was no guarantee of work. In addition, even if the work proceeded, the Framework Agreements expressly entitled Virgin Media to seek competitive quotes and to award orders as it saw fit.

[93]The Framework Agreements were essentially the terms therefore on which Svella pre-qualified to compete for work without any guarantee that work would be awarded and upon terms that Virgin Media could terminate the agreements at will under clause 26.2 or for convenience under clause 26.2A.

[94]The question of implication of terms does not of course depend on evidence as to what the parties in fact intended. Rather it is a question of law to be answered by reference to the terms of the parties’ agreement and admissible evidence as to the factual matrix. Such evidence is already before me and I do not consider that this is a case that will become stronger for being determined at trial. In such a case, the court can and should grasp the nettle and determine at this interim stage whether the pleaded case has a real prospect of success.

[95]In my judgment, Virgin Media has succeeded in establishing that there is no gap in these detailed Framework Agreements such that it is necessary to imply the pleaded terms to give business efficacy to the parties’ agreements. Equally, I consider that Virgin Media has succeeded in establishing that there is no basis for finding that the pleaded implied terms are so obvious that both parties would have confirmed that they intended to agree such terms in response to the hypothetical officious bystander’s question. Indeed, in its oral submssions, Svella has not even attempted to identify such a gap or to explain why the pleaded terms are necessary or obvious. Furthermore, the parties expressly agreed that their agreements did not create partnerships or joint ventures; that their agreements did not guarantee any work; that Virgin Media was free to seek competitive bids and place work orders as it saw fit; and that their agreements were terminable at will, alternatively for convenience.

[96]I turn then to apply the Bates criteria as a sense check. (1) An inconsistent express term

[97]There are entire agreement clauses in these contracts. I addressed that issue in Essex at [110]-[111]. In short:97.1 In JN Hipwell & Son v. Szurek

[2018] EWCA Civ 674

, Hildyard J sitting in the Court of Appeal observed, at [26], that it was well established that a term may be implied where it is necessary to give business efficacy to the contract even if the contract contains an entire agreement clause.

97.2 Lewison on The Interpretation of Contracts (8th Ed.) explains, at para. 3.140, that entire agreement clauses do not usually preclude the implication of terms because the implication of a term is elucidating what the written contract means. A similar statement in the fifth edition was approved by Andrew Smith J in Novoship (UK) Ltd v. Mikhaylyuk

[2015] EWHC 992 (Comm)

. See also Seadrill Management Services Ltd v. OAO Gazprom

[2010] EWCA Civ 691

, at [27]-[28] (per Moore-Bick LJ) and Harrison v. Shepherd Homes Ltd

[2011] EWHC 1811 (TCC)

, at [65] (per Ramsey J).

[98]I do not therefore consider the existence of entire agreement clauses to be determinative. (2) A long-term relationship

[99]In this case, the Framework Agreements were to run for the remainder of the 3-year terms from novation with Virgin Media having the option to extend twice to a total of 5 years. While I accept that there are no hard and fast rules as to how long might indicate that a contractual relationship is long term, an initial contract period of 3 years with a one-sided option to extend to a maximum of 5 years is not especially long term. Furthermore, the contract was terminable at will and, in any event, for convenience on notice.

[100]I agree with Mr Patel that evidence as to whether the parties expected the agreements to be extended beyond 5 years is irrelevant. The contracts were clear as to their terms, the limited and one-sided ability to extend, and the parties’ termination rights. Mr Berkley’s attempts therefore to look to the reality of the position at the time of this dispute arising and to rely on conversations in 2023 fall into the error of seeking to use later events to assess the terms that might be properly implied at the time of the novations.

[101]In any event, as Fancourt J observed in UTB, long-term contracts are not automatically relational. (3) Intention that the parties perform their roles with integrity and with fidelity to their bargain

[102]There is no particular material that assists on any intention to perform their roles with integrity. As to fidelity to the bargain:102.1 Virgin Media had no contractual obligation to offer any work under the Framework Agreements and was entitled to invite rival framework contractors to submit bids and then choose between contractors as it saw fit.

102.2 Equally, Svella had no obligation to enter into any Work or Package Order. That was made particularly clear by Annexure 4 of the Lightning Framework Agreement. While there was no similar provision in the Morpheus Framework Agreements, each order was again a separate contract.

102.3 Further, clause Z22.1 of the model terms of the Work Orders made clear that the parties did not intend to form any partnership or joint venture. (4) Commitment to collaboration

[103]By clause 10.2 of the Framework Agreements, the parties agreed to act in “a spirit of mutual trust and co-operation”. The agreements also imposed limited and one-sided obligations of co-operation upon Svella. In addition, it may be noted that collaborative working was a key performance indicator under the Framework Agreements and was therefore required of Svella.

[104]These clauses regulated the parties’ relationship and there is no need to imply like terms. Furthermore they sat alongside express terms making clear that no promises were being made to Svella that it would be awarded any particular work unless and until a specific order was agreed and signed. (5) Ability to capture the spirit and objectives of the parties’ venture

[105]I am not satisfied that the Framework Agreements could not, and did not, capture the true spirit and objectives of the parties’ venture; which was on a proper reading of the Framework Agreements little more than a time-limited agreement that Svella pre-qualified to compete for work without any guarantee that work would in fact be awarded. (6) Mutual trust and confidence

[106]As already identified, clause 10.2 of the Framework Agreements expressly provided that the parties had agreed to act in “a spirit of mutual trust and co-operation”. Otherwise, these were time-limited agreements in which there was no obligation to place work with Svella, an entitlement for Virgin Media to invite and accept other bids for work even within Svella’s notional territory, and no obligation upon Svella to bid for or accept work. (7) High degree of communication, co-operation and predictable performance based on mutual trust and confidence and expectations of loyalty

[107]Again, there was an express term recognising the mutual “spirit of trust and co-operation”. There was substantial communication through the development of the Operational Plan and the provisional allocation of work. That said, there was no obligation on Virgin Media to place any work with Svella, no right of exclusivity to work within a geographical area, and no obligation on Svella to bid for or accept work. There was, therefore, no expectation of loyalty or exclusivity.

[108]There were, at clauses 19.2 and 19.4 of, and at Annexure 1 to, the Morpheus Framework Agreements, obligations to attend meetings with Virgin Media’s representative and others. (8) Significant investment or a substantial financial commitment

[109]The Framework Agreements did not require any particular investment or financial commitment. The pleaded investment in purchasing NMCN’s assets from the administrators was not required by the Framework Agreements but in order to acquire NMCN’s business.

[110]I reject Mr Berkley’s argument that I should also bring into the scales any investment alleged to have been made not on the basis of the parties’ bargain but Svella’s expectation on the basis of alleged representations as to the long-term nature of the contractual relationship. Such claim cannot survive the entire agreement clauses which acknowledged that the parties had not relied on any representations or undertakings save insofar as they were incorporated into the Framework Agreements. (9) Exclusivity

[111]Svella did not enjoy exclusivity under the Framework Agreements and was only entitled to work once individual orders were placed, even though the geographical split of work in nexfibre’s Opportunity Plans and the contractors’ ability to deliver work in those areas were factors that in practice Virgin Media took into account.

[112]Standing back, I conclude that the Framework Agreements were not relational contracts in the sense described in the authorities and that the Bates sense-check confirms me in my judgment that there is no basis for implying the pleaded terms in this case in fact.

[113]Equally, I find that there is no basis for implying the pleaded terms in law:113.1 First, for the reasons already explained, I do not accept that these Framework Agreements are relational contracts in the sense explained by Leggatt J.

113.2 Secondly, I do not in any event accept that proof of a relational contract gives rise to duties of good faith as a matter of law. The touchstone remains necessity even if such test is to be applied differently from when considering business efficacy for the purpose of the Marks & Spencer test. Even so, there has been no attempt to establish that the implied terms are necessary in this case.

[114]Accordingly, I am satisfied that there is no real prospect of establishing the pleaded implied terms of the Framework Agreements at trial. THE EXIT & SETTLEMENT AGREEMENT

[115]In my judgment, the pleaded implied terms of good faith are even less tenable in respect of the Exit & Settlement Agreement. The starting point is that it is inherently unlikely that duties of good faith should be implied into a carefully negotiated settlement agreement intended to bring to an end a troubled contractual relationship. Again, Svella has failed to identify why the implied terms are either necessary or obvious.

[116]In the event of an allocated build being rejected by nexfibre in FY26, the parties agreed that Virgin Media should use “reasonable endeavours” to find replacement volume. Such express agreement meant that an implied term was not necessary and that any such implied term would be rewriting the parties’ bargain.

[117]Again, I apply the Bates criteria as a sense check. As a general observation, I accept Mr Patel’s submission that it is unlikely that an Exit & Settlement Agreement bringing an end to agreements that were not themselves relational contracts should itself be regarded as a relational contract. (1) An inconsistent express term

[118]Again there was an entire agreement clause but I do not consider that to be determinative. (2) A long-term relationship

[119]The Exit & Settlement Agreement was neither long-term nor did it seek to set out the terms of the parties’ relationship; rather it regulated the parting of their ways in respect of the Morpheus Framework Agreements.

[120]While it did not terminate the Lightning Framework Agreement, it granted only limited further work under that agreement. (3) Intention that the parties perform their roles with integrity and with fidelity to their bargain

[121]The Exit & Settlement Agreement did not amend other terms of the Lightning Framework Agreement and provided the terms on which the parties would exit the Morpheus Framework Agreements less than a year later. (4) Commitment to collaboration

[122]The Exit & Settlement Agreement embodies a clearly defined promise subject to caveats. It was a hard-edged settlement transaction and not some broader agreement where the parties were yet to work out how they might collaborate together. (5) Ability to capture the spirit and objectives of the parties’ agreement

[123]The Exit & Settlement Agreement set out the carefully negotiated terms exiting the Morpheus Framework Agreements and settling the parties’ previous dispute. There is no identified gap in such agreement, and no broader long-term collaborative relationship to have captured. The limited obligation to find replacement volume in FY26 was subject to a requirement that Virgin Media should use reasonable endeavours and there was no need for some other implied term. (6) Mutual trust and confidence (7) High degree of communication, co-operation and predictable performance based on mutual trust and confidence and expectations of loyalty

[124]There is nothing about the wording of the Exit & Settlement Agreement or the difficult context in which it was negotiated to indicate that the parties had any expectation of mutual trust, confidence or loyalty. (8) Significant investment or a substantial financial commitment

[125]The Exit & Settlement Agreement neither required any investment nor any substantial financial commitment. (9) Exclusivity

[126]The Exit & Settlement Agreement did provide limited exclusivity for FY25 and FY26.

[127]For these reasons, I conclude that the Exit & Settlement Agreement was not a relational contract and that the Bates sense-check confirms me in my judgment that there is no basis for implying the pleaded terms in this case in fact.

[128]Equally, I find that there is no basis for implying the pleaded terms in law:128.1 First, for the reasons already explained, I do not accept that the Exit & Settlement Agreement is a relational contract.

128.2 Secondly, and as already explained, I do not in any event accept that proof of a relational contract gives rise to duties of good faith as a matter of law. The touchstone remains necessity and there has been no attempt to establish that the implied terms are necessary in this case.

[129]Accordingly, I am satisfied that there is no real prospect of establishing the pleaded implied terms of the Exit & Settlement Agreement at trial. THE NEW CASE AS TO BREACH

[130]The new case at Appendix 2 of the draft Amended Particulars of Claim therefore has no real prospect of success. Lest, however, I am wrong to reject the pleaded implied terms, I have also considered whether I should grant permission to amend the statement of case in order to plead these new allegations of breach.

[131]I do not consider that such allegations advance Svella’s case where they are coextensive with claims pursuant to express terms:131.1 If - as Svella pleads - there was a contractual liability to pay the sums claimed at para. 1(c) of Appendix 2 under the Exit & Settlement Agreement and the Morpheus Framework Agreements, and Virgin Media had no legal basis for withholding such sums, then they are recoverable in contract without resorting to good faith. Indeed, a simple claim in debt is pleaded at para. 45 of the draft statement of case. Whatever duty of good faith might, contrary to my views, be implied, there would be no need for it to extend to payment obligations.

131.2 Conversely, if Virgin Media had no legal obligation to pay those sums claimed then there can be no reasonable prospect of establishing that it acted in breach of an implied term of good faith in refusing to pay sums that were not payable. Put another way, there is nothing commercially unacceptable - or one might say sharp - about not paying monies that are not in fact due.

131.3 Likewise, if Svella is right at para. 1(h) to assert that Virgin Media was in breach of the Exit & Settlement Agreement in failing to grant the committed volume within Schedule 1 to that agreement, then it will succeed at trial and there would again be no need to imply a term that extended to compliance with that agreement’s express terms. If, however, it fails to establish that case, there is no real prospect that it might establish that Virgin Media - a company disenchanted at that stage with Svella’s commercial performance and seeking to exit the parties’ contractual relationship - somehow acted sharply in not granting volume to Svella that it was not contractually required to grant.

[132]The pleaded allegations at paras 1(a), (b) and (d) of Appendix 2 are curious. The formulation in each case is that Virgin Media “intended to” take some action which might have caused Svella loss. The pleaded allegations as to Virgin Media’s intentions arise from a covert recording of a telephone call between Svella’s Managing Director, Graeme Undy, and Virgin Media’s Commercial Director, Jadon Silva, on 3 October 2024 in which Mr Silva shared Virgin Media’s then thinking about its options. It is not, however, alleged at paras 1(a), (b) or (d) that Virgin Media in fact took any of those courses of action. Further, no relief is sought by reason of these “intended to” allegations. Accordingly, there is no complete cause of action. In any event, there are no reasonable prospects of establishing that Virgin Media was in breach of any implied duty of good faith by sharing its thinking about its legal and commercial options, even if some of those options were, as Mr Silva acknowledged, ugly.

[133]Paragraph 1(f) adds nothing:133.1 It is drafted as an allegation that Virgin Media approached and encouraged others to bid for work that ought to have been given to Svella. Like the “intended to” allegations, merely approaching and encouraging another contractor to bid does not of itself lead to any loss.

133.2 If the complaint is meant to be that the work was actually placed with third parties, then that is the flipside of the coin of the allegation at para. 1(h). If there was a breach of contract in failing to grant committed volume to Svella, that was what caused loss and not the placing of that same work with a third party. In any event, as explained above, good faith adds nothing to the analysis. Virgin Media was either committed to place the work with Svella or it wasn’t.

[134]I turn then to consider the following allegations of breach:134.1 the alleged campaign to find fault pleaded at para. 1(e);

134.2 the issue of Performance Improvement Plans (“PIP”s) at para. 1(g); and

134.3 the suspension of works at paras 1(e) and (h).

[135]These details are pleaded as further particulars of the overarching breach pleaded at para. 46(2) of the draft that Virgin Media “made unwarranted claims relating to safety and quality and poor performance, in which such claims [it] had no honest belief”. Nevertheless, the pleading fails properly to particularise the serious allegation of a lack of honest belief.

[136]In any event, the alleged implied term here covers heavily regulated ground:136.1 Detailed Service Levels and the agreed criteria for the assessment of each Service Level against red, amber and green bandings were set out at Appendix 1 to Schedule B to the Framework Agreements.

136.2 Clause Z5 of the specimen terms of the Work Orders provided that Virgin Media was entitled to audit, monitor and report upon Svella’s compliance with its contractual obligations. Such right was qualified: a) The right of access was at any time during normal business hours but subject to reasonable notice: clause Z5.1. b) Further, it was only exercisable in so far as Virgin Media might “reasonably require” such access for one or more of the purposes identified at clause Z5.1(a)-(k). c) It was further qualified by clause Z5.2 which excluded any obligation to disclose information, data or records concerning its costs, profits, or margin, or which were subject to third-party confidentiality obligations. d) Further, clause Z5.3 only required the reasonable provision of information and access to premises and systems. e) The right to audit, investigate or monitor performance without any prior notice was limited to specific cases under clause Z5.4.

136.3 Where Svella failed to comply with the agreed Service Levels, Virgin Media was entitled to issue a PIP: a) Clause

3.1 of Schedule B required Virgin Media to act reasonably in deciding whether to implement a PIP. b) Clause

3.2 provided that where the Service Level Failure was not of a serious nature, then Virgin Media would first issue a Service Improvement Plan before issuing a PIP. The parties agreed that Virgin Media should have absolute discretion in determining whether the threshold of seriousness was met. c) The standard of reasonableness required to issue a PIP was further elucidated by the agreed guidance criteria as to when a PIP might be justified at clause 3.3. d) The parties also agreed detailed guidelines as to preparing, operating and closing PIPs. e) Clause 3.5 provided that where services remained at red or amber at the month end, Virgin Media could suspend the issuance of further Work Orders until such time as the services returned to green. f) The parties agreed a dispute resolution procedure about Service Levels at clause 5.1.

136.4 Virgin Media’s contractual rights to “step-in” for failure to comply with a PIP and to engage alternative contractors to resolve the disputed services were provided by clause Z11 of the terms of the Work Orders. Such rights only arose where there was a “material disruption” to the works as a result of the failure to comply with the PIP.

[137]Accordingly the parties agreed detailed provisions to regulate the auditing, monitoring and reporting of Svella’s contractual performance, for the issue of PIPs, and for the suspension of works or for Virgin Media’s step-in rights. Virgin Media’s rights under their agreements were subject to agreed Service Levels, fixed criteria for assessment, and standards of reasonableness in terms of notice and frequency, of auditing and monitoring, and strict purposes. Further, its rights to audit, investigate or monitor performance without notice were further limited to particular grounds. Likewise, Virgin Media’s entitlement to issue a PIP was subject to a test of reasonableness; its right to suspend works was dependent on breaches of pre-agreed Service Levels; its assessment of Service Levels was subject to dispute resolution procedures; and its right to step-in and engage alternative contractors was limited to where there was material disruption by reason of Svella’s failure to comply with a PIP.

[138]There was, in my judgment, no gap in that detailed contractual scheme that required to be filled by some obligation that Virgin Media should act in good faith. The implication of such a term would be to rewrite the parties’ contract which was to use a touchstone of reasonableness and agreed Service Levels. Accordingly, the issue of whether Virgin Media’s alleged actions particularised at paras 1(e)-(h) put the company in breach of contract fall to be determined according to the express terms of the parties’ contract and there is no place for an implied term.

[139]Paragraph 1(i) adds nothing to that analysis.

[140]Accordingly, there is no merit in the new breach case pleaded at Appendix 2. CONCLUSIONS

[141]For these reasons, I reach the following conclusions:141.1 Svella has no real prospect of succeeding in its claims for breaches of the implied duties of good faith of the Framework Agreements pleaded at para. 9 of the Particulars of Claim.

141.2 Furthermore, Svella has no real prospect of succeeding in its claims for breaches of the implied duties of good faith of the Exit & Settlement Agreement pleaded at para. 40 of the Particulars of Claim.

141.3 I therefore grant summary judgment in favour of Virgin Media on Svella’s claims for breaches of these terms, and it is not necessary to consider the application to strike-out such claims further.

141.4 I grant Svella permission to amend its Particulars of Claim in accordance with its second draft save that permission is refused to plead the new particulars of breach at para. 1 of Appendix 2 to the draft statement of case.