England and Wales High Court (Queen's Bench Division) Decisions

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
BIRMINGHAM DISTRICT REGISTRY
MERCANTILE COURT

		1 June 2015

Introduction

1. This is a claim by a mobile network and telecommunications distribution company for Orange and T-Mobile (now 'Everything Everywhere' ['EE']) against one of its former dealers for specific and/or cumulative repudiatory breaches of contracts and a counterclaim by him for wrongful termination of them.
2. The Claimant alleges that the customer service provided by the Defendant ultimately led to a 'Do Not Deal Notice' ['DND Notice'] against him being issued by EE whereon they were obliged to terminate his dealership.
3. The Defendant contends that, apart from two isolated incidents, he was otherwise not in any breach of his contracts.

a. As to the first incident, involving a customer called White on 10^th March 2011, when a DND Notice was threatened, he contends that the breach was waived and the Claimants are estopped from relying upon it;

b. As to the second incident, when the DND Notice was invoked on 30^th November 2012, involving a customer called Parkhurst on 13^th & 14^th November 2012, he contends that the breach was not serious, either on its own or as part of a cumulative series of any other breaches, including the incident involving White, so as to be of a repudiatory nature thereby entitling the Claimant to terminate their agreements with him.

Parties

4. The telecommunications industry is highly lucrative & competitive and heavily regulated by Ofcom. As with financial services, customer service is the subject of much regulatory scrutiny by the Regulator; poor service can lead to referrals to the Regulator and large fines being imposed and damage to the brand of the service provider. Orange is one of the leading reputable telecom service providers in UK.
5. Mainline initially worked exclusively for Orange, but from late 2010 also worked for T-Mobile, following the acquisition of Orange and T-Mobile by Everything Everywhere ("EE").
6. Mr Chaddah (trading as 2-Way Communications) was a remote (i.e. 'cold call') dealer for Mainline, promoting the mobile phone networks of Orange and (from late 2010) T-Mobile to business customers from around May 2009 until Mainline's purported termination on 5^th December 2012.

Contracts

7. The relationship between Mainline and Mr Chaddah was governed by series of interlocking agreements concerning his activity as a dealer and his rights to receive payment for his work:

a. The Dealer Terms and Conditions – Orange Products and Services (the "Orange Terms") setting out Mr Chaddah's main obligation to provide marketing services to Mainline, and containing various detailed provisions governing the parties' relationship more generally;

b. The Dealer Terms and Conditions, T-Mobile Products and Services ("the T-Mobile Terms"), were similar in effect to the Orange Terms but relating to Mr Chaddah's conduct as a dealer promoting T-Mobile, rather than Orange;

c. The Dealer Terms & Conditions for the Supply of Marketing Goods and/or Services (the "Marketing Terms") providing for Mainline to support Mr Chaddah's marketing activities by providing him with goods, services and financial support;

d. The Data Share Agreement ("DSA") containing obligations governing the detail of Mr Chaddah's marketing campaigns, and numerous provisions relating to confidential data;

e. The Revenue Share Agreement ("RSA") dealing with Mr Chaddah's right to receive payment from Mainline in exchange for his marketing services ; and

f. The Advance Payments Agreement ("APA") providing for Mr Chaddah to receive advance payments upon signing up a customer to the relevant network.

8. The parties agree that only (a) 'Orange Terms', (e) 'RSA' and (f) 'APA' above, are relevant to the Claim and Counterclaim and the following in particular.
9. Under the Orange Terms:

a. 'General' under Clause 14.12, Mr Chaddah owed obligations to Mainline to 'operate a complaints procedure (incorporating any recommendations or requirements notified from time to time by Mainline and/or Orange) and [to] fully investigate and take all reasonable steps to resolve complaints, whether raised directly by customers or indirectly through Mainline and/or Orange…";

b. 'Mandatory Orange' , under Clause 15:

i. Mr Chaddah owed obligations 'to use reasonable … endeavours to promote the products and services of Orange and procure customers for the services' Clause 15.1.1 and to 'co-operate with Mainline and comply with its reasonable directions, particularly with regard to standards and quality of promotion and service' Clause 15.1.2

ii. Mainline were 'entitled to terminate this appointment immediately if required to do so by Orange for any reason or the Buyer is in breach of this agreement' Clause 15.5.

10. Under the APA and RSA, it was common background that Mr Chaddah was 'appointed by Mainline as an Orange stockist to market, promote and sell the produces and provide subscribers for the services'. ..
11. The RSA contains a 'Termination' section that includes:

a. Clause 6.2: 'Mainline may terminate this Agreement immediately on written notice to the Dealer if (6.2.1) the dealer has breached any of its obligations under the Agreement or Mainline's Terms and conditions of business from time to time'.

b. Clause 6.5 '… Value Share Payments shall immediately cease on termination of this Agreement'.

12. The 'supplemental' APA contains an 'Advances' section that includes:

a. Clause 3.3 'All Advances shall be repayable by the Dealer to Mainline …'

b. Clause 3.4 'Mainline shall be entitled to offset the Total Value Share Payments and commissions payable by Mainline to the Dealer in respect of subscribers in any month against all and any repayments of Advance due to Mainline from the Dealer in that month and Mainline shall in addition at all times have the right to set-off any monies due to the Dealer against any sums or balance owed by the Dealer to Mainline.'

c. Clause 3.5 'Mainline may reclaim in full or in part any Advance that has been paid to the Dealer which relates to revenue which is subsequently not paid by the Subscriber to Orange for any reason'.

Breach

13. On 30^th November 2012, Mainline received a DND notice from EE concerning Mr Chaddah. This meant that Mr Chaddah could no longer legally deal with EE customers and products or realistically continue as a dealer for Mainline. Accordingly, Mainline notified Mr Chaddah in writing on 6^th December 2012 of this and of their termination of their agreements with him.
14. The reason for the DND Notice can be gleaned from an email chain sent on 15^th November 2012 by Dave Timmis, National Account Manager of EE for indirect sales, to Mainline (Victoria Tomlinson, Ruth Talbert and Kevin Oakley): alleged threatening behaviour towards two customers following a probationary period for improvement of his customer relations performance. One of the customers, Paul Parkhurst, was recorded at 'retailer feedback' at EE as having complained to EE that he had been receiving 'abusive texts & phone calls from Dee at Two way on a daily basis threatening to get bailiffs to his door' so that he 'feels very threatened'. The other, Lee Coulton, alleged Mr Chaddah was 'being abusive and threatening with charges'. '
15. Angela Howey, Head of Business Operations in the customer team of EE, is recorded in her e-mail of 14^th November 2012 at 15.39 hrs as being 'very concerned' to read of this behaviour. Understandably, she stated 'this is totally unacceptable and needs to be picked up as a matter of urgency as we would not expect any of our customers to be treated in this way. I believe we need to also question why we would have this type of dealer supporting our customers'.
16. A review of the available transcripts of landline phone calls (NB Mr Chaddah's mobile calls were not recordable) with both Messrs Parkhurst and Coulton do not reveal any abuse or improper threat by Mr Chaddah but, in my judgment, the texts sent to Mr Parkhurst manifestly do so.
17. In the afternoon of Tuesday 13^th November 2012, Mr Chaddah sent a barrage of 26 texts to Mr Parkhurst over a period of two and quarter hours i.e. one every five minutes. This was followed the next afternoon (after Mr Parkhurst had already complained to Orange as he had indicated to Mr Chaddah he would) by a further 11 over a period of two and a third hours i.e. one every 12 minutes.
18. Individually, the Claimants submit that 10 of these are rude, threatening and abusive in particular:

a. 'I will personally make you receive the maximum amount of charges possible, have a nice day won't you'

b. 'WHAT DON'T YOU UNDERSTAND … '

c. '… you are trying to avoid paying with these immature tactics … you either pay this or we send it to the recovery team where the charges will be higher and you will have adverse credit against your name for up to 5 years'

d. 'You don't get it do you, this isn't going to court and keep your recordings they are no use to anyone.'

e. GO AWAY PAUL'

f. Why do you keep texting me, we have concluded our business and will be paid within 24 hours from the debt team, you won't be laughing when you see what they bill you for, now please let's be mature and stop this immature texting ..'

g. 'you're an abusive and aggressive man …'

h. Hahahaha your small fish and we both know you don't have any recordings wake up and smell the coffee'

i. Blah blah blah, ciao'

j. 'What part of DO NOT TXT ME DON'T YOU UNDERSTAND, go and boar someone else'.

19. In his witness statement of 27^th January 2015, Mr Chaddah contends that Mr Parkhurst was abusive towards him both in texts and phone calls concerning a bill for £300 Mr Chaddah was seeking to raise against him, whereas he was 'professional' and 'polite' in his responses. Despite having access to the text messages, his sworn testimony in paragraph 78 states in contradiction to them that:

'I initially sent polite text messages in response, then did not respond at all.'

20. In paragraph 79, he continues:

'It was clear to me that I had behaved professionally throughout, and that this was simply an attempt by Mr Parkhurst to avoid paying his bill'.

21. After he had been told of his termination by Mr Chandler on 6^th December 2012 that EE considered that 2 Way Communications did not meet the standards required of an EE dealer in a number of respects, particularly in reference to customer service, he still considered:

'I did not think that I had done anything wrong in relation to the incident involving Mr Parkhurst and I certainly did not think that the incident justified terminating 2 Way Communications as a dealer'.

22. At trial, he accepted that 'looking back now I think I did something wrong' by persisting in responding to Mr Parkhurst's undoubted abusive arguments about his bill.
23. The approach of the fact finding judge to evidential discrepancies between recent and sworn witness statements prepared with the help of lawyers and contemporaneous electronic stored information ['ESI'] evidence now prolifically and readily available through the electronic disclosure process has recently been analysed by Leggatt J. in Gestmin SGPS S.A. v. Credit Suisse (UK) Limited [2013] EWHC 3560 (Comm).

'An obvious difficulty which affects allegations and oral evidence based on recollection of events which occurred several years ago is the unreliability of human memory.

While everyone knows that memory is fallible, I do not believe that the legal system has sufficiently absorbed the lessons of a century of psychological research into the nature of memory and the unreliability of eyewitness testimony. One of the most important lessons of such research is that in everyday life we are not aware of the extent to which our own and other people's memories are unreliable and believe our memories to be more faithful than they are. Two common (and related) errors are to suppose: (1) that the stronger and more vivid is our feeling or experience of recollection, the more likely the recollection is to be accurate; and (2) that the more confident another person is in their recollection, the more likely their recollection is to be accurate.

Underlying both these errors is a faulty model of memory as a mental record which is fixed at the time of experience of an event and then fades (more or less slowly) over time. In fact, psychological research has demonstrated that memories are fluid and malleable, being constantly rewritten whenever they are retrieved. This is true even of so-called 'flashbulb' memories, that is memories of experiencing or learning of a particularly shocking or traumatic event. (The very description 'flashbulb' memory is in fact misleading, reflecting as it does the misconception that memory operates like a camera or other device that makes a fixed record of an experience.) External information can intrude into a witness's memory, as can his or her own thoughts and beliefs, and both can cause dramatic changes in recollection. Events can come to be recalled as memories which did not happen at all or which happened to someone else (referred to in the literature as a failure of source memory).

Memory is especially unreliable when it comes to recalling past beliefs. Our memories of past beliefs are revised to make them more consistent with our present beliefs. Studies have also shown that memory is particularly vulnerable to interference and alteration when a person is presented with new information or suggestions about an event in circumstances where his or her memory of it is already weak due to the passage of time.

The process of civil litigation itself subjects the memories of witnesses to powerful biases. The nature of litigation is such that witnesses often have a stake in a particular version of events. This is obvious where the witness is a party or has a tie of loyalty (such as an employment relationship) to a party to the proceedings. Other, more subtle influences include allegiances created by the process of preparing a witness statement and of coming to court to give evidence for one side in the dispute. A desire to assist, or at least not to prejudice, the party who has called the witness or that party's lawyers, as well as a natural desire to give a good impression in a public forum, can be significant motivating forces.

Considerable interference with memory is also introduced in civil litigation by the procedure of preparing for trial. A witness is asked to make a statement, often (as in the present case) when a long time has already elapsed since the relevant events. The statement is usually drafted for the witness by a lawyer who is inevitably conscious of the significance for the issues in the case of what the witness does nor does not say. The statement is made after the witness's memory has been "refreshed" by reading documents. The documents considered often include statements of case and other argumentative material as well as documents which the witness did not see at the time or which came into existence after the events which he or she is being asked to recall. The statement may go through several iterations before it is finalised. Then, usually months later, the witness will be asked to re-read his or her statement and review documents again before giving evidence in court. The effect of this process is to establish in the mind of the witness the matters recorded in his or her own statement and other written material, whether they be true or false, and to cause the witness's memory of events to be based increasingly on this material and later interpretations of it rather than on the original experience of the events.

It is not uncommon (and the present case was no exception) for witnesses to be asked in cross-examination if they understand the difference between recollection and reconstruction or whether their evidence is a genuine recollection or a reconstruction of events. Such questions are misguided in at least two ways. First, they erroneously presuppose that there is a clear distinction between recollection and reconstruction, when all remembering of distant events involves reconstructive processes. Second, such questions disregard the fact that such processes are largely unconscious and that the strength, vividness and apparent authenticity of memories is not a reliable measure of their truth.

In the light of these considerations, the best approach for a judge to adopt in the trial of a commercial case is, in my view, to place little if any reliance at all on witnesses' recollections of what was said in meetings and conversations, and to base factual findings on inferences drawn from the documentary evidence and known or probable facts. This does not mean that oral testimony serves no useful purpose – though its utility is often disproportionate to its length. But its value lies largely, as I see it, in the opportunity which cross-examination affords to subject the documentary record to critical scrutiny and to gauge the personality, motivations and working practices of a witness, rather than in testimony of what the witness recalls of particular conversations and events. Above all, it is important to avoid the fallacy of supposing that, because a witness has confidence in his or her recollection and is honest, evidence based on that recollection provides any reliable guide to the truth.'

24. Further back in time in the pre-digital era (but still as extant today), the court looking for credible and reliable evidence upon which to make findings of fact follows the approach enunciated by Lord Pearce in the House of Lords in Onassis v Vergottis [1968] 2 Lloyds Rep 403 at p 431:

''Credibility' involves wider problems than mere 'demeanor' which is mostly concerned with whether the witness appears to be telling the truth as he now believes it to be. Credibility covers the following problems. First, is the witness a truthful or untruthful person? Secondly, is he, though a truthful person telling something less than the truth on this issue, or though an untruthful person, telling the truth on this issue? Thirdly, though he is a truthful person telling the truth as he sees it, did he register the intentions of the conversation correctly and, if so has his memory correctly retained them? Also, has his recollection been subsequently altered by unconscious bias or wishful thinking or by over much discussion of it with others? Witnesses, especially those who are emotional, who think that they are morally in the right, tend very easily and unconsciously to conjure up a legal right that did not exist. It is a truism, often used in accident cases, that with every day that passes the memory becomes fainter and the imagination becomes more active. For that reason a witness, however honest, rarely persuades a Judge that his present recollection is preferable to that which was taken down in writing immediately after the accident occurred. Therefore, contemporary documents are always of the utmost importance. And lastly, although the honest witness believes he heard or saw this or that, is it so improbable that it is on balance more likely that he was mistaken? On this point it is essential that the balance of probability is put correctly into the scales in weighing the credibility of a witness. And motive is one aspect of probability. All these problems compendiously are entailed when a Judge assesses the credibility of a witness; they are all part of one judicial process. And in the process contemporary documents and admitted or incontrovertible facts and probabilities must play their proper part."

25. The absence of evidence can be as significant as the presence of it. Arden LJ in Wetton (as Liquidator of Mumtaz Properties) v. Ahmed and others [2011] EWCA Civ 61 stated:

'11. By the end of the judgment, it is clear that what has impressed the judge most in his task of fact-finding was the absence, rather than the presence, of contemporary documentation or other independent oral evidence to confirm the oral evidence of the respondents to the proceedings.

26. There are many situations in which the court is asked to assess the credibility of witnesses from their oral evidence, that is to say, to weigh up their evidence to see whether it is reliable. Witness choice is an essential part of the function of a trial judge and he or she has to decide whose evidence, and how much evidence, to accept. This task is not to be carried out merely by reference to the impression that a witness made giving evidence in the witness box. It is not solely a matter of body language or the tone of voice or other factors that might generally be called the 'demeanour' of a witness. The judge should consider what other independent evidence would be available to support the witness. Such evidence would generally be documentary but it could be other oral evidence, for example, if the issue was whether a defendant was an employee, the judge would naturally consider whether there were any PAYE records or evidence, such as evidence in texts or e-mails, in which the defendant seeks or is given instructions as to how he should carry out work. This may be particularly important in cases where the witness is from a culture or way of life with which the judge may not be familiar. These situations can present particular dangers and difficulties to a judge.
27. In my judgment, contemporaneous written documentation is of the very greatest importance in assessing credibility. Moreover, it can be significant not only where it is present and the oral evidence can then be checked against it. It can also be significant if written documentation is absent. For instance, if the judge is satisfied that certain contemporaneous documentation is likely to have existed were the oral evidence correct, and that the party adducing oral evidence is responsible for its non-production, then the documentation may be conspicuous by its absence and the judge may be able to draw inferences from its absence'.
28. I follow this guidance in my assessment of the evidence in this case.
29. Both the internal inconsistencies in Mr Chaddah's evidence and the external with contemporaneous e-mail coupled with the lack of coverage of key issues in the case mean that little reliance can be placed upon his lengthy written evidence (2 statements; the first is 95 paragraphs long and the second is 23) which is mainly a self congratulatory exposition of his talents and value as a salesman who is always in the right when dealing with customers: the customers are almost always wrong. It does not deal properly with the issues of the inadequacy of his customer service system or the Parkhurst incident. His evidence is effectively an attempt to rewrite history or, at best a gloss on the truth. He gave his evidence confidently bordering on arrogance yet pleasingly, as one might expect from a successful salesman, but at times became choked with emotion as he did when confronted with the cold reality of the transcript of his rantings with customers, White and Parkhurst and that his superiors had to give him special support in his dealings with their customers in order to protect them all from potential dismissal by Orange that would have been a disaster for the businesses of both the Claimants and the Defendant. In my judgment, he displayed a lack of self awareness and objectivity when giving his evidence or in his preparation of his case. I place no reliance on his written or oral testimony save where it is supported by contemporaneous electronic or paper evidence.
30. In closing on his behalf, Mr Hoskins conceded that Mr Chaddah 'had fallen short of an acceptable standard of conduct' and now 'accepted' he had thereby been in breach of his contracts. However, in summary, Mr Hoskins argues that:

a. Whilst Mainline's termination of the Orange terms and the DSA was lawful, the purported termination of the RSA was not; the breach of Clause 6.2.1 was not of a repudiatory kind.

b. The breach should be seen as a single episode whilst under extreme provocation in isolation from previous conduct.

31. I reject these arguments:

a. The breach was serious and sustained in nature and duration with radical consequences leading, justifiably in my judgment, to a DND notice being issued by Orange upon Mainline after the customer complained to Orange. Deliberately bombarding one of Orange's aggrieved customers with offensive texts (as I find them to be) over two sustained periods of time is an appalling standard of customer service – quite the opposite of what Orange and Mainline contractually, and quite rightly, expected.

b. The six agreements have to be seen as having a common purpose of a dealership agreement to promote only EE products by Mainline and by Mr Chaddah. Mr Chaddah accepts the lawful termination of the Orange terms and DSA arising from the breach; it would be perverse to treat the (now admitted breach) of the RSA differently.

c. The breach has to be seen in the context of the customer service that Mr Chaddah was obliged to provide. Whilst Mr Chaddah was, by all accounts, a very successful seller of Orange products, his customer service was poor in quality. This began with a simply dreadful episode on 10^th March 2011 when he left a voicemail on a customers phone when he is recorded as saying:

'James you dick, give me a call back when you get this you f******g prick you f******g come back me or I'll come down to your […] close ill come to your f*****g address mate I'll [….] close and I'll f*****g rip your head apart. F*****g ring me up you c**t or I'll come and f*****g smash your f*****g face in you f*****g pussy'.

Not surprisingly, a DND Notice was threatened on this occasion but, having been caught out, Mr Chaddah begged for a second chance in e-mails dated 15^th March 2011:

'If Orange would like to put me on a trial period to keep an eye on me for 6 months to make sure this sort of behaviour is never repeated, then I would be more than happy to agree to that. I can guarantee this has never happened before and will never happen again'.

and 16^th March 2011:

'I cannot thank you enough for fighting my corner and sticking by my company and I. I have learned a real big lesson, not just in business but about me as a person. I have no intention of ever putting my business or mainline through such an ordeal like this EVER again. Rest assured we will continue to put large volumes of Quality business through Mainline for years to come.'

d. The breach was almost immediately after the conclusion of an Action Plan period between 26^th April and 1^st November 2012 aimed at ensuring Ofcom compliance with Regulation GC23 that included 'not be aggressive… or contest the customer'. Mr Chaddah from the compliance knew that 'failure to comply with Ofcom GC23 will lead to termination of your Everything Everywhere stockist status'. This was reinforced by Kevin Oakley, the Business Development Manager of Mainline, writing to him on 1^st May 2012 warning him 'if Everything Everywhere and/or Mainline become aware of any further serious issues, your connector code will be revoked'. It was further reiterated on 9^th August 2012 when Ruth Talbert, the sales manager in charge of the Action Plan emailed following a conversation with Mr Chaddah '1. All calls both to customers and Orange must be done from landlines which are recorded. 2. Instance of 'silent' calls to 345 or Orange must stop. 3. Inappropriate unprofessional conduct will not be tolerated including inappropriate language. 4. All calls made to customers must ensure that it is clear that they are dealing with 2Way Communications'

e. The Action Plan and the breach was after a series of 8 warnings by Kevin Oakley (who gave evidence in support of Mr Chaddah, his continuing business colleague now elsewhere) about customer complaints and his dealings with them during 2011 following the White incident on 10^th March 2011 that demonstrate that, whilst the White incident was of itself 'water under the bridge' if nothing else happened and waived to that limited extent, it was not an unequivocal waiver of that breach beyond that. Mr Oakley, whilst loyal and sympathetic to Mr Chaddah, not surprisingly could not demur from this. Mr Chaddah's future as a dealer was very much under probation pending improvement of his customer relationship performance and complaints procedures. The evidence produced about specific customer complaints (identified as Green, Borek, Steel, Hill, Corder, DJ Plumbing and Hadjithemistou) show that whilst Mr Chaddah may be correct that the complaints (or referrals as they were known) were unjustified, they could not be objectively assessed by Orange or Mainline because he did not deal with them properly or because there was no, or insufficient recording of them. Mr Chaddah's approach was to argue with the customer as he had with Mr White and Mr Parkhurst.

f. I accept the evidence given by the Claimants' witnesses, Gail Hollinshead and Victoria Tomlinson, upon these breaches – they provide a narrative consistent with and behind the e-mails and letters exchanged during this period. They give the picture of Mr Chaddah as very driven, ambitious and gung ho taking things personally and the pattern of behaviour of being argumentative and rude to customers not dealing with complaints efficiently in accordance with prescribed procedures. Whilst the volume of complaints was not great in terms of ratio to sales, their handling was poor. Victoria Tomlinson, said 'The Defendant is the only dealer that I am aware of that required this level of continued support and assistance. A significant amount of man power was dedicated to his account and to him in order to help him iron out the problems that were being experienced'.

g. In my judgment, all these instances are part of a common theme with the hallmark of a lack of emotional intelligence on the part of Mr Chaddah who always believes he is right and others are wrong. In marketing the most important thing is to retain existing customers by servicing them well and not aggravating them when they are rightly or wrongly aggrieved, rather than have to go out cold calling to find new ones already serviced by others. Hence the mantra 'the customer is always right'. Apart from the breaches concerning Messrs White and Parkhurst, there is no suggestion that the others alone or cumulatively would be breaches of a repudiatory nature but coming before the breach concerning Mr Parkhurst they and the one involving Mr White add to the seriousness of the breach concerning Mr Parkhurst that Orange and Mainline, rightly in my judgment, regarded as being of a repudiatory nature. It struck to the root of the relationship between all the parties governed by each of the interlocking contracts not to have an adequate complaints procedure; arguing and being rude to customers is fundamentally flawed.

32. In my judgment, the DND Notice issued by EE was a rational and inevitable decision based upon good solid evidence of the very poor customer relations performance of the Defendant over a long time culminating with a repeat of appalling rudeness to one of their customers immediately after a period of probation. The reason for the DND Notice was a serious breach of a repudiatory nature. Accordingly, I find that all the contracts were lawfully terminated on 5^th December 2012.
33. The Claim succeeds on liability in respect of breach of contract as pleaded and the Counterclaim against it of £473,608.19 fails.

Damages

34. The Claimants allege that they suffered 'loss and damage equating to £281,232.99 plus interest'. This was calculated as the amount owed of £316,518 in outstanding advance payments made to Mr Chaddah less the amount outstanding for Value Share Payments of £44,446.73 at the time of termination.
35. The RSA states unequivocally under Clause 6.5 '… Value Share Payments shall immediately cease on termination of this Agreement'. 'Value Share payments' means the bonus payable by Mainline to the Dealer which represents a proportion of revenue received by Orange in respect of each Subscriber'. The Claimants are not due to credit the Defendant with any more 'bonus' payments for work he may have carried out during the currency of the agreements.
36. The APA is a 'Supplemental Agreement' to the RSA and the 'Advance' means 'the recoupable lump sum payment payable by Mainline to the Dealer in respect of Connections' and Upgrade Connections made during the term'. The 'Term' means 'the period from 1 July 2010 unless and until terminated in accordance with Clause 6 of the RSA'.
37. Clause 3 'Advances' states that 'all Advances shall be repayable' (3.3) and prescribed how that may be occur and be achieved. One situation identified under 3.5 is that 'Mainline may reclaim in full or in part any Advance that has been paid to the Dealer which relates to revenue which is subsequently not paid by the Subscriber to Orange for any reason.'
38. The Claimant concedes in its Counter Schedule that it has received £473,608.19 from EE paid by its customers in respect of Connections and Upgrade connections due to Mr Chaddah made during the Term- £192,235.20 greater that the net loss and damage of £281,232.99.
39. In my judgment, an objective reading of Clause 3 gives the Claimant the right to recoup advances where insufficient Connections have been made or paid for by the customer or EE during the Term leaving Mainline facing a loss on its advance; it does not entitle the Claimant to make a profit out of the Defendant's breach nor the right to penalise him for his breach.
40. The Claimant has therefore proved no contractual loss or damage as had been claimed.

His Honour Judge Simon Brown QC
Specialist Mercantile Judge
Birmingham Civil Justice Centre

Clerk: Helen Foster

birmingham.mercantile@hmcts.gsi.gov.uk

Tel: (0121) 681 3033

Website: http://www.justice.gov.uk/courts/rcj-rolls-building/mercantile-court

1.^st June 2015