Cityfibre Limited v GCI Network Solutions Limited

This dispute concerns the proper construction of a Network Access and Maintenance Agreement (“NAA”) dated 11 December 2015 between the Claimant (“CityFibre”) and KCOM Group Plc (“KCOM”), as amended and novated under a Novation Agreement dated 24 June 2021 between KCOM, the Defendant (“GCI”) and CityFibre (“the Novation Agreement”).

CityFibre is a telecommunications provider that installs full fibre broadband cables for homes and businesses across the UK. GCI is a communications service provider. In simple terms, CityFibre owned and operated the network infrastructure which GCI used to provide internet connectivity to its customers. At least some of this infrastructure is located in premises owned or leased by GCI (“Locations”). GCI paid CityFibre a fee to use its infrastructure. GCI has subsequently moved away from using the CityFibre infrastructure by constructing its own network pursuant to a plan which it calls the “IP Core Network Project”. It is this fact which has given rise to the dispute.

CityFibre commenced these proceedings under CPR Part 8. The parties are, however, in dispute as to the relevant factual matrix to the making of the Novation Agreement and accordingly Mr Justice Robin Knowles ordered that the claim should continue instead under CPR Part 7 and gave directions for this trial of two issues as to liability as follows:

(1)

Is the project that the Defendant intends to implement to build a new IP core network and to cease use of the existing MANs and LDNs as defined in Sch. 1 of the NAA (the “IP Core Network Project”), and which it is implementing, a “Proposed Migration Project” within the meaning of Clause 5.20.1.1 of the Network Access and Maintenance Agreement dated 11 December 2015 (the “NAA”) as novated and amended by letter dated 24 June 2021 (the “Novation Agreement”)?

(2)

If the answer to Question 1 is “yes”, does Clause 5.20 of the NAA operate to preclude the Defendant from exercising its rights pursuant to Clauses 14.7 and 14.8 of the NAA in connection with the Proposed Migration Project?

The parties’ relationship

The NAA in its original form was an agreement between KCOM and CityFibre that was entered into as part of a ‘sale-and-leaseback’ transaction by which CityFibre acquired part of the physical infrastructure comprising KCOM’s dark fibre cable network. (Footnote: ¹) KCOM was in the business of providing network services to its customers, and the effect of this transaction was that KCOM’s network would operate on physical infrastructure owned by CityFibre. The NAA set out the terms on which CityFibre would provide KCOM with the use of its fibre assets. (Footnote: ²) KCOM was defined as the “Customer” under the NAA.

In late 2020, the owners of KCOM approached GCI (among others) in relation to a sale of the part of KCOM’s business that is relevant to this dispute. (Footnote: ³) GCI emerged as the preferred buyer and on 24 June 2021, GCI entered into an agreement to purchase KCOM’s business. (Footnote: ⁴)

On the same day, 24 June 2021, CityFibre, GCI and KCOM entered into the Novation Agreement, which amended the NAA and novated it to GCI and CityFibre. In effect, GCI stepped into KCOM’s shoes in its relationship with CityFibre: it became the “Customer” under the amended NAA.

GCI, which operates under the brand “Nasstar”, supplies network services (including internet connectivity) to its customers. The NAA sets out the terms on which CityFibre provides services to GCI, which include access to and use of CityFibre’s ‘dark fibre’ network. Dark fibre cable is unlit fibre optic cable which is laid in bulk by a network builder for the purpose of leasing it to others. GCI is currently pursuing its IP Core Network Project, which involves connecting its customers directly to a new network being built by GCI itself instead of relying on CityFibre’s network. As a result of this reconfiguration, GCI will no longer require the use of certain physical locations on CityFibre’s network, which it intends to vacate in order to save costs. The implementing of GCI’s project will lead to CityFibre incurring substantial costs (including in respect of the removing of its equipment from the various locations which it has to vacate).

It is CityFibre’s case that liability for these costs is governed by the new clause 5.20 which is incorporated into the NAA by clause 1.18 of the Novation Agreement. Clause 5.20 provides as follows:

It follows that clause 5.20 applies to an intended project of GCI to:

The drafting of the NAA is rather convoluted, with many terms defined by reference to other defined terms which are in places scattered across the main body of the contract, its schedules, and its appendices. The parties agree, however, that the contractual definitions of the key terms are as follows:

GCI also relies upon certain parts of clause 14 of the NAA (entitled “Access to Locations”) as follows:

It is common ground between the parties that, for the purposes of clause 5.20 of the NAA, the IP Core Network Project involves a reduction in GCI’s use of MAN Connections and the vacation of certain related Locations. The dispute concerns whether the IP Core Network Project is or is not a project which GCI intends to implement to “migrate certain End User Connections”.

At the time of the Novation Agreement, it is also common ground that:

GCI’s case is that its intention at the time of the conclusion of the Novation Agreement came into being as follows:

So far as (i) and (ii) are concerned, as Mr. Kulkarni KC for CityFibre rightly pointed out, the documentary and witness evidence does not support the suggestion that CityFibre ever received this Information Memorandum (Footnote: ⁸) or that Mr. Shaw of KCOM ever communicated to CityFibre GCI’s intentions concerning the Network Virtualisation Plan. So far as (iii) is concerned, I address that below.

GCI then argues that the Network Virtualisation Plan, which it intended to implement at the time of the Novation Agreement and which was known to CityFibre, would have fulfilled the requirements of clause 5.20 because it was a project:

GCI then contends that this intention was subsequently abandoned by it and that it is no longer implementing the Network Virtualisation Plan but rather is now implementing the IP Core Network Project, which it alleges has the following (different) features to its originally intended plan:

GCI accordingly submits that this IP Core Network Project is not a project involving the migration of certain End User Connections (within the meaning of clause 5.20), since (i) GCI did not intend it at the time of the Novation Agreement; and (ii) GCI is not migrating – in the sense of moving or relocating – CityFibre End User Connections. The project includes the replacement of a CityFibre End User Connection with a new network infrastructure that is not a Connection (as defined), or an End User Connection (as defined), being a connection that is not part of CityFibre’s network at all. The customer will cease to be an End User (as defined) for the same reason.

By contrast, CityFibre’s case is that:

The parties agree that the relevant principles of contractual interpretation are correctly and recently summarised in Lamesa Investments Ltd v Cynergy Bank Ltd [2020] EWCA Civ 821 at [18] and this is the approach that I apply in the present case:

In the present case, it is convenient first to address the natural and ordinary meaning of clauses 5.20 and 14 of the NAA, and then to consider whether there exists any admissible and relevant factual matrix evidence which affects in any way that ordinary and natural meaning.

The primary issue before me is whether the IP Core Network Project is a “Proposed Migration Project” within the scope of Clause 5.20 such that CityFibre can, pursuant to Clause 5.20.5, recover from GCI the costs of removing its equipment from the Locations as instructed by GCI.

In summary, GCI makes two main submissions as to why the IP Core Network Project does not fall within the definition of “Proposed Migration Project”. First, it argues that the IP Core Network Project was not the project that the parties understood GCI to have intended to pursue at the time the Novation Agreement was entered into. Second, it argues that the IP Core Network Project does not involve a “migration of End User Connections”.

GCI’s first argument focuses on the meaning of the words “the Customer intends to”. Mr Hossain KC for GCI submitted that the word “intends” limits the ambit of the clause to a project which was in fact intended by the Customer (GCI) at the time the Novation Agreement was entered into. This would require a factual inquiry into GCI’s actual intentions at that date. If the only project which GCI intended on 24 June 2021 was the Network Virtualisation Plan, it follows that any different project for which the intention was formed subsequently is not caught by Clause 5.20. Since GCI asserts that it only formed the intention to develop the IP Core Network Project after 24 June 2021, it is said that Clause 5.20 is inapplicable.

I do not accept this argument. Clause 5.20.1 begins with the words “the Customer intends to”. The ordinary and natural meaning of those words is that whatever follows them (i.e. Clauses 5.20.1.1 and 5.20.1.2) is intended by GCI as a matter of fact, and the parties acknowledge and agree that GCI does indeed so intend. The parties are describing what GCI’s intention is at the time of the novation. There is no obligation upon GCI to act upon the intention(s) it expresses in Clause 5.20.1. Considering the structure of Clause 5.20.1, the words “the Customer intends to” applies equally to 5.20.1.1 (“implement a project…”) and 5.20.1.2 (“review CityFibre’s Ethernet capabilities and evaluate the use of these products to provide connectivity…”). The agreement is recording the fact that GCI has an intention to do two things: (i) to implement a project to migrate certain End User Connections, reduce its use of MAN Connections and vacate certain related Locations, which is a “Proposed Migration Project”; and (ii) to review CityFibre’s Ethernet capabilities and evaluate the use of CityFibre’s Ethernet products to provide connectivity in relation to existing and new End User Connections in connection with that Proposed Migration Project.

The drafting of Clause 5.20.1.1 weighs against the interpretation which GCI advances. Taking the opening words of Clause 5.20.1 together with the wording of Clause 5.20.1.1, it is clear that the parties are describing or recording the fact that GCI intends to implement “a” project with three general features of the type then set out. The ordinary and natural meaning of the words used is that any project which corresponds to that description is a Proposed Migration Project.

The wording of clause 5.20.1.2 is also important in construing 5.20.1.1. It provides that GCI intends to “review … and evaluate the use of [CityFibre’s Ethernet] products to provide connectivity in relation to existing … End User Connections in connection with the Proposed Migration Project (each, a ‘Proposed Migrated Connection’)”. This is inconsistent with an agreed and fixed intention on GCI’s part to implement the Network Virtualisation Plan, which would not have involved the use of Ethernet at all. Further, GCI’s stated intention in 5.20.1.2 was only to “give CityFibre the opportunity to submit offers in connection with the provision of Ethernet products in respect of Proposed Migrated Connections”. This means that Clause 5.20.1.2 necessarily contemplates a situation where Ethernet connectivity in relation to existing End User Connections is not provided by CityFibre but by others, which is again inconsistent with the Network Virtualisation Plan.

In reply, Mr Hossain KC argued that the intention referred to in Clause 5.20.1 could only refer to an intention present at the time the Novation Agreement was entered into regarding a project which GCI intended to implement. He argued that clause 5.20.1.2 instead speaks of an alternative future possibility which cannot have been intended to be implemented as part of the Proposed Migration Project because CityFibre’s Ethernet capabilities had yet to be reviewed.

This is not a tenable distinction. Even on GCI’s case, at the time the Novation Agreement was entered into, the Network Virtualisation Plan was a future possibility. Indeed, as has transpired, that possibility has not become reality. In any event, the fact that an “alternative possibility” was expressly provided for in clause 5.20.1.2 renders it even more unlikely that the parties had agreed that the Proposed Migration Project referred only to the Network Virtualisation Plan, despite the general description of “a project” used by the parties in Clause 5.20.1.1.

GCI’s proposed approach is an impermissible attempt to interpret Clause 5.20 in light of what is said to be one party’s subjective understanding of its meaning. Contrary to GCI’s argument, there is no need for the court to determine its subjective intention, nor do the contractual words invite the court to do so. The parties have agreed and recorded GCI’s intention in their agreement.

On its true construction, the words “the Customer intends to” are declaratory: they are simply a general statement about what GCI intends to do in the future. The declared intention is set out in Clauses 5.20.1.1 and 5.20.1.2. The remainder of Clause 5.20 then addresses each party’s obligations in the event that GCI implements a Proposed Migration Project in accordance with its declared intention.

So far as GCI’s second argument is concerned, GCI’s description of the IP Core Network Project is not disputed. It is common ground between the parties that there has been a reduction in MAN Connections and certain Locations have been vacated in connection with the IP Core Network Project. The dispute is as to the meaning of “migrate certain End User Connections” and whether the IP Core Network Project meets that description.

At the liability issues hearing, the parties were essentially agreed as to the meaning of the word “migrates” in the context of computing and IT systems: it means a change, movement, or transfer of information, software, or hardware from one environment or system to another. This meaning is sufficiently wide to encompass a shift from one network to another. Mr Hossain KC accepted that moving a customer from CityFibre’s network to GCI’s own network is clearly, in ordinary language, a migration of that customer.

The dispute stems from the contractual definition of “End User Connection”. Mr Hossain KC’s argument runs as follows. “End User Connection” is a defined term in the NAA – it is a type of “Connection”. A “Connection” is defined by reference to “Connection Points”. “Connection Points” are in turn defined as points of connection to the CityFibre Network. It follows, according to Mr Hossain, that it is unintelligible to speak of migrating “End User Connections” to a non-CityFibre network because what were formerly End User Connections do not, post-migration, remain on the CityFibre network and they are therefore no longer “Connections”, much less “End User Connections”. Accordingly, he concludes that the IP Core Network Project does not involve “migrating End User Connections”, but rather terminating them.

Mr Kulkarni KC for CityFibre submitted, in contrast, that the definitions of “End User Connection” and “Connection” in the NAA simply serve to identify the relevant objects that are being migrated. Once identified, it is irrelevant that those objects might not correspond to the definition in the NAA after they have been migrated/moved. In other words, once the End User Connections have migrated to a third-party network, they may no longer be “End User Connections” as defined in the NAA, but that does not prevent the migration of the End User Connection from having occurred.

In other words, the words “migrate certain End User Connections” provide that End User Connections are to be migrated or moved but one is told nothing about which End User Connections are being migrated (the definition of End User Connection includes “any other Connection not being an LDN Connection or a MAN Connection”), the destination of the migration, or any further details of such migration. Only the object to be moved is identified by these words.

However, importantly clause 5.20.1.2 defines a “Proposed Migrated Connection” (i.e. something which it is proposed to be migrated), in connection with the “Proposed Migration Project” (as defined in clause 5.20.1.1). It provides that CityFibre has an opportunity to provide connectivity in relation to existing (as well as new) End User Connections in connection with the Proposed Migration Project (which is defined in clause 5.20.1.1), but no more than that. In other words, the contract expressly contemplates a case where ethernet connectivity in relation to an existing End User Connection is not provided by CityFibre but by someone else, such that a customer of GCI (formerly an End User) would no longer access the internet through CityFibre’s network and there would be no connection to the CityFibre network. CityFibre would have the opportunity to submit offers to provide ethernet connectivity, but GCI would not be obliged to accept those offers. Moreover, this is a “migrated” connection: the parties have expressly provided for the possibility of migrating End User Connections onto an Ethernet network, with or without CityFibre. Ethernet services from third parties can be used to provide connectivity to existing End User Connections, and such a change would constitute a migration. Since the agreement contemplates the eventuality that services to GCI’s customers are not provided by CityFibre, it cannot sensibly be concluded that the Proposed Migration Project is limited to the Network Virtualisation Plan or only concerns a situation where GCI’s customers remain connected to the CityFibre network post-migration.

This is also the answer to GCI’s argument that the defined term “End User Connection” is being used to identify the subject matter of the migration. In fact, defining the object to be migrated as an End User Connection in Clause 5.20.1.1 is entirely understandable because it specifically identifies the type of Connection with which the Proposed Migration Project is concerned. This is necessary because it distinguishes (a) what is to be done in respect of End User Connections from (b) MAN Connections (which the other words of Clause 5.20.1.1 state are to be reduced) and (c) LDN Connections (which are not reduced and accordingly left untouched).

Indeed, the possibilities catered for in Clause 5.20.1.2 provide the reason for the generalised drafting of a non-specific project in Clause 5.20.1.1. At the time the Novation Agreement was entered into, there was no certainty about the form which the Proposed Migration Project would take (as is apparent from the summary of the documentary and witness evidence set out below). The parties knew that GCI intended to carry out a project to reduce the number of MAN Connections and Locations, which, on the assumption that GCI did not wish to lose its customers, would necessitate migrating End User Connections. Clause 5.20.1.1 does not state how the migration is to be effected nor where End User Connections are to be migrated. Clause 5.20.1.2 contemplates that one possible method of migration is onto an Ethernet network which could be provided in whole, in part or not at all by CityFibre.

This interpretation of Clause 5.20.1 is also supported by the opening words of Clause 5.20.5: “notwithstanding anything else in this Agreement (including Schedule 4 (Change Control) and Schedule 5 (Operational Processes)…” Clause 5.20.5 is valuable from CityFibre’s perspective because it allows CityFibre to recover its costs so long as those costs are “incurred directly in connection with the implementation of the Proposed Migration Project”. Schedule 4 deals with changes to Connections, while Schedule 5 addresses the termination of Connections. They each allow CityFibre to recover less than the amount provided for in Clause 5.20.5, which explains the clear priority conferred upon this bespoke cost recovery provision by the words “notwithstanding anything else in this Agreement” and the references to Schedules 4 and 5.

Moreover, the specific reference to Schedule 5 indicates that the termination of Connections was an eventuality which the parties contemplated could indeed occur “in connection with the implementation of the Proposed Migration Project”. It follows that the Proposed Migration Project, which is the subject of Clause 5.20, objectively understood, could include both changes to and the termination of Connections. The possibility of GCI terminating a Connection instead of changing it is accordingly consistent with a possibility that GCI would choose a third party to provide network services rather than CityFibre.

Mr Hossain KC had no real answer to this point. He pointed out that a new version of Schedule 5 was inserted by the Novation Agreement, but that does not assist him. It is common ground that Clause 5.20 makes specific provision for the consequences of implementing a Proposed Migration Project. Schedule 5 applies to situations where GCI asks for Connections to be terminated or ceased quite apart from any Proposed Migration Project. Schedule 5 does not, either expressly or impliedly, exclude terminating/ceasing Connections from the scope of the Proposed Migration Project. Mr Hossain argued that the Proposed Migration Project could only embrace Connection Changes, but if the parties had a clear common intention or understanding that “migrate certain End User Connections” referred exclusively to End User Connection Changes as defined in Schedule 4, one might have expected them to have clearly expressed that common intention/understanding in Clause 5.20.1.1, but they did not.

Clause 12.3 of the original NAA (which was left unchanged by the Novation Agreement) states that “The Parties shall discuss in good faith opportunities to migrate connections that are provided by the Customer’s other third party service providers and that are used by the Customer’s customers onto the Network.” GCI submits that if the parties had intended to embrace migrating End User Connections away from CityFibre’s network in Clause 5.20.1.1 and on to the network of a third party, they would have used non-defined terms (“connections”) of general application to include third parties, as they did elsewhere in clause 12.3 of the NAA.

I do not accept Mr. Hossain’s argument. Clause 12.3 addresses the situation where an object (a “connection”) external to the NAA (and therefore not defined by it) could subsequently come within the terms of the NAA. Such an object necessarily cannot be identified by the use of the defined term “End User Connection” because GCI’s customers using third party services are not End Users, so there is no End User Connection which can be migrated. Indeed, the usage of “connection” in this context is consistent with the relevant term simply being used to identify the object to be migrated. Furthermore, the term is no doubt being used to embrace a wide variety of connections generally, and it would be too restrictive to speak only of migrating End User Connections given that third party providers may use different methods to provide internet connectivity.

It follows that on an objective interpretation of Clause 5.20 of the NAA, as at 24 June 2021, the Proposed Migration Project was one which involved migrating End User Connections, reducing the use of MAN Connections, and vacating Locations. There was no common intention or objective agreement about the method and destination of this migration, hence the lack of reference to a specific project and any relevant details. That was left for GCI to evaluate and determine at a later stage. Thus, GCI might splice the cable previously attached to the CityFibre MAN Connection Point to the CityFibre LDN Connection Point; or GCI might migrate the connection to CityFibre ethernet; or GCI might migrate the connection to non-CityFibre ethernet. Indeed, any combination of these options would also have been possible. Each of them would fall within the scope of “migrate certain End User Connections” within clause 5.20.1.

It is agreed that the IP Core Network Project involved GCI changing the way it provided internet connectivity to its customers. Before the migration, those customers were End Users with End User Connection Points connected to the CityFibre network through End User Connections. GCI’s customers are now connected to GCI’s own network through third party Ethernet connections. This constitutes a migration of End User Connections within the objective meaning of Clause 5.20. If CityFibre can demonstrate that its costs are “reasonably and properly incurred directly in connection with the implementation of the Proposed Migration Project”, being the IP Core Network Project, they are recoverable.

I do not consider that there is anything in the factual background at the time of the conclusion of the Novation Agreement which alters the proper construction of clause 5.20 (as set out above). Indeed, the factual matrix, in which the Novation Agreement was concluded, is consistent with the construction set out above.

In a case such as this, it is important to keep firmly in mind the approach of Leggatt J (as he then was) in Gestmin SGPS SA v Credit Suisse (UK) Ltd [2013] EWHC 3560 (Comm), which was approved by Lord Kerr (in a dissenting judgment) in R (on the application of Bancoult No 3) v Secretary of State for Foreign and Commonwealth Affairs [2018] UKSC 3 at [103] as follows:

I apply this approach, which is apposite to this case. I found most of the witness evidence unhelpful, because it consisted to a very large extent in the witness telling the court what each party allegedly meant by the wording of clause 5.20 (see, by way of example, the witness statement of Mr. Ayres, at paragraphs 15-16; paragraph 16 of the witness statement of Mr. Pedler). The only relevance of the witness evidence is the extent to which it conclusively demonstrates what was known or reasonably available to both parties at the time when the Novation Agreement was concluded. As to that, the answer is not very much, as the documentary record shows that Mr. Churchill of GCI kept his cards very close to his chest in the run up to the conclusion of the Novation Agreement and did not allow CityFibre to learn of GCI’s plans for its project other than in general terms.

The following sets out the factual background in the run-up to the conclusion of the Novation Agreement in the present case.

By 6 November 2020, GCI intended, after it had purchased the KCOM business, to “transition KCOM customers onto a rebuilt GCI core network, which will be virtualised within the points of presence of Talk Talk or Virgin Media. The objective being to eliminate the KCOM fibre network.” In other words, the KCOM fibre network would be “decommissioned” entirely. This plan was expressly referred to in GCI’s presentation paper of that date (“the November 2020 Presentation”) which concerns its acquisition of KCOM’s “Project Tiger” “network virtualisation” infrastructure. The November 2020 Presentation refers to this being a tried and tested route which GCI – in particular Wayne Churchill (CEO) – had adopted before.

The November 2020 Presentation then referred to a difference in savings or cost reductions which could be made between the KCOM (Tiger) strategy and GCI’s proposed project, explaining that that would occur as GCI intended to use a third party fibre network, whereas the KCOM proposal was itself to build another fibre network across the UK. This was, therefore, GCI’s plan from the outset: to use a third party fibre network.

The November 2020 Presentation further stated that in terms of making costs savings, “network is the largest item and contains charges to interconnect, manage transmission devices, provide electricity and other related services. All will be removed as the new physical infrastructure is constructed andcustomers are migrated. To be illuminated during year 2” (emphasis added). It goes on: “The order of any network migrationis firstly to remove the voice (Footnote: ¹⁰), and then migrate the data once this is done there will be no customers using the layer 1 fibre network (Footnote: ¹¹) and it can then be decommissioned. This can be executed in an incremental fashion, decommissioning commencement does not need to be delayed until the end of the synergy project” (emphasis added).

So far as “voice” is concerned, it is stated that “KCOM operates a legacy voice network on top of the fibre infrastructure. The legacy voice customersare to be migrated to a modern SIP voice service from Gamma, Talk Talk and/or BT. So far as data is concerned, it is stated that “a new layer three network will be built using Virgin Media, BT and/or Talk Talk network infrastructure. We will migrate all customer MPLS, Ethernet and broadband services across and decommission the existing… network” (emphasis added).

It is notable that the November 2020 Presentation suggests that GCI was accustomed to use the word “migration” to simply mean moving customers, data etc from one network infrastructure to another, whether operated by GCI or by a third party.

A Network Expert Session, comprised of engineers from KCOM and GCI, was then scheduled for 14 December 2020. Mr. Churchill, who was in charge of this project for GCI, stated in an internal GCI email of 6 December 2020 to Mike Winder and others at GCI:

“We will need to be careful that at this session we don't make it plain that we want to decommission the whole network, but [with] that in mind we can create the agenda.”

This is because it was indeed GCI’s ultimate intention to decommission the whole of the KCOM fibre network in this manner as part of its project, as set out in the November 2020 Presentation. Mr. Churchill was keen to keep this from KCOM, no doubt because it would weaken GCI’s negotiating hand if it revealed this fact.

On 9 December 2020, on behalf of KCOM, Investec sent a Management Presentation on the Project Tiger asset purchase to GCI, including Mr. Churchill. This contained KCOM’s network overview and virtualisation plan. It referred to the fact that “The [Information Memorandum] doesn’t give any real detail on the plan [to virtualise the network]” and that:

The Management Presentation included a high level plan showing the particular projects to deliver KCOM’s proposed network virtualisation. This included “CFH MANs to close with redeployment of customers and site rationalisation to the LDN node.” And “CFH End User connections to close/ redeployment of customers and site rationalisation.” GCI’s proposed project intended to “transition KCOM customers onto a rebuilt GCI core network, which will be virtualised within the points of presence of Talk Talk or Virgin Media. The objective being to eliminate the KCOM fibre network” (emphasis added).

Full decommissioning of the fibre network remained Mr. Churchill/GCI’s plan as can be seen from Mr. Churchill’s email to Mike Winder and Kevin Budge dated 31 January 2021. In his email, Mr. Churchill warned as follows:

“if the network restructuring project stalls or fails because there is something in there that means in the real world we can't decommission and eliminate the costs at the rate or in the scale that we're forecasting, then the whole business case is holed below the waterline (And by the way the more we tell them about our virtualisation plan the more nervous they will get. I know it's naive because they put the plan forward in their IM (Footnote: ¹²) but that was and IM, this is much more real. My experience is that the more we share with them about what we actually intend to do then less likely it is they will transact with us).”

As the parties got closer to concluding a deal, KCOM wanted more information about GCI’s plans for its project. As can be seen from Mr. Churchill’s email dated 5 May 2021 to Mr. Winder and Mr. Budge, copied in to Mayfair Equity (who were the private equity owners of GCI), although KCOM were acting on behalf of CityFibre in relaying to them information provided by GCI about the project, Mr. Churchill of GCI and Mr. Shaw of KCOM agreed together to construct a letter for CityFibre which contained a counter-offer supporting novation that “works for both of us”. Mr. Churchill then stated:

Mr. Shaw and Mr. Churchill then met on 6 May 2021 to discuss a counter proposal to put to CityFibre. Mr. Churchill emailed KCOM on 7 May 2021 to set out GCI’s proposed response to CityFibre as follows:

Mr. Churchill accepted in cross-examination that this told CityFibre very little about GCI’s plans and that they were presented “at a high level of abstraction” (day 2/p. 157/line 25 to p. 158/line 2).

The email exchanges suggest that Mr. Shaw presented this counter offer to CityFibre on 11 May 2021, but it is unclear precisely what he told CityFibre. Mr. Shaw was not called to give evidence.

On 30 May 2021 Mr. Churchill explained to Mayfair Equity precisely how the IP Core Network Project would work:

“It follows that how our network restructure would work then is that we’ll close down all the [78 network properties] as planned, shrinking 78 down to 14, and we will move the B-ends (Footnote: ¹³) of each of these CityFibre end user circuits into our 14 core locations (Footnote: ¹⁴).”

On 17 June 2021 Mayfair Equity produced an Executive Summary of the proposed GCI project. They stated in particular as follows:

The plan is accordingly said to be to shrink the core network down to 11 locations and connect via new third party partners.

A document called “Tiger Synergy Plan” from around this time refers to the Tiger Network Transformation: Today: “Legacy National fibre network”; End State: “Next Generation National Fibre Network; Aggregated Circuits (NNIs) (Footnote: ¹⁵).” This suggests that the overall plan was to move the end users to an entirely new network via the ethernet.

On 22 June 2021 a GCI “welcome meeting” took place which was attended by representatives of GCI and CityFibre. This is the meeting referred to above in paragraph 14(5)(iii) above. There are two manuscript notes of this meeting which are broadly consistent, one note (compiled by Mr. Litwin of CityFibre) is fuller than the other (compiled by an unknown employee of GCI), but neither note throws much light on precisely what was discussed at the meeting. Mr. Litwin’s note states in particular:

“Ethernet aggregation… Critical National locations to support regions. Produce footprint in local area by use of Ethernet …“E[nd] U[ser] circuits back to ethernet… Direct connection key site to E[nd] U[ser].”

This lends some support to the suggestion that GCI’s plan was for the End User Connections instead to be migrated to direct ethernet connectivity.

Mr. Leigh Walgate of GCI attended this meeting and I heard evidence from him. Mr Walgate was part of GCI’s technical team. In his witness statement he states as follows:

I do not accept this evidence. In cross-examination, Mr. Walgate said that the reference in the meeting note to “ethernet aggregation” referred to taking ethernet services from aggregators generally, although he then added that it could also mean taking ethernet aggregation from CityFibre. More importantly, he accepted (Day 2/p. 193/lines 19-23) that there is nothing in the notes of the meeting about GCI closing the MANs and connecting GCI’s customers directly to CityFibre’s LDN. He fairly conceded that had GCI made that clear at the meeting, namely that the proposed project was a very specific project to close MANs and connect customers to the LDN, that he would have expected that to be noted. But it was not. This undermines Mr. Walgate’s suggestion that he had a “very strong memory of what we said in that meeting.”

Indeed, this important exchange then took place at 194/lines 1-5:

Had GCI told CityFibre at this meeting that GCI’s intention was to implement a specific project to re-splice the existing CityFibre fibre which connected customers to the MANs, so as instead to connect those customers to the LDNs, or to use CityFibre’s NNI (network-to-network interface) to connect to CityFibre’s ethernet services in order to connect GCI’s customers to the LDN,then I consider that it would have been likely that this precise project would have been referred to in (i) clause 5.20 of the NAA; (ii) one of the notes of the meeting on 22 June 2021 and/or (iii) one of the emails passing between the parties at the time. But it was not.

On the same day, 22 June 2021, GCI’s solicitors, Goodwin Procter, emailed CityFibre’s solicitors, CMS, attaching a revised Novation Agreement. This included a change to the “good faith” clause 5.19 (what became clause 5.20) to reflect CityFibre/GCI discussions that day, which read:

Again, nothing is said here about this being a specific project to close MANs and connect customers to the LDN in one of the two specific ways suggested by Mr. Walgate. This clause 5.19 gets subsequently broken down into clauses 5.20.1 to 5.20.4 of the concluded agreement.

It is clear that on 22 June 2021 GCI had a discussion of some sort with CityFibre about their proposed project. We know this because on 23 June 2021 Mr. Churchill of GCI emailed Mr. Gray of CityFibre asking Mr. Gray not to openly discuss with KCOM the details of the discussion that they had had the previous day about how GCI “intend to transform the network”. Mr. Wilson of CityFibre agreed by reply email and also added that CityFibre was drawing up a response to what would become clause 5.20 “with some reasonable requests around costs we may incur to support this project working collaboratively in a way which supports both parties.”

It is far from clear, however, what was discussed in that respect. Indeed, Mr. Churchill accepted in his evidence that neither costs nor specific timelines for implementing the Network Virtualisation Plan were discussed with CityFibre at any point before the Novation Agreement was concluded(Day 2, page 175 line 24 to page 177 line 8). In re-examination he was taken to a document which suggested that he had shared the timeline with Mr. Tim Shaw at KCOM, but there was no evidence before the court that Mr. Shaw shared that timeline with CityFibre.

Had clause 5.20 been concerned solely with the Network Virtualisation Plan (i.e. migrating End User Connections onto CityFibre’s network), I consider that there would no doubt have been a documentary record of Mr. Churchill discussing the timeline of that project with CityFibre and the likely level of costs to be incurred within clause 5.20.5. But there is not.

The sending of Mr. Churchill’s email of 23 June led to the email dated 23 June 2021 sent by Mr. Wilson to Mr. Churchill, in which Mr. Wilson refers to the calls (not a meeting) which took place between them on 22 June “around the network architecture project that [GCI] wish to embark on.”

Again, had there been a discussion of the type suggested by Mr. Walgate at a meeting on 22 June, it could be expected that Mr. Wilson and/or Mr. Churchill would have referred to it in their email exchanges. But they did not. Mr. Wilson explained that CityFibre were happy to include the draft clause 5.19 (which now became 5.20) in the Novation Agreement subject to the following points:

Nothing is said here about this being a specific project only to close MANs and connect customers to the LDN. Rather, this email makes clear that GCI had by now disclosed to CityFibre that its project entailed migrating away from End User Connections and onto Ethernet connectivity generally. CityFibre wanted to have a “first look” at providing the required ethernet products for that purpose but this necessarily implied that a third party or indeed GCI itself might instead provide the necessary ethernet connectivity.

Mr. Walgate was asked how his alleged “memory” of what was discussed at the meeting on 22 June fitted with this contemporaneous email. He had no real answer to the point and accepted that the migration project could involve moving away from CityFibre’s network altogether (Day 2/p. 300/lines 1-21):

It is also apparent that CityFibre were not made aware of the extent to which GCI intended, as part of their project, to give notice to CityFibre to vacate the network properties (i.e. the Locations) and migrate from the End User Connections and onto ethernet connectivity. Mr. Churchill referred to this “leverage” that GCI had over CityFibre in his email dated 24 June 2021 to Mayfair Properties:

On the same date, Mr. Gawn, the in-house counsel for CityFibre sent an internal email in which he stated:

It is clear from this email that CityFibre were only just now beginning to glean a better understanding of GCI’s proposed project. CityFibre now understood that ethernet connectivity was indeed an integral part of the GCI migration project but do not appear to have been told the extent to which GCI intended to migrate onto ethernet connectivity (which might lead to the closing down of numerous Locations) or how GCI intended to do so. Mr. Gawn’s email suggests that he understood that there was a plan to move away from the current structure to a revised network configuration which would migrate at least some of the end user circuits into CityFibre’s LDN, but he also understood the migration project to have been expanded to include connectivity via ethernet circuits which CityFibre could (only) bid for. Whatever form the revised network configuration took, it is clear that he understood that GCI would be responsible for covering CityFibre’s cost of the proposed migration.

In evidence, Mr. Gawn was asked about this email and he explained what he understood GCI’s project to be at the time. I consider Mr. Gawn to be a reliable witness and I accept his evidence on this topic which I also consider to be consistent with the documents, or at least not inconsistent with them. In particular he stated as follows (Day 2/p. 111/lines 6-24 and p. 112/lines 7-17):

In all the circumstances, I find that the precise manner of GCI’s intended implementation of its migration project was not clear at the time of the conclusion of the Novation Agreement, and (no doubt consequently) it is only recorded in general terms in clause 5.20 of the NAA. I find as a fact that, at the time when the Novation Agreement was concluded, the manner of implementation of GCI’s intended project was not yet finally determined or fixed.

In particular, it was not fixed so as solely to move GCI’s customers from one part of CityFibre’s network to another part of CityFibre’s network, nor did CityFibre understand that this was GCI’s sole intended manner of implementation of the project. Indeed, CityFibre did not know precisely how GCI intended to implement its intended project. It knew, in general terms, that GCI intended, as part of its project, to reduce its use of certain MAN Connections and instead, in part at least, to utilise alternative ethernet connectivity in respect of both existing and new End User Connections. The parties anticipated that that connectivity might be provided in whole or in part by CityFibre (whether via its LDN or otherwise), but they also anticipated that it might be provided entirely or in part by a third party or by GCI itself. This was still to be resolved.

Mr. Gawn gave evidence that there were a number of possible ways in which GCI could choose to implement its intended project (whether by itself, CityFibre and/or third parties), but he was satisfied that the wording of clause 5.20 was sufficiently broad to ensure that CityFibre would be protected regardless of the precise form which the project ultimately took. Whilst Mr. Gawn’s views as to what the effect of clause 5.20 might be are irrelevant and inadmissible, I find that this is indeed, as a matter of construction, the legal effect of clause 5.20.

Finally, and since the IP Core Network Project falls within the ambit of Clause 5.20, the second issue arises, which is “does Clause 5.20 of the NAA operate to preclude the Defendant from exercising its rights pursuant to Clauses 14.7 and 14.8 of the NAA in connection with the Proposed Migration Project?”

Clause 14.7, which is set out above, allows GCI to serve written notice on CityFibre to vacate a Location with not less than six months’ notice. Clause 14.8, also set out above, is conditional upon the expiry of the notice period in Clause 14.7. It allows GCI to remove CityFibre’s equipment and claim an indemnity for losses arising out of CityFibre’s failure to remove its equipment.

Clause 5.20.3 obliges GCI to “engage and cooperate with CityFibre constructively and in good faith, using reasonable endeavours, to mitigate the impact of the Proposed Migration Project (including the impact of the Customer vacating the Locations) and in relation to the migration of End User Connections”.

I do not consider that, on a proper construction of clause 14.7, the operation of that clause can be precluded entirely by Clause 5.20 because GCI has no alternative power to require CityFibre to vacate the Locations. Having accepted that, Mr Kulkarni KC submitted that Clause 5.20.3 may operate in some situations to preclude GCI from exercising its power under Clause 14.7 to serve a notice to vacate, assuming that such a notice is being served in connection with the Proposed Migration Project. He submitted that serving such a notice might be contrary to GCI’s obligation to engage and cooperate with CityFibre in good faith and to use reasonable endeavours to mitigate the impact of the Proposed Migration Project. CityFibre’s case is that removing its equipment and vacating the Locations is not straightforward because of “known unknowns” concerning the equipment which might be in situ: it may be difficult in any particular case to confirm that CityFibre’s equipment can be safely removed and perform that removal within six months as a result.

As an illustration of the need for cooperation and the possible adverse consequences of vacating the Locations hastily, Mr Kulkarni KC took me to a set of emails in April 2023 between the parties’ solicitors regarding the process of vacating a Location in Nottingham. It seems that GCI (or more accurately Nasstar, which can be treated as the same entity for current purposes) had issued a termination notice for the Location and CityFibre was in the process of vacating it pursuant to that notice. However, CityFibre’s personnel were prevented from severing the fibre because it transpired that the cable was still providing connectivity for one of GCI’s customers. If the cable had been severed as required by the notice, the consequences for GCI and its customer would have been very serious indeed.

Another example given by CityFibre was of a situation where GCI had given CityFibre notice to vacate but had yet to inform the landlord which owned the Location of such fact. As a result, CityFibre was not in a position to negotiate with the landlord to take over the lease of the Location and was forced to move its equipment at short notice. Mr Kulkarni argues that this would also be a breach of the cooperation obligation in Clause 5.20.3.

Mr. Kulkarni KC accordingly submitted that where Clause 5.20.3 is engaged, a notice under Clause 14.7 cannot be served unless CityFibre can safely vacate the Location within six months.

Mr. Hossain KC, on the other hand, submits that GCI’s power under Clause 14.7 cannot be limited. Mr Hossain KC suggested that the obligation under Clause 5.20.3 could bite after the notice had been served, but it could not affect the minimum notice period of six months stated in Clause 14.7. But this is also an unsatisfactory interpretation. On a plain reading of Clause 5.20.3, it would, for example, be a breach of that provision if GCI served a notice to vacate a Location within six months where on any reasonable view that could not physically be done.

I consider the proper construction of clause 14.7 to be as follows. Clause 14.7 grants GCI a right to require CityFibre to vacate a Location except that a minimum of six months’ notice must be given: “not less than six months”. Co-operation clause 5.20.3 does not prevent GCI from issuing a notice under clause 14.7 in any particular case, but it may require GCI to afford CityFibre more than six months’ notice in a particular case, failing which GCI may be in breach of clause 5.20.3 in not co-operating with CityFibre constructively and in good faith in order to mitigate the impact of the Proposed Migration Project.

Similarly, if GCI were to give notice to vacate in respect of a large number of Locations at the same time which caused CityFibre significant logistical problems in vacating the Locations within the timescale set, that too might amount to failure to engage and co-operate with CityFibre constructively to mitigate the impact of the Proposed Migration Project, rendering GCI in breach of clause 5.20.3. Each case will depend on its own facts.

The answer to the issue as formulated is therefore “no”. Clause 5.20 of the NAA does not operate to preclude the Defendant from exercising its rights pursuant to Clauses 14.7 and 14.8 of the NAA in connection with the Proposed Migration Project. GCI has the power to require CityFibre to vacate Locations in connection with the Proposed Migration Project. However, GCI’s power under Clause 14.7 is subject to clause 5.20.3. That means that GCI must engage and co-operate with CityFibre constructively in order to mitigate the impact of the Proposed Migration Project when GCI determines the notice period for the termination of CityFibre’s rights of access and rights to use any individual Location, failing which it may have acted in breach of clause 5.20.3.

It follows that the answers to the two issues of liability set out in paragraph 3 above are respectively: