EE Ltd v Mundio Mobile Ltd

This is a claim brought by EE Limited (“EE”), a mobile network operator, against Mundio Mobile Limited (“MM”), a mobile virtual network operator (“MVNO”), pursuant to Part 8 of the Civil Procedure Rules. EE, formerly known as T-Mobile (UK) Limited, provides electronic communication services in the United Kingdom through the operation of its electronic network. MM, as a MVNO, does not own or operate its own networks. Rather it provides communication services to its customers using networks owned and operated by others.

By a “Wholesale Telecommunication Supply Agreement” dated 8^th July 2009 (“the Wholesale Agreement”) T-Mobile (UK) Limited agreed to provide Mundio Mobile (UK) Limited with wholesale access to its electronic communications network. The Wholesale Agreement was novated to MM on 29^th July 2009.

Multiple disputes have arisen between the parties, leading to various settlement agreements, including a settlement agreement dated 10^th November 2012 (“the 2012 Settlement”) and a settlement agreement dated 14^th April 2014 (“the 2014 Settlement”). The 2014 Settlement included the creation of a New Marketing Support Fund (“the New MSF”). The concept of a marketing support fund (“MSF”) was introduced first in a settlement agreement dated 30^th April 2011 (“the 2011 Agreement”) and was extended and refined in the 2012 Settlement. The 2014 Settlement consolidated three previous MSFs into a single fund, the New MSF. The New MSF is not cash as such, but rather a fund of credit which in certain circumstances MM can spend in relation to voice, SMS and data services provided by EE under the Wholesale Agreement.

By letter dated 30^th December 2014 MM claimed an entitlement to a credit from the New MSF of £2.5million for the year 2014 on the basis that it had complied with its “Minimum Year to Date Bundle Commitment”. The value of the alleged entitlement is £2.5million. This demand has led to a dispute between the parties as to how the New MSF provisions in the 2014 Settlement are to operate. Since the 2014 demand, MM has made similar demands for 2015 and 2016. Those later matters are not directly before me. But the overall value of the disputes between the parties to which my decision will be relevant is now some £6.5million.

EE now seeks the following declarations by reference to clauses 5 to 8 of Annex A to the 2014 Settlement :

The declaration sought in paragraph 5a) above is not contentious, (although there is scope for debate as to what is and is not compliance with MM’s Minimum Year to Date Bundle Commitment). But the balance of EE’s claim very much is. MM’s primary case is that it had an absolute entitlement to the sum of £2.5million once it had complied with its Minimum Year to Date Bundle Commitment up to the end of the previous calendar month. EE acted in breach of contract in failing to comply with its demand of 30^th December 2014 and MM is entitled to a declaration to that effect. Alternatively, MM contends that it was entitled to credit in the amount of the costs, fees and charges incurred by it in relation to marketing activities completed in 2014 and which exceeded £2.5million. On that alternative basis too, MM submits that it was entitled to a credit of £2.5million.

EE is one of four MNOs in the UK. It controls and operates its own mobile network. It has a large number of retail and business customers, to whom it provides voice, SMS and data services using its network. It also uses its network to provide services to wholesale customers.

One such category of wholesale customer is the MVNO. MM is a MVNO offering voice, SMS and data services to consumers, principally through pay-as-you-go SIM cards. It has provided those services pursuant to the Wholesale Agreement.

In overview, the structure of payment by MM (set out in Clause 9 of the Wholesale Agreement) was that MM purchased bundles of credits which were then consumed, according to a tariff, as MM’s customers used voice, SMS or data services. Bundles lasted one year, after which any unused credits in a bundle expired. If all bundles had been fully redeemed against services or had expired, MM was under an obligation to purchase a new bundle. Use of services was therefore on a pre-payment basis, with the value of bundles purchased always being required to exceed the value of voice, SMS or data services used.

The Wholesale Agreement (by Clause 3.2 and Schedule 9) imposed a minimum usage commitment on MM, whereby the value of bundle credits redeemed against services each year was required to exceed a minimum value, failing which EE was entitled to invoice MM for the shortfall. The minimum usage commitment increased on an annual basis until 2012. Thus, the minimum usage commitment was £3million in 2009 rising to £9.6 million in 2012.

Throughout the Wholesale Agreement the status of MM’s MVNO account with EE is and has been tracked and a statement produced and issued to MM on a daily basis. The report records all payments made by MM, credit and usage. The balance is shown in a single column. A positive credit balance means that the account is in pre-payment.

In overview again, the following material amendments were made to the Wholesale Agreement prior to the 2014 Settlement :

The special provision made in Clause 33 for MSF 2 reflected the fact that at the time of the 2012 Settlement, the full value of MSF 2 had already been credited to the MVNO under Clause 6 of Annex A of the 2011 Agreement. Clause 33 split MSF 2 into 2 separate funds : MSF2A, with a cash value of £1million, and MSF2B, with a cash value of £800,000. It provided that Clauses 12 to 16 of Annex A would not apply for MSF2B, but would apply to MSF2A. So MSF2B could be used to keep MM’s MVNO account in prepayment, but not MSF2A.

EE’s case is that Clause 33 was implemented by deducting the value of MSF2 from MM’s MVNO account and crediting the account with the value of MSF2B on 20^th and 21^st January 2013. The sum of £3million (gross) was removed from MM’s MVNO account on 20^th January 2013 against the entry “MSF2 Taken off”. The sum of £800,000 was placed back on the account the next day against the entry “£800,000 applied from MSF 2”. EE contends that this demonstrates that, prior to the 2014 Settlement, the parties recognised full well that where MM was not permitted to use fund from a MSF to keep its MVNO account in pre-payment, the funds were kept separate from the MVNO account and could not be credited. Credit does not linger on the account if it is not being actually deployed.

The events of 20^th and 21^st January 2013 have proved to be controversial. MM disagrees that the account entries reflected the implementation of clause 33. Rather it contends that the entries reflected MSF2 being taken off because the existing entitlement under clause 22 of Annex A of the 2012 Settlement could not be rolled over. Thus a debit entry had to be made for it. The £800,000 positive entry derived from the creation of MSF2B. The initial debit of £1.8million (net) reflected the fact that the absence of a roll-over for MSF2 funding precluded that recognised fund in clause 22 continuing to be credited to MM’s MVNO account. MM also points to later entries on 2^nd and 3^rd February 2013 which refer to top-up 2011 and top-up 2012. These are said to reflect the fact that MM had not used a portion of credit for which it had paid, demonstrating that unused credit and MSF funds could both be debited from the MVNO account as and when the conditions for them being applied no longer existed.

To this EE counters that if the transfers were made only because there was no roll-over of the entitlement under Clause 22 of Annex A of the 2012 Settlement, one would expect to see only the £3million coming out of the MVNO account.

In this CPR Part 8 procedure, it is not possible or appropriate to resolve such a disputed issue of fact. Thus, whilst I incline to EE’s interpretation of events, they are not an appropriate evidential basis for drawing any inference for the purpose of constructing the relevant contractual terms and I put them to one side for the purpose of reaching my conclusions below.

All references to clauses below are references to clauses in Annex A of the 2014 Settlement, save where otherwise expressly stated.

By Clause 2, terms relating to MSFs referenced in the 2012 Settlement continued to apply unless they conflicted with clauses 3 to 10 of the 2014 Settlement in which case the terms of the 2014 Settlement were to prevail. Any reference in the Wholesale Agreement including the 2012 Settlement to MSFs 2, 4 and 5 were to be a reference to the New MSF.

Clause 3 consolidated MSFs 2, 4 and 5 into a single New MSF with a monetary value of £7.3million and a credit value of £12.167million (when the rebate of 40% was taken into account). With effect from the date of execution MSFs 2, 4 and 5 ceased to exist and Clauses 15 to 20 and 22 to 28 of Annex A of the 2012 Settlement were deleted in their entirety. The effect of these deletions was that MSFs 3 and 6 also no longer existed.

Clause 4 provided that, providing that MM had paid the Minimum Usage Commitment for the relevant Calendar year, unused credit could roll over to the next Calendar Year as “Unused Credit”. Unused credit could not be used in the next Calendar Year to contribute to any Minimum Usage Commitment (as defined in the Wholesale Agreement and Schedule 9 thereof) or Monthly Bundle Commitment (as defined in the 2012 Settlement). The clause concluded :

“As of Execution Date the MVNO account balance is £1,952,726.74 (gross)…and shall remain fully available for MVNO to use.”

The critical clauses for present purposes are Clauses 5 to 7 which read as follows :

“5.

Marketing support from the New MSF shall be available to MML in any calendar month only where MML has complied with its Minimum Year to Date Bundle Commitment up to the end of the previous calendar month.

6.

The New MSF shall (i) not contribute towards any Minimum Usage Commitment and (ii) shall not be used by MML to keep the MVNO account in pre-payment except where MML’s year to date actual usage is more than the Minimum Year to Date Bundle Commitment.

7.

The amount of marketing support available to MML from the New MSF in any Calendar Year shall not exceed 50% (‘MSF Cap’) of the Minimum Usage Commitment (or Reduced Minimum Usage Commitment if applicable) for the same Calendar Year.”

In terms of definitions of the terms used in Clause 6 :

Clause 8 provided :

“In the event that Consumed Credit in any Calendar Year is greater than the Minimum Usage Commitment for that Calendar Year and the MSF Cap has been met, then for any additional payments to the MVNO account by MML, EE shall contribute an equal sum of the additional payments made by MML to the MVNO Account from the New MSF.”’

By Clause 9, any unused MSF, unused Credit and unused New MSF would expire on the termination or expiry of the Wholesale Agreement.

Clause 10 provided a disciplinary provision against non-payment of the Minimum Usage Commitment in full by the end of the year. If non-payment persisted for 30 days after notice of non-payment by EE, any entitlement to New MSF and Unused Credit ceased for the duration of the Wholesale Agreement.

By Clauses 43 and 45 the terms of the Wholesale Agreement otherwise continued to apply. In the event of conflict the terms of Annex A would take precedence over Clause 9 of the Wholesale Agreement.

The law can be summarised un-controversially, the key principles emerging in a well-known series of high-level authorities including the following: Investors Compensation Scheme Ltd v West Bromwich Building Society (No 1) [1998] 1 WLR 896 (at 912-913); Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101; Rainy Sky SA v Kookmin Bank Ltd [2011] 1 WLR 2900; Makdessi v Cavendish Square Holdings BV [2015] 3 WLR 1373 and Arnold v Britton [2015] UKSC 36.

When interpreting a written contract, the court is concerned to identify the intention of the parties by reference to what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean. The court does so essentially as one unitary exercise by focussing on the meaning of the relevant words in their documentary, factual and commercial context. That meaning has to be assessed in the light of (i) the natural and ordinary meaning of the clause, (ii) any other relevant provisions of the contract, (iii) the overall purpose of the clause and the [contract], (iv) the facts and circumstances known or assumed by the parties at the time that the document was executed, and (v) commercial common sense, but (vi) disregarding subjective evidence of any party's intentions. Commercial common sense and the surrounding circumstances should not be invoked to undervalue the importance of the language of the provision to be construed. A court will not readily accept that people have made linguistic mistakes, particularly in formal documents, but there may be cases where it is clear in context that something has gone wrong, but it requires a strong case to persuade a court that that is the case. Nor should a court reject the natural meaning of a provision simply because it appears to have been imprudent commercially or otherwise. The purpose of interpretation is to identify what the parties have agreed, not what the court thinks that they should have agreed.

Agreements should be read as a whole and construed so far as possible to avoid inconsistencies between different parts on the assumption that the parties had intended to express their intentions in a coherent and consistent way. One expects provisions to complement each other. Only in the case of a clear and irreconcilable discrepancy would it be necessary to resort to the contractual order of precedence to resolve it - see RWE Npower Renewables Ltd v JN Bentley Ltd [2014] EWCA Civ 150 (at paragraphs 15 and 17).

In written argument MM sought to place reliance on the principle of “contra proferentem” in the event of contractual ambiguity, on the basis that the contracts in question were drafted by EE and/or on EE’s standard terms. Putting to one side the evidential lacuna on this issue, the terms of most direct relevance to the dispute between the parties appear to be anything other than on standard terms. Rather they appear to be tailor-made and the product of detailed negotiation between the parties. In the event, the point was not pursued by MM.

In summary, EE contends that on a true construction of the Wholesale Agreement and the 2012 and 2014 Settlements :

Thus MM is only entitled to a credit to its MVNO account from the New MSF where 4 conditions are met :

When these conditions are met, MM is entitled under clause 6(ii) of the 2014 Settlement to a credit from the New MSF equal to the excess of actual usage over the “Minimum Year to Date Bundle Commitment” up, by virtue of clause 7 of the 2014 Settlement, to a maximum of 50% of the “Minimum Usage Commitment” for that year.

In more detail, as a matter of construction, clauses 5 to 8 when read together set out a series of conditions that must be satisfied in order for MM to have the use of funds from New MSF. In doing so, they also define the amount of funds from New MSF that MM is entitled to access and use at any given time. Being up to date with the Minimum Year to Date Bundle Commitment for the purpose of Clause 5 is a necessary but not sufficient condition for accessing the New MSF.

The prohibitions on use in Clause 6 establish the purpose for which the New MSF may be used. By Clause 9 neither funds in New MSF or Unused Credit survive termination or expiry of the Wholesale Agreement, nor is there a mechanism permitting MM to withdraw funds from the MVNO account during the currency of the Wholesale Agreement. The only use for balances in the MVNO account is to pay for usage of EE’s services. If balances in the MVNO account can only pay for usage, and if funds in New MSF can only be used to keep the account in pre-payment where the Minimum Year to Date Commitment has been exceeded, it follows that clause 6 means that the only use for which MM can use New MSF is to pay for usage in excess of the Minimum Year to Date Commitment.

Clause 7 limits the availability of funds in New MSF by providing an annual cap of 50% of the Minimum Usage Commitment in the given year. The words “shall not exceed” demonstrate that 50% is a cap, rather than the sum to which MM would be entitled.

Clause 8 operates by way of exception to clause 7 as an additional incentive for MM to over-achieve. Where MM’s usage has exceeded the Minimum Usage Commitment and the MSF Cap has been reached, such that the excess usage cannot be paid for with funds from New MSF, EE will match from New MSF further purchase of credit bundles by MM.

The logical consequence of the restrictions in clause 6 is to dictate the amount of funds that MM is entitled to have credited to its MVNO account : subject to the condition in clause 5 being met and to the cap in clause 7, MM is entitled to a credit of such funds as are required to pay for usage of voice, SMS and data services over and above the Minimum Year to Date Bundle Commitment. If MM were permitted to have its MVNO account credited with funds from New MSF beyond the extent required to pay for actual usage over and above the Minimum Year to Date Bundle Commitment, the effect would be to permit MM to use New MSF to keep the MVNO Account in pre-payment, which clause 6 expressly prohibits.

In summary, MM’s primary case is that it is immediately entitled to all funds in New MSF subject only to the annual cap once the condition in clause 5 is met. Clause 5 makes available a fund that is an accrued right on the part of MM. Its alternative case is that it is entitled to all such funds provided that it has expended an equivalent amount on marketing.

MM contends that as a matter of common and business sense, the trigger for the New MSF credit is that defined in Clause 5. If the trigger is met then the New MSF is to be credited, subject to the clause 7 cap. Reliance is placed on clause 4 which states that the MVNO account balance shall remain “fully available” for MM to use. Thus the word “available” has to mean a value that has already been credited to the MVNO Account. On EE’s case, there is internal inconsistency. There is no indication in the ordinary meaning of the words used in clause 6 that those words are intended to somehow cut down the entitlement in clause 5. There is no need to construe the eligibility of MM for New MSF pursuant to clause 6. Clause 6 deals with a different point, namely the uses to which New MSF can be put. MM does not accept that any conferral of New MSF would inevitably bring about a breach of Clause 6.

MM accepts that clause 6 stipulates that MM may not use New MSF to contribute to the Minimum Usage Commitment or to be the only basis upon which the MVNO account is in pre-payment except in those circumstances where the actual year to date usage excess the Minimum Year to Date Bundle Commitment. (It contends that as a matter of construction the exception in clause 6 applies to both its limbs). MM contends that, if the actual usage requirement in clause 6 are met, then MM can use the New MSF both for pre-payment and to contribute towards the minimum usage commitment. However, if those constraints do not inevitably arise, alternatively do not arise on the specific facts, then there is no risk of conflict between clauses 5 and 6. There is then no imperative for giving clause 5 anything other than its ordinary and natural meaning. Clause 8 is not an additional incentive. It is the only bonus reward for MM in the 2014 Settlement. It deals with a separate situation than New MSF entitlement.

The underlying fallacy in EE’s approach is said by MM to be that it treats New MSF as a bonus payment to MM for “overachievement” of its commitments. In reality, though, New MSF represented the continuation of an entitlement to marketing support which assisted MM in meeting the purchase price of EE’s services. New MSF was a fund of substance, representing repayment to MM of expenditure. In truth, EE is seeking to read qualifying words into the entitlement conferred by Clause 5 which are simply not there.

It is common ground that the sequence of agreements as set out above, and the operation of MM’s MVNO account, is the relevant factual matrix. There are differences of emphases and approach between the parties along the path of their relationship. One such difference relates to whether or not the New MSF provisions amounted to an incentive to EE to exceed its year to date actual usage. So far as material, it seems to me, properly construed, that there was at least an element of incentive in the MSF provisions from the very outset. Thus MSF 3 (the terms of which MSF 5 followed in 2012) incentivised MM to increase service usage : a sum of money would be available to MM for drawdown in tranches in return for an increase in the value of the Minimum Year to Date Bundle Commitment in the month following each drawdown. The New MSF would reward MM where it had persuaded its customers to use services to such an extent that the amount of usage exceeded the Minimum Year to Date Bundle Commitment. So, by clause 8, if Consumed Credit exceeded the Minimum Usage Commitment and the MSF Cap had been met, then for any additional payments to the MVNO account by MM, EE would match the contribution. The fact that the New MSF represented the continuation of available marketing support which could in certain circumstances assist MM in meeting the purchase price of EE’s services is not in any way inconsistent with the fact that the New MSF, as did the earlier MSFs, created an incentive on the part of MM to exceed its year to date actual usage.

In any event, the terms of the agreements are there for all to see and, against the background of the available admissible material, I turn to the questions of construction.

Clauses 5, 6 and 7 must be read together and Clause 5 cannot be read in isolation. In my judgment, the clauses run logically and sequentially together as follows : clause 5 deals with availability only; clause 6 deals with entitlement to use once availability exists; clause 7 imposes a quantum cap on any such entitlement.

As to Clause 5 :

MM relies on Clause 12.1 of the Wholesale Agreement, as amended by clause 35 of Annex A to the 2012 Settlement, in two different ways. Under Clause 12.1(i), which was introduced by clause 35, EE has an express right to suspend services in the event that the MVNO account is maintained in pre-payment only by virtue of having been credited with MSFs in that calendar year. That does contemplate EE analysing the extent to which the MVNO account is in pre-payment solely by virtue of MSF credit being awarded under the contract. That goes against EE’s suggested factual matrix whereby such an analysis would be impractical and uncommercial. However, it is clear that the amendment to introduce clause 12.1(i) was made to deal with the fact that for a limited period of time (between 10^th November 2012 and 1^st January 2013) there was a credit in MM’s MVNO account from MSF2 which was being used to keep the account in pre-payment as permitted by the 2011 Agreement.

Secondly, MM also relies on Clause 12.1(i) to meet the point that, on its case on the proper construction of Clause 5, the New MSF could be available and used to keep the MVNO account in pre-payment. MM says that would place it in breach of clause 6 but also in breach of clause 12.1(i). EE would then be entitled to suspend its services, described by MM as a “big stick” with which it could then be hit. It strikes me nevertheless that a construction of a clause that would on its face permit activity that could lead not only to an immediate breach of the immediately following clause but also an entitlement to suspend the services being provided under the contract is one that is, objectively assessed, an unlikely one.

I therefore conclude that Clause 5 does not give rise to an immediate entitlement to New MSF once MM has complied with its Minimum Year to Date Bundle Commitment. Rather it sets the ball rolling for what is to follow, in the event that New MSF becomes available to MM under Clause 5.

As to compliance with the Minimum Year to Date Bundle Commitment, that is the purchase of bundles in accordance with the Monthly Bundle commitment and the Minimum Year to Date Bundle Commitment in accordance with Clause 5 of the 2012 Settlement which provides expressly that any amount of credit on MM’s MVNO account cannot be used for the purpose of any such purchase.

As to Clause 6, I address first an important sub-issue, namely MM’s contention that the exception applies not just to the prohibition on usage by MM of New MSF to keep the MVNO account in pre-payment but also to the prohibition against MM using New MSF to contribute towards any Minimum Usage Commitment.

This is unsustainable as a matter of ordinary and natural grammatical comprehension : subclauses (i) and (ii) are separated by the word “and”, which precedes subclause (ii) in its entirety. The exception relates only to subclause (ii) which is a standalone separate provision relating to use of the New MSF. It is not an overarching exception placed as such. The absence of a comma or colon does not undermine this conclusion, as MM suggests.

Beyond that, MM’s case that it is entitled to use New MSF to contribute towards Minimum Usage Commitment sits uneasily with Clause 4, whereby if MM fails to pay the Minimum Usage Commitment in full by the end of each calendar year, any entitlement to the New MSF immediately ceases (provided EE have given written notification and there has been a failure to remedy by MM).

MM’s construction of Clause 6 also depends on a wholly artificial distinction between the Minimum Usage Commitment and the Monthly Bundle Commitment. MM contends that where the actual usage requirement is met, it can use MM to contribute towards the Minimum Usage Commitment. But it accepts that it cannot use New MSF to meet its Monthly Bundle Commitment. But Monthly Bundle Commitment is defined (in clause 4.1 of Annex A of the 2012 Settlement) as being 1/12^th of the Minimum Usage Commitment for the year. The two are inextricably linked and part and parcel of the same process. Minimum Usage Commitment is the product of 12 instalments of the Monthly Bundle Commitment.

MM was pressed on its position in this context. It had to accept that under Clauses 4.1 and 5 of Annex A of the 2012 Settlement it has a freestanding obligation to meet the Monthly Bundle Commitment (which was not extinguished by the 2014 Settlement but rather preserved by clause 2 of Annex A of the 2014 Settlement). But it contends that, if its year to date actual usage was more than the Minimum Year to Date Bundle Commitment, it could use New MSF to contribute towards any minimum usage commitment. In those circumstances, Clause 6 of Annex A of the 2014 Settlement would prevail over any inherent restriction arising out of clause 5 of Annex A of the 2012 Settlement (namely the prohibition on using MSF towards meeting the Minimum Usage Commitment).

MM’s case runs into serious difficulty because of this resulting inconsistency between its interpretation of Clause 6 of Annex A of the 2014 Settlement and Clause 5 of Annex A of the 2012 Settlement. The inconsistency leaves MM arguing that clause 6 would then have to prevail over clause 5. But Clause 5 sets out the fundamental basis of reward agreed between the parties. One would expect the parties to have reached an agreement in 2014 that was consistent with and complementary to the surviving parts of the 2012 Settlement. And, as Clause 5 of Annex A of the 2012 Settlement reflects, the fundamental premise underpinning all the agreements is that MSFs cannot be used for the purchase of bundles to meet minimum usage commitments.

On EE’s case, there is no such inconsistency. By Clause 6 of Annex A of the 2014 Settlement New MSF cannot be used towards Minimum Usage Commitment in any circumstances. That is exactly what Clause 5 of Annex A of the 2012 Settlement says. This is another reason for preferring EE’s construction to that of MM.

Thus the prohibition on the use of New MSF for contribution towards any Minimum Usage Commitment is absolute. Only the prohibition on use of New MSF to keep the MVNO account in pre-payment is subject to the exception arising where year to date actual usage exceeds the Minimum Year to Date Bundle Commitment.

Against this background, I accept EE’s construction of Clause 6 that MM is not entitled to have any funds credited to its MVNO account in any month from the New MSF unless its actual usage of services exceeds the Minimum year to Date Bundle Commitment.

The necessary implication of all the above is that the amount of permissible drawdown from the New MSF is the amount of credit due for usage in excess of the Minimum Year to Date Bundle Commitment. This is the natural and obvious consequence of the fact that, as I construe it :

Clause 7 further limits the availability of funds from New MSF. It refers to a payment that “shall not exceed” a certain amount. That is not the language of, nor consistent with, a fixed entitlement to a fixed amount. Clause 7 refers to “[t]he amount of marketing support available to MM from the New MSF in any Calendar Year”. Clause 5 describes that availability by reference to availability in any calendar month and by reference to circumstances where MM has complied with its Minimum Year to Date Bundle Commitment up to the end of the previous calendar month. This is again not consistent with MM’s case that, the moment the threshold condition in Clause 5 is met, MM becomes entitled to the whole of the amount of the cap. Rather it anticipates incremental drawdowns on a month-by-month basis.

MM points to the fact that under the 2014 Settlement the pre-existing MSFs were to be rolled into a single fund worth some £7.3million (net). MM suggests that the cap represents a restriction on how much MM would otherwise have been entitled to under the pre-existing arrangements. It is narrowing the availability of marketing support funds to MM by reference to a pre-determined cap of £2.5million rather than £7.3million. When Clause 7 speaks of not exceeding 50% of the minimum usage, it is recognising that by year 4, for example, there may not be any entitlement to the full amount because it may already have been used up. With a finite fund which gets drawn down over a period of years, it makes sense for the cap to be described as not exceeding 50%.

I do not find this persuasive. As EE points out, it is inherent in the New MSF, which is a finite fund, that when the money has gone, there is none left. There is no need for a cap to address that point. The more ordinary and natural construction of Clause 7 is that the 50% is an upper limit, as opposed to a fixed sum. If MM was to be entitled to £2.5m, no more and no less, then that is all that clause 7 needed to say. Instead, it expressed the figure as an upper limit.

Clause 8 supplements the previous provisions and is self-explanatory. Where Consumed Credit in any calendar year is greater than the Minimum Usage Commitment for that Calendar Year and the MSF Cap has been met, then EE will match any additional payments to the MVNO account by MM from the New MSF. It does not appear to me to affect the central conclusions on construction set out above.

Thus in my judgment, on a proper contractual interpretation of Clauses 5 to 7, New MSF becomes available to MM once it has complied with its Minimum Year to Date Bundle Commitment up to the end of the previous calendar month. It is not, however, entitled to have any funds from the New MSF credited to its MVNO account in any month unless its actual usage of services exceeds the Minimum Year to Date Bundle Commitment. And if and when that occurs, the maximum amount of funds that MM is entitled to have credited to its MVNO account at any time is the lesser of i) such amount as is required to pay for usage of services in excess of the Minimum Year to Date Bundle Commitment, and ii) the MSF Cap minus funds already credited from the New MSF into MML’s MVNO account in the calendar year. Save in respect of funds credited to MML’s MVNO account pursuant to clause 8, MM may not under any circumstances use funds from the New MSF to contribute towards its Minimum Usage Commitment.

The above identifies the intention of the parties by reference to what a reasonable person having all the background knowledge which would have been available to the parties would have understood the language in the contract to mean. This is not to read words into the clauses, as MM contends it is. Rather, it is to read the clauses together and in the context of the contract as a whole.

As to MM’s alternative case, it does not seem to me that MM has made good its case evidentially that it has expended more than £2.5million on marketing in 2014. But putting that to one side, it is not an alternative proposition that I can accept for these principal reasons :

For these reasons, I grant the following declaratory relief in respect of the 2014 Settlement :

I invite the parties to draw up an order accordingly and to agree all consequential matters, including costs, so far as possible. I conclude by thanking all counsel for their able and courteous assistance throughout this matter.