CL-2024-000308 - [2025] EWHC 1332 (Comm)

Neither side put in any evidence as to the matrix or background to the Framework Agreement or to the agreement represented by CCN 187. Thus there was no evidence as to why the apparently random figures for each year for Elements A, B and C were agreed as they were, other than one can surmise that in the light of the explanation of each element at Paragraph 26.1 of Schedule 8 they reflected in some way estimates of various types of costs that Airwave or its predecessors would spend in performing the contract. Equally there was no explanation as to why Element C had no indexation uplift.

It is striking that the last year, CY20, contains a much lower figure for Element C than any other year (5%). Thus for CY20, Elements A and B totalled 95% and fell to be indexed. It is obviously beneficial for Airwave (and disadvantageous for SoS) that the CY20 figure should be used for subsequent years, which is no doubt why this dispute has arisen. One suspects that the reason for the low Element C in CY20 is that there were anticipated to be some sort of decommissioning costs in the last expected year of the Framework Agreement, but I simply do not have the evidence to reach that conclusion, which would be speculation.

The starting point is that the parties anticipated when entering into the Framework Agreement that it would come to an end in 2020. The Claimant correctly points out that this was not necessarily the case (see Clause 2) and there were circumstances known when it was entered into whereby it might not end in 2020, but the parties have agreed the proportions for Elements A, B and C up to CY20 with no provision for what happens thereafter, so it is a reasonable inference that they anticipated it would come to an end by then (and no doubt if it did not they would have expected to negotiate the indexation position further).

That assumption did not prove correct and a series of CCNs have the effect that the Framework Agreement is likely to continue until 2029 and possibly longer.

It was the Claimant’s position that when the parties agreed CCN 187 in December 2018 they expressly agreed that the indexation provisions should use CY20 for indexation in subsequent years. I do not accept that. They rely on the wording of Paragraphs 3 and 4 of CCN 187 and the footnote to Appendix 1 of CCN 187. It seems to me that if the parties had actually intended such a result they would have said so in very much clearer terms. After all, given the uniquely low Element C percentage for CY20, it would be a surprising result for that same percentage to be used for every subsequent year.

To that extent, I have some sympathy for SoS in seeking to find a different construction which could, on one view, be said more accurately to reflect the assumed intention of the parties. But there are serious problems with their alternative constructions.

Dealing first with actual costs (Key Issue 2), there was no basis for using actual costs in the Framework Agreement itself, as the percentages for the various elements for each CY were set out. Nor is there anything in CCN 187 which suggests that the parties envisaged using actual costs.

But the problem is worse than that. Because Schedule 8 Paragraph 26.1 does not envisage the use of actual costs, the description of what falls within each of Element A, B and C is vague in the extreme. How would one decide what fell into what category? How would one do the calculation? The problem is that Paragraph 26.1 was never intended to be used to determine what actual costs fell into each category, because that exercise had been done by the parties in Appendix 4. It was intended to provide a (very) high level description and nothing more.

In oral argument, as I have explained, SoS submitted that in fact the calculation could be done through a combination of actual costs (to the extent that costs had been incurred at the date of the calculation) and estimated prospective costs (where costs had not been incurred at the date of the calculation). I have already pointed out that this is a different case from that pleaded. But it illustrates the problem. Either of these possibilities would have been a perfectly logical agreement for the parties to have made. But there is nothing to suggest that the parties did in fact reach such an agreement.

I was shown the well-known authorities Arnold v Britton [2015] AC 1619 and Parker v Roberts [2019] EWCA Civ 121 at [88] per Lewison LJ. These provide a reminder that the court is required to look at what the parties agreed, not what it might be said they should have agreed.

The same problems arise in relation to the alternative case put forward by SoS, based on averaging the Elements for the first 19 or 20 years of the Framework Agreement. This does not involve using any actual costs, and thus the calculation can be done using the material which the parties agreed under the Framework Agreement. But again, whilst it would be perfectly sensible for the parties to have reached such an agreement, it is impossible to find any provisions to support the contention that they did in fact agree it.

It is in a sense easier to conclude that SoS’ case is wrong than to conclude that Airwave’s case is correct. However, there is some support for their contentions.

Firstly, it is apparent that indexation was to continue for the remaining years of the contract.

Secondly, no new information was provided or to be provided in order to assess the indexation after CY20. So the materials available to the parties must have been those previously available to the parties.

Thirdly, Clause 4 of CCN 187 provides that:

“indexation will apply to the invoices amounts in the table in Appendix 1 in line with the Indexation Variation of Price (VOP) as set out in Parts D and I of Schedule 8 (charging Structure).”

This therefore incorporates what has gone before, namely Parts D and I of Schedule 8.

Fourthly, Appendix 1 provides:

“Charges exclude Indexation/Variation of Price-which will be applied at existing rates.”

The expression “existing rates” suggests a continuation from the rates that have gone before. It may be that this is the strongest point in favour of Airwave’s construction. A slightly ambiguous footnote to a table in an Appendix is hardly the most auspicious place to find the answer to the present dispute. But it does provide some measure of support for Airwave’s position.

None of this seems completely convincing. The reality is that the parties did not in my view think about the consequences of how CCN 187 would affect indexation. But I can find no support at all in the contractual documents for either construction put forward by SoS, whereas it seems to me that Airwave’s construction, whilst not straightforward, does have the advantage that there is some support for it in CCN 187 and I find that is the correct construction.

It follows that I will grant a declaration in favour of Airwave in relation to Key Issue 1 and dismiss the application for declarations in favour of SoS in relation to Key Issue 2 and 3 (Answers: Yes, no and no). Given my findings, it does not seem to me appropriate or necessary deal with Key Issue 4 and I will not grant declarations in favour of either party on that issue (not applicable).

I will give judgment remotely and deal with consequential matters on paper unless either party requests an oral hearing. One of the consequential matters is how the RPI issue which arose in the course of argument should be dealt with and I would expect the parties to correspond so I can give directions to the extent there is any dispute in that regard.