Pandora Jewellery UK Limited & Anor v EML Payments Europe Limited [2026] EWHC 1047 (Comm)

[2026] EWHC 1047 (Comm)Case No LM-2025-000334
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
LONDON CIRCUIT COMMERCIAL COURT (KBD)
Venue Royal Courts of Justice, Rolls Building, Fetter Lane, London, EC4A 1NLDate 6 May 2026
Before
HIS HONOUR JUDGE BAUMGARTNERSITTING AS A JUDGE OF THE HIGH COURT
Between
PANDORA JEWELLERY UK LIMITED (2) PAN JEWELRY LIMITED Claimants- and -EML PAYMENTS EUROPE LIMITED Defendant
Michael Watkins (instructed by Gowling WLG (UK) LLP) for ClaimantsJames McWilliams (instructed by Bird & Bird LLP) for DefendantHearing Hearing date: 29 April 2026
Approved JudgmentThis judgment was handed down remotely at 10.30am on 6 May 2026 by circulation to the parties or their representatives by email and by release to the National Archives.
[1]The two summary judgment applications before the Court give rise to a short point of construction and law relating to the meaning and effect of a written agreement dated 31 March 2011 (the “Agreement”) between Pandora Jewellery UK Limited (“Pandora”) and EML Payments Europe Ltd (“EML”) by which EML agreed to implement a gift card system for use in Pandora’s stores and online in return for payment of certain fees and charges. The Agreement was extended subsequently to cover Pan Jewelry Limited’s (“Pan”) business in the Republic of Ireland as well. Pandora and Pan are the Claimants in this action.[2]Gift cards issued under the scheme were subject to a contractual expiry date after which the funds associated with the expired card could no longer be used by the customer (the “Expired Funds”, as defined in Section 2.2.g of the Agreement). It is common ground between the parties that the Claimants were entitled to the benefit of the Expired Funds throughout the term of the Agreement. But the parties disagree about what should happen to the Expired Funds after the Agreement came to an end. The Agreement provided that the gift card scheme would continue to operate after the end of the “Term” during what is referred to in the Agreement as the “Transition Period” and the “Run-off Period” until all Card Funds (as defined in Section 1.1.d of the Agreement) had been reduced to zero.[3]On 18 April 2024, EML made a payment to Pandora in respect of the Expired Funds that had accrued prior to 31 March 2024, being the agreed expiry date of the Agreement. On 26 September 2024, Pandora queried why no further payments had been made in respect of the Expired Funds. EML replied on 1 October 2024 that no further sums were payable to Pandora as Expired Funds and that, pursuant to the terms of the Agreement, EML was entitled to retain the Expired Funds (a position that would also apply to the cards issued by Pan as and when they expired).[4]The Claimants now seek payment of the Expired Funds from EML.[5]These proceedings were commenced by the Claimants on 23 September 2025. EML filed its Defence to the same on 7 November 2025. No Reply was filed by the Claimants.[6]The Claimants’ case is that EML’s obligation to make payments to them in relation to Expired Funds continued during the Transition Period and the Run-off Period by operation of Sections 7.3 and 7.4 of the Agreement, and that, by refusing to pay what it owes, EML has acted in breach of contract and trust. The Claimants seek declaratory relief and monetary relief together with interest and costs.[7]EML denies the claim on the basis that Section 2.2.g when read as a whole with the Agreement expressly provided that it was entitled to retain Expired Funds during the Transition Period and the Run-off Period. EML also denies the Agreement gave rise to the trust averred by the Claimants.

Issue

[8]The issue raised is whether EML’s obligations in relation to the Expired Funds continued to operate during the Transition Period and the Run-off Period, as the Claimants allege, or whether EML was entitled to keep the Expired Funds for itself. The parties agree that this raises a question of construction and law which is suitable for summary determination under CPR r.24.2.[9]The issue can be reformulated into two questions:(1) Do the Claimants have a contractual entitlement to be paid the unspent outstanding balances on gift cards (i.e., Expired Funds) expiring after the Agreement ended on 31 March 2024 as “Breakage Payments” under Section 2.2.g of the Agreement?(2) If not, does EML hold those Expired Funds on resulting trust for the Claimants, such that EML must account to them for the same? I shall answer those questions after setting out the legal principles relating to summary judgment and the construction and interpretation of the Agreement and the resulting trust averred by the Claimants.

Legal principles on summary judgment applications

[10]The Court may give summary judgment in favour of a party pursuant to CPR r.24.3 if it considers that the respondent has no real prospect of succeeding on its claim and there is no other compelling reason why the case or issue should be disposed of at trial.[11]The legal principles relating to summary judgment are well-established; see, e.g., Easyair Limitedv Opal Telecom Limited [2009] EWHC 339 (Ch) at [15], where Lewison J (as he then was) set out the correct approach on summary judgment applications by defendants:(1) The court must consider whether the claimant has a “realistic” as opposed to a “fanciful” prospect of success: Swain v Hillman [2001] 1 All ER 91.(2) A “realistic” claim is one that carries some degree of conviction. This means a claim that is more than merely arguable: ED&F Man Liquid Products Limited v Patel [2003] EWCA Civ 472, at [8].(3) In reaching its conclusion the court must not conduct a “mini-trial”: Swain v Hillman.(4) This does not mean that the court must take at face value and without analysis everything that a claimant says in his statements before the court. In some cases it may be clear that there is no real substance in factual assertions made, particularly if contradicted by contemporaneous documents: ED&F Man, at [10].(5) However, in reaching its conclusion the court must take into account not only the evidence actually placed before it on the application for summary judgment, but also the evidence that can reasonably be expected to be available at trial: Royal Brompton Hospital NHS Trust v Hammond (No.5) [2001] EWCA Civ 550.(6) Although a case may turn out at trial not to be really complicated, it does not follow that it should be decided without the fuller investigation into the facts at trial than is possible or permissible on summary judgment. Thus the court should hesitate about making a final decision without a trial, even where there is no obvious conflict of fact at the time of the application, where reasonable grounds exist for believing that a fuller investigation into the facts of the case would add to or alter the evidence available to a trial judge and so affect the outcome of the case: Doncaster Pharmaceuticals Group Limited v Bolton Pharmaceutical Co 100 Limited [2006] EWCA Civ 661.(7) On the other hand it is not uncommon for an application under Part 24 to give rise to a short point of law or construction and, if the court is satisfied that it has before it all the evidence necessary for the proper determination of the question and that the parties have had an adequate opportunity to address it in argument, it should grasp the nettle and decide it. The reason is quite simple: if the respondent’s case is bad in law, he will in truth have no real prospect of succeeding on his claim or successfully defending the claim against him, as the case may be. Similarly, if the applicant’s case is bad in law, the sooner that is determined, the better. If it is possible to show by evidence that although material in the form of documents or oral evidence that would put the documents in another light is not currently before the court, such material is likely to exist and can be expected to be available at trial, it would be wrong to give summary judgment because there would be a real, as opposed to a fanciful, prospect of success. However, it is not enough simply to argue that the case should be allowed to go to trial because something may turn up which would have a bearing on the question of construction: ICI Chemicals & Polymers Limited v TTE Training Limited [2007] EWCA Civ 725, at [12] per Moore-Bick LJ.

The Agreement

[12]By the Agreement, EML agreed to implement a gift card system for use in the Claimants’ stores and online in consideration for the payment by the Claimants of various fees and charges. The Agreement was amended on seven occasions pursuant to a series of written amendment agreements.[13]“Cards” issued under the Agreement (as defined in Section 1.1.b) had an “Expiry Date” of 12 months (for cards issued by Pandora in the United Kingdom) and five years (for cards issued by Pan in Ireland), as defined in Section 2.2.g. From the beginning of the Agreement in 2011 until it expired in 2024, Expired Funds were paid to Pandora pursuant to Section 2.2.g. No Expired Funds accrued during this period in relation to Pan because Ireland was only added to the Agreement in 2020, and the five year Expiry Date in Ireland had not yet occurred.[14]Pursuant to Addendum No.7, the parties acknowledged that the Agreement was to expire on 31 March 2024 but made provision for an extension of the Transition Period contemplated therein and to the provisions of Section 7.3 relating to the Run-off Period. Section 4.1 of Addendum No.7 provides that the Agreement shall remain in full force and effect save as expressly modified therein.[15]The relevant provisions of the Agreement and its various Addenda are as follows.

Bank accounts

[16]The Agreement provided for the establishment of two accounts called the “Distributor Deposit Account” and the “Programme Account”. In broad outline, the Claimants were required initially to deposit the funds which they collected from their cardholders (the “Card Funds”) into the Distributor Deposit Account and then to pay those funds into the Programme Account where they would thereafter be held for the purposes of settling any transaction on the cards.[17]It is common ground that the parties agreed to fund the Distributor Deposit Account and the Programme Account as follows:(1) The Claimants were obliged to collect the full amount of the Card Funds for each Card and to deposit such funds into the Distributor Deposit Account no later than the banking business day following the issuance of the Card: Section 4.5.b.(2) On the second business banking day from the date of activation of the Card, the Claimants were obliged to transfer the Card Funds from the Distributor Deposit Account to the Programme Account to be held thereafter on trust by EML: Section 4.5.f.(3) The Claimants were also obliged to make an “Initial Deposit” into the Programme Account in accordance with Section 4.5.f and were obliged to deposit “Base Funding” in an amount equal to the value of the estimated Card activations in the following 14 Business Days pursuant to Section 4.5.c.

Funds transfers

[18]The contractual mechanism through which funds transfers worked is set out in Sections 2.5.a and 2.5.b of the Agreement.[19]Section 2.5.a of the Agreement provides (emphasis added):
“At its cost, [the Claimants] will establish and maintain a deposit account with a bank approved by [EML] in which the Card Funds will be held in trustfor the purposes stated in this Agreement (the ‘Distributor Deposit Account’). The Distributor Deposit Account shall be used solely for the purpose of the Program [sic].”
[20]Pursuant to Section 2.4 (as amended by Addendum No.1), EML was named as the “Issuer” and was thereby obliged to maintain or hold the Programme Account; see Addendum No.1, Section C, which provides in relevant part (emphasis added):
“Section 2.5.b … . … The Programme Account will be an account of Issuer and will be a ring fenced account with Issuer as Trustee, that can only be used to settle Cardholder liability, with no right of set off or counterclaim.”
[21]Section 2.6 then provides (emphasis added):
“The Card Funds will be held by [EML] in the Programme Account. The funds for each Card will not be segregated in the Programme Account, but will be tracked for accounting purposes by [EML] as an account (the ‘Card Account’)[ There are several references to the term “Gift Card Account” in the Agreement, although this term is not defined in the Agreement. I take the term “Gift Card Account” to be the same as the “Card Account” defined in Section 2.6, though, as I see it, nothing turns upon it. ] within the Programme Account. A Card will be activated by [EML] for use by the Cardholder to purchase goods or services up to the amount of the available balance of the Card Account (the ‘Available Balance’). The initial Available Balance of the Card Account will be the amount of the Card Account as activated by [EML]. Thereafter, the Available Balance will be reduced by (a) redemptions resulting from the use of the Card; (b) fees and charges, if any, listed on the Fee Schedule D; and (c) other payments or reductions, if any, required by law. If a credit is permitted to the Card Account for returned merchandise at a Distributor Location, the Available Balance will be adjusted to reflect the permitted credit. The Card Account will exhaust on the date when the Available Balance is zero. Transactions on the Card will be declined if the Available Balance is zero.”

EML’s obligations in relation to Expired Funds

[22]Section 2.2.g of the Agreement provides (emphasis added):
“To the extent permitted by applicable law, each Gift Card will expire and become unusable by the Cardholder after the expiry date (the ‘Expiry Date’). The Expiry Date is specified in Programme Schedule A. Upon expiry of a Gift Card, the amount of any Card balances remaining on any Card after the Expiry Date (the ‘Expired Funds’) will be remitted to [EML] from the Gift Card Account[i.e., the “Card Account” defined in Section 2.6, tracked by EML within the Programme Account for accounting purposes] and paid to [the Claimants] in accordance with the Breakage Payment as outlined in Fee Schedule D.”
[23]Fee Schedule D provides that: “Subject to the terms and conditions of the Agreement, the following fees and charges will apply in the Programme”.[24]Paragraph 2 of Fee Schedule D provides for the payment of a fee by EML to the Claimants on the following terms (emphasis added):
“For the period commencing on the Programme Commencement Date through the termination of this Agreement (the ‘Breakage Payment Period’), [EML] will pay [the Claimants] an amount equal to one hundred percent (100%) of the Expired Funds collected by [EML] during the Distributor Commission Period[ The term “Distributor Commission Period” is not defined or used in the Agreement. ] (the ‘Breakage Payments’). The Breakage Payments will be made quarterly to [the Claimants], and will be due and payable within 30 calendar days following the close of the quarter in which the funds are collected by [EML]. The Breakage Payments will terminate upon termination of this Agreement.”
Paragraph 2 thus defines the “Breakage Payments” by reference to a period of time, and confirms that the payments in relation to that period of time would terminate at the end of that period.[25]By paragraph 5 of Fee Schedule D, the parties acknowledge that (emphasis added):
“Other than the fees and charges stated in the Agreement, the parties agree that no fees or charges shall be due or payable to each other, charged to the Purchaser or the Cardholder, or assessed against the balance of the Card Account ... .”
[26]A similar acknowledgment is contained in Section 5.1, which provides that: “[no] fee shall be assessed against the Gift Card or Gift Card Account, unless the fee is approved by [the parties] and specified in Fee Schedule D or an amendment thereto”.[27]There are no relevant amendments to Fee Schedule D.

Expiry of the Term, the Transition Period and the Run-off Period

[28]The original “Term” of the Agreement was defined in Sections 1.1.o and 7.1 and commenced on the Effective Date (defined in the preamble as 31 March 2011) and continued for five years following the “Programme Commencement Date” (defined in Programme Schedule A as when the first Card is sold to a “Purchaser” and activated for use in the Programme); thereafter, the Agreement automatically renewed for three year terms.[29]Pursuant to Addendum No.7, the parties acknowledge that the Agreement was to expire on 31 March 2024 but provided for an extension of the Transition Period contemplated therein and to the provisions of Section 7.3 relating to the Run-off Period. Section 4.1 of Addendum No.7 provides that the Agreement shall remain in full force and effect save as expressly modified therein.[30]Section 7.3, as amended by Addendum No.7, provides as follows (emphasis added):
“Upon termination of this Agreement, the Programme will continue to operate for a transition period beyond the initial term or end of the renewal term, as applicable, up to and including the 30th September 2024 (the ‘Transition Period’) in order for the parties to wind down the Programme. During the Transition Period, the Programme will continue to operate in accordance with the terms of this Agreement. For clarification, the Transition Period is not part of the term of the Agreement, but rather a post-termination service. At the end of the Transition Period, or when this Agreement is terminated in accordance with its term, the Programme shall be run-off as follows: …. c. Run-off. The parties will cooperate to run-off the existing Card Accounts over time in an orderly fashion until the Card Accounts have a zero balance. During the run-off, redemptions on the Cards at the Distributor Locations will continue to be settled and the Expiry Date will continue to be assessed against the Card. …”
[31]The “Programme” is defined in Sections 1.1.j and 2.1 as follows:
“During the Term of this Agreement, the parties will install and operate a card Programme at Distributor and at the Distributor Locations (the ‘Programme’) under which Cards issued by the Issuing Bank will be distributed and sold through Distributor to Purchasers for use by Cardholders to purchase goods and services from Distributor Locations. …”
[32]Section 7.4 provides that Sections 6.2 to 6.7, 7.2 to 7.4, 8.1, 8.3, 8.4, and Article 9 shall survive termination of the Agreement and that the provisions of (emphasis added):
“Articles 2 through Article 5 shall survive during and as required for the run-off under Section 7.3.”
Article 2 includes Section 2.2.g, which imposes the obligation on EML to remit to itself Expired Funds and to make payments to the Claimants in accordance with Section 2.2.g and the Breakage Payment provision in Fee Schedule D. Thus it appears that, by the amendments made through Addendum No.7, the parties agreed that Section 2.2.g would survive termination of the Agreement, and continue to operate, during and as required for the run-off under Section 7.3. Discussion Construction Legal principles

Discussion

[33]The legal principles relating to the construction of contracts are well-established and uncontroversial. In JP Morgan International Finance Limited v Werealize.Com Limited [2025] EWCA Civ 57 Lewison LJ summarised (at [21]) some of the salient points as follows (emphasis added):
“i) Where the parties have used unambiguous language the court must apply it: Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900 at [23]. ii) Commercial common sense should not be invoked to undervalue the importance of the language of the provision which is to be interpreted. Save in a very unusual case, the meaning of a provision is to be found in its language: Arnold v Britton [2015] UKSC 36, [2015 AC] 1619 at [17]. iii) Business common sense is useful to ascertain the purpose of a provision and how it might operate in practice. But in the tug o’ war of commercial negotiation, business common sense can rarely assist the court in ascertaining on whose side the centre line marking on the tug o’ war rope lay, when the negotiations ended: Wood v Capita Insurance Services Ltd [2017] UKSC 24, [2017] AC 1173 at [28]. Moreover, business common sense must be considered from the perspective of both parties to the contract; not just one of them: BMA Special Opportunity Hub Fund Ltd v African Minerals Finance Ltd [2013] EWCA Civ 416 at [24]. iv) A court should be wary of assuming that it knows what is or is not commercially sensible where the language points to a clear answer. Parties who have chosen clear language in which to express their bargain can be assumed to have intended the result and therefore not to have regarded it as one that has no commercial or economic rationale: Palladian Partners LLP v The Republic of Argentina [2024] EWCA Civ 641 at [59]. v) A court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be an imprudent one for one of the parties to have agreed: Arnold v Britton at [20]. vi) In the case of a sophisticated and complex agreement, prepared with the assistance of skilled professionals, textual analysis is likely to be the principal tool of interpretation: Wood v Capita Insurance Services Ltd at [13]. vii) But even in such a case, negotiators may not achieve a logical and coherent text, because of conflicting aims, different drafting styles or deadlines which require compromise: Wood v Capita at [23]. In complex documents of the kind in issue there are bound to be ambiguities, infelicities and inconsistencies. An over-literal interpretation of one provision without regard to the whole may distort or frustrate the commercial purpose: Re Sigma Finance Corp [2009] UKHL 2, [2010] BCC 40 at [35]. viii) It is trite both that a provision in a formal document should be considered in the context of the document as a whole and that one would in principle expect words and phrases to be used consistently in a carefully drafted document, absent a reason for giving them different meanings: Barnardo’s v Buckinghamshire [2018] UKSC 55, [2019] ICR 495 at [23].”
[34]As Snowden LJ (as he then was) said in Sahara Energy Resource Limited v Société Nationale de Raffinage SA [2026] EWCA Civ 54, at [45]:
“…. as explained in Wood v Capita Insurance [2017] AC 1173, the court’s task when interpreting an agreement is to ascertain objectively, with the benefit of the admissible background, the meaning of the words that the parties have used. The court’s approach is neither a purely literalist nor an entirely contextual one. The court will consider the words used in the context of the agreement as a whole; it will have regard to the nature, formality and quality of drafting of the agreement; and it will have regard to the wider context. However, … evidence of the negotiations and earlier drafts is not admissible as an aid to interpretation of the final agreement: see e.g.Investors Compensation Scheme v West Bromwich BS [1998] 1 WLR 896.”
His Lordship went on to say, at [76]:
“It is trite law that in construing a particular clause of an agreement, the court does not have regard to the literal meaning of the words in isolation, but places the clause in the context of the agreement as a whole, and iteratively checks the possible rival meanings against the other provisions of the document.”
[35]I pause here to observe that this last principle is of some importance in this case, as I emphasised in Lewison LJ’s summary from Werealize.Com at [21]. The Agreement is reasonably detailed, and has been amended on a number of occasions. It appears to be the product of negotiation between sophisticated parties. I return to this point in my discussion and analysis of the parties’ submissions on its proper construction.[36]To these general principles can be added two further points of relevance in this case:(1) where possible, the court will seek to give effect to all parts of the contract and will avoid treating any part of it as inoperative or surplus: A&V Building Solutions Limited v J&B Hopkins Limited [2023] EWCA Civ 54 at [46], per Coulson LJ; and(2) where a contract contains general provisions and specific provisions, the specific provisions will be given greater weight than the general provisions where the facts to which the contract is to be applied fall within the scope of the specific provisions. The specific thus overrides the general: see Steve Ward Services (UK) Limited v Davies & Davies Associates Limited [2022] EWCA Civ 153 at [16], per Coulson LJ.

Analysis

[37]James McWilliams, who appears for EML, invites the Court to enter reverse summary judgment in EML’s favour and to dismiss the Claimants’ cross-application on both questions. As to the construction question, Mr McWilliams submits the Claimants are wrong on this issue because, while EML was obliged to make Breakage Payments to the Claimants in respect of outstanding balances on expired gift cards during the term of the Agreement, that obligation ceased on termination. Mr McWilliams submits this is put beyond sensible argument by the Agreement itself, which states in terms at paragraph 2 of Fee Schedule D that: “[the] Breakage Payments will terminate upon termination of this Agreement”; see [24] above. Mr McWilliams submits there is no textual foundation for the Claimant’s case that EML somehow nevertheless remained obliged to make such payments, nor any justification for looking beyond the clear and unambiguous language that the parties did use. In the absence of a contractual obligation to pay the Expired Funds to Pandora as Breakage Payments, it follows that EML is entitled to retain the same for itself.[38]Mr McWilliams developed this argument as follows: (1) While Section 2.2.g of the Agreement provides for the Expired Funds to be:
“remitted to [EML] from the Gift Card Account and paid to [the Claimants]”, that payment is to be: “in accordance with the Breakage Payment as outlined in Fee Schedule D”
. It is thus Fee Schedule D that contains the substantive provisions entitling the Claimants to payment in respect of the Expired Funds and which delineates the circumstances in which those payments are to be made in the form of Breakage Payments. (2) Paragraph 2 of Fee Schedule D only imposes upon EML an obligation to make Breakage Payments:
“[for] the period commencing on the Programme Commencement Date through the termination of this Agreement”, contractually defined as the “Breakage Payment Period”
. Inherent in this obligation and definition is a temporal qualification on EML’s obligation to make Breakage Payments, i.e. it envisages a period after which EML will not be required to make such payments. That period is after termination of the Agreement. (3) The position is put beyond doubt by the final sentence of paragraph 2 of Fee Schedule D, which states in terms that:
“[the] Breakage Payments will terminate upon the termination of the Agreement”
. This can only mean that EML is no longer required to make Breakage Payments after termination.[39]Mr McWilliams submits this construction of the Agreement is the correct one for three reasons.[40]First, it is the ordinary and obvious meaning of the words used by the parties in Section 2.2.g and paragraph 2 of Fee Schedule D. He submits that, in a detailed written contract of this type between sophisticated commercial parties, this is decisive.[41]Second, it gives effect to the Agreement as a whole and avoids treating any part of it as inoperative or surplusage:(1) If the intention was (as the Claimants assert) for the Expired Funds to be paid to them in full in all circumstances, the Agreement need only have provided that the Expired Funds be paid by EML from the Programme Account to the Claimants. Mr McWilliams submits that is precisely what the Agreement provides for in the event that, during the validity of the Card, the customer uses Card Funds to make a purchase. Section 2.2.g, however, does not do that; rather, it provides for the monies held in the Programme Account to be remitted in the first instance to EML. This payment to EML rather than directly to the Claimants only serves a purpose if there are some circumstances in which EML is not obliged to pay those monies onward to the Claimants.(2) If EML’s obligation to make Breakage Payments does not cease with termination and is in fact unqualified as the Claimants contend, the entire concept of a “Breakage Payment Period” and the express term that: “[the] Breakage Payments will terminate upon the termination of the Agreement” would be otiose. EML’s construction, by contrast, gives the provisions of paragraph 2 of Fee Schedule D coherence and effect.[42]Third, it gives primacy to the specific provision in the Agreement dealing with Breakage Payments, namely paragraph 2 of Fee Schedule D. While Section 2.2.g of the Agreement read in isolation might give the impression that the Expired Funds will always be paid to the Claimants, it is only the general provision.[43]Michael Watkins, who appears for the Claimants, submits the proper application of the relevant legal principles leads to the opposite conclusion:(1) Pursuant to Section 7.3, the terms of the Agreement continued to operate during the Transition Period.(2) Thereafter, Section 7.3 imposes an obligation on the parties to (Mr Watkins’ emphasis):
“cooperate to run-off the existing Card Accounts over time in an orderly fashion until the Card Accounts have a zero balance.” (3) Section 7.4 expressly provides that Article 2 shall “survive during and as required for the run-off under Section 7.3”
. Article 2 includes Section 2.2.g, which contains EML’s obligation to pay Expired Funds to the Claimants. (4) Section 2.2.g is “required for the run-off under Section 7.3” because it is the only provision in the Agreement which provides for the distribution of Expired Funds so as to reduce the Card Accounts to zero, and there is no express or implied term in the Agreement which provides that EML is entitled to keep the same. (5) Accordingly, EML’s obligations in relation to Expired Funds continued during the Transition Period and the Run-off Period until the Card Accounts have a zero balance. By keeping those funds for itself, EML has acted in breach of Sections 2.2.g, 7.3, 7.3.c, 7.4, 2.5.b, 2.6, 5.1 and paragraph 5 of Schedule D.[44]While the Claimants’ arguments are carefully and attractively presented by Mr Watkins, I do not consider they sit with the proper construction of the Agreement as a whole on the close analysis that the authorities require. The starting point is the language of Section 2.2.g itself. As Mr McWilliams submits, while Section 2.2.g read in isolation might give the impression that the Expired Funds will always be paid to the Claimants, it is only the general provision. It does not confer a free standing or unqualified right on the Claimants to receive payment of Expired Funds. It provides instead that, upon expiry of a gift card, the Expired Funds (emphasis added):
“will be remitted to [EML] from the Gift Card Account and paid to [the Claimants] in accordance with the Breakage Payment as outlined in Fee Schedule D.”
EML’s obligation to pay is therefore expressly conditioned by, and referable to, the Breakage Payment regime.[45]The substantive content and temporal scope of that mechanism is set out by specific provision in paragraph 2 of Fee Schedule D. That paragraph defines the “Breakage Payment Period” as the period:
“commencing on the Programme Commencement Date through the termination of this Agreement”, and provides, in clear and unqualified terms, that: “[the] Breakage Payments will terminate upon termination of this Agreement.”
[46]In my judgment, read in context of the Agreement as a whole that language lends itself only one proper interpretation: the parties agreed that EML’s obligation to make Breakage Payments would come to an end on termination of the Agreement. The general provision in Section 2.2.g must give way to the specific provision in Fee Schedule D. I cannot see any basis for reading paragraph 2 of Fee Schedule D to mean that payments continue after termination, or, as Mr Watkins implies, that termination refers only to the end of the quarterly payment mechanism rather than to the underlying entitlement itself.[47]Mr Watkins submits that Sections 7.3 and 7.4 have the effect of extending the obligation to make Breakage Payments beyond termination. While Section 2.2.g survived termination “during and as required for the run-off”, that did not enlarge or alter its substantive content. Sections 7.3 and 7.4 determine whether Section 2.2.g continues to operate after termination, not what Section 2.2.g requires when it does so. Section 2.2.g continues to operate during run-off, but according to its terms. Those terms include the express limitation contained in Fee Schedule D. Reading Section 2.2.g together with paragraph 2 of Fee Schedule D, the obligation to make Breakage Payments did not survive termination of the Agreement on 31 March 2024.[48]I do not see how the run-off provisions compel a different conclusion. Section 7.3.c requires the parties to cooperate to run-off existing card accounts “until the Card Accounts have a zero balance”. The position with Cards which expire during run-off is not provided for in Section 7.3.c; instead, Section 2.2.g remains operative. As I have found, it does not require payment of those funds to the Claimants in those circumstances. The mechanism for run-off is therefore complete without any continuing Breakage Payment obligation.[49]Indeed, the wording of Section 2.2.g itself supports this interpretation. It contemplates two distinct steps: first, the remission of Expired Funds from the “Gift Card Account”/Programme Account to EML; and, second, payment to the Claimants, but only “in accordance with” the Breakage Payments provisions. That can only have a sensible meaning if there are circumstances in which Expired Funds are remitted to EML but no onward payment is due. Termination of the Agreement is such a circumstance. To construe Section 2.2.g as conferring an ongoing entitlement to Expired Funds after termination would render both the defined “Breakage Payment Period” and the express termination provision in Fee Schedule D otiose. That would be contrary to the well-established principles of contractual construction I have set out above, particularly in the context of a detailed commercial agreement. The Expired Funds are not a “fee or charge”, and so do not offend any other provision of the Agreement. While the result in law is a contractual bounty for EML, (as Arnold v Britton holds) this Court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be an imprudent one for one of the parties to have agreed. I have been so; the Agreement is detailed, it has been amended on a number of occasions, and it appears to be the product of negotiation between sophisticated parties.[50]Submitting that it would be surprising or unreasonable for a payment services provider to retain Expired Funds in this way, Mr Watkins further argues this interpretation of Section 2.2.g and Fee Schedule D does not produce a commercially reasonable result. Even if that were so, that cannot justify departing from the clear language of the Agreement. The Court’s task is to interpret the bargain the parties made, not the bargain they might be thought to have made. While it may be that there is no other provision of the Agreement which allows EML to keep Expired Funds for itself and other provisions of the Agreement make it clear that EML is not entitled to do so in other circumstances (see, e.g., Sections 2.5.b, 2.6, 5.1, and paragraphs 3 and 5 of Fee Schedule D), the words “will be remitted to[EML]” in Section 2.2.g are plain and speak for themselves.[51]Lastly, Mr Watkins prays in aid the trust over the Programme Account monies created by Section 2.5.b of the Agreement (emphasis added):
“The Programme Account will be an account of [EML] and will be a ring fenced account with [EML] as Trustee, that can only be used to settle Cardholder liability, with no right of set off or counterclaim.”
[52]That, however, does not take Mr Watkins’ arguments further. The Expired Funds do not remain in the Programme Account (with each Card tracked separately therein by EML as a “[Gift] Card Account” in accordance with Section 2.6) because they are remitted to EML in accordance with Section 2.2.g and paid to the Claimants in accordance with the Breakage Payment. That is what happened: the Expired Funds were remitted to EML in accordance with Section 2.2.g, i.e. no longer held in the Programme Account, and paid to the Claimants in accordance with Section 2.2.g and Fee Schedule D. As I have found, paragraph 2 of Fee Schedule D only imposes upon EML an obligation to make Breakage Payments:
“[for] the period commencing on the Programme Commencement Date through the termination of this Agreement”, contractually defined as the “Breakage Payment Period”
. This envisages a period after which EML is not required to make such payments. That period is after termination of the Agreement. Accordingly, the Expired Funds were remitted to EML in accordance with the purpose for which the trust was impressed upon it by Section 2.5.b, as I explain further below in answering the question posed on breach of trust.

Conclusion

[53]For all those reasons, I find that, on the proper construction of the Agreement, EML’s obligation to make Breakage Payments terminated on 31 March 2024. Section 2.2.g does not require payment of Expired Funds to the Claimants in respect of Cards expiring after that date.[54]The answer to the question posed on construction is “no”. Breach of trust Legal principles

Breach of trust

[55]The legal principles in relation to this issue are also well-established:(1) An express trust requires the so-called “three certainties” identified by Lord Langdale MR in Knight v Knight (1840) 49 ER 58; 3 Beav 148: (a) intention to create a trust; (b) certainty as to the subject matter of the trust; and (c) certainty as to the beneficiaries of the trust.(2) The requisite intention to create a trust is often uncontroversial. As the editors of Lewin on Trusts (20th Edition, Sweet & Maxwell), observe (at 5-004): “in most cases there is no difficulty in discovering such an intention because the settlor directs that the trust property is to be held ‘in trust’ or ‘upon trust’.”(3) Where property is transferred on trust for a particular purpose, it is held on resulting trust for the transferor but is subject to a power in the trustee to use the trust property for the relevant purpose: Barclays Bank Ltd v Quistclose Investments Limited [1970] AC 567; and Twinsectra Limited v Yardley [2002] 2 AC 164.(4) If the purpose of the power cannot be achieved, the beneficiary is entitled to exercise their rights and call for the trust property to be reconveyed to them in the usual way: Twinsectra, at [13] per Lord Hoffmann and [100] per Lord Millett.(5) The key feature of a Quistclose trust is that the trust property is not intended to be at the free disposal of the recipient: see Lewin, at 9-054. This is often demonstrated by a requirement that the property should be kept separate: see Lewin, 9-065.

Analysis

[56]Mr Watkins contends the Agreement was intended to and did in fact create a Quistclose trust on the terms pleaded in paragraphs 30 and 31 of the Particulars of Claim. Section 2.5.b expressly provides that the Card Funds were to be held by the EML in the Programme Account, which was to be:
“a ring fenced account with [EML] as Trustee, that can only be used to settle Cardholder liability, with no right of set off or counterclaim.”
Thus, says Mr Watkins, Section 2.5.b expressly provides for there to be a trust, expressly provides that the trust property should be “ring fenced” (i.e., kept separate from the Defendant’s own affairs), and expressly provides that the funds could only be used for the purpose stated therein. In such cases, it is well-established that the property is held on resulting trust for the benefit of the payor (i.e., the Claimants): see Lewin, at 9-055.[57]It seems to me that this argument faces two hurdles and falls at each.[58]First, even if a Quistclose trust arises, its purpose is to ensure monies are applied in accordance with the Agreement. Section 2.2.g expressly permits Expired Funds to be remitted to EML. Once that occurs, the trust is discharged in orthodox Quistclose terms. As Lewin sets out, at 9-051:
“There need be no mandatory obligation on the part of the recipient to apply the money in accordance with the stated purpose. If the money is paid away not in accordance with the stated purpose, there is a breach of the resulting trust for which the payee is liable to pay equitable compensation. What is mandatory is that the money, if applied at all, is applied only for the stated purpose and for no other purpose. But that does not mean that the recipient is subject to a trust in the strict sense to carry out the purpose. He is empowered to carry out the stated purpose. If and to the extent that he does so, the money will be discharged from all equitable rights and interests which previously subsisted in it. The purpose of the arrangement is accordingly not to provide security for repayment of the loan. The discharge operates like the discharge in every other case where a trustee duly exercises a power vested in him to distribute the trust property freed and discharged from the terms of the trust. Hence the ‘primary trust’ is properly analysed as a power and not a trust.”
[59]The purposes to which EML was entitled to apply monies it held in the Programme Account are set out in the Agreement. In the case of Expired Funds, Section 2.2.g of the Agreement expressly provides that those monies are to be remitted from the ringfenced Programme Account in respect of which EML was said to be Trustee to EML itself. In making such payment, EML applied the monies it held in the Programme Account in accordance with the Agreement and thereby discharged any trust to which they were subject. Its obligation thereafter to make a Breakage Payment was purely contractual. Whatever credit risk the Claimants assumed once the monies were in EML’s hands and subject to payment to the Claimants in accordance with Section 2.2.g and Fee Schedule D was one the Claimants accepted by the express words of the Agreement itself. Had the parties intended to mitigate any such risk by requiring the monies to remain held on trust until payment over the Claimants, they could have provided so in the Agreement. They did not.[60]Second, and developing the last point further, the Agreement does not treat Expired Funds as the Claimants’ property held for return, but as sums generating a contractual payment obligation (i.e. the “Breakage Payments”) during a defined period. The Agreement does not provide that the Claimants are entitled to the Expired Funds. Section 2.2.g provides in terms for the Expired Funds to be remitted out of the Programme Account in respect of which they are said to be held on trust and EML’s only obligation thereafter is to make the Breakage Payments in accordance with Fee Schedule D. If, as is in fact the case, Fee Schedule D provides that EML does not have to make a Breakage Payment in a given circumstance, it must follow that the parties understood that EML should be entitled to keep the Expired Funds for itself. That architecture is inconsistent with an ongoing proprietary entitlement.

Conclusion

[61]For all those reasons, I find the Expired Funds are not held on resulting trust for the Claimants and the Claimants’ trust claims also all fall to be dismissed.[62]The answer to the question posed on this point is also “no”.

Disposal

[63]There are no reasons, still less compelling ones, for there to be a trial in these proceedings.[64]For the reasons which I have set out, I grant EML’s application and enter reverse summary judgment in its favour and dismiss the Claimants’ application. I will order accordingly.