Lewis Silkin achieved success for QuidPay Finance Limited ("QuidPay") against a leading e-money services provider, SettleGo Solutions Limited (trading as "OpenPayd"). OpenPayd provided QuidPay with electronic money and related payment services. Following an expedited Preliminary Issues trial, the Court ordered OpenPayd to release a substantial multi-million pound reserve of client funds that it had sought to retain after the parties' commercial relationship came to an end, contrary to the express terms of the agreement between the parties.
The team was led by Duran Ross (Partner), supported by Fraser McKeating (Managing Associate), Bella Lamplough Shields (Associate) and Giorgia Merighi (Trainee Solicitor).
QuidPay's claim arose after OpenPayd imposed a restriction on QuidPay's e-money accounts, citing alleged fraud involving two of QuidPay's end customers (the subject of separate proceedings in Malta). Those restrictions prevented QuidPay from using OpenPayd's payment services and facilitating its own e-money services to its end customers, with the result that neither QuidPay nor its end customers could access funds held within the accounts. OpenPayd also retained a reserve of QuidPay's funds (the "Reserve"), effectively treating the sum as "security collateral for an uncrystallised liability" notwithstanding clear safeguarding obligations contained in the Payment Services Regulations.
QuidPay initially sought an injunction against OpenPayd to release all monies owed to it in accordance with the underlying agreement. Following the eleventh-hour assertion of an alleged "legal impediment" on the return of funds if QuidPay were successful in obtaining interim relief, Richard Spearman KC (sitting as a Deputy High Court Judge) ordered a Preliminary Issues trial to determine the correct interpretation of certain contractual clauses relating to the taking of the Reserve by OpenPayd and other matters. Ultimately, due to the alleged legal impediment falling away shortly before the hearing of the Preliminary Issues trial, only one Preliminary Issue remained to be determined, as follows:
"Does clause 15 of the Defendant's General Terms of Use, as applicable to the agreements between the parties, survive the termination of the agreements, and in particular where, assuming the Defendant has validly exercised a right to require the Claimant to maintain a reserve in accordance with clause 15.1 and/or 15.3 prior to termination of the agreements, does that give rise to any accrued right of the Defendant which survives termination of the agreements (such that the Defendant is entitled to continue to require the maintenance of a reserve after termination of the agreements)."
The trial was heard by Lance Ashworth KC, sitting as a Deputy High Court Judge. The issue arose from OpenPayd requiring QuidPay to maintain the Reserve under its standard terms of business. After QuidPay terminated the agreement, OpenPayd argued that its right to hold the Reserve continued indefinitely pending resolution of proceedings brought against OpenPayd's parent company ("OP Malta") in Malta and a chain of indemnities between OP Malta, OpenPayd and QuidPay. QuidPay's case was that any such right fell away on termination, as the contract expressly provided for which clauses survived termination. Clause 15, the Reserve clause, was not one of those clauses. QuidPay therefore argued that, following its termination of the contract, it was entitled to immediate repayment of the Reserve in full.
The Court agreed with QuidPay. It held that the contractual obligation to maintain the Reserve was a primary, ongoing obligation which did not survive termination of the agreement, meaning OpenPayd had no continuing right to withhold the funds once the relationship ended. The judge agreed that it was "difficult to see how [the obligation to maintain the Reserve] could impliedly survive termination if it was not said to do so expressly". The judge also rejected OpenPayd's "backwards" argument that the way it had chosen to operate the reserve in practice reflected the correct interpretation of the contract, describing that approach as an impermissible attempt to construe the agreement by reference to one party's own conduct after the contract was made.
The Court further found that OpenPayd's preferred interpretation sat uneasily with the safeguarding protections afforded to customer funds under the Electronic Money Regulations 2011, reinforcing the construction for which QuidPay had contended.
The Court also held that there was no commercial justification for departing from the words of the contract, noting that the matter ultimately came down to the "question of how the parties [...] contracted as to the allocation of risk". Neither party's construction of the clause was one which was wholly contrary to commercial common sense and neither outcome arising from the respective interpretations was so commercially absurd as to merit departing from the view the Judge had reached on the construction of the words as written.
As a result, OpenPayd has been ordered to release the disputed, multi-million pound Reserve to QuidPay immediately.
Commenting on the outcome, Duran Ross said: "We are delighted to have achieved this important result for QuidPay after a series of hard-fought Court hearings. The judgment provides a welcome reinforcement of the modern approach to interpretation of contracts, which is to first consider the wording of the contract, and then, only where ambiguous, to consider whether there is any justification for departing from that construction on the basis of contextual considerations and commercial sense."
QuidPay's claim against OpenPayd is ongoing with it seeking, amongst other things, damages, which were not the subject of the trial.
Lewis Silkin instructed Hugh Miall KC and Ryan Hocking of XXIV Old Buildings. The Defendant was represented by Allen Overy Shearman & Sterling LLP, which instructed Nico Leslie (Fountain Court).
