Delivery Hero SE v Mastercard Asia/Pacific PTE Ltd
| Jurisdiction | England & Wales |
| Judge | Mr Justice Foxton |
| Judgment Date | 19 July 2023 |
| Neutral Citation | [2023] EWHC 1827 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2022-000657 |
[2023] EWHC 1827 (Comm)
Mr Justice Foxton
Case No: CL-2022-000657
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
Sa'ad Hossain KC and Harry Stratton (instructed by Goodwin Procter (UK) LLP) for the Claimant
Richard Millett KC (instructed by Bird & Bird LLP) for the Defendant
Hearing dates:10 July 2023
Draft Judgment Circulated: 12 July 2023
Approved Judgment
I direct that no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
THE HONOURABLE Mr Justice Foxton
This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be Wednesday 19 July 2023 at 10:30am.
The Honourable
Introduction
This is an application by the Claimant ( Delivery Hero) for summary judgment on its claim for payment of the “Sign-On Bonus” pursuant to its Client Business Agreement ( the CBA) with the Defendant ( Mastercard).
Delivery Hero carries on the business of online food ordering and delivery to customers, in association with vendors who provide food, and riders who transport it to customers.
Mastercard is a Singaporean company and subsidiary of Mastercard Incorporated. It provides payment processing services in various countries in the Asia Pacific region to merchants such as Delivery Hero, including the Mastercard Payment Gateway Service ( MPGS).
Delivery Hero and Mastercard entered into the CBA which set out terms which would apply to Delivery Hero's use of MPGS. Mastercard would receive fee revenue when orders were processed through MPGS. In return, Mastercard undertook various obligations to Delivery Hero, including an obligation to pay an upfront sign-on bonus ( the Sign-On Bonus).
It is common ground that the CBA was terminated in 2022:
(1) Mastercard says that this occurred on either 9 or 12 October 2022, following service by it on 9 September 2022 of a notice under the terms of the CBA requiring breaches of the CBA by Delivery Hero to be remedied within 30 days, which Mastercard says was not done.
(2) Delivery Hero says that the CBA was terminated on 31 December 2022, because Mastercard's notice and purported termination were a repudiatory breach of contract.
Delivery Hero claims that it had acquired an accrued right to the Sign-On Bonus before termination even on Mastercard's case, and it seeks summary judgment pursuant to CPR 24.2 in respect of the Sign-On Bonus, in the sum of USD40 million and interest in the sum of USD 4,512,624.66.
I have spared the parties the usual citations to the summary judgment test, but have had it well in mind.
The relevant terms of the CBA
Clause 1 of the CBA addressed the support which Mastercard agreed to provide to Delivery Hero:
(1) Clause 1.2 states that the support would be “paid by Mastercard to the Client over five (5) Contract Years commencing from the succeeding quarter from the Commencement Date” (defined as the Support Period) but that “for the avoidance of doubt, notwithstanding the Support Period, the Sign-On Bonus specified in Clause 1.4 below will be payable from the Commencement Date”.
(2) Clause 1.3 provides that “where Support payments are due under this Agreement, Client … shall submit a request for payment to Mastercard in an amount equal to the relevant support payment due” (a Payment Request). Clause 1.3 went on to provide that “the validity of the Payment Request shall be determined by Mastercard in accordance with the terms of this Agreement. Support payments will be made to the Client … within forty-five (45) days of receipt by Mastercard of a valid Payment Request.”
Clause 1.4.1 provides that the Sign-On Bonus specified in Exhibit A (USD40m) would be payable upfront on the Commencement Date (which it is agreed is 28 March 2022) in the following terms:
“The Sign-On Bonus specified in Exhibit A will be payable to Client at the Commencement Date, subject to receipt by Mastercard of a valid Payment Request”.
Clause 1.4.2 provides:
“If Client fails to comply with the MPGS Order Target (as defined in Clause 2.5.2 below), Mastercard will be entitled to recover the Sign-On Bonus in accordance with clause 3.5 below.”
Clause 3.5 dealt with the subjects of set-off generally, and potential claw back of the Sign-On Bonus, as follows:
“ Support Refund
3.5.1 With the exception of the Sign-On Bonus, which is covered under Clause 3.5.2, Mastercard will be entitled to set-off or recover any amount which:
(a) Mastercard may have paid if it is later determined that Client is not entitled to such amount whether as differential or whole, due to material breach, nonperformance or violation of the terms of this Agreement; or
(b) is otherwise due to Mastercard under or arising out of this Agreement.
Mastercard may make that recovery or set-off at any time during the Term and for a period of one year from the expiry of this Agreement.
3.5.2 The Client agrees that the following claw back terms will apply for the Sign-On Bonus:
(a) MPGS annual schedule outlined in Table 3 of Exhibit A will be utilised for tracking and management. To give sufficient time for technical integration, Contract Year 1 for purposes of determining achievement of the MPGS Order Target shall commence six (6) months from the Commencement Date (“ MPGS Integration Period”). Subsequent Contract Years will follow thereafter.
(b) It is expressly clarified that any shortfall for MPGS Order Target in a Contract Year (where the Contract Year shall be prior to Contract Year 5) will not trigger a clawback, however, it will require the Parties to discuss plans for a catch-up schedule.
(c) At the end of Contract Year 5, if the MPGS Order Target is not met, both Parties can mutually decide to extend the contract by 12 months.
(d) If after Contract Year 6, the MPGS Order Target is still not achieved, pro-rata clawback will become applicable.
Notwithstanding the above, the clawback amount shall be calculated using the following formula in the event the provisions of Clauses 2.5.4, 2.5.5 and 2.5.6 become applicable.
Percentage of Achievement = [Actual number of Orders processed at the end of Contract Year 5 or Contract Year 6 (if applicable)] / [MPGS Order Target minus actual number of Orders from acquirer(s) that Mastercard did not equalize (if applicable) minus actual number of Orders from acquirer(s) in cases of interruption of MPGS (if applicable) minus actual number of Orders from acquirer(s) in case of sub-standard performance of MPGS in any Country (if applicable)]
Clawback Percentage = One (1) minus the Percentage of Achievement
Pro-rata Clawback Amount = Sign-On Bonus multiplied by Clawback Percentage. For the avoidance of doubt, the Pro-rata Clawback Amount shall only apply if the Clawback Percentage is a positive number.
Notwithstanding the above, Mastercard shall have the right to claw back the entire Sign-On Bonus in the event of breach of Clauses 2.7, 2.8, 2.11.2, 3. 6 or 3.8. Mastercard will in good faith analyse the impact of breach of Clause 3.8 and its resulting loss prior to the claw back of the Sign-On Bonus.”
The provisions referred to in that last quoted paragraph were as follows:
(1) clause 2.7: agreeing not to encourage holders of Mastercard branded card to move to competing cards or converting Mastercard branded cards to competing cards;
(2) clause 2.8: agreeing to ensure the provisions of the CBA are complied with in relation to any cards where Delivery Hero divests of the relevant cardo portfolio;
(3) clause 2.11.2: agreeing not to use Support from Mastercard for the benefit of any competing brand;
(4) clause 3.6: agreeing to comply with anti-bribery and corruption legislation; and
(5) clause 3.8: a confidentiality obligation.
Contract Year 6 would have been the year from 29 September 2028. This was never reached, due to the termination of the CBA in 2022.
When did the right to the Sign-On Bonus accrue?
It is common ground that the termination of the CBA did not affect rights which had already accrued – or earned, or unconditionally acquired, as it sometimes put – although the effective termination of the CBA would prevent primary obligations accruing due thereafter: Bank of Boston Connecticut v European Grain and Shipping Ltd (the Dominique) [1989] AC 1056, 1098–1099, 1096 and 1111; Chitty on Contracts (34th ed), [27–079]. The issues between the parties in this case are:
(1) what had to occur for Delivery Hero to acquire an accrued right to the Sign-On Bonus?; and
(2) had those matters occurred prior to 9 October 2022?
What had to occur for Delivery Hero to acquire an accrued right to the Sign-On Bonus?
As it appeared from the skeleton arguments, the issue between the parties was limited to a dispute as to whether, as a matter of timing, all the events which had to occur before Delivery Hero acquired an accrued right to the Sign-on Bonus had occurred before termination.
However:
(1) Mr Millett KC raised a further argument in a supplemental note before the hearing, the gist of which was that Mastercard would arguably have had the right to recover the Sign-On Bonus, had it been paid, on the ground that there had been a total failure of consideration, which provided a defence to the claim for payment.
(2) At the hearing, Mr Millett KC developed that argument, to contend that Delivery Hero's right to the Sign-On Bonus was conditional upon it not being in material breach of the CBA when the Payment Request was made and/or when the 45-day period elapsed, which condition was not satisfied.
It makes more sense to deal with those arguments...
To continue reading
Request your trial