Harry Greenhouse v Paysafe Financial Services Ltd
| Jurisdiction | England & Wales |
| Judge | Andrew Burrows |
| Judgment Date | 30 November 2018 |
| Neutral Citation | [2018] EWHC 3296 (Comm) |
| Court | Queen's Bench Division (Commercial Court) |
| Docket Number | Case No: CL-2017-369 |
| Date | 30 November 2018 |
[2018] EWHC 3296 (Comm)
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (QBD)
Royal Courts of Justice
The Rolls Building
London, EC4A 1NL
Andrew Burrows QC
(SITTING AS A JUDGE OF THE HIGH COURT)
Case No: CL-2017-369
Mr Andrew George QC and Mr Daniel Cashman (instructed by Northridge Law LLP Solicitors) for the Claimant
Mr Hugh Norbury QC and Mr Adil Mohamedbhai (instructed by Fieldfisher LLP Solicitors) for the Defendant
Hearing dates: 5, 6, 7 November 2018
Andrew Burrows QC:
INTRODUCTION
(1) General
This is a dispute about the alleged non-payment of commission in the context of e-wallets and online gambling/gaming. The defendant, Paysafe Financial Services Ltd (formerly known as Optimal Payments Ltd), operates a global electronic money payment service allowing users to send and receive payments online. In other words, users are provided with e-wallet facilities. Neteller is one of the defendant's brands. As this case is concerned with Neteller's operations, it is convenient to refer to the defendant throughout as Neteller. The events with which we are concerned occurred between May 2013 and October 2014. The bulk of Neteller's business was then (and remains) in providing e-wallet facilities to participants in online gambling and gaming (especially online poker). Neteller had contractual relationships with merchants, particularly those operating online gambling and gaming sites, whereby Neteller was paid a percentage fee when a Neteller account was used to pay money to those merchants.
Neteller referred to the users of its facilities as its ‘members’. Members were able to sign up to Neteller directly through its website. Neteller also ran an ‘affiliate programme’ whereby ‘affiliates’ would promote Neteller's services in return for commission on transactions using Neteller undertaken by the members they had recruited. If recruited by an affiliate, members were ‘tagged’ to the affiliate who had recruited them. In short, the affiliate was paid commission on transactions using Neteller by members tagged to that affiliate.
Harry Greenhouse, the claimant, was well-known in the poker community and remains so. Prior to the events with which we are concerned, he had played mid to high stakes poker for many years and he ran a poker coaching business between 2006 and 2014. From early 2013 his business interests included promoting various brands providing online payment services to, amongst others, online poker players. In May 2013 he approached Neteller with a view to becoming one of its affiliates. The person he dealt with at Neteller was Lee-Ann Johnstone. She was in charge of Neteller's affiliate programme (in her capacity as Vice-President of Marketing for Neteller between 2011 and 2016). On 9 July 2013, a contract – ‘the affiliate agreement’ – was entered into between Mr Greenhouse and Neteller (or, to be precisely accurate, Optimal Payments Ltd which was the company behind Neteller at that time). This case is about elements of that contractual relationship. As is common ground, the affiliate agreement was lawfully terminated on 26 October 2014 under an express termination clause (Neteller having given Mr Greenhouse the required 30 days' written notice of termination).
This is a split trial so I am dealing with liability only. The determination of quantum awaits, and is dependent on, this judgment. Prior to, or during the course of the trial, the disputed issues have been narrowed down to four. I shall refer to them as follows: the ‘affiliate consent form issue’; the ‘merchant exclusion issue’; the ‘unilateral notice issue’; and the ‘daily reporting issue’. The law that I have to apply and most of the relevant facts are not in dispute. What is in dispute throughout is how the law applies to the facts.
(2) Some features of the contract with Mr Greenhouse
When Mr Greenhouse approached Ms Johnstone in May 2013, he made clear to her that, because of his extensive contacts in the poker world, he could recruit many new members for Neteller. Very importantly, he also suggested that he could encourage existing members of Neteller, who had not been using their Neteller accounts for many months (perhaps because they were using an account of one of Neteller's rivals, in particular Skrill), to start using their accounts again. He was therefore seeking, and was given, a bespoke affiliate agreement. The contract (ie the affiliate agreement) entered into on 9 July 2013 (which comprised Neteller's standard affiliate terms modified by terms set out in a letter of 5 July 2013 including a schedule attached to that letter) was, at the time it was entered into, unique to Mr Greenhouse. Three particular features of that contract differed from Neteller's standard affiliate agreement. First, and most importantly, he was allowed to have tagged to him existing members, whom he had reactivated, provided they had not used Neteller for a period of six months and provided they were not already tagged to another affiliate. Secondly, he was given a choice of allocating a ‘referred member’ (ie one of the members he had recruited, whether a new or a reactivated member) to one of three affiliate accounts: a Gold VIP account, an Exclusive VIP account or a Super Affiliate account. There were different rates of commission for him on each of the three accounts. In practice, as we shall see, Mr Greenhouse only ever allocated members to the Gold VIP account although one of his claims (relevant to the ‘merchant exclusion issue’) was that he would have allocated members to the Exclusive VIP account if Neteller had not, in breach of contract, applied merchant exclusions to that account. Thirdly, the agreement was to continue for (at least) one year (terminable after that date by either party giving written notice of 30 days) but, after one year, Neteller had the right to amend the terms of the agreement by giving Mr Greenhouse 60 days' notice of such amendments.
(3) The two main witnesses
I should indicate at the outset my impressions of the two main witnesses, Mr Greenhouse and Ms Johnstone. Much of the relevant evidence is contained in contemporaneous documents, especially emails, but, in addition to their witness statements (dated 17 and 18 September 2018 respectively), both Mr Greenhouse and Ms Johnstone gave oral evidence for the best part of a day each.
I regarded Mr Greenhouse as a reliable and credible witness. He was ‘on top of’ the documents on which he was asked to comment and gave careful and considered responses. Counsel for the defendant, Hugh Norbury QC, accused him at times of being evasive and putting forward inappropriate legal arguments instead of his own evidence. My view was that he was rightly taking his time to ensure that he understood the context of the emails that he was being asked about; and it was not surprising that he saw matters through the lens of the legal case that he was bringing. He came across as clever, with an acute business mind, and driven by making money. He also came across as someone who was willing to manipulate others to his own advantage and his business ethics will strike many as questionable. In particular, he made available online what became known as ‘the cashback bible’ which told online gamers how they could ‘play the system’ so as to maximise cashback deals and such like from the merchants operating online gaming sites. His advice may be viewed as encouraging people to mislead those merchants by, for example, depositing money with merchants to attract cashback deals without any intention of going on to spend much, if any, money with those merchants. Mr Greenhouse saw it rather as explaining the tricks of the trade, within the rules, and having the legitimate aim of maximising gains from the deals offered.
Ms Johnstone, in contrast, seemed at times to be out of her depth during her cross-examination by counsel for the claimant, Andrew George QC. She responded to a number of questions by saying simply that she had no answer to the question. While I regarded her as a witness who was doing her best to be as honest and accurate as possible, two general features of her evidence are noteworthy. The first was that, as made clear by the contemporaneous emails and her evidence in relation to the merchant exclusion issue, she had occasionally thought it necessary, in order to protect Neteller's interests (ie out of loyalty to Neteller) to tell Mr Greenhouse one thing while those within the company, herself included, were aware that the actual position was rather different. Secondly, her understanding was that at all relevant times it was perfectly acceptable for Neteller to change the terms of the affiliate agreement made with Mr Greenhouse if it was in Neteller's interest to do so. It may well be, as she thought, that that was permitted under some of the other contracts with which she was dealing. But that was certainly not the case in relation to the affiliate agreement with Mr Greenhouse: it is not in dispute that unilateral amendments were only permitted after one year and then only by giving 60 days' notice to Mr Greenhouse.
I also heard evidence on behalf of Neteller from Mark Jeffrey and Sara Rita who were both employed by Neteller at the time of these events. Both were reliable and credible witnesses but only the former added anything of real relevance and even that was of very limited significance.
THE RELEVANT LAW
As I have said, the law applicable to this case is not in dispute. There are five main areas of law in play: (1) contractual interpretation; (2) implied terms; (3) variation of a contract; (4) promissory estoppel; and (5) interpretation, and withdrawal, of a unilateral notice of amendment. I shall now look at each of these five areas...
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