In brief
- In Pandora Jewellery UK Ltd & Anr v EML Payments Europe Ltd [2026] EWHC 1047 (Comm), the High Court dismissed retailers' claims that they were entitled to post-termination payments of expired funds on their gift cards, ruling that the payment services provider could retain the funds instead.
- A specific express provision overrode a general provision that the retailer relied on to claim post-termination payments.
- The court emphasised that its role is not to rewrite clear contractual language based on what might appear fair and reasonable, even where one party gets an unexpected windfall.
The facts
In March 2011, the claimant (Pandora) and defendant (EML) entered into an agreement by which EML agreed to implement a gift card scheme for use in Pandora's retail stores and online. Under the agreement, funds collected from customers by Pandora were initially paid into a deposit account and were then transferred to a scheme account, where they were held on trust by EML.
The cards expired after 12 months, after which any remaining balance could no longer be used by the customer. These "expired funds" were to be paid to Pandora as "breakage payments" until termination of the agreement. The agreement expired on 31 March 2024, but a transition period and run-off period were put in place to allow for the scheme to be wound down.
EML made a payment to Pandora on 18 April 2024 for breakage payments that had accrued before 31 March 2024. However, no payments were made in respect of breakage payments accruing during the transition period and run-off period. Pandora issued proceedings for those sums, but EML contended that under the terms of the agreement it was entitled to keep the funds for itself and sought reverse summary judgment.
The key clauses
Section 2.2.g provided that:
Upon the expiry of a Gift Card, … [the Expired Funds] will be remitted to [EML] from the Gift Card Account and paid to [the claimant] in accordance with the Breakage Payment as outlined in Fee Schedule D.
Fee Schedule D specified that:
For the period commencing on the … Commencement Date through the termination of this Agreement (the 'Breakage Payment Period'), [EML] will pay [Pandora] an amount equal to one hundred percent (100%) of the Expired Funds … The Breakage Payments will terminate upon termination of this Agreement.
Section 7.3 of the agreement dealt with the transition period and run-off period, and provided that:
Upon termination of this Agreement, the [scheme] will continue to operate for a transition period … up to and including the 30th September 2024 (the 'Transition Period') in order for the parties to wind down the [scheme]. During the Transition Period, the [scheme] will continue to operate in accordance with the terms of this Agreement. For clarification the Transition Period is not a part of the term of the Agreement, but rather a post-termination service…
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. …
Under section 7.4, section 7.3 survived termination of the agreement, and section 2.2.g survived "during and as required for the run-off".
The judgment
As Judge Baumgartner noted, the legal principles relating to the construction of contracts are now well established. The court must ascertain objectively, with the benefit of the admissible background, the meaning of the words that the parties have used.
In this case, the judge noted that, while section 2.2.g read in isolation might give the impression that expired funds would always be paid to Pandora, it was only a general provision – it did not provide the claimant with a free-standing or unqualified right to receive expired funds. Instead, EML's obligation to pay was expressly conditioned by and referable to the breakage payment regime set out in Fee Schedule D, which provided in clear and unqualified terms that breakage payments would terminate upon termination of the agreement.
Judge Baumgartner rejected Pandora's argument that sections 7.3 and 7.4 extended EML's payment obligations beyond termination. Whilst section 2.2.g survived termination "during and as required for the run-off", that did not enlarge or alter its substantive content – it continued to operate according to its terms. The fact that section 7.3.c required the parties to cooperate "until the card accounts have a zero balance" also did not compel a different conclusion.
While this construction may result in a "contractual bounty" for EML, the fact that it was a surprising or commercially unreasonable result did not justify departing from the clear language of the agreement. The court's task was to interpret the bargain the parties made, not the bargain they might be thought to have made.
The judge also rejected Pandora's further argument that EML held the expired funds on resulting trust. Whilst, pursuant to the agreement, the card funds were to be held in the scheme account by EML as trustee, section 2.2.g expressly permitted expired funds to be remitted to EML. Once that occurred, the trust was discharged. Any obligation to make a breakage payment thereafter was purely contractual.
Key takeaways
- As this decision emphasises, under English law, plain language prevails in commercial contracts.
- Even where an agreement delivers an apparently unintended windfall to one party, the courts will not invoke business common sense to depart from clear and unambiguous contractual drafting.
- It is therefore vital to give clear consideration to the commercial implications of contractual terms at the outset, rather than seeking to rely on arguments of commercial reasonableness at a later stage.
- The interaction between general operative clauses and specific provisions must also be considered carefully, as inconsistencies between the two are likely to be resolved in favour of the specific provision. For retailers, this decision is a helpful reminder that, when entering into payment services and gift card arrangements, they cannot assume that expired customer funds will automatically be returned to the retailer.