England and Wales High Court (Chancery Division) Decisions

Household Global Funding Inc v. British Gas Trading Ltd [2001] EWHC Ch 400 (29th June, 2001)

Case No: HC 0100604

IN THE HIGH COURT OF JUSTICE CHANCERY DIVISION

Royal Courts of Justice

Strand, London, WC2A 2LL

Date: 29th June 2001

B e f o r e :

THE HONOURABLE MR JUSTICE LIGHTMAN

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Lord Grabiner QC, Mr David Mildon QC and Mr Paul Key (instructed by Simmons & Simmons, City Point, 1 Ropewalk Street, London EC2Y 9SS for the Claimants)

Mr Christopher Carr QC & Mr Andrew Lenon (instructed by Linklaters Alliance, One Silk Street, London EC2Y 8HQ for the First and Second Defendants)

The Third Defendant was unrepresented

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APPROVED JUDGMENT

INTRODUCTION

1. The claimants in this action are Household Global Funding Inc ("HGF"), its subsidiary Household International (UK) Limited ("HI") and HI's subsidiary HFC Bank Plc ("HFC"). They are part of the "Household" group of companies ("the Household Group"). The defendants are British Gas Trading Limited ("BGT") and GB Gas Holdings Limited ("GBG"), both of which are subsidiaries of Centrica plc ("Centrica"). They are part of the Centrica group of companies ("the Centrica Group"). The defendant, Goldbrand Developments Limited ("Goldbrand"), is a joint venture company owned in equal shares by HI and BGT.
2. This action is concerned with the rights of BGT on the expiration of the term of a joint venture between HI and BGT ("the Joint Venture") under the provisions of a Receivables Purchase Agreement ("the RPA") dated the 14th June 1996 made between HGF, HFC and BGT. The RPA provides that in the events that have happened BGT shall purchase the "Receivables". The issue between the parties is as to the meaning of this term in this context.
3. The Centrica Group provides a wide range of products and services including the provision of energy, financial service products and insurance. BGT carries on business as a supplier of gas and electricity to domestic and business users in the United Kingdom. HFC is a bank well known as the issuer and operator of a number of branded credit cards. On the 14th June 1996 BGT and HI established the Joint Venture which (unless extended by BGT) was to continue for five years from (in the events that happened) the 3rd September 1996. The date on which the Joint Venture comes to an end is referred to (for reasons which will appear) as the Purchase Date. To this business BGT contributed (through a subsidiary) a licence to use its "Goldfish" trademark and brand ("the Mark") which at that date enjoyed no goodwill, and capital funding of some £44 million, and HI contributed its credit card expertise and (for this purpose) the services as card issuer of HFC. The product of the Joint Venture was the Goldfish credit card ("the Card"), a credit card with associated loyalty arrangements under a loyalty scheme ("the Scheme") whereby cardholders earned points from their card usage which are redeemable against (amongst other things) household gas bills, and a portfolio of credit card agreements between customers and HFC ("the Portfolio").
4. There is a complicated contractual structure. The principal agreement is a joint venture agreement between HI and BGT ("the JVA") to which are annexed drafts of a series of ancillary agreements ("the Ancillary Agreements") and an initial business plan ("the IBP") to which reference is made in the various agreements. The Ancillary Agreements were executed dated the 14th June 1996 at the same time as the JVA. The JVA provided for the establishment of Goldbrand as the Joint Venture vehicle owned in equal shares by HI and BGT. Its role was to act as an intermediary marketing the Card and to operate the Scheme which is there referred to as "the GEL Programme" (GEL being the previous name of Goldbrand). But beyond this its role was to act as the medium for the receipt, holding and distribution of the profits of the Joint Venture to HI and BGT on the Purchase Date.
5. The Ancillary Agreements included: (a) (of foremost importance for the purposes of these proceedings) the RPA, whose role was to confer upon BGT the right to extend the life of the Joint Venture from the minimum five to a maximum eight years and to exercise during the life of the Joint Venture any one of three options in respect of the sale of "Receivables" to be completed on the Purchase Date; (b) a card agreement ("the Card Agreement") made between HFC and Goldbrand under which HFC agreed to issue the Card and provide the necessary processing services in respect of the Card; (c) an agreement made between HFC and Goldbrand ("the Intermediary Agreement") providing for payment to Goldbrand of a brokerage commission for introducing new cardholders to HFC; (d) an agreement between BGT and Goldbrand relating to advertising the Card; and (e) a Loan Notes Subscription Agreement ("the LNSA") made between BGT and Goldbrand under which BGT agreed to subscribe in cash for up to (in aggregate) £49,833,020 of Loan Notes which was repayable, together with interest at the rate of 12% rolled up and compounded, on "the Purchase Date".
6. The Card proved to be a popular and successful product. As at February 2001 there were some 739,939 accounts and over 1,021,611 cardholders who have entered into cardholder agreements with HFC. The total sum due from cardholders to HFC amounts to some £600 million. In 2000 BGT decided not to extend the life of the Joint Venture beyond the initial five years. In anticipation of the expiration of the Joint Venture (and in place of the Joint Venture) on the 13th December 2000 Centrica entered into a new joint venture with Lloyds TSB, the aim of which is to provide a broad range of financial services, including banking products, under the Goldfish brand, and Centrica proposes to contribute the Portfolio to this new joint venture on or after the Purchase Date. In pursuance of this plan, having earlier given notice that it did not intend to extend the period of the Joint Venture beyond the 3rd September 2001, on the 1st December 2000 BGT gave notice electing to exercise its right under the RPA on the Purchase Date to purchase what are referred to in the JVA as "the Receivables". On the same day HFC gave notice terminating the Card Agreement also on the 3rd September 2001. Thereafter on the basis that BGT was entitled to the business as a going concern, BGT required all relevant data relating to the accounts of customers. An exchange of correspondence followed in which HCF did not display full hearted willingness to provide this information and certainly if it did not receive a substantial payment. There then emerged a disagreement as to BGT's entitlement under its purchase of Receivables. This disagreement led to this litigation.
7. The issue which arose was whether as a matter of construction of the RPA the subject of the option to purchase was only the sums due from card customers on their accounts with HFC ("the Debt") or was the whole Card business as a going concern, including both the Portfolio and the information or data held by HFC as Card processor relating to each cardholder which is essential for the continuing relationship as Card issuer with that cardholder. (The transfer of the data held by a processor where the transfer involves a change in the client for whom the processor provides processing services is referred to as an internal migration; the transfer of data from one processor to another (who is generally referred to as "the target") is referred to as an external migration. The lengthy period required for preparation for a migration together with the process of migration itself are referred to as a conversion. For convenience I use the term "migration" to include both the preparation leading to the migration and migration itself).
8. The resolution of this dispute was a matter of great urgency since the purchase is due to be completed on the 3rd September 2001. HGF, HI and HFC commenced these proceedings to resolve this issue on the 9th February 2001. There followed applications by both sides for summary judgment which were heard by Lloyd J. between the 2nd and 4th April 2001. On the 24th April 2001, Lloyd J. (in a careful and fully reasoned judgment to which I am indebted) refused both applications. He held that both sides had well arguable cases and that a decision should only be made which of them was correct at a trial when all the relevant evidence might be properly considered. He directed a speedy trial, and the speedy trial began before me on Wednesday the 6th June 2001. In view of the obvious urgency of an early judgment, I have sought to oblige. This has meant that I have avoided detailed consideration of what I consider to be peripheral matters.
9. At the trial both parties put before the Court a body of evidence from both witnesses of fact and experts. The evidence of the witnesses of fact was principally directed to furnishing the court with the matrix of fact in which the various agreements are to be construed; and the expert evidence was principally directed to the issue whether the timetable for sale under the three options conferred on BGT afford a contra-indication to any intention that a sale should involve a "migration of data" and accordingly a sale as a going concern as claimed by BGT. As is recurrently the state of affairs in cases such as the present, the quantum of the evidence was disproportionate to its value.

THE JVA

10. The JVA began with a recital that:

"the parties propose that [Goldbrand] should be used as their joint venture vehicle to develop a consumer credit card business and initially introduce a credit card to be known as the 'Goldfish Card'".

The JVA then went on to provide that:

(1) Goldbrand (which at that time had an issued share capital of £1 registered in the name of BGT) was to increase its share capital to £25,000 and BGT was to subscribe at par for 12,499 and HI at par for 12,500 of the new shares (clause 2.1.C);

(2) HFC was to become Goldbrand's bankers and HI should at all times ensure the maintenance by HFC of such amount of regulatory capital as should be required from time to time to maintain the capital adequacy of HFC as the issuer of the Cards (see clause 5.3);

(3) (unless and until the parties otherwise agreed) Goldbrand's business was to be confined to the establishment, marketing, introduction and management of a range of financial services including, but not limited to, credit cards, insurances and loans (see clause 4);

(4) appropriate permissions would be obtained to enable Goldbrand and HFC to use the Mark in relation to the anticipated activities (clause 5.6);

(5) finance for Goldbrand's business would be provided by the subscriptions for shares and the loans to be made by BGT under the LNSA;

(6) Goldbrand should prepare a five year business plan which should include in respect of each year a summary of business objectives and that the first business plan in respect of the five year period should be in the agreed form annexed i.e. the IBP;

(7) if BGT should become (as in the event it did become) the owner of the whole share capital of Goldbrand on a purchase under the RPA, HI should covenant that for two years after the Purchase Date no company within the Household Group would compete with Goldbrand by offering a credit card (or certain other products) in conjunction with any provider or supplier of gas, water or electricity (other than BGT) or by offering a customer loyalty scheme redeemable against charges for gas, water or electricity (clause 9.3);

(8) if HFC should become the owner of the whole share capital of Goldbrand under the RPA, BGT should covenant that for two years after the Purchase Date no company a member of the Centrica Group would be involved in the offer of such a credit card or allow the holder of a credit card to redeem loyalty points against charges for gas, water or electricity (clause 9.4);

(9) the JVA should continue in force until terminated and both HI and BGT should be entitled to terminate the JVA forthwith on termination for any reason of the Card Agreement (clause 14.2.F);

(10) each party agreed that (save as otherwise provided in the JVA) it would at all times act in good faith towards the others and use all reasonable endeavours to ensure the observance of the JVA and the Ancillary Agreements, and would do all things necessary or desirable to give effect to the spirit and intention of the JVA and the Ancillary Agreements (clause 18.10).

THE LICENCE AGREEMENTS

11. The appropriate permission to use the Mark referred to in clause 5.6 of the JVA was granted (with retrospective effect to the 1st September 1996) by two trade mark licence agreements dated the 11th January 1999. By the first ("the First TMLA") made between GBG and HFC, GBG granted to HFC a non-exclusive non-assignable licence to use the Mark for the purpose of fulfilling its obligations to Goldbrand under the Card Agreement:

"... or following termination thereof for the purpose of fulfilling any obligations of an equivalent or similar nature to [Goldbrand] in connection with the Goldfish Card."

By the second ("the Second TMLA") made between GBG and Goldbrand, GBG granted Goldbrand a similar licence for the purposes of the promotion, development and marketing of the Card for the duration of the JVA and (in case of a purchase of Goldbrand) for HGF or HFC pursuant to the RPA for the further term of seven years.

THE CARD AGREEMENT

12. The Card Agreement provided that Goldbrand should act as HFC's exclusive intermediary in making arrangements for the issue and operation of the Cards; that HFC should offer the Cards to, and establish accounts for, applicants introduced by Goldbrand; that HFC should administer the accounts; that Goldbrand should establish and be responsible for the Scheme; that all advertising and marketing should be the responsibility of Goldfish; and that the Card application form and loan agreement should be the sole responsibility of HFC. Clause 5.7(C) provided that HFC should solely be responsible for card issuance, administration, billing and collection (and the Cardholder Account Agreement should indicate such) and should be the owner of and creditor on any account and any receivable. (It is not stated that it shall in the same way be owner of the Portfolio, but this is implicit in the facts that HFC was to be the party to the agreements with cardholders and that there was no provision to the contrary effect). By clause 6.1 HFC agreed to ensure the provision of card processing services through the use of internal or external facilities and might engage a subcontractor for this purpose as card processor; HFC was entitled to change such card processor and select for this purpose an affiliate of HFC. Clause 7.1 provides for the agreement of a computer model to be used to calculate the sum payable (by reference to such model) in the RPA. The Card Agreement was to continue in force for five years and thereafter for up to three successive terms of one year unless either party gave nine months notice as there provided to determine it. The Card Agreement provided that out of the monies earned HFC was entitled to a sum equal to 18% interest on the capital it is required to maintain to satisfy the capital adequacy ratio required under the Banking Act. Out of this 18%, HFC was required to pay the cost of the provision (whether by itself or through contractors) of processing services as well as its operating costs, and to finance the Receivables (i.e. pay suppliers to cardholders before cardholders paid HFC).

THE IBP

13. The IBP, as well as being annexed to the JVA, was treated as one of contractual documents both in the JVA (see e.g. clause 7.1 and the 7.1.R) and in the Ancillary Documents (see e.g. clause 5.7A of the Card Agreement). The IBP (so far as material) provided as follows:

"1. Introduction

The Golden Eagle Initial Business Plan has been drawn up as a required element of the Joint Venture ("JV") agreement between British Gas Trading and HI(UK). It details business objectives of Golden Eagle and details the key business target of recruitment associated with Golden eagle marketing spend.

2. Business objectives and review of projected business

2.1 Business objectives

These are:

2.1.1 To establish a credit card base in line with [the business targets set out in] section 3 below;

2.1.2 To maximise loyalty to the credit card, via the cardholder loyalty scheme

2.1.3 [Return on Investment]

2.1.4 To develop new financial services revenue streams

2.1.5 To provide a quality credit card service which meets all required service standards and matches industry operational cost benchmarks

2.1.6 To build the portfolio to achieve maximum value via disposal

2.1.7 To evaluate all opportunities for disposal with the objective of maximising profit

2.2 Strategy for achieving business objectives

2.2.1 Establishing credit card base

This large card portfolio size will be achieved by marketing a card with a relatively low APR, a highly competitive balance transfer interest rate, and a very attractive loyalty scheme. Brand awareness will be built throughout Great Britain via Press, TV and Radio advertising. Direct mail will be used as the main vehicle for targeting prospective customers.

...

A key element in aiding card recruitment will be the attractiveness of the loyalty offering. It will be vital that all major UK newspapers run articles on the scheme indicating just how attractive it is compared to the other schemes.

2.2.2 Maximising loyalty to the credit card, via the cardholder loyalty scheme

The loyalty scheme will be the best currently on offer in the UK. As has already been stated much emphasis will be placed on the attractiveness of the loyalty scheme, but over the life of the card the loyalty scheme will be enhanced to bring new exciting redemption offerings on board without diluting the core loyalty proposition.

...

2.2.5 Provision of a quality credit card service which meets all required service standards and at least matches industry operational cost benchmarks

An essential element of the success of the venture will be the provision by Golden Eagle of a quality service to its cardholders. The aim of Golden Eagle is to become one of the industry leaders.

To achieve this aim [Goldbrand] will outsource all of the operational aspects of the card to HFC and have in place challenging service level agreements. Under these, applications must be dealt with promptly, phones answered quickly, and written correspondence answered in good time using, in all cases, clear concise language. Where customers fall seriously into debt they continue to be handled in a sensitive manner without compromising [Goldbrand's] targets on return.

Strict monitoring of the operational performance of HFC will be carried out by [Goldbrand] to ensure that operational targets and service level agreements are met."

 

THE RPA

14. The RPA provided exit provisions from the Joint Venture. In short, the joint venture was to continue for five years from (in the events which happened) the 3rd September 1996; but BGT was given the right to give notice to the other parties to the RPA extending the period of the joint venture to six, seven or eight years. The date of expiration of the five year or extended period was referred to as "the Purchase Date". The exit provisions took the form of three options conferred on BGT, one to buy, one (subject to a right of pre-emption conferred on HFC) to sell to a third party and one to require HGF to purchase. In each case the subject of the purchase or sale was "the Receivables". The sale and purchase were to be channelled through Goldbrand (which is referred to in the RPA as "the Company") which was to purchase from HFC at a lower price and sell on to the eventual purchaser at a higher price and thereby make a significant turn. All the purchase and sale transactions were to be completed on the Purchase Date.
15. The RPA began in clause 1 with a definition clause. The relevant definitions were as follows:

"1. Definitions

1.1 In this Agreement, where the context admits:

'Account' means the accounting and related activity associated with the line of credit available to and used by a Cardholder;

...

'Affiliate' means any subsidiary or holding company of the relevant entity and any subsidiary of such a holding company;

'Base Value Price' means the aggregate of

(i) the Par Value Price as at the Purchase Date; and

(ii) subject to Clause 4.5 an amount equal to 17 per cent of the average of the Par Value Price of the Receivables on each day during the 12 month period prior to the Purchase Date;

'Business Day' means a day, other than a Saturday or Sunday, on which banks are open for ordinary banking business in London and Chicago;

'Card Agreement' means the agreement of even date between HFC and the Company relating to the Goldfish Card;

'Cardholder' means an individual who accepts a Goldfish Card, and for whom an Account is opened. For the avoidance of doubt this shall exclude Additional Cardholders;

'Cardholder Agreement' means an unsecured personal consumer credit agreement between HFC and a Cardholder, from which Receivables are derived;

'Computer Model' means the computer model agreed by the parties to the Card Agreement pursuant to Clause 8 thereof;

'Goldfish Card' means the credit card contemplated by HFC and the Company under the Card Agreement;

'GEL Programme' means the incentives programme operated by the Company pursuant to the Card Agreement whereby usage of the Goldfish Card may generate points to be redeemed against certain benefits;

...

'Licence Agreements' shall mean the trademark licence agreements provided for under the Joint Venture Agreement;

'Loan Notes' means the loan notes of the Company subscribed for by BGT pursuant to the Subscription Agreement of even date between BGT and the Company.

'Market Value Price' means the market value price of the Receivables as determined in accordance with Clause 5;

'Offer Value Price' means that amount which a Third Party Bidder has bona fide agreed to pay the Company for the Receivables as at the Purchase Date on the basis specified in Clause 4.2(a)(1);

'Option Notice' means a notice referred to in Clauses 4.1(A), 4.2(A)(1), or 4.3(A);

'Par Value Price' means the value of the Receivables as determined in accordance with the Computer Model adopting the accounting policies applied by HFC for the purposes of its audited accounts as at 31st December, 1995, as confirmed to BGT by HFC's auditors on or before the date of this Agreement;

'Party or Parties' means HGF and/or HFC and/or BGT and/or the Company and/or, if the context so requires, any Affiliate which is a permitted assignee of HGF, HFC, BGT or the Company;

'Purchase Date' means the fifth anniversary of the date of entering into the first Cardholder Account Agreement pursuant to the Card Agreement [i.e. 3rd September 1996] or if BGT shall by written notice given to the other Parties at least 9 months prior to that anniversary have so elected it shall mean such of the sixth, seventh or eighth anniversary of the date thereof as BGT may subsequently nominate by written notice to the other Parties given at least 9 months prior to any such subsequent anniversary (or if that day is not a business day, the next business day after it);

'Receivable' means each amount due to HFC from a Cardholder under a Cardholder Agreement, including all amounts advanced under the Cardholder Agreement, all charges forming part of the total charge for credit and/or for ancillary services relating to the Cardholder Agreement and all premiums under payment protection insurance policies paid by HFC to the insurers (with the right to any proceeds of any claim by the Cardholder payable to HFC under the Cardholder Agreement) and which are unpaid by the Cardholder;

'Ordinary Shares' means ordinary shares of £1 each in the share capital of the Company;

...

'Third Party Bidder' means any person which is not an Affiliate of any Party and is

(i) an authorised institution under the Banking Act 1987; or

(ii) a reputable issuer of credit cards in the United Kingdom; or

(iii) a reputable issuer of credit cards outside the United Kingdom which is entitled to issue credit cards in the United Kingdom; ..."

 

16. The RPA then proceeded to set out the three options conferred on BGT and the way they were to operate:

 

"3. Purchase by the Company

On the Purchase Date, the Company shall purchase from HFC, and HFC shall sell to it, the Receivables as at the Purchase Date for the Par Value Price as at the Purchase Date provided that an Option Notice shall have been duly given by that date.

4. Purchase by others

4.1 BGT

On the Purchase Date, BGT shall be entitled to purchase from the Company, and the Company shall sell to it, the Receivables as at the Purchase Date for the Market Value Price as at the Purchase Date provided that:-

(A) BGT shall have given to the Company and HFC not later than 60 business days prior to the Purchase Date notice in writing of its exercise of its rights under this Clause 4.1 and no other Option Notice shall have been given;

and

(B) the sale of the Receivables by HFC to the Company pursuant to Clause 3 shall have been duly completed.

4.2 Third party

(A) On the Purchase Date, the Company shall sell the Receivables as at the Purchase Date to a Third Party Bidder at the Offer Value Price provided that:

(1) BGT shall have given to HFC not later than 8 months prior to the Purchase Date notice in writing that it proposes to seek from Third Party Bidders offers to purchase the Receivables as at the Purchase Date on the basis that any Third Party Bidder will

(a) own and fund the credit card portfolio represented by the Receivables for such period;

(b) maintain the GEL Programme or some other loyalty scheme at such level; and

(c) market and sell other financial services to Cardholders at such levels

as will in each case maximise the amount the Third Party Bidder will agree to pay the Company for the Receivables as at the Purchase Date

(and the Company and HFC shall upon receipt of any such notice provide such reasonable assistance as may be necessary and customary to facilitate the seeking of such offers);

(2) BGT shall have given to HFC no later than 4 months prior to the Purchase Date notice in writing of the Offer Value Price, and all other terms, of what it reasonably believes to be the most beneficial bona fide offer made by a Third Party Bidder to purchase the Receivables from the Company on the basis provided for in paragraph (1) above and of its reasons for such belief and no other Option Notice shall have been given;

(3) HFC shall not have exercised its rights pursuant to Clause 4.2(B);

and

(4) the sale of the Receivables by HFC to the Company pursuant to Clause 3 shall have been duly completed.

(B) In the event that BGT shall have given HFC the notice referred to in Clause 4.2(A)(1), HFC shall be entitled on the Purchase Date to purchase and the Company shall sell to it the Receivables as at the Purchase Date at the higher of:

(1) the Base Value Price; and

(2) the Offer Value Price (and in the case of a purchase at the Offer Value Price in addition on terms which are the same as, or have materially the same economic value as, the other terms notified by BGT pursuant to Clause 4.2(A)(2)) provided that:

(a) HFC shall have given BGT and the Company no later than 3 months prior to the Purchase Date notice in writing of its exercise of its rights under this Clause 4.2(B); and

(b) the sale of the Receivables by HFC to the Company pursuant to Clause 3 shall have been duly completed.

 

4.3 HGF

On the Purchase Date, the Company shall sell to HGF, and HGF shall purchase, the Receivables as at the Purchase Date for the Base Value Price provided that:-

(A) BGT shall have given to HGF no later than 90 business days prior to the Purchase Date notice in writing of the operation of this Clause 4.3; and

(B) the sale of the Receivables by HFC to the Company pursuant to Clause 3 shall have been duly completed.

4.4 Subsequent Events

Forthwith upon the last to occur of the following events:-

(A) the completion of the sale and purchase of the Receivables pursuant to Clause 3; and

(B) the completion of the sale and purchase contemplated by the Option Notice or in the case of an Option Notice relating to Clause 4.2(A) of any sale and purchase pursuant to Clause 4.2(B);

the Parties shall procure that:-

(C) any outstanding Loan Notes shall subject to Clause 4.5 be repaid by the Company in accordance with their terms out of amounts paid to the Company on completion of the sale and purchase referred to in Sub-Clause 4.4(B);

(D) (subject to paragraph (C) above) the Company shall declare and pay an immediate cash dividend of the whole of its lawfully distributable reserves;

and

(E) (subject to paragraph (D) above) the following sale and purchase of Ordinary Shares (with all rights accruing thereto other than in respect of the dividend referred to in sub-clause (C) above) at their par value is effected:

(1) in the case of a sale and purchase of the Receivables pursuant to Clause 4.1 or 4.2(A), the sale to and purchase by BGT of all Ordinary Shares held, owned or controlled by HGF or any permitted assignee or transferee of HGF or any Affiliate thereof;

or

(2) in the case of a sale and purchase of the Receivables pursuant to Clause 4.2(B) or 4.3, the sale to and purchase by HGF of all Ordinary Shares held, owned or controlled by BGT, or any permitted assignee or tranferee of BGT or any Affiliate thereof.

...

4.9 Completion

Completion of the sales and purchases provided for in Clause 3 and the Option Notice and for matters referred to in Clause 4.4 ... shall take place on the Purchase Date in the order provided for in Clause 3 and/or 4 but otherwise contemporaneously. Such sales and purchases shall be made by way of written offer followed by acceptance by payment."

 

17. Clause 4.7 provided that any purchase by BGT or HGF or HFC pursuant to clause 4 might be made at their absolute discretion by an affiliate. Clause 6.5 provided that, where a party failed to perform an obligation by reason of an event beyond his control, he should not be considered to be in breach of contract in respect of his failure to do so during the period when he was disabled from doing so. There was no express provision for extending the completion date beyond the Purchase Date.
18. Provision was then made for determination by a valuer of the Market Value payable by BGT if it exercised the option itself to purchase the Receivables:

5.1 Market Value

The Market Value Price of the Receivables as at the Purchase Date shall be the fair market value thereof as agreed between BGT and HGF or in default thereof within 30 business days of the notice referred to in Clause 4.1(A) such value as determined by the Valuer (as defined in Clause 5.2) nominated by agreement between BGT and HGF or failing which, at the request of BGT or HGF, nominated by the President for the time being of the Institute of Chartered Accountants in England and Wales.

5.2 Qualification of Valuer

The Valuer shall be a reputable firm of chartered accountants, and shall act as expert and not as arbitrator in determining the fair market value of the Receivables as at the Purchase Date his manner of proceeding shall be at his absolute discretion and in so acting he shall determine such value prior to the Purchase Date taking into account the matters specified in Clause 5.3 provided that

(A) BGT and HGF shall be entitled to a reasonable opportunity to submit either orally or in writing (as the Valuer shall direct) their own respective views on how such value should be determined and their reasons for such views; and

(B) the valuer shall give due weight to any representations put forward by any Party received by him within such time limit as he may determine.

The Valuer's decision which he shall give before the Purchase Date shall be final and binding on the Parties (save in the case of manifest error) and his costs shall be borne by BGT and HGF equally.

5.3 Considerations and Assumption

The Valuer shall assume:

(A) the continuation of the GEL Programme or some other loyalty scheme, at a level sufficient to retain at least the same level of Receivables as at the Purchase Date;

(B) the continuation of an income stream from selling financial services to Cardholders at least consistent with the pattern of trading established in relation thereto up to the Purchase Date;

(C) the continuation of the features and specifications, branding and product specifications of the Goldfish Card in existence as at the Purchase Date;

(D) that the size of the portfolio represented by the Receivables and related potential impact on marketability will not reduce its value;

(E) that the existence of the rights under Clause 4 will not reduce value; and

(F) that there is a willing buyer and willing seller."

 

19. An obligation was imposed on the parties to cooperate:

"6. Covenants

6.1 Cooperation - Each Party shall cooperate fully in furnishing any information or performing any action reasonably requested by the other Parties, which information or action is necessary to the timely and successful consummation of the transactions contemplated by this Agreement. No Party shall be obliged to disclose to the other any information which it is required under contractual relationships at the date of this Agreement, law, relevant codes of practice or other legal reasons to keep confidential.

8.5 Further assurance

At any time after the date hereof each of the Parties shall execute or procure the execution of such documents and do or procure the doing of such acts and things as the Party so requiring may reasonably require for the purpose of giving to the Party so requiring the full benefit of all the provisions of this Agreement."

 

20. Certain supplementary provisions were then made to ensure that, if HGF or HFC was the purchaser of the Receivables, it should for seven years continue to have the benefit of the Scheme and Mark. (This is reflected in the First and Second TMLAs)

"6.3 Continuation of GEL Programme - BGT agreed and shall procure that in the event of the purchase of the Receivables by HGF or its Affiliate pursuant to Clause 4.2(B) or 4.3 or the operation of Clause 4.6 neither it nor any of its Affiliates shall unreasonably cease its participation in the GEL Programme for a period of 7 years after the Purchase Date and shall not do anything after the date hereof which would oblige it to cease such participation.

6.4 Continuation of Licence Agreement - BGT agrees and shall procure that, in the event of the purchase of the receivables pursuant to Clauses 4.2 or 4.3 or the operation of Clause 4.6 the Company and HFC and its Affiliates may continue to use Goldfish names and logos in accordance with the Licence Agreements for a period of 7 years after the Purchase Date.

...

But clause 6.4 has a significance going beyond this, and requires careful analysis which is given later in this judgment.FC and/pr BGT and/or the Company and/or, if the context so requires, any Affiliate which is a permitted assignee of HGF, HFC, BGT or the Company;

PRINCIPLES OF CONSTRUCTION

21. It is I think convenient at this point to set out the relevant principles of construction. They may be stated as follows:

(1) the object of contractual construction is to ascertain the intention of the parties, based on the meaning which their agreement would convey to a reasonable person having all the background knowledge which would reasonably be available to the parties in the situation in which they were at the time of the contract: ICS v. West Bromwich [1998] 1 WLR 896 ("ICS");

(2) in the last thirty years or so, there has been a shift away from literalist, rigid and technical methods of contractual construction to a more commercial, purposive and flexible approach, exemplified by decisions such as ICS, Mannai Investments v. Eagle Star Life Assurance Co Ltd [1997] AC 749 and most recently BCCI v. Ali [2001] 1 All ER 961;

(3) the meaning which an agreement would convey to a reasonable person with the relevant background knowledge may not be the same as the dictionary meaning of the words used. The law does not require judges to attribute to the parties an intention which they plainly could not have had: ICS.

(4) when construing a commercial document such as the RPA, the court should endeavour to identify and give effect to what it considers to be the commercial purpose of the agreement; Lewison: The Interpretation of Contracts 2nd Edition, paragraph 1.06;

(5) the court should be slow to construe a commercial agreement in a way that produces an uncommercial or absurd result;

"The more unreasonable the result, the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they shall make their intention abundantly clear": per Lord Reid in Wickham Machine Tools Sales Ltd v. Schuler AG [1974] AC 235 at 251.

"... if detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense, it must be made to yield to business common sense": per Lord Diplock in Antaios Cia Naviera SA v. Salen Rederierna ABU [1985] AC 191 at 201

 

(6) in case of badly drafted contracts (and by common consent the RPA is such) the fact that the contract is badly drafted:

"affords no reason to depart from the fundamental rule of construction of contractual documents that the intention of the parties must be ascertained from the language they have used interpreted in the light of the relevant factual situation in which the contract was made. But the poorer the quality of the drafting, the less willing any court should be to be driven by semantic niceties to attribute to the parties an improbable and unbusinesslike intention, if the language used, whatever it may lack in precision, is reasonably capable of an interpretation which attributes to the parties an intention to make provision for contingencies inherent in the work contracted for on a sensible and businesslike basis": per Lord Bridge in Mitsui Construction Co Ltd v. AG of Hong Kong [1986] 33 Build LR 1 at 14 (Privy Council).

22. In summary, the Court should adopt a purposive approach to the construction of the RPA, taking account both of the relevant factual background and the poor draftsmanship and seek by reference to the commercial purpose and scheme both of the RPA and the Ancillary Agreements which formed part of the composite transaction, an interpretation of which the language as a whole is capable and attributes to the parties an intention which accords with business common sense. But I would add a necessary caution. The Court cannot set out to make a new contract for the parties merely because the terms which they appear to have agreed may appear unduly one sided. Any remoulding by the Court in the course of the construction process of the parties' obligations expressed in the language used must be founded on the intention of the parties whether express or implied in the document itself read in the relevant matrix of facts.
23. The special feature of the RPA is that it contains a definition clause providing that the critical word "Receivables" should bear a particular assigned meaning where the context admits. Such a definition clause requires the Court faithfully to adopt that definition as the primary meaning, which is only displaced if it is apparent that to give the word that meaning in any particular context is inapt.

MATRIX OF FACTS

24. The construction of the RPA must take place in the matrix of facts in which it was made with particular regard to its commercial purpose. Evidence is admissible as to: (1) any relevant facts which affect the way in which the language of the contract would have been understood by a reasonable man in the parties' position; (2) the common assumptions of the parties (even if those assumptions are mistaken); and (3) facts throwing light on the commercial purpose of the contract, such as the genesis of the transaction, the background, the context, and the market in which the parties were operating.
25. As regards the business objectives of the transaction, authoritative guidance is provided by the IBP. As I have already stated, the IBP is not merely an annexure to the JVA, but it is referred to in the JVA and Ancillary Agreement as the guide to the essential business objectives and the projected means of achieving those objectives. I was proffered oral evidence of witnesses (e.g. of Mr Parsons) as to the objectives of the JVA, but I do not think that such oral evidence in anyway adds to or subtracts from the contents of the IBP. Indeed, I do not think that legally it could.
26. As regards common assumptions: (1) I was proffered evidence, again from Mr Parsons, as to the parties' common assumptions as to the meaning of the term "Receivables", and in particular that Mr Hill agreed with him prior to the date of the Agreements that in the context of the RPA the term "Receivables" included the customers' accounts and was not limited to the credit balances. Having seen and heard both Mr Parsons and Mr Hill I incline to the view that there may well have been a conversation to this effect: support is to be found in the letter written by Mr Hill to Mr Waugh dated the 17th December 1999. But I cannot think in a case such as the present, in which there is no claim to rectification, that any agreement so reached is of assistance when the term in question is defined in a definition clause in the RPA; (b) I was proffered evidence to the effect that there was a common assumption that a data migration would have to take place on termination of the Joint Venture and that the notice periods in the RPA were sufficient to allow (together with a transfer of the Portfolio) an orderly migration to a purchaser, and most particularly BGT. Reliance for this purpose is placed by BGT on Mr Parson's evidence of a conversation with Mr Hill. Mr Hill denies that there was such a conversation. I am not satisfied that there was any such conversation. If the matter of a migration had been discussed, I would expect that some record would have been made of it or reference made to it in a subsequent document, and the parties would have prompted their solicitors to reflect that agreement in a provision in the RPA. I do not think that the question of a migration was ever addressed seriously (if at all) by either party. If it had, the occasion for this litigation would not have arisen.

THE SALE TIMETABLE

27. It is convenient first to look at the timetable laid down by the RPA for the various stages in concluding and completing the sale of Receivables:

(a) all sales must pass through Goldbrand and accordingly as the prelude to the completion of any sale of the Receivables pursuant to the provisions of the RPA, HFC is required on the Purchase Date to sell the Receivables to Goldbrand at the Par Value Price, namely the value of the Receivables determined in accordance with a computer model and in effect their value as debt;

(b) at least 9 months before the 3rd September 2001 BGT must give notice of election whether to extend the duration of the Joint Venture from 5 to any of 6 to 8 years and accordingly delay the Purchase Date beyond the 3rd September 2001;

(c) not later than 8 months prior to the Purchase Date, if BGT proposes to seek offers from third parties to purchase the Receivables at the Offer Value Price, BGT must give notice to HFC that it proposes to do so. The offer from the third party ("the Third Party Offer") must be sought on the basis specified in clause 4.2(A)(1);

(d) if BGT obtains a Third Party Offer more than 4 months before the Purchase Date, it has the option to give notice to HFC not later than 4 months prior to the Purchase Date of the Third Party Offer. The price offered by the third party is referred to as the Offer Value Price;

(e) if such notice is duly given, HFC has a month to decide whether, (instead of the Third Party Offer being accepted) HFC should itself purchase at the higher of the Offer Value Price or the Base Value Price, which is defined as the Par Value Price together with the addition of an amount equal to 17% (or in certain circumstances 14%) of the Par Value. Notice of election by HFC to purchase must be given not later than 3 months before the Purchase Date;

(f) in the absence of any other notice of election having previously been served, BGT is given the options—

(i) not later than 90 business days before the Purchase Date to require HGF to purchase the Receivables for their Base Value Price;

(ii) not later than 60 business days prior to the Purchase Date to give notice electing to purchase the Receivables at their Market Value Price, a price to be determined by the valuer on the assumptions specified in clause 5.3.

28. This examination of the timetable discloses that the provisions of the RPA allow for a period of three months between the dates of an acceptance of an offer from a Third Party Bidder and the Purchase Date and for 60 business days (in effect the same period) between exercise by BGT of its option to purchase and the Purchase Date and it is to be inferred that the parties contemplated that this was a sufficient period for any exercise required both to ascertain the price and complete the transaction whatever it was.

MIGRATION EVIDENCE

29. A large part of the evidence and argument in this case has been directed to the inferences that can be drawn when construing the RPA from the absence of any provision for data migration or the cost to HFC of providing the necessary services for such a migration, and from the problems of reconciling the time estimates for such a migration with the timetable for completion of a sale under clause 4 of the RPA. The evidence has also been directed to the question (which I shall briefly consider later) whether the claimants have been in breach of contract.
30. Clause 6.1 of the Card Agreement provides that HFC has the duty to ensure the provision of card processing services: for this purpose it may provide the service itself or engage as sub-contractor an outsider or an affiliate of HFC. It is clear on the evidence, and became common ground in the course of the trial that at the date of the JVA the parties intended that HFC should engage an outside processor, namely EDS, and that EDS should use the EDS processing system; but it was on the cards that, if and when the Whirl processing system became available, HFC would take processing in-house and adopt this system. During the period of the Joint Venture, the Whirl system did prove itself and became available and HFC (with the consent of BGT) adopted this system and HFC became processor in place of EDS. HFC was at the same time processing a number of other cards, and HFC put in place an integrated system which at the same time processed data relating to all these cards.
31. The practical significance of HFC assuming the role of processor in place of EDS in this way was that it operated to extend the time required for any subsequent migration at the instance of BGT to a processor of its choice. If EDS had remained processor, BGT could have chosen EDS as its processor and the internal migration required for this purpose would have taken less time than that which would be taken by the external migration now required by BGT to FDR as BGT's processor of choice. Further, the length of time required for a migration from HFC to BGT's processor of choice is increased beyond what it otherwise would be by reason of the adoption by HFC of an integrated processing system. I should make it clear that to my mind BGT can make no complaint in regard to this change of processor whether or not the increased time period required for a subsequent migration from HFC proves critical for any reason.
32. My reasons are twofold. First BGT agreed unconditionally to the change which was to the advantage of the Joint Venture. Secondly HFC under the terms of the Card Agreement was perfectly entitled to act as it did without the consent of BGT.
33. Regarding the migration required on the facts of this case from HFC to FDR I record the following findings on the issues of fact raised by the parties:

(1) migrations are a routine part of the credit card industry and the tasks required to effect a smooth migration are normal functions of professionals in the field;

(2) the migration of live credit data from one computer system to another is a complex and time consuming procedure which needs to be planned with great detail and executed with great care, failing which errors will occur with the consequent loss of customer satisfaction and loyalty;

(3) the complexity of conversions has not changed since 1996;

(4) large organisations like FDR and HFC handle migrations in their stride, and partial conversions of a bank's card portfolio (which is what the migration by HFC would be) are regular occurrences in the USA. HFC has been involved in four such transactions in the USA since 1995;

(5) though it may be theoretically possible to effect a migration on a business day, it is invariable in practice and regarded generally as essential that it take place on a non-business day e.g. over a weekend or holiday period;

(6) it is the target rather than the source which is required to perform the bulk of the work in a migration. The target also sets the process and agenda;

(7) unless some very exceptional circumstance exists, it is invariable in practice that the processor from whom the data is to migrate is paid for the substantial work and services required of him in the migration to the target processor;

(8) it is unwise to plan for two conversions at the same time;

(9) there is no legal impediment to the migration taking place from HFC to FDR which now owns PaySys, the developer of Vision Plus software from which the Whirl system was built. There are no licensing issues which would restrict the ability of HFC to migrate the portfolio, and BGT's data request would not require the transfer of any trade secrets, intellectual property or know-how;

(10) if EDS had remained card processor and BGT had appointed EDS its processor, the basic cost of migration from EDS to EDS would have been in the region of $75,000.

34. The time required for a data migration is an issue of some importance. On this issue I had the benefit of the evidence (on behalf of HFC) of Mr Brian-Davis and, as their expert, Ms Ruggiero, a computer programmer by training and profession with vast experience behind her and (on behalf of BGT), as their expert, Mr Kreis, a vastly experienced manager and consultant in the computer field). All these witnesses were competent to assist the Court on this issue and all were anxious to do so. As regards the relative expertise of Ms Ruggiero and Mr Kreis in respect of time estimates in 1996 and today for the necessary periods to prepare for and carry out migrations, there is little to choose between them. Ms Ruggiero as a programmer has years of experience of direct involvement in the processes of migration; Mr Kreis conceded that as a manager and consultant he would in practice consult a person such as Ms Ruggiero before committing his company in this regard. Ms Ruggiero conceded that she did not personally have experience of a migration between two very large processors such as HFC and FDR but I do not think that this materially affects the value of her evidence. Her knowledge and experience enabled her to tackle the implications of such a migration. The estimates of both experts afford informed and independent views either of which the parties to the RPA (no doubt with proper professional advice) could reasonably have held when they signed the agreement if they had addressed the question. So far as I have to choose between their estimates, by a slight margin I prefer the estimates of Ms Ruggiero because of her practical experience as a programmer and because her approach appears more cautious and realistic and that of Mr Kreis inclines to lend itself towards the optimistic.
35. After anxious consideration I hold that, if HFC had continued to retain EDS as processor and BGT had intended to appoint EDS its processor, the internal migration would take four to five months; and if a transfer from HFC to FDR or some other processor were required, the external migration would take anything up to twelve months. If the parties had given consideration to the period required, or if an intention is to be imputed to the parties to have given consideration to the time required, without hesitation I would hold that the periods I have stated would be the minimum periods required, and I cannot conceive that they would have considered the timescale for notices in the RPA adequate for this purpose. They would have provided a substantial margin to cover all possible eventualities, e.g. the problems and delays occasioned if either HFC's processor or the target was already in the course of another migration and the closed periods when migration has to be placed on hold. It is, I think, quite inconceivable that they would have allowed any appreciable risk that the transaction might have to "go off" because of an inability to meet the Purchase Date.

SUMMARY OF OPPOSING CASES ON CONSTRUCTION

36. Lord Grabiner (on behalf of the claimants) submits that the RPA makes plain that the sale to BGT is of the Debt alone. Reliance is placed on the fact that the subject matter of the sale is "Receivables" and nothing more or less; that "Receivables" is so defined in the definition clause; that no provision is made for the sale of a going concern, let alone of the Portfolio and for a consequent migration of data; that there are contra-indications to any intention that there should be a migration of data in (a) the absence of any provision for payment to HFC for the extensive services required on its part for any such migration; (b) the timetable for completion which makes totally inadequate provision in terms of time for such an exercise being completed prior to the Purchase Date; and (c) the Purchase Date is a business day, a quite inappropriate day for a migration of data.
37. Mr Carr (on behalf of BGT) submits that, notwithstanding the definition of "Receivables", the clear intent to be gathered from the RPA read as a whole in the context of the other agreements (and most particularly the IBP) is that BGT should purchase the whole business as a going concern, and that entitles BGT to the Portfolio and the migration of data; that the first contra-indication relied on by Lord Grabiner is misconceived because HFC is entitled to payment for its services; and the second can in the circumstances carry little weight, and most certainly insufficient to swing the balance on the issue in favour of HGF.
38. It is necessary in examining these opposing submissions to have in mind the two quite different scenarios postulated by these two constructions in respect of what BGT was intended to acquire in consideration of the payment of the price (in default of agreement) determined by the expert in accordance with the formula set out in clause 5.3.
39. On the construction favoured by the claimants, BGT obtains only:

(a) the Debt;

(b) HGF's shareholding in Goldbrand;

(c) (through its ownership of Goldbrand) the full names of the credit card customers and the Scheme;

(d) the benefit of HFC's restraint of trade covenant as provided in clause 9.3 of the JVA;

(e) the full value of the enhancement in value of the Mark, an enhancement achieved by the expenditure upon its profile by advertising and the operations of the JVA, freed from, and no longer encumbered by, any licence in favour of the JVA.

40. Beyond this, the claimants say that BGT obtains the benefit of an obligation on the part of HFC (at no cost to BGT) to seek to recover and pay over the Debt. I can however see no basis for implying any such obligation on the part of HFC.
41. On the other side, HFC would retain the Portfolio and be entitled to continue its existing relationship with the credit cardholders though it would have to offer a different branded card and a different loyalty programme, and have to operate clear of the restrictions imposed by the restraint of trade covenant.
42. It is common ground that, if the RPA only effects a sale of the Debt to BGT, the sale operates as an equitable assignment which BGT can convert into a legal assignment by giving notice to the credit cardholders. If no such notice is given, collection will have to be made by or in the name of HFC; if notice is given, BGT will be able to collect itself, but the price for giving such notice will be a hefty bill for stamp duty. In my view, in the absence of BGT giving notice of the assignment to the credit cardholders (as I have already said) HFC could be under no obligation to BGT to take steps to recover the Debt, at any rate save and unless indemnified against any costs incurred and paid a reasonable remuneration for the service provided. The offer by HFC to render this service free of charge cannot of course affect the question of construction. As a mere debt divorced from the credit cardholders agreements (saving only if value is attributed to the Debt as a possible building block in a new business set up by BGT) its value (discounted for the risks and costs of recovery) must reduce its value far below its book value.
43. On this construction BGT would be left with a number of building blocks for its own new credit card business, (the name of the cardholders, the goodwill of the Mark and the Scheme), but its efforts to attract the existing credit cardholders would have to face the competing challenge of HFC (though blunted by the restraint of trade covenant in clause 9 of the JVA). It is sufficient to say that what BGT would get would be substantially less than a going concern, and the value to BGT of the Debt may be worth in the circumstances little (if any) more than its value as historic loans, and on any basis far less than that of a continuing relationship with the credit cardholders.
44. On BGT's construction, beyond what the claimants concede, BGT would be entitled to the going concern, including the Portfolio and a right to the migration of data to a processor of its choice. BGT concedes that the purchase of the Portfolio and the future conduct of the business of issuer of the Cards must be an affiliate authorised to carry on the credit card business with such authorisation in place by the Purchase Date and (as is clear) the migration of data to BGT's appointed processor must be completed on the same date, subject only to a possible allowance for any time lost by reason of a breach of obligation on the part of the claimants.

THE STRUCTURE AND OBJECTIVE OF THE JOINT VENTURE

45. It is convenient next to look at the structure and objective of the Joint Venture. As regards the structure, the parties (and the only parties) to the Joint Venture are HI and BGT, and Goldbrand is the designated Joint Venture vehicle. It is important to bear in mind that, though other associated companies of HI and BGT have roles assigned to them, they are not joint venturers.
46. BGT was to provide the capital by way of a loan of £44 million needed to finance Goldbrand pursuant to the LNSA. This (together with accrued interest) is to be repaid on the Purchase Date in whole or in part out of the balance between the purchase price paid by Goldbrand for the Receivables and the sale price paid by the eventual purchaser. BGT also through a subsidiary was to provide a licence to use the Mark at a time before it had acquired any value.
47. The Banking Act 1987 provides that institutions engaged in deposit-taking activities be authorised under that Act, and in practice it is impossible to operate a credit card without conducting a deposit-taking activity, because many cardholders deposit funds with the Card issuer in anticipation of expenditure in excess of their permitted credit limit. Accordingly a bank has to be selected to operate and hold the credit card business and the Portfolio during the life of the Joint Venture. The Banking Act also requires such an institution to maintain a capital adequacy ratio of 9.5% of its book debts. HI provided HFC, an authorised bank and widely respected card issuer, to fulfil the roles of banker to Goldbrand and issuer of the Card. (With a pool today of receivables of some £600 million, its necessary regulatory capital is almost £50 million). Notwithstanding the prominence of the role of HFC, it is necessary to bear in mind that it is not a joint venturer: it is merely a service provider. If ever this could be in doubt, this is made plain by clause 2.2.5 of the IBP which spells out clearly that Goldbrand shall monitor the operational performance of HFC to ensure that operational targets and service level agreements are met.
48. Under the Intermediary Agreement Goldbrand has the responsibility for, and cost of, acting as intermediary in respect of the issue of credit cards (for which HFC pays a brokerage fee); its role extends to administering the Scheme and advertising the Card and the Mark. The loan of £44 million odd by BGT was made to put Goldbrand in funds for this purpose. Goldbrand is also the receptacle for and the medium for distribution of the profits of the Joint Venture. As well as being entitled to receive from HFC the profits of the ongoing business, it is intended to receive, in the form of the difference between the par value of Receivables and the price on resale, a capital payment calculated at the least to be at least sufficient to enable it to redeem the loan notes.
49. Turning to the objectives, these are to be found in the provisions of the IBP, namely to maximise the value on sale of the business created. The sale particularly in mind must inferentially be a sale on expiration of the short lifespan of the Joint Venture pursuant to the provisions of the RPA. The question arises whether the sale referred to is a sale to the Third Party Bidder, and (on exercise of the right of pre-emption) to HGF or whether it also refers to sales to BGT and HGF.

MEANING OF RECEIVABLES

50. The essential question in this case is whether (as the claimants contend) the term Receivables in clause 4.1 (read with clause 5) of the RPA has the meaning assigned in the definition clause 1.1 (namely the Debt) or (as BGT contends) whether the context does not admit of that meaning and postulates instead the entire business carried on by the Joint Venture which includes both the Portfolio and the necessary data to operate accounts of the Cardholders.
51. The starting point is clause 1, the definition clause. This clause provides that the words listed bear the meanings assigned "where the context admits". Accordingly some other meanings can only be given to those words if the context shows that the meaning assigned cannot be intended, but requires some other meaning to be given. The words defined in clause 1 include, as well as "Receivables", "Par Value Price" and "Base Value Price". The definition of "Cardholder Agreement" is significant: it is defined as the consumer credit agreement between HFC and a Cardholder "from which Receivables are derived". There is accordingly the clearest possible distinction drawn between cardholder agreements and receivables. In regard to these agreements it is to be noted that clause 1 provides that the definition of the term "card agreement" refers to the Card Agreement and in the body of the RPA reference is made to certain provisions of the Card Agreement. This lends particular significance to the provisions of the Card Agreement that HFC shall hold and own the Accounts and Receivables and (by implication for the reasons I have already given) the Portfolio.
52. Looking at the provisions of clause 4.1 (read with paragraph 5) in isolation, there is much to be said for the contention of BGT. For, as Lloyd J said in paragraph 41 of his judgment: