LANCORE SERVICES LTD V BARCLAYS BANK PLC

[2009] EWCA Civ 752, Court of Appeal, Sir Andrew Morritt, Lord Justice Rimer and Lord Justice Goldring, 23 July 2009

Banking - Credit card payments - Merchant Services Agreement - Supplier using facility to process payments for third party - Whether MSA entitled bank to withhold payment - Penalty clause - Unjust enrichment

Lancore entered into a merchant services agreement with the bank under which the bank would make payments to Lancore for purchases transacted by credit card holders. The bank, relying on the terms of the MSA, suspended payments when it discovered that Lancore had been acting as a payment processor for a third party in respect of the sale of pharmaceutical products and pornographic downloads. Lancore sought to recover the sums withheld. The Court of Appeal, dismissing an appeal from the judgment of HHJ Hodge QC, held that the payments withheld were not card payments at all, that the clause permitting withholding was not a penalty and that there was no restitutionary remedy based on unjust enrichment because the parties had agreed what would happen if Lancore did not comply with the MSA.