Pinsent Masons advises EmpatKali founders in deal that signals Asia expansion for Afterpay
Out-Law Guide | 09 Nov 2011 | 3:58 pm | 7 min. read
The High Court (Mr Justice Walker) gave judgment in July 2011 in respect of a dispute between Playup Interactive Entertainment UK PTY Limited ("Playup") and Givemefootball Limited ("Givemefootball"). The case involved a claim and counterclaim in relation to alleged breaches of a Sponsorship Agreement (the "Agreement"). The key issue contested related to the electronic dissemination of SMS and e-mail advertising to recipients collated in online IT databases.
Playup is an interactive gaming business providing mobile telephone and internet based betting style gaming during sporting events. Givemefootball is a joint venture between the Professional Footballers' Association ("PFA") and Sports News Media Limited. Each year at the end of the football season the PFA hosts the PFA's Fans Awards (the "Awards"), which names a Player of the Year, based on fans' votes, in each of the four English professional football leagues. Givemefootball hosts a number of websites, including the official website of the PFA.
In February 2008 Playup entered into an Agreement with Givemefootball for the sponsorship of the Awards for a term finishing in June 2010. Under the Agreement, Playup was required to pay £1.034 million in four tranches, in return for a range of "targeted marketing opportunities". This included two streams of multimedia marketing using customer data collected by Playup ("Data Rights"). The first of these Data Rights involved 12 programmes of at least 1 million emails to be sent out monthly throughout the term of the Agreement. The second was a series of 6 SMS message programmes to be sent out to at least 250,000 recipients bi-monthly throughout the term of the Agreement.
In both cases it was specified that the recipients must be "opted-in recipients who are contained in databases owned or controlled by the company." Also contained in the Agreement were Warranties, Representations and Undertakings relating to the Data Rights in which Givemefootball stated that the recipients of the emails and SMS messages "have [a] provided the Company with prior notifications of their consent to receiving direct marketing [b] from the Sponsor".
Disputes about the Data Rights arose towards the end of 2008, when it emerged that Givemefootball had been using customer data collected by third party webhosts ("Bought In Data") as part of their multimedia marketing obligations. Playup said it was not acceptable for Givemefootball to use data supplied by an individual to a company other than Givemefootball as a source for the selection of recipients, asserting that the words 'opted-in' in the Agreement referred only to those opting in through the official PFA website. Givemefootball countered that the programme recipients could comprise of anyone who had indicated to any business entity a willingness to receive marketing from other companies. They conceded in both their written closing and their oral submissions that there had to be some limitation on who could be a programme recipient for the purposes of the agreement, but they argued that the word "targeted" in the Agreement meant that the emails and SMS messages had only to be sent to people with known sporting interests, particularly, but not exclusively, in football.
A secondary dispute over the Data Rights related to the delivery of the SMS messages. Where a number used for the purposes of the programme did not actually correspond to a mobile device of an opted-in recipient, Playup contended that that message could not be described as having been 'sent'. Givemefootball responded that its obligation was merely to send the messages, rather than to deliver them. Playup accepted that 'delivery' could be impaired by numerous factors, but said it remained Givemefootball's contractual responsibility to ensure that the messages were at least sent to actual mobile devices.
In November 2008 Playup gave notice of termination of the Agreement, by which point it had paid £692,000 to Givemefootball. Playup sought repayments under the Agreement and damages for breach. Givemefootball denied any breach, and counterclaimed for the remaining instalment in the sum of £342,000 plus VAT.
The court had to decide whether there had been a repudiatory breach of the Agreement and, if so, what damages could be recovered.
The court had to establish whether the Agreement required the recipients of the messages to have signed up specifically through the PFA website, or whether it was sufficient for them to have been selected from Bought In Data obtained by Givemefootball from a third party web provider.
The court referred to the specific commercial context of the agreement, asserting that the essential purpose of the Agreement was to give Playup access to benefits associated with the PFA Awards. Givemefootball's suggested interpretation of the limitations contained in the Agreement on who might be a programme recipient presented "a substantial and surprising departure from" this essential purpose. Playup entered the Agreement to obtain marketing access to the "avid" football fans involved in voting for the Awards specifically, rather than simply anyone who liked sport.
The court criticized the conduct of Givemefootball in relation to the Data Rights, in particular the "deliberate dishonesty" of two of the company's directors in both their correspondence on the matter with Playup, and their evidence to the court. Evidence presented by Givemefootball about the databases used in performance of the Agreement was thus not to be believed.
Regarding the secondary issue of the sending of the SMS messages, Givemefootball's assertion that they should not be held responsible for the delivery of the messages did not address Playup's contention. Their contractual obligation was to send the messages to actual mobile devices, and the question of whether or not they were then successfully delivered was not relevant. The court could not comment on the proportion of SMS messages sent to actual mobile devices, but accepted that this was a material issue.
The court concluded that in total not more than 260,000 of the 1 million emails promised, and 39,450 of the 250,000 SMS messages promised, were sent to qualifying participants,. This constituted a repudiatory breach for which Playup was entitled to terminate the Agreement.
Playup's loss claim
A clause in the Agreement stipulated that in the event of a material breach Givemefootball would repay Playup the portion of the sponsorship fee already paid that related to the unelapsed term. Thus, liability for this dispute having been established, it was common ground that Playup were entitled to receive a contractual payment of £340,251.14 plus VAT.
In calculating additional damages payable, the court first apportioned a percentage of the sponsorship fee attributable to the Data Rights, and applied this percentage to the amount actually paid by Playup to Givemefootball as part of the Agreement. It then calculated the combined number of emails and SMS messages sent to qualifying participants as a percentage of the total number promised, and applied this percentage to the paid-up value of the Data Rights obtained from the first calculation. Together these calculations produced a figure for damages of £53,000. Playup was not entitled to any sum for wasted costs and expenses.
This case does not present any new law, but it does provide useful guidance for the construction of sponsorship agreements which involve the use of multimedia marketing streams.
The key word in this Agreement was 'targeted'. Had Playup simply sought access to a database of general sports fans they could have used much cheaper, less targeted advertising campaigns, such as through Google. In fact, it was found that even defining 'targeted' as specifically football fans was not specific enough. Access to the PFA website's users, whose "avid" level of interest in football is higher than average football fans, was fundamental to the commerciality of the Agreement for Playup, and in choosing to advertise through a sponsorship arrangement with Givemefootball it was clear to both parties that this was what was meant by the word 'targeted' in the actual Agreement. With an increasing number of marketing and promotional campaigns being conducted through online and/or telecommunication mediums, this case thus shows that the definition of key words such as 'targeted' will be interpreted purposively, and viewed very much in light of the commercial context of the Agreement itself.
Although the court did not address in detail the secondary issue of whether an SMS message may be deemed 'sent' even if it never reaches an actual mobile device, this case highlights a potential ambiguity and thus the need for parties to make sure that there is a mutual understanding of the obligations contained in any such Agreement, and that they are suitably defined, in writing, from the outset. In this case the issue turned on the validity of the phone number, which had been directly referred to in the clause. Had it not been, or had the wording been different, it may not have been found to be a breach.
The issue of consent was discussed in this case only in relation to the channels through which it was obtained. It was never suggested that Givemefootball did not have permission from the recipients of the emails and messages, even where their data had been obtained from a third party. However, the case again highlights a potential issue in this regard. At the very least it shows that merely ensuring the consent of the recipient may not suffice to fulfil a contractual obligation relating to multimedia marketing.
The inclusion in the Agreement of a pre-agreed formula for the calculation of repayments in the event of a material breach enabled a smooth final calculation of the loss claim. In fact, Playup remained a net payor under the Agreement, because the disputed issues related only to some of the obligations under the Agreement, the rest of which were honoured and paid for accordingly.
Pinsent Masons advises EmpatKali founders in deal that signals Asia expansion for Afterpay