Marshall v N M Financial Management Ltd

JurisdictionEngland & Wales
CourtCourt of Appeal (Civil Division)
JudgeSTICE BUTLER-SLOSS,LORD JUSTICE MILLETT
Judgment Date13 Mar 1997
Judgment citation (vLex)[1997] EWCA Civ J0313-8
Docket NumberCHANF 95/1466/B

[1997] EWCA Civ J0313-8

IN THE SUPREME COURT OF JUDICATURE

IN THE COURT OF APPEAL (CIVIL DIVISION)

ON APPEAL FROM THE HIGH COURT OF JUSTICE

CHANCERY DIVISION

(MR JONATHAN SUMPTION QC—SITTING AS A DEPUTY JUDGE OF THE HIGH COURT)

Royal Courts of Justice

Strand

London WC2

Before:

Lord Justice Butler-Sloss

Lord Justice Millett

CHANF 95/1466/B

NM Financial Management Limited
Defendant/Appellant
and
Anthony Arthur Marshall
Plaintiff/Respondent

MARK CRAN QC & NEIL CALVER (Instructed by Sweetlands, Surrey, RH4 1TP) appeared on behalf of the Appellant

MARK BARNES QC & ANDREW LENON (Instructed by Messrs Taylor Joynson & Garrett, Blackfriars, EC3Y ODX) appeared on behalf of the Respondent

STICE BUTLER-SLOSS
1

I will ask Millett LJ to give the first judgment.

LORD JUSTICE MILLETT
2

This is an appeal by the Plaintiff, N.M. Financial Services Management Ltd. ("the Company") from an Order of Mr Sumption QC, sitting as a Deputy Judge of the Chancery Division on 16 June 1995.

3

The question in the appeal is whether the Respondent, Mr Marshall, is entitled to Renewal Commission under Clause 10(g) of his agency agreement with the Company even though he has not satisfied the conditions on which such Commission is payable contained in paragraphs (i) and (ii) of that Clause. The Deputy Judge held that he is.

4

The facts can be shortly stated. For nearly 12 years Mr Marshall worked as a self-employed sales agent of the Company selling life assurance, pensions and similar financial products. He did not receive a salary. He was paid entirely by commission generated on business which he introduced to the Company.

5

Two kinds of commission were involved: initial commission and renewal commission. Both were calculated as a percentage of premiums paid by investors on business introduced by Mr Marshall. Initial commission was payable at the rate of 25% on premiums paid during the initial period of each policy, which could last for as long as 48 months. Mr Marshall's entitlement to initial commission arose as and when each premium was received, but ceased on the termination of the agency agreement. Thereafter no further initial commission was payable in respect of business which had been introduced by Mr Marshall during the continuance of the agency agreement. Renewal commission was paid at a much lower rate (2.5%) on premiums received after the initial period. The present appeal is concerned only with renewal commission, and the question is whether Mr Marshall is entitled to receive it after the termination of the agency agreement.

6

The agency agreement is dated 1 July 1988. Clause 2 is concerned with Mr Marshall's appointment. Paragraph (a) reads:

"The Company hereby appoints the Agent and the Agent agrees to act as an agent of the Company upon the terms and conditions contained in this Agreement."

7

The rest of the Clause sets out the agent's duties and responsibilities; paragraph (c) prohibits the agent from procuring or endeavouring to procure any person to enter into an Investment Agreement with any person other than the Company or its associates. The Clause does not impose upon Mr Marshall any positive obligation to do anything, his right to commission being sufficient incentive to ensure that he should attempt to procure business for the Company. Clause 8 is concerned with commission; paragraph (a) of that Clause provides:

"The Company shall pay Commission to the Agent for Investment Business which he obtains in accordance with this Agreement. Commission shall be calculated at the rates and in accordance with the provisions contained in the Commission Schedule."

8

Clause 10 is concerned with the termination of the agreement which is terminable by either party by written notice to the other at any time. Paragraph (f) and (g) provide:

"(f) Subject as provided in sub-clauses 10(g) and 10(h) following termination of this Agreement no sums (and without prejudice to the generality of the foregoing no Commission other than Commission to which entitlement shall have arisen pursuant to the Commission Schedule) which shall not at the date of such termination have become due and payable shall be payable to [the agent].

(g) If at the date of termination of this Agreement … the Agent has for a period of not less than five years been continuously an Agent of the Company and either

(i) within the period of one year after the date of such termination the Agent does not become an Independent Intermediary or become employed by or represent or become an Appointed Representative of any Company or organisation which may directly or indirectly be in competition with the Company; or

(ii) at the date of termination the Agent (if an individual) has attained the age of 65 years

then the Company shall pay to the Agent Renewal Commission arising up to his death (in the event that the Agent is an individual) or its liquidation (in the event that the Agent is a limited Company) in respect of any Investment Agreements which result from applications submitted by the Agent prior to such termination at the rates and upon and subject to the terms and conditions set out in the Commission Schedule."

9

Paragraph (h) provides for discretionary payment of Renewal Commission to the agent if he dies during the continuance of the agency agreement, although curiously not if he dies after its termination but after having complied with proviso (i).

10

The Commission Schedule is concerned with the details of the commissions payable. In the schedule the word "Commission" is defined as meaning "Initial Commission and Renewal Commission". Clause 2(a) of the Schedule provides:

"The Company shall … pay Commission to the Agent … "

11

Clause 2(b) provides:

"Entitlement to Commission in respect of an Investment Agreement submitted by the Agent shall arise upon receipt by the Company of any appropriate payment …"

12

And 2(e):

"Entitlement to Commission in respect of an Investment Agreement shall cease to arise in the following circumstances:-

(i) upon termination of this Agreement (subject to any rights to Commission under clauses 10(g) and 10(h))"

13

These provisions can be summarised for present purposes as follows: (i) Commission (both initial and renewal) is payable on receipt of the relevant premium.

(ii) Entitlement to such commission ceases on termination of the agency agreement; but

(iii) This is subject to a right to renewal commission under Clause 10(g)(h).

14

In relation to renewal commission the Deputy Judge held:

(1) Clause 10(g)(i) is in unreasonable restraint of trade and is void. There is no appeal from this ruling.

(2) Since no one suggested that the whole agency agreement was avoided as a result, the question was: how much should be excised? (3) Provisos (ii) and (iii) are not cumulative but alternative. The intention is not to limit the right to post-termination renewal commission to agents aged 65 or more, but to limit it to agents who have not competed with the Company during the first year after termination unless they are aged 65 or more. Proviso (iii) is in reality a proviso to proviso (ii). To excise proviso (i) alone would radically distort the effect of Clause 10(g). Accordingly both provisos must be excised. There is no appeal from this ruling.

(4) The remaining question was whether the excision of both provisos means that Clause 10(g) should be deleted in toto; or whether Clause 10(g) should stand shorn of the offending provisos. (5) Clause 10(g) should stand without the provisos, because in substance the consideration for the payment of post-termination renewal commission is not the acceptance by Mr Marshall of the invalid restraint of trade but his services in introducing business to the Company prior to the termination of the agency agreement.

15

The Company appeals from this last ruling and submits that the whole of Clause 10(g) should be struck out, leaving Mr Marshall with no entitlement to post-termination renewal commission. It is to be observed that, if correct, this means that Mr Marshall and other agents engaged on similar terms are not entitled to post-termination renewal commission even if they have complied with condition (i) by refraining from competing with the Company at all.

16

Both parties pointed to passages in the Company's evidence as seemingly supporting their respective arguments. In an affidavit sworn by the Development and Sales Support Manager of the parent company of the Company the deponent deposed that the effect of Clauses 10(g) and 10(h) was that the Company

"… agrees in certain specified circumstances to relax the general rule that once the agent ceases to work for [the Company], he is no longer entitled to commission in respect of [the Company's] clients who were serviced by the agent prior to the termination of his agency. By competing...

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