McMillan Williams (A Firm) v Range
| Jurisdiction | England & Wales |
| Judge | Lord Justice Ward,Lord Justice Mantell,Lord Justice Jonathan Parker |
| Judgment Date | 17 March 2004 |
| Neutral Citation | [2004] EWCA Civ 294 |
| Docket Number | Case No: B2/2002/2772 |
| Court | Court of Appeal (Civil Division) |
| Date | 17 March 2004 |
[2004] EWCA Civ 294
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM BRIGHTON COUNTY COURT
His Hon. Judge Lloyd
Royal Courts of Justice
Strand,
London, WC2A 2LL
The Rt. Hon. Lord Justice Ward
The Rt. Hon. Lord Justice Mantell and
The Rt. Hon. Lord Justice Jonathan Parker
Case No: B2/2002/2772
Stephen Neville (instructed by Martin Cray & Co.) for the Appellant
David Head (instructed by Messrs DMH) for the Respondent
McMillan Williams, the appellant, is a three partner firm of solicitors with five offices in Surrey and South London. Sarah Range, the respondent, is a solicitor, admitted in May 1997, who joined the firm as an assistant solicitor in the family law team. The firm had written to her on 23 rd March 1999 saying:-
"Your initial advance salary will be £22,000 per annum based on our two year rolling contract system. However you will be paid on a commission only contract and will be paid one-third of all your paid bills.
We recognise that when fee earners start with us it takes time to generate a flow of paid bills and for that reason in the first two years the expectation is that the billing will be at least three times what has been paid as a "salary". At the end of the two years there is a balancing exercise. Any billing in excess of three times what has been paid is paid by way of six monthly bonus."
On 8 th April 1999 Miss Range signed the contract of employment presented to her and returned it under cover of a letter in which she stated:-
"I also confirm your conversation … regarding the commission scheme and I understand that any amount I bill over £130,000 per annum attracts commission at 50%."
She started work on 26 th April 1999.
The contract contained this provision for her remuneration:-
"9. Pay –
(a) you will be paid commission of 33% of all profit costs paid on bills delivered by you or on which a proportion of the profit costs is allocated to you. In anticipation of the commission you will receive you will be paid a monthly advance on your commission equivalent to £22,000 per annum. The amount of the monthly advance may be varied by mutual agreement.
(b) the first calculation of commission payable to you will be after you have been employed two years (unless your employment is terminated earlier in which case the provisions set out at (d) below apply) . The difference between the commission payable to you and the total advance paid will be calculated ("the calculation") and any excess of commission payable over the total advance paid will be paid to you as bonus. Any shortfall is payable by you. After the first two year period the calculation will be carried out at the end of each six month period. At the discretion of the partners any shortfall may be carried over to the following six month period.
(c) any excess or shortfall arising from the calculation is interest free until it exceeds £10,000. Thereafter the whole sum will attract interest at 5% over Bank of Ireland base rate and will be paid either by you or to you at the end of each month that the excess or shortfall exceeds £10,000.
(d) on the termination of your employment, howsoever occasioned, a final calculation will be carried out. No payment will be made for unbilled work in progress or profit costs that are unpaid. Any excess or shortfall on the final calculation will be paid by you or to you within twenty-eight days and you will accept that as full and final payment under this contract."
Her hopes, and no doubt the firm's hopes, that she would build up a successful and lucrative practice were not fulfilled. The work was apparently largely legally aided and so very poorly paid. Her billing was significantly less than £66,000 per annum, the benchmark figure which had to be attained to produce the salary or commission of £22,000 per annum which she was being paid. She felt there was no future for her in private practice as a family lawyer and she resigned with effect from 17 th November 2000.
When the calculation of her commission was made, it revealed a shortfall of some £17,000 and in August 2001 the firm made a claim for £18,333.19 for the overpayment and interest pursuant to clause 9 of the contract of employment.
In her defence Miss Range alleged that the firm had negligently misrepresented the volume and quality of work in the family department in suggesting that she would have no difficulty in billing between £80,000 and £90,000 per annum. In her counterclaim she sought damages for these misrepresentations. The defence also took a more unusual point. She contended that the effect of the contract was to make advances to her against future commissions and that consequently it was a regulated agreement within the Consumer Credit Act 1974 which was unenforceable against her. It is common ground that if it is a regulated agreement then it was not executed in the proper form or in compliance with the formalities required under the Act and the claim would fail.
Thus it was decided that a preliminary issue be tried to determine whether the contract was indeed a regulated agreement under the 1974 Act and specifically whether: -
i) the contract was for the provision of regulated credit within s.8 and s.9 of the 1974 Act, and
ii) the contract was an exempt agreement within s.16 of the 1974 Act and the associated regulations.
That was heard by His Hon. Judge Lloyd sitting in the Brighton County Court on 11 th December 2002 when he found for the defendant and dismissed the firm's claim. The firm appeals with permission granted by Tuckey L.J.
This was an Act to establish a new system for protection of consumers. The relevant provisions are these:-
"8. Consumer Credit Agreements.
(1) A personal credit agreement is an agreement between an individual ("the debtor") and any other person ("the creditor") by which the creditor provides the debtor with credit of any amount.
(2) A consumer credit agreement is a personal credit agreement by which the creditor provides the debtor with credit not exceeding £25,000.
(3) A consumer credit agreement is a regulated agreement within the meaning of this Act if it is not an agreement (an "exempt agreement") specified in or under s.16.
9. Meaning of credit.
(1) In this Act "credit" includes a cash loan, and any other form of financial accommodation. …
10. Running-account credit and fixed-sum credit.
(1) For the purposes of this Act –
(a) Running-account credit is a facility under a personal credit agreement whereby the debtor is enabled to receive from time to time (whether in his own person, or by another person) from the creditor or a third party cash, goods and services (or any of them) to an amount or value such that, taking into account payments made by or to the credit of the debtor, the credit limit (if any) is not at any time exceeded; and
(b) fixed-sum credit is any other facility under a personal credit agreement whereby the debtor is enabled to receive credit (whether in one amount or by instalments) . …"
Section 16 deals with exempt agreements. Section 60 provides for the form and content of agreements, s.61 deals with the signing of the agreement, s.62 and 63 with the duty to supply copies of the unexecuted and the executed agreement, while s.64 imposes the duty to give notice of cancellation rights. By virtue of s.65 the consequence of improper execution of a regulated agreement is that it is enforceable against the debtor or hirer on an order of the court only. Section 127 sets out in what circumstances the court will enforce such an improperly executed agreement.
The issues.
The issues before the judge and before us are these:-
i) Was this an agreement by which the firm provided Miss Range with credit of any amount? If not, it was not a personal credit agreement within the meaning of the Act and it was therefore enforceable according to its terms.
ii) If, however, it did provide Miss Range with credit, did that credit exceed £25,000? That might depend upon whether it provided for running-account credit or fixed-sum credit. If the credit exceeded the limit, then it is enforceable.
iii) If credit under £25,000 was provided was it an exempt agreement?
The first question: did this agreement provide credit?
The judge's view was this:-
"Miss Range was being paid sums that she was not earning. That is the monthly sum she was being paid when not her earnings, because of course her remuneration was based on the commission. Clause 9 of the contract provided for the payment to Miss Range of an advance of £1,833.33 and that was paid each month. The advance was paid to her regardless of whether she had earned any commission or not. …
I consider the payments of £1,833.33 to the defendant were not her remuneration for services. Under clause 9(a) that remuneration was 33% of the profit costs delivered. These were cash advances until the calculation under 9(b) was to be carried out. …
I find that the payments of £1,833 per month were on a commonsense view a subsidiary arrangement to assist the defendant financially, i.e. a cash loan which was either repayable in part, and in given circumstances would attract interest, or to be taken into account when paying the remuneration. I find that the agreement entered into does fall within the Consumer Credit Act 1974 …"
Mr David Head on Miss Range's behalf supports the judge's reasoning. He submits in summary that there is no correlation between the monthly advances and the amount actually earned. He points out that there is no entitlement to be paid hour by hour for the time worked but only to the...
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