ON APPEAL FROM THE CENTRAL LONDON COUNTY COURT
His Honour Judge McMullen QC
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE STANLEY BURNTON
LORD JUSTICE PATTEN
| DEAN & DEAN SOLICITORS
|- and -
WordWave International Limited
A Merrill Communications Company
165 Fleet Street, London EC4A 2DY
Tel No: 020 7404 1400, Fax No: 020 7831 8838
Official Shorthand Writers to the Court)
Charles Joseph (instructed by DWFM Beckman) for the Respondent
Hearing date: 25th October 2011
Crown Copyright ©
Lord Justice Stanley Burnton :
"Dean & Dean
£55,000 ... base
3½ times salary
30% of own billing of own clients
150,000 ... of
Includes my trainee
Trainee I get credit for
£100 - £140 ph + trainee
When we go to court trainee comes too
For 1st year
Then review ... what
Wd arrange for me to do
PR work for networking
Further to our telephone conversation please let me have your letter of offer as a reply to this email.
I will phone you on Monday and let you have my final decision."
"As discussed I set out below the terms of our offer of employment to your good self.
Basic Salary of £55,000 (fifty five thousand pounds) 10% of your billing of your own clients after billing three and one half times your salary from those clients. 5% of your billing of our clients after billing three and one half times your salary.
Your guarantee of £100,000 of billing from your own clients.
The above terms are for a one year period after which both parties will negotiate a new contract if necessary.
You will have a minimum of a one year contract with this firm (we hope you stay forever).
Also usual statutory employment terms i.e. holidays etc.
In any event I hope that this clarifies our offer.
We hope that you will agree and join us."
"I have a few queries in respect of the terms you have set out and for the sake of completeness and certainty I would be grateful if you could clarify these matters for me:
1. On Tuesday you offered 30% commission on my own clients after billing three and a half times my salary. This offer is for 10%. Please explain.
2. The terms state that I guarantee that I will bill a minimum of £100,000 from my own clients but you do not set out what the consequences are if I do not; (although very unlikely to be applicable)
3. The terms state that this offer is for a one year period. Are you offering me a one year fixed term contract of employment or are you saying that I am employed in the normal sense with a review of the terms from both sides once I have completed a years service.
4. Depending on the answer to point 3 above I will need to know that notice period you require from me if I wish to leave the practice during this first one year period. Will you be applying statutory terms (i.e. one week per year of service)? I am unsure whether or not you are saying that I am unable to leave the firm in my first year.
Whilst I also hope that I will want to stay forever and am confident that we will make an unbeatable team I would be grateful if you could clarify the above matters. "
"1. I am sorry it should read 30%. But so there are no misunderstandings it is 30% after you have billed and the office has collected the fees.
2. a deduction from your salary of an amount of 15,000
3. the offer of one year relates to the terms so that both parties are fixed to the said agreement for at least one year i.e. you and jami. Contract to be a normal contract with the terms to be reviewed after a year.
4. I think that 30 days notice would be appropriate for both parties. I personally prefer that both parties agree a minimum of one year as you are leaving a secure job. Its up to you, let me know.
I hope that clarifies the position."
According to Ms Moussaoui, this email was not received by her until 31 January. In the meantime, she and Dr Mireskandari met on 27 January. Dr Mireskandari typed out the following letter in her presence:
Please find below the terms agreed between Dean & Dean Solicitors and your self for your employment.
The terms do not set out the standard contract terms which will be with your contract.
You will let us know the date you will commence within the next few days but you anticipate to be within 30 days if not sooner.
Please sign below to acknowledge acceptance of the terms.
Terms of agreement
Salary £55,000.00 (fifty five thousand)
After three and one half times your collected billings of your own clients you will receive 30% (thirty percent) of your billing.
After three and one half times your collected billing of the clients of Dean and Dean you will receive 5% of your billing.
Both parties to review the above terms after one year.
Notice period for the first year to be 3 months.
You will bill a minimum of at least £100,000 for the first year.
In the event that you are unable to bill £100,000 you will agree to reduce your salary of the first year by £10,000."
It is obvious, and common ground, that given their previous communications the reference to "three and one half times" was, and was understood by both Ms Moussaoui and Dr Mireskandari, to be three and one half times her salary. At the trial, it was common ground that the words in the last sentence "In the event that you are unable to bill £100,000 …" was intended and understood to be "In the event that you are unable to bill and to collect £100,000 …"
The contractual issues between the parties
(1) Was the £100,000 minimum of her billings to be based on fees for her work for her own clients only, or on all the fees for her work, for both her clients and the firm's clients?
(2) Was the threshold of £192,500 reached when Ms Moussaoui billed fees to that sum, or was in reached only when fees to that sum had been both billed and received?
(3) Once the threshold was passed, was her commission payable on fees billed or only on fees billed and received?
(4) Were fees billed for the work of Ms Moussaoui's trainee to count for the purposes of calculating her commission and to determine whether there should be a deduction from her salary?
Analysis of the contract issues
The judgment below
"Generally speaking it is not permissible to look at the negotiations leading up to a contract to find the meaning of the words used the in the document but in this case it is the joint submission of counsel that I should engage in this form of archaeology. That means that words spoken and written in the run-up to the contract are relevant and the contract itself is incomplete. The contract is said to be partly oral and partly written. What is also unusual about this case is that both parties criticise the agreement which they themselves rely on. The defendant typed it, in his office, in the presence of the Claimant, each contributing to it. They are both lawyers. It is a mess."
"It is necessary to set out the contract itself and then to analyse each part of it. So far as is relevant, the contract provides as follows - "
He then set out the terms of the letter of 27 January 2005, and continued:
"The other documents which are relevant to the meaning of these terms are …"
The judge then referred to Ms Moussaoui's note of the telephone call and to the emails to which I have referred.
"The guarantee and thresholds
The counterclaim by the Defendant is for £10,000 since it is said the Claimant failed to achieve billings in respect of her own clients exceeding £100,000. The document itself says this: In the event you are unable to bill £100,000 you will agree to reduce your salary of the first year by £10,000.
Both sides agree this is inaccurate. They at least agree that the words 'and collect' should be inserted, so that this represented fees received. There is an important distinction between billing and collecting. Both parties agree that I should insert the words 'and collect' into the final paragraph. What they do not agree on is whether or not that is targeted upon the Claimant's own clients or all her billings.
I agree looking at the documents in the lead up to the negotiations, that the words 'your own clients' appear frequently. Had I looked only at the documents, it would be clear that the parties agree that the £100,000 related to billings from the Claimant's own clients (that is those coming over from Moss Beachley or, as it is put, clients introduced by the Claimant). However, reliance is placed upon the phone call where the Claimant said it was unfair to expect that, and she did not agree to it, and that is why the words 'your own clients' do not appear in the final paragraph of the contract. I accept that submission. I accept her evidence as to what occurred and it is not appropriate to record (in an amendment to the contract which I would figuratively put in) the words 'your own clients'. She was to bill £100,000 and have fees received of £100,000 for the first year in which case she would not be liable to pay the penalty. That is the correct construction of the penalty clause.
The next issue relates to whether or not there were two thresholds before commission would be accrued. The contract itself, at first sight, indicated that, but I do not consider it is correct that the joint intention of the parties was that the Claimant should have to make £192,500 on one or other of the types of account. At its extreme, it would involve the Claimant billing hours of over £400,000 before she would be entitled to any commission on the excess. It must be borne in mind that commission is not payable until the threshold is reached and then only on the excess over the threshold. The language of the clause does not make sense. It does not make sense grammatically and it does not reflect what the parties were discussing. What it means is this: after £192,500 of your collected billing of your clients and of Dean & Dean you will receive 30% and 5% respectively. The difficulty therefore is the word 'collected'.
In my judgement this, too, did not express the intention of the parties. The word 'collected' appears twice. These are very strong words and yet they do not reflect the intention of the parties. Let us examine what the purpose of this agreement was. It was to ensure, as a minimum, that Claimant brought in enough to cover her funding of £100,000. At the other end it was to give her an incentive to bring in more work. Thus between £100,000 actually received and £192,500 billed was a grey area where neither party would pay the other but, after £192,500 of work done, the Claimant would be entitled when the money came in, to her commission upon it. In my judgement this is a very sensible payment by results system. It gives the Claimant an incentive – she does not get paid for everything that she does, she has to do a minimum amount of work to cross the threshold and then she would become commissionable.
So I hold that there were not two thresholds required here. The Claimant was required to bill, but not to have collected, fees to the extent of £192.500. This aspect of the case was the subject of an Application to Amend. It is a new case. There is no evidence of it at all in the evidence of Mr Tehrani or the Defendant, except for a citation from the contract itself. In my judgement the intention of the parties was not reflected in this aspect of the contract relating to thresholds. I do not accept that the arrangement is impractical. The Claimant's own clients brought in by her can easily be distinguished from the firm's and it is not saved by treating these two thresholds as disjunctive.
The second issue relates to whether uncollected billings count for the threshold. I do not accept, as urged by the Defendant that this is a new case, nor so I accept that this is a bizarre hybrid system. The purpose which I have described of incentivising the Claimant is achieved by this threshold. She bills. It is assumed that the bills she sends are properly rendered and collection is, I hold, in the hands of the administrators and so long as it is billed (and in this case I have seen evidence of internal audit by the proprietor, Mr Tehrani, of ticking the bills), then the collection of that is left to others. So the £192,500 is made up of fees billed."
The contentions of the parties
Lord Justice Patten;
Lord Justice Mummery