Robertson v Hill Samuel Investment Services Ltd [1999] UKEAT 404_97_1401

EAT

Robertson v Hill Samuel Investment Services Ltd

[1999] UKEAT 404_97_1401 · 1999-01-14

MR JUSTICE CHARLES: This is an appeal from a decision of the Industrial Tribunal contained in its Extended Reasons dated 29 January 1998 prepared by the Chairman who heard the case sitting alone.

Before the Tribunal the Applicant (Mr Robertson) made a number of claims against the Respondent (Hill Samuel).

The decision under appeal relates only, or primarily, to the first of those claims and only to a preliminary issue relating thereto which is for unpaid commissions in respect of Unit Trust Management Service Business (UTMS) and Investment Management Service Business (ITMS). In paragraph 2 of his Extended Reasons the Chairman said that:

"At the outset of the hearing the parties agreed that the central issue for the determination of the dispute was whether the commission claimed was renewal commissions within the terms of the contract between the Respondent and the Applicant. I therefore decided to determine the point as a preliminary issue before considering matters of jurisdiction and quantification of any order."

The Chairman expressed his decision in paragraph 5 of point 3 of the Extended Reasons in the following terms:

"In the light of my findings of fact and having considered the submissions of the parties I have concluded that the words renewal commission in paragraph 3(1) of the company representative commission schedule do not include commissions payable for private client business."

So described and expressed the decision is one of construction and thus of law.

The principles and approach relating to the construction of commercial documents

These are set out and explained in paragraphs 12.104, 105 and 111 of Chitty on Contracts 27th Edition. Since the publication of that text book and the date of the hearing before the Tribunal the cases referred to in those passages and thus the relevant principles have been the subject of consideration by the House of Lords in cases to which we refer below. The paragraphs in Chitty are in the following terms:

"12.104 Meaning of Words and Phrases

Where the words of a written Agreement have a clear and fixed meaning, not susceptible of explanation, extrinsic evidence is not admissible to show that the parties meant something different from what they have written. But where the wording or phraseology is susceptible of more than one meaning, or if an ambiguity emerges when it is sought to apply the language of the document to the circumstances under consideration, extrinsic evidence will be admissible to ascertain the true meaning of the words or phrases used. The Court is entitled (indeed, bound) to enquire beyond the language of the document and see what the circumstances were with reference to which words were used, and the object appearing from those circumstances which the person using them had in view. The Court must place itself in the same "factual matrix" as that in which the parties were. In Reardon Smith Line Ltd v Yngvar Hansen-Tangen , Lord Wilberforce said:

"No contracts are made in a vacuum; there is always a setting in which they have to be placed. The nature of what is legitimate to have regard to is usually described as "the surrounding circumstances" but this phrase is imprecise: it can be illustrated but hardly defined. In a commercial contract it is certainly right that the Court should know the commercial purpose of the contract and this in turn pre-supposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating."

He further stated that, just as the intention of the parties is to be ascertained objectively, so also "when one is speaking of aim, or object, or commercial purpose, one is speaking objectively of what reasonable persons would have in mind in the situation of the parties".

12.105 On the other hand, although evidence of the facts about which the parties were negotiating is admissible to explain what meaning was intended, the Court is not entitled to look at what the parties to the contract said or did whilst the matter was in negotiation nor are drafts or preliminary agreements permissible in aid of its determination, except where it is sought to rectify the document or to show that the parties negotiated on an agreed basis that the words used bore a particular meaning. Evidence will also not be permitted to show what were the parties subjective intentions with respect to the words used. "The general rules seems to be that all facts are admissible which tend to show the sense which the words bear with reference to the surrounding circumstances of and concerning which the words were used, but that such facts as only tend to show that the writer intended to use words bearing a particular sense are to be rejected". In Prenn v Simmonds , Lord Wilberforce summed up the position as follows:

"In my opinion, then, evidence of negotiations, or of the parties intention, and a fortiori of [the Plaintiff's] intentions, ought not to be received, and evidence should be restricted to evidence of the factual background known to the parties at or before the date of the contract, including evidence of the genesis and objectively the "aim" of the transaction."

12.111 Subsequent Acts

The admissibility of evidence to show that the parties have acted upon an instrument in a particular sense is probably confined to ancient documents. Evidence of user, and acts done in pursuance of instruments, has been admitted to explain old, or obsolete, or even imperfect expressions to be found in ancient documents. Attempts were, however made to extend the rule to cases where the document was modern and the ambiguity patent. The acts and conduct of the parties under the agreement were admitted to show the sense in which the parties to it used the language they employed, and their intention in executing the instrument as revealed by their language interpreted in this sense. The House of Lords has now decisively rejected this extension, it is held that "it is not legitimate to use as an aid in the construction of the contract anything which the party said or did after it was made". Subsequent actions are therefore inadmissible to interpret a written agreement, although they are admissible to show whether there was a contract and what the terms of the contract were, either originally or by variation or as a basis for an estoppel."

The two cases cited in paragraphs 12.104 and 105 of Chitty have been considered recently by the House of Lords in Mannai Investment Co. Ltd -v- Eagle Star Life Assurance Co. Ltd

[1997] AC749

and Investors Compensation Scheme Ltd -v- West Bromwich Building Society

[1998] 1WLR 896

The Mannai case was a majority decision. We set out below passages on the approach to construction in the speeches of Lord Steyn and Lord Hoffman who were both in the majority:

(a) At

[1997] 2WLR 961

G to 961A and

[1997] AC767

G to 768B Lord Steyn says this:

".......The approach in Reardon Smith Line Ltd v Yngvar Hansen-Tangen (trading as H.E. Hansen-Tangen)

[1976] 1WLR 989

, which deals with the construction of commercial contracts, is by analogy of assistance in respect of unilateral notices such as those under consideration in the present case. Relying on the reasoning in Lord Wilberforce's speech in the Reardon Smith case, at pp. 996d-997d, three propositions can be formulated. First, in respect of contracts and contractual notices the contextual scene is always relevant. Secondly, what is admissible as a matter of the rules of evidence under this heading is what is arguably relevant. But admissibility is not the decisive matter. The real question is what evidence of surrounding circumstances may ultimately be allowed to influence the question of interpretation. That depends on what meanings the language read against the objective contextual scheme will let in. Thirdly, the inquiry is objective: the question is what reasonable persons, circumstanced as the actual parties were, would have had in mind........" (b) At

[1997] 2WLR 967

G to 968B, 968E/G, 972G to 973B and

[1997] AC774

D/H, 775C/E, and 779F to 780B Lord Hoffman says this:

"I propose to begin by examining the way we interpret utterances in everyday life. It is a matter of constant experience that people can convey their meaning unambiguously although they have used the wrong words. We start with an assumption that people will use words and grammar in a conventional way but quite often it becomes obvious that, for one reason or another, they are not doing so and we adjust our interpretation of what they are saying accordingly. We do so in order to make sense of their utterance: so that the different parts of the sentence fit together in a coherent way and also to enable the sentence to fit the background of facts which plays in indispensable part in the way we interpret what anyone is saying. No one, for example, has any difficulty in understanding Mrs Malaprop. When she says "She is as obstinate as an allegory on the banks of the Nile," we reject the conventional or literal meaning of allegory as making nonsense of the sentence and substitute "alligator" by using our background knowledge of the things likely to be found on the banks of the Nile and choosing one which sounds rather like "allegory."

Mrs. Malaprop's problem was an imperfect understanding of the conventional meanings of English words. But the reason for the mistake does not really matter. We use the same process of adjustment when people have made mistakes about names or descriptions or days or times because they have forgotten or become mixed up. If one meets an acquaintance and he says "And how is May?" it may be obvious that he is referring to one's wife, even if she is in fact called Jane. One may even, to avoid embarrassment, answer "Very well, thank you" without drawing attention to his mistake. The message has been unambiguously received and understood..........

It is of course true that the law is not concerned with the speaker's subjective intentions. But the notice that the law's concern is therefore with the "meaning of his words" conceals an important ambiguity. The ambiguity lies in a failure to distinguish between the meanings of words and the question of what would be understood at the meaning of a person who uses words. The meaning of words, as they would appear in a dictionary, and the effect of their syntactical arrangement, as it would appear in a grammar, is part of the material which we use to understand a speaker's utterance. But it is only a part; another part is our knowledge of the background against which the utterance was made. It is that background which enables us, not only to choose the intended meaning when a word has more than dictionary meaning but also, in the ways I have explained, to understand a speaker's meaning, often without ambiguity, when he has used the wrong words.........

In the case of commercial contracts, the restriction on the use of background has been quietly dropped. There are certain special kinds of evidence, such as previous negotiations and express declarations of intent, which for practical reasons which it is unnecessary to analyse, are inadmissible in aid of construction. They can be used only in an action for rectification. But apart from these exceptions, commercial contracts are construed in the light of all the background which could reasonable have been expected to have been available to the parties in order to ascertain what would objectively have been understood to be their intention: Prenn v Simmonds

[1971] 1 WLR 1381

, 1383. The fact that the words are capable of a literal application is no obstacle to evidence which demonstrates what a reasonable person with knowledge of the background would have understood the parties to mean, even if this compels one to say that they used the wrong words. In this area, we no longer confuse the meaning of words with the question of what meaning the use of the words was intended to convey. Why, therefore, should the rules for the construction of notices be different from those for the construction of contracts? There seems to me no answer to this question. All that can be said is that the rules for the construction of notices, like those for the construction of wills, have not yet caught up with the move to common sense interpretation of contracts which is marked by the speeches of Lord Wilberforce in Prenn v Simmonds

[1971] 1WLR 1381

and Reardon Smith Line Ltd v Yngvar Hansen-Tangen ,

[1976] 1WLR 989

........"

Further in the West Bromwich case the headnote at

[1998] 1WLR 897

A to B, the headnote records as follows:

" Held , allowing the appeal (Lord Lloyd of Berwick dissenting), that in construing contractual documents the aim was to find the meaning which the document would convey to a reasonable person having all the background knowledge reasonably available to the parties, including anything which would have affected the way a reasonable man would have understood it, but excluding previous negotiations and declarations of subjective intent;......."

In his speech

[1998] 1WLR 912

E to 913F Lord Hoffman says this:

"In the Court of Appeal, Leggatt LJ said, on the authority of Through the Looking-Glass , that the judge's interpretation was "not an available meaning of the words." "Any claim (whether sounding in recission for undue influence or otherwise)" could not mean "Any claim sounding in recission (whether for undue influence or otherwise)" and that was that. He was unimpressed by the alleged commercial nonsense of the alternative construction.

My Lords,

I will say at once that I prefer the approach of the judge. But I think I should preface my explanation of my reasons with some general remarks about the principles by which contractual documents are nowadays construed. I do not think that the fundamental change which has overtaken this branch of the law, particularly as a result of the speeches of Lord Wilberforce in that the meaning which a document would convey to a reasonable man was what the parties using its words against the relevant background would reasonably have been supposed to mean and included the possibility of ambiguity and even misuse of words or syntax; that the court was not obliged to ascribe to the parties an intention which plainly they could not have had, and in choosing between competing unnatural meanings was entitled to decide that Prenn v Simmonds

[1971] 1WLR 1381

, 1384-1386 and Reardon Smith Line Ltd v Yngvar Hansen-Tangen ,

[1976] 1WLR 989

, is always sufficiently appreciated. The result has been, subject to one important exception, to assimilate the way in which such documents are interpreted by judges to the common sense principles by which any serious utterance would be interpreted in ordinary life. Almost all the old intellectual baggage of "legal" interpretation has been discarded. The principles may be summarised as follows.

(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.

(2) The background was famously referred to by Lord Wilberforce as the "matrix of fact," but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.

(3) the law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.

(4) The meaning which a document (or any other utterance) would convey to a reasonable man is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammars; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. The background may not merely enable the reasonable man to choose between the possible meanings of words which are ambiguous but even (as occasionally happens in ordinary life) to conclude that the parties must, for whatever reason, have used the wrong words or syntax: see Mannai Investment Co. Ltd -v- Eagle Star Life Assurance Co. Ltd

[1997] AC749

(5) The "rule" that words should be given their "natural and ordinary meaning" reflects the common sense proposition that we do not easily accept that people have made linguistic mistakes, particularly in formal documents. On the other hand, if one would nevertheless conclude from the background that something must have gone wrong with the language, the law does not require judges to attribute to the parties an intention which they plainly could not have had. Lord Diplock made this point more vigorously when he said in Antaios Compania Naviera S.A. v. Salen Rederierna A.B.

[1985] AC191

, 201:

"if detailed semantic and syntatical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense.""

We have set out the above quotations at some length in the hope that they may be of assistance in the future. It can be seen from such quotations that the two recent cases in the House of Lords explain and apply the earlier cases in the House of Lords which are referred to in the passages cited from Chitty which were in existence at the time this matter was heard by the Tribunal.

Here, in our judgment correctly, it is common ground that the words used in the relevant agreement do not have a clear and fixed meaning that is not susceptible of explanation and therefore that extrinsic evidence is admissible, and should be considered, as an aid to construction.

It follows that a Court or Tribunal should adopt a business commonsense approach to the construction of the agreement. In doing so it should have regard to the background information reasonably available to the parties but exclude their subjective intentions, and evidence as to their negotiations. Further on matters relating to construction (as opposed to rectification, or estoppel, neither of which were raised before the Tribunal) the conduct of the parties after the contract was entered into is not relevant.

The passage we have quoted from a speech of Lord Hoffman in the West Bromwich case provides a useful statement as to the approach to be adopted. In our judgment the weight to be given to material reasonably available to, but not actually seen by or which is not in the knowledge of, a party could give rise to problems. Like the expression "the surrounding circumstances," what is "reasonably available", is an imprecise term and it is thus difficult to define as Lord Wilberforce said in the passage from his speech cited in paragraph 12.104 of Chitty. Adopting his language what is "reasonably available" can be illustrated, and indeed may be obvious, in a given case but cannot be defined. Generally we add that this quoted passage from the speech of Lord Wilberforce in the Reardon Smith Line case set out in paragraph 12.104 of Chitty still provides succinct and helpful guidance.

The documents in this case and some comments on them

(1) The agreement was entered into on 12 June 1991, and the main contract document is called a company representative agreement (the Company Representative Agreement). The Company Representative Agreement provided by clauses 3(1) and 5(3) that:

"3.1 Commission will be payable to the Company Representative in respect of authorised applications in accordance with the Commission Schedules issued from time to time.....

5.3 ..... Payments due to the Company Representative will be paid in accordance with the Commission Scale."

(2) We add that(a) these appear to be the only relevant provisions in the Company Representative Agreement relating to payment (and they were the only provisions therein to which we were referred in this respect),

(b) they introduce into the contract documents, or parts of documents, called the Commission Schedule and the Commission Scale,

(d) both clauses refer to "commission", and 3(1) says that what is payable is "commission" and

(e) "authorised applications" are not defined save by reference to the Commission Schedule.

We also note that clause 3(1) provides that the commission that will be payable will be in accordance with the Commission Schedule s issued from time to time and not the Commission Schedule issued at the date of the agreement.

Important issues are what is, are, or comprise the relevant Commission Schedule and Commission Scale.

(3) It was common ground that the Commission Schedule at the date the Agreement was entered into (the Commission Schedule) was a document appearing at page 3 of our bundle which has on it the manuscript comment "latest confirmed 12/11/91 by G Cross". It is thus not a document dated 12/11/91 and is a document that was in existence at the date of the agreement.

(i) and (ii) and 3(i) and (ii) as follows:

"1 (i) This is the commission schedule referred to in the Company Representative Agreement, and forms part of that Agreement.

(ii) Commissions are payable by the Company:

(a) Only after completion of business and where there is no subsequent cancellation.

but

(b) Where monies are received by the Company on a regular basis, only after each payment by the client is received.

3 (i) Renewal commission will not be paid after termination of the Company Representative Agreement unless the Company Representative has completed at least 5 years' service from appointment to termination. Appointment under previous "Adviser" or "Associated" Agreements with the Company shall be valid for this purpose provided that service has been uninterrupted.

(ii) In the event of termination by retirement or death of a Company Representative who has the requisite period of service to qualify for continuing renewal commissions, the Company shall have the option of commuting such renewals into a lump sum."

We note that these provisions do not contain an express positive obligation to pay renewal commission after termination, but assume that it is payable after termination to qualifying persons under the terms of their contracts because it seeks to limit circumstances in which it will be paid.

We also note that it is common ground, and the Tribunal found, that Mr Robertson had completed five years service. This finding was based on paragraph 3(i) and Mr Robertson's service prior to the entry into of the Company Representative Agreement pursuant to an "Associate Agreement".

(4) "Renewal commission" is not defined in the contract documents.

(5) The document accepted to be the Commission Schedule referred to in the Company Representative Agreement is at page 1 of the document with the overall heading "Hill Samuel Investment Services". The heading thereunder at page 1 is "Company Representative Commission Schedule". Pages 2 to 5 of that document contain schedules and notes thereto under the headings in the same form as that on page 1. These headings are:

"Company Representative Commission Scale-Scale D" and "

Notes to Commission Scale", as we shall so describe these documents.

(6) The Company Representative Commission Scale-Scale D contains columns with headings "Initial Commission" and "Renewal Commission" some of which relate to UTMS and ITMS Business.

(7) The Notes to Commission Scale contain the following provisions:

"NOTES A (applicable only to Hill Samuel Life Assurance Limited business):

1. Extra premiums imposed for medical reasons and payable throughout the policy's premium paying term will qualify for initial commission at the same rate as applies to the tabular premium. Other extra premiums, known as 'monetary' extra premiums, will not qualify for commission. Any renewal commission for extra premiums will be at the same rate as applied to the tabular premium.

2. Initial commission will be paid on any increase in premiums arising from an alteration to a policy requested by the policyholder. The amount of commission payable in respect of the increase will be determined in accordance with the remaining term of the policy after alteration. Renewal commission will be paid on any increase in premiums arising from an alteration to a policy under the terms and conditions of the policy itself.

NOTES C (applicable in respect of all Hill Samuel Group Companies and companies outside the Group):

1. Company Representatives are credited with commission at the rates and bases shown in this Schedule in respect of new business submitted through their agencies.

In addition, Company Representatives registered in connection with the introduction, appointment and servicing of Appointed Representatives to which Scale A Commission Schedule applies are credited with commission at 50% of the initial commission and 100% of the renewal commission rates shown in this Schedule in respect of Hill Samuel Life Assurance Limited products.

2. The rates and terms included in this Schedule are effective for policies with commencement dates on or after 1 July 1988.

3. The Company reserves the right to change the commission rates set out in this Schedule at any time.

4. Commission becomes due only when a policy has come into effect and the relevant premium or investment has been received Hill Samuel Life Assurance Limited or, in the case of products and services of other companies, when the relevant notification has been received by Hill Samuel Investment Services Limited.

5. Commission on policies and services not included in this Schedule will be quoted on request through divisional offices.

6. For single contribution Hill Samuel Life Assurance Limited products and all other companies' products, Sale Credit is equal to Initial Commission."

(8) At the date the agreement was entered into in June 1991, the Company had issued a document (it was issued in February 1991) which has three headings one under the other namely:

"Active Products Chart", "

HSISG Products (Excluding HSLA)" and "Adviser Scale Commission" (we refer to this document as the Active Products - Adviser Scale Commission).

(9) Hill Samuel asserts that the Active Products - Adviser Scale Commission is the Commission Scale referred to in clause 5.3 of the Company Representative Agreement, whereas Mr Robertson asserts that this Commission Scale is the Company Representative Commission Scale - Scale D referred to above.

(10) The Tribunal found that Mr Robertson did not receive a copy of the Active Products - Adviser Scale Commission but that he must have seen it in the office and been aware of its contents (see paragraph 4.7 of the Extended Reasons).

We note that, in our judgment importantly, this finding is not dated and could relate either to the period before the Agreement was entered into in June 1991, or after it. This is because Mr Robertson had worked for, or with, Hill Samuel pursuant to an Associate Agreement since 1982. It is also clear that the evidence heard by the Tribunal related to both periods.

Further it is an important part of Hill Samuel's case that prior to the entry into of the agreement in June 1991, Mr Robertson was being paid in accordance with the Active Products - Adviser Scale Commission, however there are no findings made by the Tribunal that this was the case, or as to why any such payment would be relevant to his remuneration under the new Agreement entered into in June 1991.

(11) the Active Products - Adviser Scale Commission includes a column with a heading "Initial %" which corresponds to the column headed "Initial Commission" in the Company Representative Commission Scale - Scale D and a column headed "Service Fee" which corresponds to the column "Renewal Commission" in the Company Representative Commission Scale - Scale D.

The columns cover and describe the same products for example, PEPs, products of Hill Samuel Management International (Bank Von Ernst and Private Client Investment Service - Discretionary) being products of Hill Samuel Management International (Jersey). During submission we were told that the columns contain changes in rate but the example we were given did not bear this out. We were referred to product code 741 in the Active Products - Adviser Scale Commission relating to Private Client Investment Service carried out by Hill Samuel Private Client Management (Jersey) but there was no change in rate in respect of this product. In submission the comparison was made with the rates payable in respect of Private Client Investment Service by Hill Samuel Private Client Management (London) and not Jersey. We were also referred to product 720 in the Active Products - Adviser Scale Commission which refers to Investment Trust Management Service provided by BLW & Co and were invited to compare that with an Investment Trust Management Service under the heading Robert White & Co. Limited in the Company Representative Commission Scale - Scale D. But it is not obvious why this is the same product.

We have not carried out any exhaustive examination of the entries in the various columns to identify changes in product, or changes in rate.

(12) No other documents were alleged to be, or to together comprise, the Commission Scale referred to in the Company Representative Agreement were referred to, or relied on, at the Tribunal, or before us.

We have set out extracts from the documents at some length with our comments thereon. We have again done this in the hope that it will assist those who have to deal with this matter in the future.

Some history and findings of fact by the Tribunal with comments thereon

Paragraphs 4.4 and 4.5 of the Extended Reasons are in the following terms:

"4.4 Up until October 1987 there was no renewal commission payable on private client investment business. In that month the providers of the financial products indicated to the respondent that they would be willing to pay a commission for the purposes of encouraging the adviser who had sold the contract, to keep in touch, in the hope that the client might place further business with the Company in the future. On introduction it was referred to as a renewal commission. It is treated as renewal commission in the Company representative commission schedule, (see A1/15); it was paid to advisers according to their commission statements as renewal commission.

4.5 In February 1989 a memorandum was circulated to all Divisional Managers entitled NON - HSLA RENEWALS (see R2). Materially it states that renewals on ITMS and UTMS business would be paid to an adviser who inherited an "orphan" client with such an investment, on the understanding that the adviser should service the clients on a regular on-going basis; failing which the renewal commission would be withdrawn. The Applicant was unaware of this memorandum."

The memorandum was in the following terms:

"It has now been agreed, with effect from 1st January 1989, that renewals on UTMS, PCIS and ITMS will be paid to an adviser who inherits an orphan client with an investment in these services.

This is on the strict understanding that these clients will need to be serviced on a regular on-going basis.

If this does not happen, renewals will be withdrawn.

It is the responsibility of Divisional Managers to advise Beech Street of changes in the servicing adviser in order that the correct person receives the renewals."

this document therefore refers to "renewals" both in its heading and in the body of its text.

We note that it was found that Mr Robertson was unaware of this memorandum but it was later found that he had inherited orphan clients (paragraph 4.15) and had been paid before 1991 in relation to them. But there is no finding as to the basis of that payment and thus for example(a) whether it was pursuant to this memorandum, and therefore on the basis that clients had to be serviced, and if so how this fits with the findings in paragraphs 4.8 and 5.1 as to Mr Robertson's objective views and assumptions,

(b) the rate at which Mr Robertson was paid and by reference to what documents these sums were claimed and paid,

(d) how Mr Robertson made applications for payment and

(e) whether and if so how the finding at the end of paragraph 4.4 that the commission referred to therein was paid to advisers according to their commission statements as renewal commission fits in with the findings relating to orphan clients, (and it is to be noted that this finding in paragraph 4.4 is not dated).

Paragraph 4.6 of the Extended Reasons reads as follows:

"4.6 The respondent never sent any formal document to the Applicant telling him that it was not renewal commission but a servicing fee. However in November 1990 the respondent issued a pamphlet entitled Hill Samuel Adviser Commission Scheme. Materially it provides at para 8.2(ii) entitled Adviser business buy-out, -Rewards, -Servicing Fee:

"A sum equal to the servicing fees which were paid in the last 12 months on investment business, which is still in force at the date of retirement plus...."

The Applicant acknowledges that he received this document. But I am satisfied that he did register that a servicing fee was not a renewal commission."

We note that this acknowledgement is not dated. Also the last two sentences in paragraphs 4.6 do not fit together. There was some discussion and speculation between ourselves, and during the hearing, as to whether there was a typing error in these sentences (e.g. should the last sentence read "but I am satisfied that he did not register that a servicing fee was not a renewal commission". We understand that the Applicant did, and does, acknowledge that he received this document but there was no agreement between the parties as to whether the word "not" should be added to the last sentence at paragraph 4.6, and we do not think it right to speculate further in this judgment as to whether or not there is a typing error in this paragraph.

We also comment that this finding and, for example, the findings in paragraphs 4.8 and 5.1 of the Extended Reasons relate to Mr Robertson's state of mind and subjective intentions before, and after, the contract was entered into and therefore these findings are inadmissible as an aid to construction.

Paragraph 4.7 of the Extended Reasons reads as follows:

"4.7 The commission schedule was updated by Active Products Charts. The one for February 1991 (see R3) has a column headed Servicing Fee. It clearly applies to private client business. I am satisfied that the applicant did not receive this document. Although I have concluded that he must have seen it in the office and been aware of its contents."

We comment that the finding that Mr Robertson must have seen this document and been aware of its contents is not dated. This is an important omission both as to the identification of the relevant background and what the contract documents are. Also it is not entirely clear what is meant by the finding that Mr Robertson did not receive this document if he had seen it and he was aware of its contents.

Paragraph 4.8 of the Extended Reasons is in the following terms:

"4.8 I am however satisfied that both before and after June 1991, the applicant targeted private client business in preference to Life Policy and Pension business, in the belief that he would receive renewal Commission on that business, after a termination of his contract."

This perhaps indicates that the finding that Mr Robertson had seen the "Active Product Chart" and knew of its contents relates to the period before June 1991 but in our judgment this is not clear. Further, and in any event, as already mentioned this finding relates to Mr Robertson's subjective intentions and is therefore not admissible as an aid to construction.

Paragraph 4.15 of the Extended Reasons reads as follows:

"4.15 It is common ground that when an adviser left, the client, who was then known as an "orphan" client, was assigned to a new adviser who received the "renewal commission/servicing fee". I find that the applicant had inherited such "orphan clients" and the commissions, prior to June 1991. I reject his evidence that he assumed that the departing advisers must have had less than five years service, since there is no evidence before me that any other type of renewal Commission is transferred from the adviser who sold the business to another."

We comment that in this paragraph the finding is dated and that importantly it relates to what was common knowledge of the parties before the contract was entered into. Further in this paragraph the Tribunal made an express finding to the effect that there was no common understanding that Mr Robertson's orphan clients, and thus orphan clients generally, came from departing advisers with less than five years service. However, we have had difficulty in following the expressed reasoning that underlies this conclusion.

Other parts of the Extended Reasons and some comments on them

The sub-paragraphs of paragraph 4 of the Extended Reasons contain what the Chairman describes as the material facts. In sub-paragraphs 4.1 to 4.3 he refers to the Company Representative Agreement and the Notes to Commission Scale (referred to in paragraph (5) under the heading " The Documents and some comments on them " above). These are notes to the Company Representative Commission Scale - Scale D which is referred to in the Extended Reasons as the "company representative commission schedule". The Chairman also refers to the "Active Products Chart" for February 1991 which is the document referred to in paragraph (8) under " The Documents and some comments on them " above. The Chairman says that: "According to the company representative agreement, commission payable on termination is set out in the company representative commission schedule (paragraph 4.1). But what the Company Representative Agreement says is that it is payable in accordance with the Commission Scale. Given the argument that exists between the parties it is in our judgment surprising that the Chairman does not deal expressly with the issue as to what document, or documents, comprise the Commission Scale. By inference the indication is that he concluded that this was the Company Representative Commission Scale - Scale D.

The Chairman also finds that Hill Samuel: "reserved the right to change the commission rate set out in the schedule at any time. An example of such a document is the Active Products Chart in February 1991 (see RJ) (paragraph 4.3). This must be a reference to paragraph 3 of Notes C in the Notes to Commission Scale.

However nowhere in the Extended Reasons does the Chairman explain whether in his view the Commission Scale is in the Company Representative Schedule (and thus is the Company Representative Commission Scale - Scale D) or whether the Company Representative Commission Scale - Scale D is replaced by, amended by or should be read with the Active Products - Adviser Scale Commission, or how in his view a reserved right to vary rates of commission introduces a "service fee" or excludes from the term "renewal commission" commissions payable in respect of private clients.

It is apparent from paragraph 5 of the Extended Reasons that the Chairman did not make any link, or provide any express reasoning between the expression of his conclusion in that paragraph and his earlier findings of fact, and identification of relevant documents.

We add that, as appears above, we have also had difficulty in understanding some of the findings and observations contained in the Extended Reasons.

Additionally the Extended Reasons do not contain any statement of the principles and approach applied by the Chairman in construing the agreement and as we understood the position from Counsel who appeared for Hill Samuel before us, and before the Tribunal, the Chairman did not have the benefit of any significant submissions as to this. Mr Robertson was in person before the Tribunal. In those circumstances we are of the view that the relevant principles and approach as to the construction of commercial agreements should have been explained in submission by Counsel for Hill Samuel. This could have been done shortly by reference to a text book or text books (e.g. by reference to the paragraphs in Chitty on Contracts which we have set out above). If this had been done it should have helped focus the evidence and to provide a framework for the argument and the findings that were made.

We comment generally that in our judgment it is an important part of the duties of Counsel, and other legally qualified representatives, to put the relevant principles of law before a Tribunal and that this is particularly the case when the other parties (as here) are unrepresented. In our judgment legally qualified representatives should always seek to ensure that so far as practicable the unrepresented party has a sufficient understanding of the relevant legal principles and approach and thus of the issues to be decided by the Tribunal. Further, and in any event, a clear statement of those principles and approach will be likely to greatly assist the Tribunal in performing its task.

Finally as to the Extended Reasons we comment that paragraphs 4.9 to 4.14 thereof contain findings as to events after the agreement was entered into in June 1991.

Our approach

This has been a two stage approach. Firstly we have considered whether the Tribunal failed to provide adequate reasons or misdirected itself in law. Secondly we have considered whether it is open to us to decide the point of construction considered by the Tribunal. The second stage arises because notwithstanding the establishment of grounds of appeal at the first stage we might nonetheless be able to decide that point of construction on the basis of the findings of fact made by the Tribunal (for example see O Kelly v Trust House Forte Plc

[1983] ICR 728

in particular at 764B/D).

Conclusions

In our judgment:

(A) The Extended Reasons do not inform either side how they have won or lost and they fall short of the requirement set out by Bingham LJ in Meek v City of Birmingham District

[1987] IRLR250

in particular at paragraph 8, and

(B) The Extended Reasons show that the Tribunal misdirected itself in law in its approach to the construction of the agreement.

On both these alternative grounds we have concluded that unless we can construe the agreement ourselves the appeal should be allowed and the matter remitted to a different Tribunal.

As to (A) in our judgment examples of the manner in which the Extended Reasons failed to provide an adequate explanation are (i) no link is made between paragraph 5 and the earlier findings, (ii) the documents making up the agreement are not identified, (iii) the effect of the "Active Products Chart" to which the Chairman refers is not explained, it is said that it is an example of a document changing rates of commission, although it was in existence prior to the entry into of the agreement in June 1991 and it is not relied upon by Hill Samuel to justify a change of rate but is relied on by them to justify their refusal to pay after termination what is therein described as "service fee" but which was described in the Company Representative Commission Scale - Scale D as "renewal commission" and (iv) no statement of the principles and approach being applied is made. This is not intended to be an exhaustive list.

Further in connection with this conclusion we add that neither side before us identified, or sought to rely on, the reasoning set out in the Extended Reasons. Hill Samuel adopted the result but not the reasoning. One of the arguments on behalf of Counsel for Mr Robertson was that the Chairman had found that the agreement initially comprised the Company Representative Agreement and the Commission Schedule (i.e. the documents referred to in paragraphs (2) and (3) under the heading " The Documents and some comments on them " above) and that it had been varied by the Active Products - Adviser Scale Commission. We can understand why Counsel put this point and agree that this approach could not be correct because the Active Products - Adviser Scale Commission was in existence prior to the date the agreement was entered into in June 1991, but we have concluded that this was not the approach that had been adopted by the Chairman. However this argument highlights the fact that it is not apparent from the Extended Reasons(a) whether the Chairman concluded that the Active Products - Adviser Scale Commission was included within the contract documents, or

(b) why he concluded it had an effect on the terms of Mr Robertson's contract with Hill Samuel. This is at the heart of the dispute between the parties.

As to (B) in our judgment examples of the manner in which the Extended Reasons show that the Tribunal misdirected itself in law are(i) findings are made, and apparently relied on, as to the subjective intention and motives of Mr Robertson and events after the entry into of the agreement, and

(ii) no effective attempt is made to identify the relevant background against which the agreement is to be construed.

In our judgment it is not open to us to construe the agreement and determine whether the conclusion reached by the Tribunal as to Mr Robertson's contractual entitlement is right or wrong.

Our main reasons for this second conclusion are that(i) it is not clear on the findings before us what the contract documents are,

(ii) the documents that could comprise the agreement, or the written part of it, contain a number of undefined terms,

(iii) even if we could identify the contract documents they are not in clear and unequivocal language and could only be properly construed having regard to the relevant background, and

(iv) there are no adequate findings as to the relevant background and indeed some of the findings as to it made by the Tribunal are unclear.

Points and problems as to the construction of the agreement

We refer to some of these in the hope that it will assist in the future. We however make it clear that we are not attempting to set out anything like an exhaustive list. An underlying problem appears to be that the monies claimed by Mr Robertson in respect of private client business on their introduction into the sums payable to representatives of Hill Samuel, were described as "renewal commissions". Later, and before the agreement that Mr Robertson entered into in June, but when he was working for Hill Samuel under an "Associate Agreement", they were described as "servicing fee".

Problems

(1) During the currency of the agreement Mr Robertson was to be paid what is described as commission by Clause 3(1) of the Company Representative Agreement and this includes the sums described as "renewal commission" in Company Representative Commission Scale - Scale D but as "servicing fee" in the Active Products - Adviser Scale Commission.

(2) What are the contract documents? In this context we have set out details of relevant documents above and a central question is whether the Active Products - Adviser Scale Commission is a contract document.

(3) What is the effect of the Active Products - Adviser Scale Commission(a) if it is a contract document, and

(b) if it is not, and having regard to the answers to those questions what is the Commission Scale referred to in the Company Representative Agreement?

(4) Was any part of the relevant agreement made orally?

(5) What is the contractual entitlement to sums described as "renewal commission" and/or "servicing fee" during the currency of the agreement, and after its termination?

(6) What were the terms, and relevance, of Mr Robertson's earlier agreement, or agreements, with Hill Samuel?

(7) What was the position in respect of orphan clients generally, and Mr Robertson's orphan clients in particular?

(8) What was an "authorised application" referred to in clause 3 of the Company Representative Agreement, or how did representatives generally, and Mr Robertson in particular, make claims for commission?

(9) As to the sums that came to be called "servicing fee" did a representative have to show that he had done some "servicing" before he became entitled to any payment and did Mr Robertson have to show this prior to June 1991 and is this relevant?

(10) What documents and information relating to the payment of Commission were available, or reasonably available, to the parties at the time the agreement was entered into in June 1991?

Overall Conclusion and Recommendation

We allow the appeal and remit the matter for rehearing by a differently constituted Tribunal. This is not an indication of our view as to the true construction of the agreement, or of the merits of Mr Robertson's claim or Hill Samuel's defence. As we have explained we are not in a position to reach a properly informed view on these issues.

We recommend that the newly constituted Tribunal consider whether all Mr Robertson's claims be heard and dealt with together by a full Tribunal and that even if it is again decided to deal with points of construction as preliminary points, or with claims separately, all preliminary points and claims should be heard by a full Tribunal because findings of fact as to the relevant background are likely to be important.

Given the lack of clarity and definition within the relevant documents, and the need to consider the relevant background (and with the very useful benefit of hindsight) we would warn against the identifications of preliminary points. We do not know the detail of all Mr Robertson's claims and thus whether some should be dealt with separately.

In any event we recommend that there should be a directions hearing before the new Tribunal who should consider requiring the parties to prepare statements, bundles of documents, statements of issues and skeleton arguments.