Advance payment of commission

McMillan Williams (a firm) v Range CA TLR 16 April

The defendant took up employment as an assistant solicitor with the claimant firm at an initial annual advance salary of £22,000, to be paid on a commission-only basis. Her contract of employment made provision for payment of ‘commission of 33% of all profit costs paid on bills delivered by 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 defendant’s hopes of building up a successful practice were not fulfilled. In November 2000 she resigned, calculation of her commission under the contract revealing a £17,000 shortfall. Her defence to the claim for the recovery of the shortfall was 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 and unenforceable against her because it was not executed in the proper form. Her defence failed. The true nature of the contract was to provide for payments to be made to the claimant in advance of the services she was to supply. It was impossible to say, at the time the contract was made, whether the defendant would be the debtor or the creditor at the time the calculation came to be made. One did not know, at the moment the party’s obligations were crystallised, whether the defendant would in fact be provided with credit. The contract was not one for the provision of regulated credit within ss8 and 9 of the Act and it was therefore enforceable.