Tuesday 5 July 2005

Commission Advances for Employees not void under Consumer Credit Act

The Court of Appeal has held that monies paid to employees by way of 'advances' on commission are not 'credit' within the meaning of the Consumer Credit Act 1974. Accordingly the repayment clauses are enforceable even if they do not comply with the technical requirements of the Act (and, of course, they never will).

In McMillan Williams v Range, the employers were a three-partner firm of solicitors based in Surrey and South London. They employed an assistant solicitor on a 'commission' basis, to receive one-third of her billings. For the first two years, they paid her £22,000 on account, intending an up or down adjustment to be made after two years. Her billings were not anything like sufficient to cover her salary (i.e. £66,000) and, after she resigned, they sued her for return of £17,000 overpaid commission. She counterclaimed for misrepresentation, alleging the firm had misled her over the amount of work available.

The Court of Appeal, dealing with this as a preliminary issue, held that the arrangement was not one for 'credit' - thus Ms Range could not defeat the claim by pointing the fact that her contract did not comply with the provisions of the Consumer Credit Act 1974.

This very sad case is worth reading - particularly paragraphs 29 and 30 - where the Court of Appeal criticises both sides in extremely robust terms for running up £50,000 of costs on just the preliminary issue, and for "posturing and jockeying for position" throughout "tedious correspondence". The Court makes it very clear that they expect cases of this nature to be dealt with, if at all possible, by mediation.

McMillan Williams v Range

Daniel Barnett
5th July 2004

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