19 April 2018 - Post by:Muir MacKean
In Openwork v Forte, the Court of Appeal confirmed that finding a clause lacks certainty is only ever a last resort. A provision, the overall effect of which is explicit despite its terms being incomplete, may still be sufficiently certain in effect to be enforced.
Mr Forte, a financial adviser, had entered into a contract with Openwork concerning the sale of investment products. Sales by Mr Forte to his clients would entitle him to commission from Openwork (which was in turn entitled to commission from the investment provider).
When an investor withdrew funds within three years of the investment date, a clawback provision in the contract required Mr Forte to repay “a percentage” of his commission to Openwork. However, the provision did not specify the percentage, nor how it was to be calculated, except by reference to “three factors” (the amount invested, the length of time invested, and the amount withdrawn).
The appeal centred on the first instance Judge’s findings that:
- where a contract entitles a party to a proportion of a specified whole, then the issue is whether the proportion and the whole can be identified; and
- the “three factors” rendered the parties’ contractual intent clear – commission should be clawed back on a reducing straight-line basis from (a) the full commission at the date of investment, to (b) zero at the three-year point.
The Court of Appeal upheld both findings. The court’s role in a commercial dispute is to give legal effect to the parties’ intention, rather than refusing to do so because the parties have not made its task easy (Astor Management v Antalaya Mining). The intention here was for commission to be clawed back if investment funds were withdrawn early.
Further, the court will only find a provision unenforceable for uncertainty if it is legally or practically impossible to give it sensible meaning (Durham Tees Valley Airport v Bmibaby). Here, the provision’s “three factors” enabled a straightforward calculation of Openwork’s entitlement to clawback. Though not expressly set out in the contract, the formula for this calculation gave capable effect to the parties’ intention. As such, the provision was enforceable.