Harper v Interchange Group Ltd

Commission provisions in a commercial agreement are construed as a coherent whole. Separate entitlements are not cumulative unless the language makes that intention clear. General words such as “any other contracts” may be read as excluding contracts dealt with specifically elsewhere in the agreement.

Where a contract provides a detailed mechanism for challenging payment statements and referring disputes to an expert, that mechanism may be a precondition to pursuing a later claim. An objection must identify the complaint with sufficient particularity. Rectification requires strong evidence of a continuing common intention, together with an outward expression of that intention, up to execution of the written agreement.

The claimant sold software-related assets and rights to the defendant under an Asset Sale Agreement dated 22 April 1996. The agreement provided for commission on licence fees, gross margin, enhancements and recurring income.

The claimant sought further commission on contracts with members of the Unisource group, contending that the agreement entitled him to cumulative commission of 7.5 per cent of licence fees and 10 per cent of gross margin. The defendant disputed that construction and relied alternatively on the contractual dispute machinery, estoppel by convention, account stated and rectification.

The court determined four preliminary issues concerning construction, the effect of clauses 3.4 and 3.5, estoppel by convention and rectification.

1. Construction. The claimant was entitled to 10 per cent commission on gross margin relating to Unisource Contracts, but not an additional 7.5 per cent commission under the general licence-fee provision. The agreement contained no express cumulative wording. The definitions of “Licence Fees”, “Gross Margin”, “Enhancements” and “Recurring Income”, read with clauses 3.3.1 to 3.3.3, indicated separate and non-overlapping categories of commission. The general reference to “any other contracts” did not include contracts specifically dealt with elsewhere in clause 3.3.
2. The construction was consistent with the factual background and commercial sense. The parties knew that Unisource Contracts might be concluded and that other contracts might also arise. The agreement was structured to provide commission for all categories without double recovery.
3. Contractual machinery. Although unnecessary to the result, the court held that clauses 3.4 and 3.5 formed a comprehensive mechanism for resolving disputes about payments under clause 3.3. It applied to disputes of construction as well as mathematical calculation disputes. An objection had to be made within 28 days and state the complaint with sufficient particularity. A general assertion that the amount was incorrect was insufficient. Failure to invoke the machinery would have precluded the later claim.
4. Estoppel and rectification. The court accepted, for the purposes of argument, that there had been a common assumption supporting an estoppel by convention, but held that it would not have been unconscionable to permit the claimant to raise the construction issue. Rectification would also have failed because the parties had not maintained a common intention about the commission terms up to execution of the agreement.
5. The preliminary issues were answered in the defendant’s favour on construction and, alternatively, on the contractual machinery. The estoppel and rectification defences failed. The account-stated defence was not pursued.