Unite the Union v Liverpool Victoria Banking Services Ltd & Ors

Commercial affinity agreements are construed in their contractual and commercial context. Where the agreements concern discounted products marketed through an affinity scheme, a commission clause referring to premiums earned in respect of the services does not ordinarily extend to equivalent products sold to members through the general retail business. A construction involving substantial evidential and administrative unworkability is unlikely to reflect the parties’ intention, particularly where a workable construction is available. Commission was therefore payable only on specific discounted products made available and marketed to members and dependants under the schemes. Use of a dedicated sales channel was not essential where the product was nevertheless sold as a scheme product.

Unite succeeded to the property and rights of the Transport and General Workers’ Union and Amicus on their merger. Before the merger, each union had entered into an agreement with the respondents concerning insurance and other financial products marketed to union members. The agreements provided for commission calculated by reference to specified premiums and other revenue.

The dispute concerned whether commission was payable on all relevant insurance products sold to members or dependants during the contractual periods, including products sold through general retail channels without the affinity discount, or only on discounted products supplied under the affinity schemes. The High Court, Commercial Court, dismissed Unite’s claim but adopted a causal-connection construction which might have required commission on some non-scheme sales: [2014] EWHC 19 (Comm). The central issue on appeal was the proper construction and practical operation of the commission clauses.

1. Appeal allowed. The High Court’s order was set aside. The claim was dismissed, and the respondents obtained judgment on the counterclaim for £140,067.70, with interest from 1 November 2012 at a rate to be determined.
2. The agreements had to be construed against the background of existing affinity schemes under which members received discounted insurance and the unions received commission. Their purpose was to continue and promote those schemes. The recitals, the definition of the services, the marketing-plan provisions and the relationship-management provisions all supported that conclusion.
3. The agreements did not govern general retail marketing directed at the public. It would have been unnecessary for the unions to appoint the respondents to market products generally available to everyone, and commercially anomalous for the respondents to accept restrictions on such marketing.
4. The High Court’s construction was substantially unworkable. It required difficult and often unverifiable inquiries into what marketing a non-declarer had seen, why that person chose the respondents, and the influence of different marketing materials. Workability was a relevant consideration because general retail sales already existed and could foreseeably become more significant during the contractual term.
5. The contractual reference to services and premiums did not extend commission to every product within the relevant categories. Commission was payable only when the premium or other specified revenue was earned on the sale of a specific discounted product made available and marketed to union members and dependants under the relevant affinity scheme. A dedicated telephone or website channel was not indispensable where a member later disclosed membership and obtained the scheme discount.

1. Court of Appeal (Civil Division): The appeal was allowed. The High Court’s order was set aside, the claim was dismissed, and judgment was entered for the respondents on the counterclaim.
2. High Court, Queen’s Bench Division, Commercial Court: Teare J dismissed Unite’s claim, made no order on the counterclaim and adjourned Unite’s application for an account: [2014] EWHC 19 (Comm).