Openwork Ltd v Forte

A contractual provision is void for uncertainty only where the court cannot safely identify its meaning or give it sensible legal or practical content. The court should strive to give effect to the parties’ objectively ascertainable intention, while avoiding the creation of a bargain which they did not make.

A commission clawback clause can therefore be enforceable despite omitting an express formula. Where it identifies the commission, the relevant withdrawals and a defined three-year period, a straight-line reduction from full clawback at the outset to none after three years may give effect to its stated criteria.

A financial adviser received lump-sum commission under a franchise agreement for investments made by two clients. The incorporated financial manual provided for a percentage of the initial commission to be clawed back when funds were withdrawn within three years. It identified the amount invested, time invested and amount withdrawn as relevant factors, but supplied no express formula.

The High Court held that the clause was enforceable and adopted a straight-line calculation. It awarded the respondent £344,292.12. The adviser appealed, arguing that the judge had invented the missing formula and that repayment of the respondent’s own commission to the investment provider had not been proved. The respondent also applied to adduce fresh evidence under CPR Part 52.21(2).

1. Appeal dismissed. The parties plainly intended the clawback provision to have legal effect. Its definite purpose and stated criteria allowed the court to ascertain its practical meaning. Treating it as wholly ineffective would have defeated the parties’ objective intention: per Simon LJ, with whom Newey and Arden LJJ agreed.

2. A court should strive to give effect to an intended contractual obligation. A term is void for uncertainty only where it is legally or practically impossible to give it sensible content, or where the words do not reveal a definite meaning on which the court can safely act. Difficulty of interpretation does not itself establish uncertainty. The court may resolve omitted machinery or detail where the contractual intention and an appropriate objective standard are ascertainable, but it may not make a new contract for the parties.

3. The clawback was a percentage of the commission and depended upon the amount withdrawn and the time elapsed within a three-year period. No clawback arose after three years, while withdrawal immediately after investment attracted full clawback. For an intermediate withdrawal, the proportion recoverable reflected the unexpired portion of the three-year period. The judge’s straight-line calculation gave effect to those criteria and did not invent a different bargain.

4. The judge was entitled to find that the respondent had accounted to the investment provider for its own clawback. Oral evidence established a reconciliation and netting-off system covering numerous transactions. On that evidence, the relevant debits were proved on the balance of probabilities despite the absence of documents identifying separate payments.

5. The application to adduce fresh evidence was refused. Applying the principles in Ladd v Marshall [1954] 1 WLR 1489 CA, the proposed material could and should have been obtained with reasonable diligence for use at trial. The respondent had been put to proof and could not use the appeal to present a new evidential case 22 months later.

1. Court of Appeal (Civil Division): The adviser’s appeal was dismissed. The respondent’s application to admit fresh evidence was refused.
2. High Court, Chancery Division, Bristol District Registry: Mr Recorder Blohm QC held the clawback provision enforceable, applied a straight-line calculation and found £344,292.12 repayable. The judgment was dated 14 April 2016; no citation was stated.