Court of Appeal decides whether claimant was entitled to commission where insurance products were sold to its members

The first instance decision in this case was reported in Weekly Update 04/14. The claimant trade union entered into an agreement with the defendant, which sells insurance products. In return for access to the claimant's members for marketing purposes, the defendant agreed to pay a commission to the claimant. However, some members of the claimant purchased the defendant's insurance products directly. As a result, the parties disputed whether the claimant was entitled to its commission for all products sold to the claimant's members or only for those products sold via a dedicated telephone line/website identified in marketing materials sent to the members.

This depended on the interpretation of the agreement between the parties which obliged the defendant to pay commission "in respect of the Services". Teare J accepted that this covered selling which followed advice and marketing to the members but rejected the defendant's argument that only those sales to members via the designated channels fell within the scope of "Services". Certain members might read the marketing literature sent to them directly and then purchase a product in the same way as any member of the general public.

Accordingly, the judge concluded, on the facts of the case, that commission was payable when there was a "causal connection" between the Services (i.e. marketing) and the earning of premium. He rejected an argument that his conclusion was unworkable in practice. An appeal from that decision has now been allowed by the Court of Appeal, which found in favour of the defendant.

The Court of Appeal held that the judge's approach was unworkable. Instead, a commission could only be earned where a product has been sold because of the marketing of the scheme (and this would include the situation where a member chose to not use one of the dedicated channels but then, at the last moment, revealed that he is a member): "Such a conclusion links the entitlement to commission to cases where the aim of the...schemes – to promote the sale of scheme products in return for the efforts spent in marketing them – has been achieved". This avoided the claimant obtaining commission when there is no real connection between the marketing and the ultimate purchase.