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Clients 1 - Agents 0: a recent High Court decision that may impact introducers of business everywhere

Posted on 13 October 2020

In a recent decision between a sports intermediary company and Liverpool FC (LFC) (Winlink Marketing Limited (WML) v Liverpool FC), the Court determined that WML's claim for £1.125 million commission under an introduction agreement with LFC should fail as it was not an 'effective cause' of LFC's £15m training kit sponsorship deal with BetVictor.  Whilst there were specific facts at play in this case, this decision has potentially far-reaching implications for all agreements where one party is acting as an intermediary or otherwise being remunerated for introducing an opportunity to another party. Such situations are particularly common in the tech, real estate and sports industries and this case could impact future situations for intermediaries who often find it difficult to recover amounts that they consider they are due for assisting at the start of commercial relationships.  

Background

In 2013, LFC had entered into an introduction agreement with WML, which suggested that WML would be paid commission if a 'Relevant Contract' then ensued.

WML duly put LFC in touch with BetVictor in 2013, which, at that time, led to LFC and BetVictor discussing a potential three year sponsorship deal.  This particular deal did not materialise but in 2016, LFC and BetVictor  (by this point under different ownership and management), entered into a £5million three year sponsorship arrangement for LFC's training kit, a much more expensive and high profile arrangement than that under consideration in 2013.

WML argued that LFC owed it commission under the introducer agreement for having effected an introduction to BetVictor in accordance with its terms.  However, LFC's evidence was that the deal was conducted by its marketing executive who had a strong commercial relationship with the then BetVictor CEO, shortly after she joined the club in 2015 and had nothing to do with WML's 2013 introduction.

A 'Relevant Contract' under the agreement was defined as being an agreement that was entered into 'during the Introduction Period' but this period was not actually defined, nor was the need for WML to actually be involved in bringing about the deal.

Decision

Whilst the Court was prepared to accept that "entered into during the Introduction Period" covered any legally binding sponsorship agreement entered into by LFC before termination of the introduction agreement (or after termination with a sponsor introduced before termination), it concluded that commission was still not payable in this instance. 

One of the factors that influenced the Court here was the Court's finding that the introduction agreement should be construed as including an 'effective cause' requirement implied into it. In other words, WML's services had to be an effective cause of the agreement with BetVictor.  The Court pointed, for example, to the fact that WML's appointment was non-exclusive which created the risk of LFC having to pay two commissions, in the absence of such a provision.  Further, the agreement required WML to take on obligations and to comply with LFC's reasonable and lawful instructions; and protected WML's interests in the event of a termination after an introduction but before a relevant contract was signed. The Court concluded it was 'highly improbable' that WML and LFC would have included such a provision unless they also intended that commission would only be payable if the introduction was an effective cause of a relevant contract.  For LFC to wish to pay a commission for introductions that were not an effective cause of the sponsorship agreement, would be unreasonable to a high degree and make no commercial sense to either party.

Further, the Court would imply a term that required WML to be an 'effective cause' of the sponsorship agreement. The introduction agreement would lack commercial and practical coherence in the absence of such an effective cause term. In the circumstances it was plainly necessary that such a term be implied to give the introduction agreement business efficacy and "to give effect to what is so obvious that it goes without saying and so prevent it from taking effect in the entirely unreasonable and uncommercial outcome that would otherwise result".

On the facts, given that WML had no involvement in the negotiations between LFC and BetVictor and that the deal concluded was wholly different from what had been offered previously in 2013-14, WML was not entitled to any commission.

Implications

The Court's decision suggests that, unless there is an express term in an introduction agreement clearly setting out the basis upon which any commission will be paid to an intermediary or introducer, the simonourt may construe or imply an effective term clause. This would mean that unless the intermediary was directly involved in bringing about the relevant deal or transaction or was an effective cause of the agreement, they will not be entitled to commission under that agreement. This is bad news for introducers and agents across the country, who not only often already face difficulty in recovering amounts that they consider they are due under such agreements but also it would appear now also need to play an active role in the commercial negotiations (unless the agreement states otherwise).

As a result, it would be prudent and make commercial sense for intermediaries to check their agreements to make sure they are clear as to when any commission is to be paid and, if necessary, state that commission is payable irrespective of whether the intermediary was an effective cause or played an active role in putting together the relevant contract. Likewise, those appointing intermediaries to act on their behalf would also do well to clarify the position on this point in order to avoid any potential future disputes.

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