Dean & Dean Solicitors v Dionissiou-Moussaoui

The claimant respondent, Sofia Dionissiou-Moussaoui, to whom I shall refer as Ms Moussaoui, is a solicitor. In February 2005 she left her employment with the firm of Moss Beachley and went to work for the defendant appellant solicitors. She was to be paid a salary and commission on the fees resulting from her work for the firm. She worked for the defendant as an employed solicitor until 25 August 2006, when she resigned. She claimed that there was commission due to her under her contract of employment. The defendant denied liability.

In August 2007 Ms Moussaoui issued proceedings in the County Court claiming outstanding commission. The defendant disputed that the terms of her contract were as she alleged, and denied liability. It counterclaimed the sum of £10,000 alleged to be due under her contract of employment for her failure to bill fees to the minimum specified in her contract. Her claim, and the defendant’s counterclaim, came before His Honour Judge McMullen QC and were tried over a period of 4 days in April 2008.

In his judgment the judge made findings as to the terms of Ms Moussaoui’s contract relating to commission and salary, and in his order dated 9 Sept 2008 gave directions as to the basis on which the claimant’s claim against the defendant Appellant for commission was to be determined. He dismissed the counterclaim.

This is my judgment on the defendant’s appeal against the order made by His Honour Judge McMullen QC.

The relevant communications relating to the making of the agreement between the parties took place in January 2005. They consisted of telephone calls, emails, and a letter typed by Dr Mireskandari of the defendant in the presence of the claimant and signed by both of them. Ms Moussaoui made a note of one of their telephone conversations that the judge found to be contemporaneous and accurate. It reads:

On 19 January 2005 Ms Moussaoui sent the following email to Dr Mireskandari:

Dr Mireskandari replied:

Ms Moussaoui responded:

On Tuesday you offered 30% commission on my own clients after billing three and a half times my salary. This offer is for 10%. Please explain.

The terms state that I guarantee that I will bill a minimum of £100,000 from my own clients but you do not set out what the consequences are if I do not; (although very unlikely to be applicable)

The terms state that this offer is for a one year period. Are you offering me a one year fixed term contract of employment or are you saying that I am employed in the normal sense with a review of the terms from both sides once I have completed a years service.

Depending on the answer to point 3 above I will need to know that notice period you require from me if I wish to leave the practice during this first one year period. Will you be applying statutory terms (i.e. one week per year of service)? I am unsure whether or not you are saying that I am unable to leave the firm in my first year.

Dr Mireskandari replied on 24 January:

Both Ms Moussaoui and Dr Mireskandari signed the letter.

There was a further inconsequential email from Ms Moussaoui to Dr Mireskandari on 31 January 2005. That was the entire documentation relating to the contract of employment.

Ms Moussaoui’s employment began on 28 February 2005. In October 2005 she was given written employment particulars for the purposes of section 1 of the Employment Rights Act 1996, but they were deficient, stating in relation to her remuneration only that “You will be paid £55,000 plus agreed bonus per annum”.

After completion of her first year’s employment, Ms Moussaoui continued to be employed by the defendant on the same terms, save that her salary was increased to £65,000 a year and the threshold to 3 times her salary, i.e., £195,000.

Ms Moussaoui’s particulars of claim pleaded that the agreement between the parties had been made orally on or around Wednesday 26 January 2005, and that “The Agreement was subsequently recorded in a one page document that was signed by the parties prior to the commencement of the Claimant’s employment”, i.e., in the letter of 27 January.

In paragraph 3(ii) of its defence, the defendant pleaded that “the Claimant and Dr Mireskandari made an oral agreement as to commission contained partly in a telephone conversation on or about 26 January 2005, and contained partly in alternatively evidenced by emails passing between [them] between 19 January 2005 and 24 January 2005 and a letter dated 27 January 2005 …”

Although this is an allegation of “an oral agreement”, that is inconsistent with the immediately following averment that it was “contained partly” in the emails and letter. The confusion as to whether in part at least the agreement was oral or written was, as we shall see, not confined to the defence.

Before the first day of the trial, the principal issues as to the terms of the contract were:

Was the £100,000 minimum of her billings to be based on fees for her work for her own clients only, or on all the fees for her work, for both her clients and the firm’s clients?

Was the threshold of £192,500 reached when Ms Moussaoui billed fees to that sum, or was in reached only when fees to that sum had been both billed and received?

Once the threshold was passed, was her commission payable on fees billed or only on fees billed and received?

Were fees billed for the work of Ms Moussaoui’s trainee to count for the purposes of calculating her commission and to determine whether there should be a deduction from her salary?

Until the beginning of the trial, it appeared to be common ground that there was one threshold for Ms Moussaoui’s billings to meet before she became entitled to commission. However, on the first day of the trial, the defendant applied for, and despite the opposition of Mr Joseph on behalf of Ms Moussaoui obtained, permission to amend the defence to plead that there were two thresholds, each of 3½ times Ms Moussaoui’s salary, one for her bills for work done for her own clients and the other for the firm’s clients. The defence was amended in manuscript, but either no copy was provided to those acting for Ms Moussaoui or it was mislaid, and Mr Power does not have a copy. The result is that we do not know how the amendment was pleaded.

During the trial, both Ms Moussaoui and Dr Mireskandari gave evidence, as did Mr Tehrani, who had been the sole principal of the defendant in January 2005. Dr Mireskandari became his partner later in 2005, and subsequently Mr Tehrani retired as a partner and became a consultant with the firm.

It is trite law that there is a crucial difference between a contractual document and a document the contents of which are only evidence of a contract concluded orally. If a document is contractual, then in the absence of a plea of rectification, or an allegation that it has been replaced or revoked by a subsequent agreement, the role of the court is to construe the document. If it is alleged that the written agreement mistakenly failed to reflect an anterior oral agreement, so that the written agreement falls to be rectified, that earlier oral agreement must be clearly pleaded and proved. In the absence of a plea of rectification, communications preceding the written agreement may provide context and background, but they cannot be substituted for the terms of the written agreement itself.

The letter of 27 January 2005 was clearly intended to be contractual. It requested Ms Moussaoui to sign it “to acknowledge acceptance of the terms”. She did sign it. So did Dr Mireskandari. It unambiguously provides for 2 thresholds, one for billing of Ms Moussaoui’s own clients and one for the firm’s clients. In both cases, the threshold required fees to be both billed and collected, i.e., paid to the firm. Ms Moussaoui’s own particulars of claim averred that the agreement was “recorded” in the letter, i.e., that the letter correctly set out what had been previously agreed. It follows that if she was going to allege that the letter did not accurately record their agreement, and that it fell to be rectified, she had to amend her particulars of claim. That did not happen. Frankly, I think that Ms Moussaoui should have sought an adjournment, if only for an hour or two, to consider the consequences of the defendant’s amended case and any amendment to the pleadings.

I can now turn to the relevant parts of the judge’s judgment.

The judge summarised the principles of the interpretation of contracts in 5 numbered paragraphs. His summary is unexceptionable. He continued:

The judge then referred to the contract, as follows:

The judge addressed the issues of the £100,000 guarantee and the thresholds in a passage that I shall set out in full:

In relation to the so-called penalty clause, it was clearly open to the judge to construe the reference to billing £100,000 as including bills for work for both Ms Moussaoui’s and the firm’s clients. However, he seems to have arrived at “the correct construction of the penalty clause” by reference to what was either negotiation or an anterior agreement. If the former, it was inadmissible; if the latter, the process was not one of construction but of rectification.

More importantly, the judge then departed from the clear words of the letter of 27 January, which he had held to be “the contract”, not by reference to any preceding oral or written agreement but by reference to his view as to “the purpose of the agreement” and what would be “a very sensible payment by results system”. He then rejected the clear words of the letter requiring the threshold to be of “collected billing”, apparently because since the defendant was responsible for collecting fees it would be unfair to Ms Moussaoui for her entitlement to commission on fees to depend on their collection.

The grounds of appeal complain that the judge wrongly ignored the evidence of “the contractual memorandum signed by both parties and dated 27 January 2005”. In my judgment, this contention, examined in isolation, is unanswerable. The judge treated the letter of 27 January as a contractual document. In relation to the question whether there was one threshold or two, and on the question whether the thresholds related to fees both billed and collected, he departed from the clear words of the document in favour of what he considered fair. In effect, the judge rewrote the contract for the parties.

Mr Joseph’s response was two-fold. He told us that it was common ground before the judge that the letter of 27 January was not a contractual document in the sense that I have used that expression. Secondly, he submitted that there was evidence before the judge, apart of course from the letter of 27 January, on the basis of which he would have been justified in finding that the agreement between the parties was in the terms he found.

I regret that I cannot accept these points. As to the first, such an important forensic agreement should be recorded in writing. It involved a departure by Ms Moussaoui from her own pleading. It flew in the face of the clear statement in the letter of 27 January that she was to sign it “to acknowledge acceptance of the terms”. It is essential that any agreement between the parties such as that suggested by Mr Joseph be recorded in writing so that it is clear to the parties, the judge at first instance, and this Court in the event of an appeal. Otherwise there is obvious room for misunderstanding. In any event, as has been seen the judge treated the letter as a contractual document in his judgment. He did not proceed on the basis suggested by Mr Joseph. Lastly, the grounds of appeal drafted by Mr Croally, who represented the defendant before the judge, repeatedly refer to the letter as “the contractual memorandum”. That is inconsistent with his having conceded that it was not such.

As to Mr Joseph’s second point, his insuperable difficulty is that the judge did not make the findings of fact that his case requires. He dealt with the questions as to the number of thresholds and whether fees had to be collected not on the basis of his findings as to oral agreements, but as issues of, it seems, interpretation. In so doing, he reached conclusions that are unsustainable as a matter of law.

The judge said that the agreement between the parties was a mess. I regret that this Court is faced with a mess. We have findings as to the terms of the contract between the parties that are not based on findings of primary fact and are unsustainable on the basis of what, in the absence of appropriate findings, is clearly a contractual document containing the relevant terms.

To allow this appeal would be to treat the letter of 27 January as binding even though it may not have accorded with the prior agreement of the parties. To dismiss the appeal would require this Court to accept the rewriting of the terms of that letter when there may have been no justification for doing so.

In these circumstances, I see no alternative but to allow the appeal to the extent of remitting the claim and counterclaim to be retried by a different judge. This is a result that I would avoid if it were at all possible. The sums involved in this case are not huge. The Law Society has intervened in the defendant’s practice, and there is a question as to Dr Mireskandari’s ability to meet any liability that Ms Moussaoui may establish, apart from any liability for costs. But I see no alternative.

There is a lesson in this. It is the responsibility of the advocates for the parties, but also of the trial judge, to ensure that the trial proceeds on the basis of allegations and issues that are identified in writing. That identification is the function of the pleadings. If the pleadings do not represent the parties’ cases, they must be amended or the basis on which the trial is to proceed set out in an agreed document. These basic, essential, requirements were not met in this case, and that has led to the situation faced by this Court.

We have not had any submissions as to the costs of this appeal. My provisional view is that both parties were in part responsible for the confusion as to the status of the letter of 27 January. Subject to any written submissions the parties may make when they have considered the draft of this judgment, I would set aside the order made by the judge, remit the claim and counterclaim to be tried by a different judge, and order the costs of the proceedings so far, including the costs of the appeal to the Court of Appeal, to be in the discretion of the judge hearing the retrial. I would determine the amounts of both parties’ costs in the Court of Appeal by summary assessment on the basis of schedules of their costs to be exchanged and submitted to the Court within 7 days and written submissions to be exchanged and submitted to the Court within 14 days.

I agree.

I also agree.