Farhaz Khan successfully defends summary judgment application in tech dispute

Red Squirrel Consulting v Wireless Logic Ltd

The defendant is a provider of machine to machine (M2M) and Internet of Things (IoT) connectivity platforms, including SIM cards. The claimant brought the proceedings to recover unpaid commission said to be due under a 2011 agency agreement. The dispute concerned the meaning and effect of cl.7 of the agreement which provided that the claimant (the agent) would receive commission payments from the defendant (the principal) for all sales by the principal to a “Customer”. Under cl.7.2(a) the commission was 40% of the gross profit payable monthly arising from all sales by the principal to a Customer for as long as they were a customer of the principal. Clause 7.9 provided that each party would keep separate records and accurate accounts of all sales of products and would permit the other to inspect and take copies of relevant documents at all reasonable times but not exceeding once in any three-month period. The claimant’s case was that it was entitled to commission which had not been paid or had been incorrectly calculated and brought an application for summary judgment by way of specific performance  of cl 7.9 for disclosure of the defendant’s worldwide book of sales accounts and records. It said that it was entitled to inspect the defendant’s records under cl.7.9 to verify the entitlement to and calculation of commission. The claimant submitted that the records and accounts in cl.7.9 included those relating to the base costs of the sales as well as customer sales invoices, because both categories of records were needed to check the calculations of gross profit and so of commissions, and this was supported by the requirements of reg 12 of the Commercial Agents (Council Directive) Regulations 1993.

The defendant argued that the effect of the definition of Customer in the agreement was that its liability to pay commission pursuant to cl.7.1 and cl.7.2 and therefore to provide information and documents pursuant to cl.7.9 was limited to sales “concluded by the [claimant] (or concluded by the [claimant] with the assistance of the [defendant]” and the true meaning and scope of cl 7.9 did not require the defendant to disclose confidential information relating to the cost of sales.

HHJ Pelling QC refused the summary judgment application. Given the competing constructions of cl.7 it was not appropriate to grant summary judgment to enforce cl.7.9 in circumstances where the trial Judge would determine the meaning of the whole agreement. Having elected to issue the claim, it was impermissible to attempt to enforce the information provisions of cl.7.9 separately and in advance of the rest of the claim, rather than seeking the material by way of disclosure in the ordinary course of the proceedings.

The case has been reported on Lawtel and can be found here https://www.lawtel.com/UK/Searches/1140/AC5011592.

Farhaz Khan acted for the successful defendant Wireless Logic Ltd instructed by Peter Sheppard, Scott Butler and Jennifer Tur of Osborne Clarke.