High Court Clarifies Commission Calculation for Principals
A recent High Court judgment in Contract Natural Gas (Marketing) Limited v The Joint Liquidators of Contract Natural Gas Limited has shed light on how principals should calculate commission payable to their commercial agents.
The case involved a dispute over £6 million in unpaid commission, with the agent arguing that it was entitled to 25% of CNG's yearly Wholesale Gross Gas Margin for new wholesale business and 15% for existing wholesale business.
The court found that the agreement between the parties used a formula-based approach, which calculated commission as a percentage of the relevant yearly margin after deductions. The Agent had argued that certain costs, such as finance costs and revenue-assurance expenditure, should not have been deducted from the margin, but the court ruled in favor of CNG's interpretation.
The judgment also addressed the Commercial Agent's Regulations, which were cited by the Agent as requiring a transaction-by-transaction calculation. However, the court held that the regulations only identify the transactions attracting commission and regulate when the resulting entitlement arises, without prescribing the financial components to be used in the calculation.