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Hills v Niksun [2016] EWCA Civ 115

On 1 March 2016 the Court of Appeal gave judgment in Hills v Niksun [2016] EWCA Civ 115. Mr Hills, the Respondent represented by Matthew Winn-Smith, was successful in resisting the appeal.

Mr Hills was employed by Niksun Inc. (“Niksun”) as a regional sales manager in the UK. The judge found that he had been underpaid commission in respect of the Asian and Pacific element of a sale of software to the international businesses of Credit Suisse (the “APAC” deal). Niksun had allocated 48% of the available APAC commission to the UK office, and the judge found that it should have allocated two-thirds.

The main issue raised in the appeal was whether the judge was right to interfere with Niksun’s exercise of its discretion provided to it in the contractual documents. Niksun submitted that the judge was wrong to decide (a) that the UK (and therefore Mr Hills) was entitled to a higher commission rate, and (b) that one of the main factors used by Niksun in deciding the commission distribution, viz. the “Point of Influence”, had been wrongly identified as the USA instead of the UK. Niksun argued that it was not for the judge to determine the “Point of Influence”; that was a matter for Niksun under the contract. The courts should not substitute their own views of reasonableness for the views of the contractual party in question.

Mr Hills (below) had the burden of proof, but once he demonstrated that there were grounds for thinking that Niksun’s decision was not reasonable (as he did by pleading and relying on certain evidence), the evidential burden shifted to Niksun to show that its decision was reasonable. 

The Court of Appeal considered that the judge was justified in saying that the absence of evidence from Niksun as to the decision-making process meant that he could not assume that the decision was a rational one (as now required following Braganza v BP Shipping Limited [2015] UKSC 17). Mr Hills had cast doubt on the process and thus Niksun had not discharged its evidential burden.  The judge could therefore substitute his own view as to the appropriate commission rate.

Matthew Winn-Smith / 4th Apr 2016


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