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England and Wales High Court (Chancery Division) Decisions
You are here: BAILII >> Databases >> England and Wales High Court (Chancery Division) Decisions >> Crane v Sky In-Home Service Ltd & Anor  EWHC 66 (Ch) (26 January 2007)
Cite as:  EWHC 66 (Ch),  Bus LR D47,  BusLR D47
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Strand, London, WC2A 2LL
B e f o r e :
| JOHN HAROLD CRANE
|- and -
|(1) SKY IN-HOME SERVICE LIMITED
(2) THE SECRETARY OF STATE FOR TRADE AND INDUSTRY
Mr Jasbir Dhillon (instructed by Herbert Smith LLP)) for the 1st Defendant
Mr Jonathan Crow QC and Mr Jason Coppel (instructed by The Treasury Solicitor) for the Secretary of State
Hearing dates: 7 – 10, 13 – 16, 20-24 & 27 November 2006
16 January 2007
Crown Copyright ©
Mr Justice Briggs :
i) Whether COPA (together with a side letter of even date) sets out the whole of the relationship between the parties with regard to sale of part of the Hardware, or whether as Mr Crane contends it was extended to apply to what are called Sky+ boxes, and if so, on what terms;
ii) Whether the relationship thus created constituted Mr Crane a "commercial agent" within the meaning of reg.2(1) of the Regulations;
iii) If it did, whether Mr Crane's activities as a commercial agent are to be regarded as "secondary" within the meaning of reg.2(3), as amplified by the Schedule thereto, with the consequence that he is not entitled to compensation or indemnity by reason of reg.2(4);
iv) If not, whether SHS terminated the agreement because of default by Mr Crane which would justify immediate termination within the meaning of reg.18(a), with the consequential loss of the right to compensation or indemnity;
v) If Mr Crane succeeds thus far, whether his entitlement is to compensation or indemnity. Save where dealing specifically with this issue, and in the interests of economy, I shall refer to Mr Crane's claim as a claim for compensation in the general sense, so as to encompass either compensation or indemnity in the strict sense.
Issue (i) – Whether Mr Crane's agency extended to the sale of Sky+ boxes.
"a) Takes up Sky's free minidish and digibox offer, or buys a Sky+box;
b) Completes and signs a Sky digital subscription contract…
c) Agrees to receive a Sky World package"
Those requirements are cumulative.
"a) £30 standard installation of their Sky+box or free minidish and Sky box; and
b) receive Sky Sports free for a month"
The ASA who makes such a sale to a qualifying customer becomes entitled to an enhanced ASA commission from BSB of £25.53 plus VAT, regardless whether the customer takes up Sky's free minidish and digibox offer, or purchases a Sky+box, while simultaneously subscribing for the first time to Sky Digital.
Validity of the Regulations and/or the Schedule.
"thus, with the object of establishing certainty as to the law, renvoi to the internal law of Member States takes place solely in relation to matters for which it has not been possible to create uniform rules for the Member States of the Community, or in which no element of competition is involved, or which do not effect the degree of protection by the law which has already been achieved."
"The Member States are at liberty:
1. Not to apply Article 15 (4), last sentence, 19, 26 (2), 30 and 31 to persons who act as commercial agents but by way of secondary activity only; the question whether the activity is carried on in that way being determined in accordance with commercial usage in the State whose law governs the relations between principal and agent;"
"The Committee considers that Article 4 gives Member States too much latitude and this might make it difficult to define the scope of the Directive precisely. Article 4 should, therefore, be deleted…"
"Under Article 4 (1) Member States are also free not to apply the provisions of the directive to persons who act as commercial agents by way on secondary activity only. No definition is given of "commercial agency by way of secondary activity" because it is impossible to lay down suitable criteria for every possible case, and instead reference is made to commercial usage in individual Member States."
"Each of the Member States shall have the right to provide that the Directive shall not apply to those persons whose activities as commercial agents are considered secondary by the law of that Member State"
It is apparent that two significant changes had been made to the formulation of the derogation option. The first was to extend its application to all the provisions of the Directive rather than merely to certain specific paragraphs. The second was to alter the criterion for the identification of activities as secondary from the commercial usage of individual Member States, to the law of such states.
"Whereas additional transitional periods should be allowed for certain Member States which have to make a particular effort to adapt their regulations, especially those concerning indemnity for termination of contract between the principal and the commercial agent, to the requirements of this Directive,"
1 "Member States shall bring into force the provisions necessary to comply with this Directive before 1st January 1990….
3 However, with regard to Ireland and the United Kingdom, 1st January 1990 referred to in paragraph 1 shall be replaced by 1st January 1994."
Italy was given a more limited extension of time, but only in relation to compliance with Article 17 (relating to indemnity and compensation).
"Having regard to the Treaty establishing the European Economic Community, and in particular Articles 57 (2) & 100 thereof,
Whereas the differences in national laws concerning commercial representation substantially affect the conditions of competition and the carrying-on of that activity within the Community and are detrimental both to the protection available to commercial agents vis-à-vis their principals and to the security of commercial transactions; whereas moreover those differences are such as to inhibit substantially the conclusion and operation of commercial representation contracts where principal and commercial agent are established in different Member States;
Whereas trade and goods between Member States should be carried on under conditions which are similar to those of a single market, and this necessitates approximation of the legal systems of the Member States to the extent required for the proper functioning of the common market; whereas in this regard the rules concerning conflict of laws do not, in the matter of commercial representation, remove the inconsistencies referred to above, nor would they even if they were made uniform, and accordingly the proposed harmonisation is necessary notwithstanding the existence of those rules;"
(3) "The provisions of the Schedule to these Regulations have effect for the purpose of determining the persons whose activities as commercial agents are to be considered secondary.
(4) These Regulations shall not apply to the persons referred to in paragraph (3) above."
Secondly, by the Schedule, the concept of secondary activities was defined by a formula which, in essence, defined activities with a specified primary purpose, and provided that all other activities were to be considered secondary. It is not necessary to set out the detailed provisions of the Schedule at this stage. It is common ground that the Secretary of State sought by the Schedule to fill an acknowledged lacuna in the law of the United Kingdom by the provision for the first time of a comprehensive definition of secondary activity.
a) Having regard to the primary harmonising purpose of the Directive, the purpose of the derogation option in Article 2 (2) was only to enable Member States to avoid having to re-cast or abandon their existing law defining persons whose activities as commercial agents were secondary. It was, as he put it, a take it or leave it option to adopt such a definition where it formed part of the Member State's national law, rather than an option to decide precisely to how wide a class the benefit of the Directive should apply.
b) It followed that in relation to a Member State with no existing law separating agents whose activities were secondary from the rest of the class of commercial agents, the option in Article 2 (2) of the Directive was of no effect.
c) He did not go so far as to submit that the Directive prohibited the enactment of national law which, even for the first time, created such a distinction, nor did he submit that the detailed terms of the Schedule created a distinction which, if duly enacted as part of the law of the United Kingdom, would have been an inappropriate basis for the exercise of the Article 2 (2) opt out.
d) His submission therefore was not that reg 2(3) and (4) and the Schedule were prohibited by the Directive, but merely that they were an exercise in national legislation which the Directive neither required by way of obligation, nor authorised by way of Treaty right.
e) It followed in his submission that, far from having available the power to make regulations conferred by section 2(2) of the ECA, the only means whereby a system of United Kingdom national law defining the class of agents whose activities were secondary could be created was by primary legislation. Once created by primary legislation, Mr Roughton accepted that the derogation option in Article 2(2) could be exercised by reference to it, by regulations under section 2(2), at any time.
"A Directive shall be binding, as to the result to be achieved, upon each member state to which it is addressed, but shall leave to the national authorities the choice of form and methods."
I consider it implicit that the manner whereby the result intended by a Directive to be achieved is actually implemented in any particular Member State is a matter of indifference from the perspective of the Treaty and of the Commission. Whether that is to be done by primary or delegated legislation in the United Kingdom is therefore a matter for Parliament, which has expressed its will in that regard by the terms of Section 2(2) of the ECA: see per Jacob LJ. in Oakley Inc v Animal Limited  Ch 337 at paragraph 52 – 56, and 61 – 64.
"(2) Subject to Schedule 2 to this Act at any time after its passing Her Majesty may by Order in Council, and any designated Minister or department may by regulations, make provision-
(a) for the purpose of implementing any Community obligation of the United Kingdom, or enabling any such obligation to be implemented, or of enabling any rights enjoyed or to be enjoyed by the United Kingdom under or by virtue of the Treaties to be exercised; or
(b) For the purpose of dealing with matters arising out of or related to any such obligation or rights or the coming into force, or the operation from time to time, of subsection (1) above;
and in the exercise of any statutory power or duty, including any power to give directions or to legislate by means of orders, rules, regulations or other subordinate instrument, the person entrusted with the power or duty may have regard to the objects of the Communities and to any such obligation or rights as aforesaid."
a) The question whether any particular delegated legislation is authorised by section 2(2)(a) does not demand a line by line analysis of the directive which it purports to implement. Parliament must be taken to have known in 1972 that directives frequently contain options or choices or other matters left to the discretion of Member States, and chose to leave the making of those choices and the exercise of those options and discretions to the designated Minister or Department, subject to the important reservations in Schedule 2 (such as imposing or increasing taxation, the making of retrospective legislation, the conferring of further power to sub-delegate and the creation of new criminal offences). Subject to those reservations, the powers in section 2(2) should be broadly construed: See per Waller LJ at paragraph 19 -29, per May LJ at paragraphs 44 – 46 and per Jacob LJ at paragraphs 61 -67.
b) If there is nothing in a statutory instrument purportedly made under section 2(2)(a) which is not explicitly contemplated in the relevant directive, the section will have been complied with because the statutory instrument will necessarily have been made solely for the purpose of the directive and for enabling its implementation: see per Jacob LJ paragraph 65. In this context I interject that it may not matter much whether any particular provision in the statutory instrument is best understood as implementing a Community obligation, enabling any such obligation to be implemented or enabling any Treaty rights to be enjoyed by the United Kingdom, so long as one of those three alternatives applies. A right to derogate from the general objectives in a Directive is a Treaty right, because Directives take their force from the Treaty.
c) Section 2(2)(b) of the ECA is properly invoked by any provisions in a statutory instrument which constitute "further measures to be taken which naturally arise from or closely relate to the primary purpose being achieved" see per Waller LJ at paragraph 39.
d) Further or alternatively, if there is a distinction between the making of a choice which a Directive requires a Member State to make, and one which is not so required, but which has the effect of tidying things up or making closely related original choices which the Directive does not necessarily require, then such choice falls within section 2(2)(b), if not within section 2(2)(a): see per May LJ at paragraph 47.
Issue (ii) – Whether Mr Crane was a commercial agent within reg 2(1).
" "commercial agent" means a self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person ("the principal"), or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal…"
Issue (iii) – Were Mr Crane's activities "secondary" within the meaning of Regulation 2(3) and (4)?
"1. The activities of a person as a commercial agent are to be considered secondary where it may reasonably be taken that the primary purpose of the arrangement with his principal is other than as set out in paragraph 2 below.
2. An arrangement falls within this paragraph if –a) the business of the principal is the sale, or as the case may be purchase, of goods of a particular kind; andb) the goods concerned are such that –i) transactions are normally individually negotiated and concluded on a commercial basis, andii) procuring a transaction on one occasion is likely to lead to further transactions in those goods with that customer on future occasions, or to transactions in those goods with other customers in the same geographical area or among the same group of customers, and
that accordingly it is in the commercial interests of the principal in developing the market in those goods to appoint a representative to such customers with a view to the representative devoting effort, skill and expenditure from his own resource to that end.
3. The following are indications that an arrangement falls within paragraph 2 above, and the absence of any of them is an indication to the contrary –a) the principal is the manufacturer, importer or distributor of the goods;
b) the goods are specifically identified with the principal in the market in question rather than, or to a greater extent than, with any other person;
c) the agent devotes substantially the whole of his time to representative activities (whether for one principal or for a number of principals whose interest are not conflicting);
d) the goods are not normally available in the market in question other than by means of the agent;
e) The arrangement is described as one of commercial agency.
4. The following are indications that an arrangement does not fall within paragraph 2 above –a) promotional material is supplied direct to potential customers;
b) persons are granted agencies without reference to existing agents in a particular area or in relation to a particular group;
c) Customers normally select the goods for themselves and merely place their orders though the agent."
Issue (iv) – Termination within reg 18(a)?
"(a) the principal has terminated the agency contract because of default attributable to the commercial agent which would justify immediate termination of the agency contract pursuant to regulation 16…"
Reg 16 forms part of Part IV of the Regulations. That Part contains rules which override freedom of contract in relation to termination, for example by imposing minimum notice periods. Reg 16 is designed to qualify those rules, as follows:
"These Regulations shall not affect the application of any enactment or rule of law which provides for the immediate termination of the agency contract-
(a) because of the failure of one party to carry out all or part of his obligations under that contract
(b) where exceptional circumstances arise"
Issue (v) – Compensation or Indemnity?