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You are here: BAILII >> Databases >> England and Wales High Court (Queen's Bench Division) Decisions >> Vick v Vogle-Gapes Ltd [2006] EWHC 1579 (QB) (30 June 2006) URL: https://www.bailii.org/ew/cases/EWHC/QB/2006/1579.html Cite as: [2006] EWHC 1579 (QB) |
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QUEEN'S BENCH DIVISION
Strand London WC2A 2LL |
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B e f o r e :
____________________
TONY VICK |
Claimant |
|
- and - |
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VOGLE-GAPES LIMITED |
Defendant |
____________________
Jason Coppel (instructed by Howes Percival) for the Defendant
Hearing dates: 22,23,24,25 and 26 May 2006
____________________
Crown Copyright ©
HIS HONOUR JUDGE RICHARD SEYMOUR Q.C.:
Introduction
The pleaded claims of Mr. Vick
"19. In the circumstances, it is the Claimant's primary case ("the Primary Case") that the Defendant terminated his agency without notice, in breach of Regulation 15, on about 15 April 2004 (alternatively on the date the letter of 7 April 2004 was received by the Claimant).
20. Alternatively, if, which is denied, it is held that the Claimant's letter of 2 April 2004 did amount to a unilateral termination by the Claimant of his agency, the Claimant's secondary case ("the Secondary Case") is that he terminated the agency on about 2 April 2004, by reason of the Defendant's said breaches of the agency agreement set out at paragraphs 8 - 12 above."
"7. In breach of the terms pleaded at paragraph 3 above and/or of Regulation 7(1) and/or 7(2), the Defendant, in a letter dated 30 January 2004, purported unilaterally and unreasonably to vary the Territory and Market with effect from 1 March 2004, primarily by introducing a large number of additional excluded customers, and thereafter has failed to pay commission to the Claimant in respect of orders to those additionally excluded customers.
8. The Claimant did not accept that the Defendant was entitled to make the said variation and, inter alia, in a letter dated 25 February 2004 (and incorrectly marked "Without Prejudice") sought compensation and reminded the Defendant of the existence/effect of Regulation 7 in respect of his continued entitlement to commission.
9. Further at around this time, the Defendant was failing in any event to pay to the Claimant commission due in respect of all material orders, pursuant to its obligations under the Contract and Regulations (and was late in paying such commissions as it did pay to the Claimant). These matters were raised with the Defendant in correspondence from the Claimant on 19 and 28 March 2004.
10. The Claimant is unable fully/properly to particularise these claims for commissions due on sales made during the agency prior to disclosure herein.
11. Further, in breach of its obligations under Regulation 4, the Defendant, in this same period (early 2004), by requiring its employed staff to visit customers in the Territory without the knowledge or consent of the Claimant, who undermined the Claimant's efforts on behalf of the Defendant to those customers, and then itself inaccurately and unfairly undermining the Claimant 's efforts in writing to the Claimant."
"20. Paragraph 19 is denied. The Claimant terminated the Contract within the meaning of the Regulations. The Defendant will rely upon a subsequent letter dated 26 July 2004 from the Claimant's solicitors to the Defendant in which they alleged that "[t]he correspondence that passed between our client and you post the end of January 2004 evidences that you, as Principal, acted in such a manner as to make the agency no longer workable, thereby entitling our client to terminate such agency".
21. As to paragraph 20, it is admitted that the Claimant terminated the Contract but denied that the Defendant had acted in breach of contract such as to justify such termination, or at all.
23. If which is denied, the contract was terminated by the Defendant within the meaning of reg. 15, it is denied that the Claimant is thereby entitled to damages in respect of the Defendant's failure to give due notice. The Defendant will say that the Claimant was not entitled to notice of termination by virtue of his own repudiatory breach of contract. The Defendant will say that the Claimant had acted in repudiatory breach of clauses 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5, 3.1.6, 3.1.7 and 3.1.10 of the Contract, and will rely upon the following facts and matters:
(a) Despite repeated requests by the Defendant, the Claimant was failing to devote sufficient effort to what the Defendant described as "merchandising", whereby an agent would visit retail customers and re-stock stands/displays showing the Defendant's products. The Claimant was not making sufficient visits to customers in this Territory and/or was not carrying out his merchandising responsibilities during those visits he did undertake.
(b) As a result, the Claimant's performance in generating "transfer orders ex-warehouse", which principally derived from repeat orders for the purpose of filling stands/displays, was the worst of any of the Defendant's salesforce. The "transfer orders ex-warehouse" procured by the Claimant fell by almost 50% in the last year of his agency (comparing the figures for October 2003 to March 2004 with those for October 2002 to March 2003).
(c) (As the Claimant was aware), certain of the customers in the Claimant's territory had informed the Defendant that they no longer wished to deal with the Claimant.
(d) The Claimant was refusing to follow ordering procedures laid down by the Defendant in the interests of increasing efficiency and maximising customer satisfaction, whereby orders should have been transmitted to the Defendant immediately on being placed by the customer using an IPAC handheld computer. In relation to the IPAC, the Claimant told Amanda Perrey of the Defendant during the week of 17 October 2003 to "shove it up your arse". Shortly afterwards, the Claimant told Richard Pyrah, the Defendant's UK Sales Manager that he could "stuff the IPAC" and that he was not bothered because "it would cost T&C 100K to get rid of him".
(e) From May 2003 onwards, and despite being requested to do so by the Defendant, the Claimant failed to complete and pass to the Defendant weekly activity reports which would have given the Defendant a clearer account of his activities and enabled the Defendant to issue instructions appropriate to maximise sales in his territory.
(f) The Claimant unreasonably failed to co-operate with the Defendant in its attempts to resolve its concerns regarding his performance. He refused to discuss matters and instead abused the Defendant's employees using foul language (and see paragraph 9 (e) above).
(g) The Claimant failed to inform the Defendant of other agencies which he held, in breach of clause 3.3 of the Contract."
"(a) In the letter dated 30 January 2004, the Defendant informed the Claimant that, pursuant to clause 7 of the Contract, and as from 1 March 2004, his territory was varied so as, in effect, to exclude the counties of Wiltshire and Dorset, and that the outlets set out on a list attached to the letter were no longer included within the Market to which he was entitled to sell.
(b) The Defendant was entitled to vary the Claimant's territory pursuant to clause 7.1 of the Contract.
(c) The Defendant was entitled to vary the Market to which the Claimant was entitled to sell pursuant to clause 7.2 of the Contract.
(d) In both cases, the Defendant acted reasonably in the light of concerns that the Claimant was failing to maximise sales opportunities within his territory (although, strictly, that was a requirement only of clause 7.1).
(e) The Defendant only took action pursuant to clause 7 of the Contract having tried and failed to engage the Claimant in constructive dialogue about how sales, in particular of what were known as "transfer orders ex-warehouse", could be improved in his territory. On the last such occasion before the 30 January 2004 letter, the Claimant told Barry Page and Richard Pyrah of the Defendant, at a meeting on 21 January 2004 at the Sarum Show, Salisbury, to "fuck off' and that "under European law it will cost you 90k to get rid of me".
A small number of the customers excluded to whom the Claimant was no longer permitted to sell after 1 March 2004 were customers which he had previously acquired for the Defendant whilst acting as its agent. He is entitled to commission on sales to those customers prior to the termination of the contract pursuant to clause 5.1 of the Contract. It is denied that the Defendant breached the Contract by failing to pay commission to the Claimant on such sales prior to its termination; no commission was due prior to the termination of the Contract on the payment schedule laid down by clause 5.3."
"As to paragraph 9, it is admitted that the payments of commission by the Defendant were, on occasion, late. This was a matter which the Defendant had discussed with the Claimant. The Defendant had explained that the delays were caused by difficulties in obtaining information from wholesalers as to the orders which had been placed, and offered to revert to a system previously used by the parties which would have eliminated those delays (see, in particular, a letter dated 22 March 2004 to the Claimant from Richard Pyrah of the Defendant)."
The factual background
The Agency Agreement
"1.1 In this Agency Agreement the following expressions have the following meanings:
1.1.1 "Commission" means the amount set out in Appendix 1;
1.1.2 "Market" means the retail outlets in the Territory excluding those outlets set out in Appendix 2;
1.1.3 "Products" means the products of the Principal set out in Appendix 3;
1.1.4 "Quota" means such numbers of Products for such period as shall from time to time be notified by the Principal to the Agent;
1.1.5 "Territory" means [customers within the Market included within] the geographical area outlined on the map attached to this Agreement."
"Commission shall be paid at 8% of the Net Sales Value on sales of Products within the Territory.
Net Sales Value means the price (before deduction of any discount for prompt settlement) actually charged to the customer (less any value added or other sales tax and less any packaging, carriage, and point of sale material included in the invoice."
"2.1 The Principal appoints the Agent as its sole agent for the sale and marketing of the Products for the Territory.
2.2 The appointment of the Agent shall [be for a period of [6 months] and thereafter shall] continue on an annual agreement until either party serves on the other [three months written notice] to terminate this Agreement such notice period to expire at the end of a calendar month....
3.1 The Agent shall:
3.1.1 carry out lawful duties that he has undertaken to the Principal to carry out;
3.1.2 act in the interests of the Principal;
...
3.1.4 act towards the Principal in good faith;
...
3.1.7 carry out any reasonable instructions given to him by the Principal;
...
3.1.12 ensure that sales of the Products within the Territory reach the Quota.
...
3.3 If the Agent wishes to become an agent or distributor or employed representative for any goods which do not compete with the Products the Agent shall give prior notification to the Principal:
3.3.1 of the type of goods;
3.3.2 of the area being represented;
3.3.3 of any changes to that agency or distributorship or employment which have or could have an effect on the Agent's performance of this Agreement or of the occurrence of any event allowing that agency distributorship or employment to be terminated
...
4.1 The Principal shall:
...
4.1.2 act towards the Agent dutifully and in good faith;
5.1 The Agent will be paid Commission on the following sales of the Products by the Principal
5.1.1 if the sale of the Products was concluded as a result of the Agent's action;
5.1.2 if the sale by the Principal is to a customer whom the Agent had previously acquired as a customer for the Products;
5.1.3 if the sale is to a customer within the Territory.
5.2 Commission will be paid to the Agent on sales of Products concluded after termination of the Agency if
5.2.1 the sale was mainly attributable to the Agent's efforts prior to termination of the Agency and the transaction was entered into within one month of the Agency terminating (which the Agent and the Principal consider to be a reasonable period); or
5.2.2 if the order for the sale reached the Principal or the Agent prior to termination of the Agency and the transaction is within clauses 5.1.1, 5.1.2 or 5.1.3 above.
5.3 The Agent will be paid Commission on sales made within clauses 5.1 or 5.2 [to the extent to which payment has been received by the Principal at the end of the month following the month of payment] [invoiced to customers at the end of the month following the month of invoice]....
7.1 If in the reasonable discretion of the Principal, the Agent is failing to maximise sales opportunities within the Territory, the Principal may by one month's written notice to the Agent amend the Territory.
7.2 The Principal may by one month's written notice to the Agent amend the Market by adding or deleting specific customers or categories of customers."
The Commercial Agents Regulations
"7(1) A commercial agent shall be entitled to commission on commercial transactions concluded during the period covered by the agency contract:
(a) where the transaction had been concluded as a result of his action; or
(b) where the transaction is concluded with a third party whom he has previously acquired as a customer for transactions of the same kind.
7(2) A commercial agent shall also be entitled to commission on transactions concluded during the period covered by the agency contract where he has an exclusive right to a specific geographical area or to a specific group of customers and where the transaction has been entered into with a customer belonging to that area or group.
8. Subject to regulation 9 below, a commercial agent shall be entitled to commission on commercial transactions concluded after the agency contract has terminated if
(a) the transaction is mainly attributable to his efforts during the period covered by the agency contract and if the transaction was entered into within a reasonable period after that contract terminated; or
(b) in accordance with the conditions mentioned in regulation 7 above, the order of the third party reached the principal or the commercial agent before the agency contract terminated.
...
16. 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; or
(b) where exceptional circumstances arise.
17(1) This regulation has effect for the purpose of ensuring that the commercial agent is, after termination of the agency contract, indemnified in accordance with paragraphs (3) to (5) below or compensated for damage in accordance with paragraphs (6) and (7) below.
17(2) Except where the agency contract otherwise provides, the commercial agent shall be entitled to be compensated rather than indemnified.
...
17(6) Subject to paragraph (9) and to regulation 18 below, the commercial agent shall be entitled to compensation for the damage he suffers as a result of the termination of his relations with his principal.
17(7) For the purpose of these regulations such damage shall be deemed to occur particularly when the termination takes place in either or both of the following circumstances, namely circumstances which -
(a) deprive the commercial agent of the commission which proper performance of the agency contract would have procured for him whilst providing his principal with substantial benefits linked to the activities of the commercial agent; or
(b) have not enabled the commercial agent to amortize the costs and expenses that he had incurred in the performance of the agency contract on the advice of his principal.
...
18 The indemnity or compensation referred to in regulation 17 above shall not be payable to the commercial agent where -
(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 above; or
(b) the commercial agent has himself terminated the agency contract, unless such termination is justified -
(i) by circumstances attributable to the principal, ...
19 The parties may not derogate from regulations 17 and 18 to the detriment of the commercial agent before the agency contract expires."
The material facts
"Just a short note to confirm our telephone conversation as follows:
With effect from 1 August 1999 we will pay commission on all direct deliveries, within your territory, invoiced by Gibbs Palmer (Midlands).
In addition to compensate for loose stock orders, which appear to be going towards Gibbs Palmer (Midlands) rather than your existing wholesalers, your commission will be raised by 1%.
As discussed could you send copies of any Gibbs Palmer transfer orders to the office for our records and to enable us to monitor this.
I trust the above goes some way to assisting with shifts in business and I look forward to continued area development."
"Regarding your commission I am pleased that commencing 1st March 2000, you will receive:
9% commission on all direct and wholesale accounts within your area.
9% commission on all direct deliveries into your area.
9% commission for Tillington/GCA direct deliveries into your area.
5% commission for Wyevale direct deliveries into your area.
I have also arranged for a presenter, stapler, repair kit etc. to be forwarded to Wendy [Mrs. Vick].
Many thanks for journey plans which have been received into the office, if you could continue to forward them two weeks in advance it would be appreciated.
As a final note, congratulations on the excellent over achievement of last year's sales and this year's budget for January. Can't wait to see February's figures!!"
"I know that we have spoken on a number of occasions and that Andy Fox has covered this with you on [sic] prior to Richard assuming the role of Sales Manager. I am pleased that you will now agree to rectify this with the employment of a family member to assist you.
I do not wish to continue to go over old ground, but merchandising can greatly enhance your potential earnings whilst ensuring that we provide our customers with higher levels of service that they are increasingly coming to expect.
Which ever way you wish to look at it your level of ex-warehouse transfer orders are the lowest consistently with in the company. This is of concern and does highlight the potential business lost not only for you in the form of lost commission but to us in the form of lost sales.
I would also ask for your support with Richard, as he stated at our meeting he is determined to do a good job for T&C and immediate responsibility for the sales team rests with him however, his performance is reflected at the end of the day by the ability of the sales team and I would be grateful for your full support for Richard in particular with regards to weekly reports and office requests.
Sorry I could not stay to help you break the show down!! but trust we can move forward more positively."
"To confirm our conversation after the sales meeting.
We are concerned about the general decline and the lack of merchandising in your area.
You have been telling us for sometime that you intend to address the situation, firstly with your wife and of late your son-in-law, but nothing to date has materialised.
You need to rectify the situation very quickly as we feel it will have a big impact on our business in the South West. We have already seen the success that our competitors are having and to say that they have only moved forward in your area is very disturbing and would not be a lie.
Your transfer order ex-warehouse is the worst in the whole of the company and indicates that you are not fulfilling your obligations to T&C. I must remind you that, when we agreed that you could be an agent, you assured us that you would continue to give the same level of service that you gave when you were employed by us, which has not been the case.
I know that Nick and Richard have spoken to you in the past about the above and would have hoped by now that you would have rectified the situation in order to protect our business and your agency.
I would like you to come back to me a.s.a.p. with suggestions/proposals on how you intend to address the problems."
"I know that you were aware that I intended to spend a couple of days on Tony's area to see at first hand the condition of some of his accounts, and attached is a list of accounts visited and comments. I picked accounts in South Wales as I assumed that being close to his home they would be the better ones.
I have to say that the general condition was very disappointing, plan-o-grams over 5 years old, fixtures shabby (a lot of old grey stands!!!), a lot of damaged packaging collecting dust and in most cases our display stands were being used for other manufacturers products.
I also bumped into Andy Rowe who has recently met with South West Buying Group, whilst they did not have a problem with Tony they felt he was unable to look after them from a merchandising point of view they feel he was promotions orientated and did not want to get his hands dirty with merchandising. It looks as though we will loose [sic] this business totally!!
Please could you seriously have a chat with Tony at the Mills Show it appears that he fails to see the issues and concerns that we continue to highlight to him that we must address!
Also on a separate note we are having major problems with the ipaq (Tony told Amanda early in the week that she can, I quote, "shove it up her a..."). It would be courteous for Tony to apologise to Amanda urgently.
I am afraid that Tony seems to blame the office week in week out, Amanda and Jamie despite spending time running through the system on several occasions he still is being very bloody minded! Please could you talk him through this again."
"Following our discussions at the Mill Trade Show on Tuesday 21st October 2003, I felt the need to confirm in writing our discussions as follows:
Mobile Sales Manager - iPaq
I am sure that you are aware that there has been considerable investment made by the company introducing this new technology and that Nick wanted to make sure this device was fully operational before you took it on. This is now working extremely well provided that it is fully embraced by the user. The issues that you continually refer to are not a fault with the system but your reluctance to use the system as it was intended. The customer data held on the iPAQ is controlled by you (provided you check your database regularly). There is now the facility to enter new customer details and amend details as necessary.
The other area that I have concern over is reporting. I am no longer able to ascertain call rates/history etc. as you do not complete any reports, therefore the iPaq must be used to record all visits done for Town & Country. I have to complete monthly reports and this is causing me some embarrassment and I would be grateful if you could address this urgently.
The last point, is that on average the iPaq saves approx. 1.5 hours of paperwork each day and this must be of benefit to you. We shortly, will no longer be able to accept manual orders as these have to be re-entered onto our system at head office causing further work for an already busy team - your appreciation and understanding would be gratefully appreciated.
Merchandising
I know that both Barry and Nick have spoken to you regarding this matter on several occasions. My understanding, following your change from fully employed to agent, is that, as far as Town & Country are concerned, you would continue to provide the same level of customer support and contact.
I have recently become more concerned, especially after my meeting at Hurrans and the comments they made with reference to the two stores on you [sic] area.
You mentioned that at the Spread Cheltenham show last year that you would address the merchandising issue and I am afraid that I do not yet see any evidence of this.
Please could you confirm how you intend to address this. I must report to Barry and Nick shortly.
CDS/SW Buying Group
I am also concerned with the loss of business within the major key accounts, the first being CDS and the second being the South West Buying Group.
Briers are being aggressive throughout the country but have so far only been successful in gaining the above two accounts from us.
Barry & Nick are once again concerned about this matter and I need to address the reasons we have been unsuccessful in maintaining this business. Please detail the reasons to me before my next management meeting on Tuesday nth November.
Finally, I am not good at putting pen to paper and I am as you are aware determined to do a good job for Town & Country and feel that you must support myself and the company in achieving our goals and that this letter is meant to be constructive and pave the way to develop your area further."
"I write to advise you that I am very disappointed in your lack of response to Richard's letter dated the 27 October 2003.
As we are all extremely busy and as Barry is away at present I have arranged a Sales Meeting for 5 December 2003.
I think it appropriate that you meet with myself, Barry and Richard on that date to address all the issues and to see if we can move forward in a responsible and positive manner.
Meanwhile I would appreciate you looking at the issues that have been previously pointed out to you and it would help if you produced a positive programme on how you intend to address them."
"My feelings are that it cannot carry on the way it is and I feel there is [sic] only 2 options. Tony guarantees that he will correct all the issues in a reasonable time frame or Tony's area is drastically reduced taking off Wiltshire, Dorset and selected key accounts, Tillington members etc.
Other issues
1. Briers success within the area.
a) CDS
b) South West Buying Group
c) Mole Valley
d) Mill (38k)
2. Hurrans x 2 Kate now has to call on.
3. Leekes Nick has to manage.
4. Taking on other agencies without notifying anyone.
5. Merchandising support.
6. Not attending Xmas Sales Meetings.
7. I am sure Al has issues with regards to Wyevale, Tillington etc.
On Monday 22nd December an Agenda confirming the meeting and detailing subjects of discussion is sent to him by post we can then talk further on the Monday before the meeting."
Month and Year | Turnover (£ ) | Turnover previous year (£ ) | Difference (%) | ||
May 2003 | 29,102.14 | 31,661.33 | - 8.1 | ||
June 2003 | 23,857.37 | 27,065.39 | - 11.86 | ||
July 2003 | 23,942.22 | 17,310.23 | + 38.31 | ||
August 2003 | 60,968.12 | 34,261.37 | + 77.95 | ||
September 2003 | 22,130.80 | 31,396.31 | - 29.52 | ||
October 2003 | 62,547.18 | 64,462.63 | - 2.98 | ||
November 2003 | 45,800.35 | 42,363.18 | + 8.11 | ||
December 2003 | 8,976.69 | 45,419.30 | - 80.24 | ||
January 2004 | 39,037.13 | 62847.06 | - 37.89 | ||
February 2004 | 29,561.51 | 36,852.09 | - 19.79 | ||
March 2004 | 52,596.30 | 73,911.35 | - 28.84 | ||
"Richard and I had a meeting with Tony at Chateau Impney.
He was very belligerent and really did not want to discuss any issues. He was not interested in our complaints.
Have arranged a further meeting 21 January.
I am very concerned that if we cannot resolve the issues at our next meeting we really need to explore our alternatives. "
"Myself and Richard met Tony at the Sarum Show, Salisbury.
We put our suggestions forward and Tony was totally unwilling to discuss the situation or offer any alternative remedies.
He told us both to f..k off and under European law it will cost 90K to get rid of him. He said that he was already talking to his solicitors and if we want to take him on he would fight all the way. He walked away from the meeting saying "see you in court".
I suggest that we arrange a meeting a.s.a.p. to discuss the situation."
"As you know, for sometime we have been concerned with the situation with regard to the maintenance of accounts; the call rates and results in your area compared to that of other areas.
Our last two meetings have not resulted in any action from you or any proposals coming from you as to how you intend to improve the situation, we are of the view that we have given you ample time, and were willing to work with you, to see your area improve.
The Agency Agreement you signed with us permits, under clause 7, variations to be made by us of both the Territory and the Market. We have concluded that, in light of your failure to come up with any proposals, it is appropriate that we exercise our discretion under clause 7. Therefore, please take this letter as notice to you that as from 1st March 2004:
1. Your Territory is varied and will comprise the following: Powys, Dyfed, West Glamorgan, Mid Glamorgan, Gwent, Avon, Somerset, Devon, Cornwall and the Channel islands and for avoidance of doubt as set out on the map attached
2. The Market is varied so that the retail/wholesale outlets set out on the list attached are not included within the Market and should not be serviced by you.
We are sorry that we have felt it necessary to take this action. However, despite our best efforts to persuade you to take action to improve and maintain your area you seem not to be interested in seeking an improvement. You have left us with very little choice but to take the above action."
"With the re-organisation of the areas also affecting John and Kate I would like to see a smooth handover of the accounts that you will no longer be calling on.
We need to arrange a meeting to discuss the handover and the issues for the transition to the new areas and to ensure that our customers experience very little or no disruption. We also need to discuss the level of merchandising that will be required in your area.
Venue to be Town and Country Offices. For your convenience listed below are a number of suggested dates and I would be grateful if you would advise, at your earliest convenience, which one would be suitable.
20th February 2004
26th February 2004
27th February 2004
As from 1st March 2004, Under Clause 3 of the Agency Agreement, the following will apply:
1. You will need to produce journey plans and these to be sent to the office on a weekly basis.
2. A weekly written report to Richard Pyrah, UK Sales Manager notifying him of progress in your area and any information pertaining to Town & Country's business."
"Richard regarding the sales figures for my area for January we spoke at the Home Hardware Show.
There is an amount of £ 3,500 missing for a direct delivery to Otter Nurseries and they have also had the same in February which should be on my figures."
"With regard to your letter dated 30th January 2004, I would like to make the following points:
I have never agreed with you that the accounts on my area are not properly maintained. I have worked for you for nearly 9 years and in that time my turnover has increased year by year from around £ 40,000 to £ 500,000, and is probably the best area for sales in the country per head of population.
As I am your only Sales Agent and not fully employed by the company, my time is therefore split between yourselves and other Principals of which you were aware when you offered me the agency 5 years ago.
My area, in general, continues to grow as most of my major garden centre customers have increased range and space in their centres.
You say you are willing to work with me but I do not receive copy orders and very little other communication from the office. Also, I am continually chasing you for commissions owed (due the end of the month following invoice) as per our contract.
There are also sales on my area, direct and indirect, which I am not being paid or credited against target. Under the terms of our contract I would like to inspect your records to ascertain these amounts.
I understand under our contract you can change parts of the area as you have indicated in your letter dated 30th January, however, under Regulation 17 of the Commercial Agents Regulations 1993, I would be entitled to be compensated for the loss of commission on that area.
..."
"Further to your fax dated 22"d February 2004 regarding Otter Nurseries.
This giveaway was organized by the Tillington Group negotiator and Squires Garden Centre and was part of a Town & Country part funded promotion.
As with Squires these items have been sold at a standard cost basis and will be given away by Otter.
Therefore, under the circumstances as before with these types of promotions sales are not credited to the area and as such do not attract commission.
If you disagree with this or you are suggesting that you generated this order please liaise with Barry."
"You seem to have missed the point. Regulation 17 refers to the termination of an Agency Agreement and so has no relevance in this situation. We are not terminating your Agreement, but it has been varied in accordance with the terms of the Agreement to which you freely entered into [sic].
...
Nevertheless since the Agency continues it is not necessary to consider Regulation 17 or King and Tunnock. It is however extremely important that arrangements for the ongoing Agency relationship are made and is of paramount importance and concern.
I am disappointed that you chose to ignore my letter of the 17th February 2004 offering you a choice of three dates to meet and handover Dorset and Wiltshire in a proper manner conducive to the wellbeing of Town and Country and also to discuss your area in detail for the continuance and further growth of your area.
I have listed below three more dates for us to meet and I suggest you contact Richard Pyrah our UK Sales Manager to confirm and arrange a meeting.
o Friday 12th March 2004
o Thursday 25th March 2004
o Friday 2nd April 2004"
"I did not ignore your letter dated 17th February, 2004, otherwise Richard would not be receiving my journey plan or a weekly report. However, if you need a meeting, I suggest you give me at least a month's notice, not two days, as my time is always well planned in advance, and expect me to travel to Leicester and cancel various meetings with customers is not reasonable. You obviously do not read the information I sent to you i.e. journey plan, as you would know that w/c 8th March, 2004, I was in the Channel Islands working on your behalf Furthermore, the other dates you suggest I am already booked up. If you require a meeting I suggest you telephone me and arrange to come and see me. With regard to the handing over of accounts, you have all the information you require on the Ipaq system. I have no further information.
This agreement appears to becoming [sic] very one sided - you only answer and do things you require not vice-versa. Under the Agency Agreement I have asked to inspect your books or be supplied with enough copies to enable me to check you are paying me all that is due in commission. Under agency law I am still not getting information such as copy orders etc. from the office. Payment is overdue every month and from now on I will be invoicing you for interest on these amounts as is my right under the Late Payment of Commercial Debts (Interest) Act 1998.
Two orders for Otter Nurseries worth over £ 7,000 have not appeared on my sales or commission statement and under our agreement all orders delivered to customers on my area are due commission.
I suggest you put these things right before we have a meeting."
"On another point and a subject of which I have written to you before. I have visited several customers on your area and I am still concerned with the lack of merchandising general condition of the Town and Country display unit and lack of stock on the displays, in particular Sunnydale GC Cw[m]bran (these stands went in on Nov 3rd and there is no record of you ever visiting since) St. Johns GC Newport, Banbury's GC Barnstaple, which I would like you to call on at your earliest to rectify the situation and report back to me as soon as possible bearing in mind that we are fast approaching a very important time for our business.
I have spoken to Barry on this subject and he confirms to me that one of your your [sic] obligations for being appointed an agent was to maintain the service that you supplied to our customers while you were previously employed full time by the company.
I am also aware of the success our competitors are having in your area, which is contrary to the situation in all other areas of the country and would like your comments on how you intend to deal with this ever-increasing problem and I need to remind you that I have yet to receive a list of known competitor stockists either solely or jointly.
With Easter approaching I need to point out the importance for our customers to have full stocks and that the products are displayed in a conducive manner to effect and increase consumer sales and to reflect the image of the company.
We are also aware that our competitors are targeting the Channel islands which if successful could have big implications on your commission and a big impact on our sales."
"I refer to your letter dated 22nd March, 2004, and my comments are as follows:
1. The commission system is definitely not to be changed.
2. Sunnydale Garden Centre - I have visited this centre on 4 occasions since they received their 2 mtrs. If you had bothered to ask Philip the owner he would have confirmed this. Also, his stands are completely full and promotions.
3. Banbury's Garden Centre - Again, I have visited 3 times this year and they have the complete range of our gloves merchandised on his own stands and also promotions.
4. St. Johns Garden Centre - We have never been a sole supplier. They have always stocked their own gloves plus another two suppliers. He has just moved his stock onto new fixtures and will give us extra room asap. He also has several promotions and again I have called on 3 occasions this year, if you had bothered to ask Phil Silk
5. With regard to competitors, the only one who has some customers is Briers because they are based on my area. We have not lost any business via my main wholesaler Mill, who are up on last year and they have always stocked two glove companies.
6. Channel Islands - Where you get your information from I don't know. I was there two weeks ago and I deal with all the main people in the Islands and there is not one Briers glove on the Island The only other gloves are one small Garden Centre who stock a small amount of First Choice.
As I said before, I have not changed the way I have worked in 9 years for you and my customers are all serviced regularly, as they always have been, and you have always been satisfied with this practise.
The only problem I see is that Town & Country staff i.e. yourself; your new rep, Nick and Al, all coming onto my area and upsetting the customers with all your visits. Do you want to lose customers to the opposition because you are going the right way about it?
It is also customary and good manners to inform me when visiting my area.
If you concentrated on doing your job i.e. giving me the information and back-up like my other Principals do, instead of trying to find fault and making snide remarks, I am sure it would be better all round
Finally, I have just received the figures for February, which is a month behind, and note that the following are missing off the figures:
Home Hardware
Curtis Holt
Clemsons
Otter Nurseries
These accounts should be included in my figures and on my commission statement. If these figures were correctly entered on my area I would be over target for the year.
I trust you will remedy this with a revised sales analysis."
"In reply to your letter dated 19th March.
Your letter suggests that we are being unreasonable in our efforts to try to arrange meetings and that your time is more valuable than either mine or Richard's. Just for the record whilst we have been trying to arrange meetings with you since early January you have not offered any dates whatsoever, or alternative suggestions or meetings and have clearly ignored my continued efforts to meet and resolve the issues.
With reference to my letters of the 17 February 2004 and 5 March 2004 in each of those letters I gave you three dates (6 in Total) from which to arrange a meeting and to which I received no response. We are aware how important it is for you to continue with your work and that was the reason that Richard and I met you on two separate occasions in your area to discuss the problems in January.
At the first meeting, on the 6 January 2004 at Chateau Impney when we reiterated our concerns, you offered no comments or suggestions and made it clear that you had no interest in any discussion. I then proposed that we arrange another meeting to give you the opportunity to consider and prepare a plan for the future.
Subsequently arrangements were made, with your agreement, for the 21 January 2004. Despite the efforts and the time that Richard and I spent driving to and from our arranged meetings yet again there were no suggestions or plans presented by yourself of how to resolve the issues. We then presented our proposals to you and were informed in no uncertain manner that you were not interested in continuing with the discussions. I then pointed out to you that we had an Agency Agreement signed by yourself and the changes were in line with that Agreement. You [sic] reply was that the Agreement you had signed with Town and Country was "not worth the paper it was written on and none of your concern. It was clear that you had no intention of acting reasonably. It was, by now, obvious that we were left with no alternative but to implement the changes that are now in place.
We have continued to show our willingness to work with you but are finding it very difficult as you appear to have no interest in resolving the issues. You failed to respond to our requests or suggestions to find a solution in order to protect yours and our interests in the area and, if left unresolved, will only further damage our company.
I have written to you previously with concerns about the poor maintenance of the accounts you service. You assured us that you would employ a merchandiser to fulfil your obligations and this was to be your wife. At a later date you informed us that your son-in-law would now be working as a merchandiser which was as long ago as January 2003, yet again in March 2003, again in August 2003 and then again in October 2003. We feel you have had enough opportunities with the two meetings at which you declined to discuss the issues, and then two letters each proposing three separate meetings (6 in total) to which I received no response. You have demonstrated your unwillingness to rectify or even discuss the situation.
Had you accepted any one of those opportunities, we would by now, have resolved many of the issues including your request to view the record of the payments of your commission.
I now offer three more dates from which to arrange a meeting once more:
4 May: 5 May: 6 May 2004.
It would be reasonable to expect you to choose one of the dates within the next 7 days to allow us the benefit of planning our days.
With regard to the payment you refer to in your letter for Otter Nurseries, I believe Nick Page the Sales and Marketing Director has written to you on this subject. However just to be clear this was a promotional item that was sold to the customer for a give away and charged at cost price to promote our products in your area. No commission is due in line with previous promotional activity and something you are fully aware of.
With regard to the fact that you state in your letter you have no further information with regard to the customers in Devon and Wiltshire. This is extremely disturbing as you and I both know that Customer Record Cards are kept, and always have been, and are very important in the continuity of our business. The people now covering these areas have to have these historical records to understand the products, customer purchasing and the frequency of calls. I have asked you for these previously, but to date they have not been received by me.
I also need to point out that you are our representative in the area and I am not at all happy with the fact that you are totally unresponsive and feel that you are quiet [sic] happy for the situation to continue which leads me to believe that the situation may be far more serious. I intend to visit our customers in your area shortly in the hope of finding that my fears and concerns are unfounded"
"As you have not responded to my letter dated 19th March 2004, I feel it necessary to write to you again.
Under both the 1993 Regulations and our contract you have failed in your obligations as a Principal:
1. To act dutifully and in good faith to your agent, contra to Regulation 4.
2. There has been little or no communication between the office and myself again contra to Regulation 4 and also Regulation 12.1.
3. Failed to pay me commissions due on certain orders and customers, contra to Regulations 7, 10 and 11.
4. Lost orders, which were sent to you by me, contra to Regulation 4.
5. Customers complaining to me about Town & Country staff acting arrogantly in their stores and are considering closing accounts, contra to any definition of best practice and Regulation 4.
In general, I am out selling on your behalf spending money to obtain orders, which you are not paying me for. You have made this agency untenable and unworkable. You are, therefore, depriving me of earning a living and fundamentally breaching my contract.
It is in this light that I am using the PSA to instruct Solicitors to take action against Town & Country for the loss of the whole of the agency and to inspect your books for the last five years to ascertain the level of any unpaid previous commissions owed. I have the legal right to this information under Regulation 12.2.
If I have not heard from you with the offer of full payment by 15th April, 2004, they have been instructed to proceed with legal action."
"Thank you for your letter of 2 April the contents of which disturb me greatly. I have to confess that I do not understand the points you are making in your paragraphs numbered 1 to 5 and I have no evidence here of what you are complaining about.
I did speak to you on Tuesday, at long last, and I did offer to come down to meet you to talk about the situation during the course of this week, at any time and any location. However, you refused to take up this offer and told me in no uncertain terms that as far as you are concerned the matter was closed and now in the hands of your solicitors.
The purpose of this letter is, in the light of that conversation, together with your comments in your letter of 2 April (that you think the Agency is untenable and unworkable and that your solicitors are going to take action against us for "loss of the whole of the Agency") that with effect from 2 April, you are no longer acting as our agent, and that we should therefore act accordingly. We cannot see that there is any other interpretation to be made because of the contents of your letter and the telephone conversation we had. If we are wrong in making this assumption, then could you kindly speak to me or e-mail me immediately on receipt of this letter.
You state that you have placed the matter in the hands of your solicitors, and if this is so then please could you ask them to communicate, not with ourselves, but with our solicitors who are Howes Percival [whose address was then set out]."
"With reference to your fax dated 7th April, 2004, my recollection of events seems totally different to yours.
You telephoned me twice on Monday, 5th April, 2004, and on both occasions I was busy with customers. You phoned again on Tuesday morning, 6th April, 2004, and left a message on my answerphone suggesting that we had a meeting that week. I returned your call on Tuesday morning whereupon you told me you had just received my letter dated 2nd April, 2004, and now there was no point in us having a meeting. You then asked me if I was still acting as your agent in the South West and I confirmed to you that I was, although it was and still is very difficult to do so. I would like to point out that this was the first time that we had spoken in three months.
If you had read the letter correctly it stated that if I did not receive full payment for the loss of the agency plus all outstanding commission by 15th April, 2004, then the matter would be placed in the hands of the solicitors. This has not occurred as yet and I was hoping that we could reach a reasonable solution.
I have never suggested or stated that I intended resigning from the agency. I am still acting as your agent in the South West and unless you intend to terminate the contract will continue to do so. If however, you persist in your actions in trying to unilaterally alter my terms and conditions without my agreement, then I may be forced to do so because of your fundamental breaches of our contract.
With regard to the statement in your letter referring to points 1 to 5, I feel it is self-explanatory and are covered in the regulations governing sales agents. If you are in any doubt over this legislation I suggest you discuss these provisions with your solicitor."
"Thank you for your letter of 15 April. We asked you to come back to us "immediately" which you have not done.
We did read your letter correctly in that the only possible interpretation we could put on your request for "full payment for the loss of the agency plus all outstanding commission" was that you felt that you were terminating the agency. We had not terminated the agency, all we were doing was varying its terms in accordance with what we were permitted to do under the Agency Agreement. We agree that we advised you that we were altering your terms and conditions, but your agreement to that alteration occurred when you signed up to the Agency Agreement in the first place. The Agency Agreement permitted us to alter. We did so but you were not prepared to accept the alteration and claimed that the agency had been lost. In our view your actions so far have shown that you have repudiated the agency and nothing in your letter of 15 April leads us to think otherwise.
As regards points 1 to 5, merely referring us to the legislation is particularly unhelpful. Your letter of 2 April claimed that we have not acted dutifully and not acted in good faith. You have given us no examples of this, which is why we said that we did not understand what you were saying and in particular we said we had no evidence of this. Merely to refer us to the legislation does not give us the evidence of what you are complaining about!
There is little point in continuing correspondence between us. We were entitled to vary the terms of the Agency Agreement. You did not accept that variation and claimed that our actions led to the loss of the whole of the agency. We treat that as you terminating the agency and we have acted accordingly."
The reduction in the "Territory" and in the "Market"
"20. The Claimant contends that the only reasonable construction (contra proferentem if necessary) of clause 7, in the light of the Regulations and in any event, is that:-
Where, judged objectively, the Defendant is entitled to conclude that the Claimant is - not de minimis, but significantly - 'failing to maximise sales opportunities" within the Territory/Market, the Defendant has the right to make an objectively reasonable and proportionate reduction in the geographical area and/or specific customers serviced by the Claimant, which reduction must in all events not amount to the substitution of the Agreement by an essentially different contract.
21. Any other construction would be contrary to the obvious intentions of the parties and/or inconsistent with both business efficacy and the perspective of the officious bystander (it is in all events to be recalled that the parties entered into the Agreement on the express understanding, indeed for the sole purpose, of the Claimant being self-employed and representing more than one principal), and/or is precluded by the Regulations.
22. To take some examples that might be pertinent to this action:-
a. If the Defendant reasonably perceives that the Claimant is not working as hard or as effectively as he should/could in respect of a small group of customers or over a short period of time, it cannot have been the intention of the parties that the Defendant should per se be entitled to make a significant and permanent reduction to the Territory/Market
b. Even if the threshold level of inattention and/or incompetence on the part of the Claimant is objectively determinable by the Defendant, the Defendant could not remove such a significantly large part of the Territory/Market as entirely to change the basis of the Agreement."
"shall not, without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee."
"The motives of the employer cannot be determinative, or even relevant, in judging the employees' claims for damages for breach of the implied obligation. If conduct objectively considered is likely to cause serious damage to the relationship between the employer and the employee a breach of the implied obligation may arise."
"15. In this case, C's right to commission on sales to customers in the Territory was not simply important, it was the essence of his entitlement under the contract. But for clause 7, a drastic reduction to that entitlement would clearly not simply be a breach of contract, but the termination of the contract and the substitution of it by another: see by analogy Hogg v. Dover College [1990] ICR 39.
16. There is no warrant in this case for D to reduce C's territory and customer base in the way that they did - D's figures are not accepted - C's evidence was that he calculated he would suffer a reduction of 40% and he gave figures for a few key accounts, not challenged, which added up on their own the loss of over 25% of his commission income. However, even if the reduction was only 25 - 40%, it was still, as recognised by RP and BP (though he tried to disavow it at trial) as "drastic".
17. D's case as to specific customers was: it had lost 2 (in circumstances which, even on D's evidence, were hardly unambiguously down to C) and that one other, Hurrans, had asked for another rep dealing with all its other stores to deal also with those in C's area, which had been implemented in October 2003 and another, Leekes, had asked that N Page should deal with the principal buyer - also implemented some time pre-30/1/04 - but that C welcome to continue visiting and merchandising.
18. There was, as at 30/1/04, no single outstanding request by a customer for C to be replaced.
19. D led no evidence that customers in Dorset or Wilts were more or less satisfied with C.
20. As at 30/1, C's turnover - the single most important indication of success - was at least stable (after many years of increase), which was in line with the employed field staff"
"This gives rise to the first issue in this appeal: whether by invoking special condition E(a)(iii), and in the circumstances, Wimpey are to be taken as having repudiated the contract. Woodar so claim, and assert that they have accepted the repudiation and are entitled to sue Wimpey for damages.
My Lords, I have used the words "in the circumstances" to indicate, as I think both sides accept, that in considering whether there has been a repudiation by one party, it is necessary to look at his conduct as a whole. Does this indicate an intention to abandon and to refuse performance of the contract? In the present case, without taking Wimpey's conduct generally into account, Woodar 's contention, that Wimpey had repudiated, would be a difficult one. So far from repudiating the contract, Wimpey were relying on it and invoking one of its provisions, to which both parties had given their consent. And unless the invocation of that provision were totally abusive, or lacking in good faith, (neither of which is contended for), the fact that it has proved to be wrong in law cannot turn it into a repudiation. At the lowest, the notice of rescission was a neutral document consistent either with an intention to preserve, or with an intention to abandon, the contract, and I will deal with it on this basis, more favourable to Woodar. In order to decide which is correct Wimpey's conduct has to be examined."
Late payment and non-payment of commissions
"In my judgment the question whether the non-payment of agreed wages, or interference by an employer with a salary package, is or is not fundamental to the continued existence of a contract of employment, depends on the critical distinction to be drawn between an employer's failure to pay, or delay in paying, agreed remuneration, and his deliberate refusal to do so. Where the failure or delay constitutes a breach of contract, depending upon the circumstances, this may represent no more than a temporary fault in the employer 's technology, an accounting error or simple mistake, or illness, or accident, or unexpected events ... If so it would be open to the court to conclude that the breach did not go to the root of the contract. On the other hand if the failure or delay in payment were repeated and persistent, perhaps also unexplained, the court might be driven to conclude that the breach or breaches were indeed repudiatory."
The effect of the letter dated 2 April 2004
Did the Company accept the repudiation of the Agency Agreement on the part of Mr. Vick?
The consequences of the ending of the Agency Agreement
"52. Mr. Coppel submits that in this case the agency contract was terminated by his client, the commercial agent, who was justified in so doing by circumstances attributable to the principal, within the meaning of reg. 18(b)(i). He submits that even if the claimant had acted precipitately so as to preclude himself from being able to recover damages at common law, nonetheless, looking at the matter as one of substance, the claimant had been justified in bringing the contract to an end because of the failure by the defendant to pay commission over such a lengthy period of time. Whatever technical rules might exclude his entitlement to recover under English law, they should not affect his rights under the regulations.
53. Mr. Tolley, for the defendant, submitted that the dual effect of regulation 16 and 18, when read together, is that when determining whether a termination is justified under 18(b)(i), it is necessary to apply precisely the same principles as operate at common law. In other words, if the agent is not justified in terminating the contract at common law, because he has affirmed the contract and made an election which leaves him only with his right to damages, then he cannot be any more justified within the meaning of reg. 18(b)(i) to terminate the contract pursuant to the regulations.
54. The drafting of the regulations gives no clear answer as to which construction is correct. Reg 18(a) in terms refers to the case where the principal is entitled to terminate the contract and says that such termination is justified if it would be permitted pursuant to regulation 16. In fact, it seems to me that an agency contract would never be terminated pursuant to regulation 16, since that does not provide any right to terminate which did not otherwise exist. On the contrary, all that provision is doing is preserving such existing common law rules as permit the contract immediately to be terminated because of the failure of the defaulting party to carry out his obligation under the contract. I take it that regulation 18 (a)(i) is intending simply to indicate that there will be no right to compensation where the principal has terminated the agency contract in circumstances where at common law he would have been entitled to do so because of the agent's failure to carry out his side of the bargain. One might have thought that 18(b) would be intended to preserve the right to compensation in precisely the same circumstances. Surprisingly, however, it does not in terms make reference to regulation 16 in the way in which reg 18(a) does. The reason for this may be that regulation 18(b)(ii) provides for justified termination for reasons which do not involve breaches by the principal at all. That would not have prevented some reference to regulation 16 in 18(b)(i), however, and in the circumstances that would have clarified the position. Nevertheless, in my judgment the better view is that regulations 18(a) and 18(b)(i) ought to be seen as the reverse sides of the same coin. In other words, the compensation is not payable if the principal terminates in circumstances which would be justifiable at common law because of the agent's conduct; but on the other hand it is payable if the commercial agent terminates in circumstances which are justifiable at common law because of the conduct of the principal. ..."
The Company's alternative case
"The general rule is well established that, if a party refuses to perform a contract, giving therefore a wrong or inadequate reason or no reason at all, he may yet justify his refusal if there were at the time facts in existence which would have provided a good reason, even if he did not know of them at the time of his refusal."
The assessment of compensation for loss of an agency
"(a) deprive the commercial agent of the commission which proper performance of the agency contract would have procured for him whilst providing his principal with substantial benefits linked to the activities of the commercial agent; or
(b) have not enabled the commercial agent to amortize the costs and expenses that he had incurred in the performance of the agency contract on the advice of his principal."
"27. It is convenient to begin the discussion by considering the concept of compensation. Article 17(3) of the Directive and regulation 17(6) provide that the agent shall be entitled to compensation for the damage he suffers as a result of the termination of his relationship with his principal. On the face of it, therefore, they give the agent a right to receive compensation for any damage he has suffered; they do not simply provide for him to receive payment of an amount that is fair and reasonable having regard to all the circumstances of the case. This can be compared with the position which applies in relation to an indemnity. In that case article 17(2) of the Directive and regulation 17(3) specifically provide that the agent shall be entitled to an indemnity, limited in amount, if and to the extent that the payment is equitable having regard to all the circumstances of the case. No comparable provision is made in relation to payment of compensation, however, from which I think one can fairly conclude that the distinction is important because it goes to the heart of the task which the court is required to undertake when it has to assess how much the agent is entitled to receive by way of compensation in any given case.
28. To an English lawyer the expression "the damage he suffers as a result of the termination of his relations with his principal" is redolent of the language of breach of duty, but reference to other parts of the Regulations makes it clear that regulation 17(6) must have been intended to extend beyond the situation in which the agency is terminated by an unlawful act on the part of the principal. For example, paragraph (8) expressly provides for the payment of compensation in cases where the agency is terminated by the death of the agent and the effect of regulation 18(b) is that the agent's entitlement to compensation is not excluded in cases where he has terminated the agency himself on the grounds of age, infirmity or illness which prevents him from continuing his activities. This makes it necessary to ask what damage (using that word in its widest sense) the agent can be said to have suffered in those circumstances. One answer to the question is that he has suffered a loss of the goodwill attaching to the agency business that he would have enjoyed if his relationship with the principal had not come to an end. These provisions therefore support the conclusion that the purpose of the regulation is not to provide compensation for damage caused by a breach of duty (for which a claim could be made outside the terms of the Regulations in any event), but to provide compensation for the loss of goodwill for which a claim would not otherwise arise. In my view that conclusion is consistent with paragraph (7), both limbs of which contemplate that the agency has built up a fund of goodwill which, in the situation described in sub paragraph (i), will enable the principal to benefit from it through profits generated in the future or which, in the situation described in sub paragraph (ii), could have been expected to enable the agent to generate enough commission to amortise certain costs incurred in setting up the business. It is reinforced by regulation 18(c) which deprives the agent of any right to compensation if he transfers the agency to another person. In such a case it is reasonable to assume that he will have recovered any value attaching to the business as part of any payment he receives for the transfer. This view is also consistent with the description in the Commission's report of the philosophy which underlies the French law from which the Directive was apparently derived.
29. However, I do not think that it would be right to regard the loss of goodwill as the only damage in respect of which the agent may be entitled to receive compensation. Under regulation 17(7)(a) the agent is deemed to suffer damage, and must therefore be entitled to recover compensation, when the agency is terminated in circumstances which deprive him of the commission which proper performance of the contract would have enabled him to earn while providing the principal with substantial benefits as a result of his activities. In such a case the value of the business at the date of termination ought to reflect the agent's potential future earnings which are the rewards he was entitled to receive in respect of any benefit that his principal might obtain from his activities. In this type of situation, therefore, the agent should be adequately compensated if he is paid for the value at the date of termination of the business he has built up. However, the position envisaged in sub paragraph (b) of regulation 17(7) is rather different. If the agency is terminated in circumstances where the agent has not been able to amortise expenses he had incurred on the advice of the principal in setting up the agency, the value attaching to the business may or may not provide sufficient compensation. I see no reason to restrict the meaning of "damage" in those circumstances to loss of goodwill. In my judgment the agent is entitled to recover whatever loss he can show he has suffered which in a case of this kind might consist in whole or in part of the amount of the unamortised expenses. "
The learned Lord Justice then considered a number of authorities and continued:-
"38. With the exception of Duffen v. Frabo SpA [2000] Eu LR 167 and P J Pipe & Valve Co. Ltd. v. Audco India Ltd [2005] EWHC 1904 (QB) these decisions all point to the same conclusion, namely that the damage suffered by the agent as a result of the termination of his relations with his principal is normally the loss of the agency business, including whatever goodwill attaches to it. In my judgment that is the correct interpretation of regulation 17(6) and therefore the compensation which the agent is entitled to receive in such cases should reflect the value of the business at the date of the termination. Once that is recognised the task of assessing the amount of compensation in any given case is made easier because the court can concentrate on the facts and matters that have a bearing on the value of the business to the exclusion of those that do not. For example, at one point Mr. Moser sought to argue that compensation could, in an appropriate case, be assessed by reference to the benefit that the principal had obtained from the agent's activities prior to termination or to the value of the agency business at the date of termination, or even to both. However, if one is seeking to put a value on the agency business itself it is difficult to see what relevance can be attached to the benefits obtained by the principal prior to its termination. If the court had power to award the agent whatever amount it considered to be fair and reasonable in all the circumstances of the case as a form of severance payment, there might be something to be said for taking into account the duration and quality of the agent's performance as well as any enduring benefits to the principal, but in my view that is not what regulation 17(6) provides for.
...
44. It is of course true that neither Directive 86/653 nor the 1993 Regulations make it a precondition to the right of an agent to receive compensation that the principal should continue in business, but I do not think it follows that it is a matter that can be ignored altogether when it comes to assessing compensation. Although I would agree that the value of the rupture of the agency relationship is the source and justification of compensation, in the sense that the damage suffered by the agent is to be assessed by reference to the value of the business of which he is deprived by the termination of the relationship, I do not think that means that the Directive or the Regulations require one to shut one's eyes to what was likely to happen in the future when it comes to assessing compensation.
...
48. However, there is at least one type of case in which it is necessary to adopt a purposive approach in order to give effect to the intention of the Directive, namely, where the agency had a limited life and expired by effluxion of time. In that situation it might be said that at the termination of the relationship the agent had nothing he could sell and that no goodwill attached to the business. However, it is plain, as this court observed in Light v. Ty Europe Ltd. [2003] Eu LR 858, that the Directive is intended to provide a remedy in such cases. In my view the explanation lies in the fact that, although the agent had nothing he could sell, he had none the less built up a business to which goodwill attached in the ordinary way and which, if the relationship had continued, would have continued to produce profits in the form of commission. When the agency expires the benefit of that goodwill passes to the principal and if he is continuing in business is likely to be of value to him. As I see it, one purpose of the Directive and the Regulations is to enable the agent to obtain the value of the goodwill which he has built up and which would otherwise pass to the principal free of charge."
The learned Lord Justice then came to the facts of the case before him. He recorded that before the trial judge it had been agreed that the damage in respect of which the claimant was entitled to receive compensation was the loss of the goodwill attaching to his agency. He continued:-
"55. The judge then noted that neither side had put before him any evidence of how commercial goodwill is conventionally valued or any evidence of its value in this particular case. He therefore proceeded to make an assessment by reference to such material as was before him which included evidence of the amount provided by the defendant of the amount of commission that Mr. Lonsdale had earned in each of the six calendar years immediately preceding the termination of the agency in June 2003....
The learned Lord Justice then set out other pieces of evidence before recording the conclusion of the trial judge that compensation of £ 5000 should be awarded.
57. Mr. Moser challenged the judge's decision both on the grounds that he had failed to apply the two years' commission guideline and on the grounds that he had failed to give sufficient weight to the duration of the agency (in this case 13% years) or for the fact that Mr. Lonsdale had performed satisfactorily. However, for the reasons I have already given, I do not think that either of those criticisms is well founded. I am unable to accept that there is or should be any guideline of the kind suggested by Mr. Moser; nor do I think that the duration of the agency or the quality of the agent's performance are necessarily important factors. Whatever the period of the agency in this case, and however well Mr. Lonsdale had performed, nothing could alter the fact that Howard & Hallam's business was in decline and with it the prospects for the agency. The judge was placed in a difficult position in this case because he was provided with very little material on which to base his decision and the valuation of commercial goodwill is not a matter with which he could be expected to be familiar. In most cases the court is likely to benefit from having the assistance of an expert witness (ideally a single joint expert) who can give evidence about the appropriate way of valuing a business of this kind, but I should not wish to encourage the view that that will always be necessary since in some cases the amount in issue will be too small to make that a sensible or proportionate course. If the parties cannot reach agreement it may be sufficient to place all the material before the court and invite the judge to make whatever he considers to be the appropriate order, as the parties did in this case. In such a case the judge is entitled to apply his common sense and adopt a broad brush approach."
Compensation for failure to give notice
Claim for commission under Regulation 8
The Counterclaims
Set-off
Conclusion