England and Wales Court of Appeal (Civil Division) Decisions

Mercantile International Group Plc v Chuan Soon Huat Industrial Group Ltd. [2002] EWCA Civ 288 (8th March, 2002)

IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM QUEEN’S BENCH DIVISION
COMMERCIAL COURT
(Mr Justice Andrew Smith)

		Royal Courts of Justice Strand, London, WC2A 2LL
		8th March 2002

Lord Justice Rix :

1. This appeal concerns the question whether the respondent, Mercantile International Group plc (“MIG”), was a “commercial agent” within the meaning of the Commercial Agents (Council Directive) Regulations 1993 (the “Regulations”).
2. Those Regulations provide, by regulation 2(1), that –

““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…”

3. In the court below Andrew Smith J found that MIG was such a commercial agent and that its principal was Chuan Soon Huat Industrial Group Limited (“CSH”), here the appellant. The importance of that finding is that it may entitle MIG pursuant to Part IV of the Regulations to claim indemnity or compensation on the termination of the agency contract. MIG has formulated a claim in excess of £1.5 million on that basis. However, all issues as to such indemnity or compensation are not yet before the court. This appeal arises out of a preliminary issue stated as follows:

“Whether MIG were a commercial agent within the meaning of the 1993 Regulations.”

4. In the course of the hearing below, it was agreed to supplement that issue by asking whether, if MIG were such a commercial agent, it was remunerated wholly or in part by “commission” within the meaning of the Regulations. The judge decided that MIG was not remunerated by commission, and there is no cross-appeal from that finding.
5. CSH is a Singaporean company which manufactures timber products such as door and window frames. MIG, an English company, was for over 20 years (until the relationship was terminated with effect from September 1999) CSH’s sole representative for the marketing of CSH’s products in the UK (subsequently in the UK and Ireland, and latterly, for certain products, in the world). I use “representative” as a neutral word. MIG entered into contracts with retail businesses (the “purchasers”) on terms which stated that the contracts were with CSH and that MIG acted as agents only. MIG confirmed those contracts to CSH, also purportedly as agents. However, in certain respects, and in particular as regards price, the confirmations to CSH were not in identical terms to those agreed with the purchasers. CSH knew that MIG charged more to the purchasers than MIG confirmed to Singapore, and did not mind nor care to know the detail of it. CSH was satisfied to get the price which it stipulated, and was content that MIG should keep for itself an undefined margin. MIG obtained no remuneration, whether in the form of commission or otherwise, from CSH. The overall relationship between CSH and MIG was governed by a contract which in 1985, when that relationship was first defined in writing, was called an “Agency Agreement”. In 1989 that contract was superseded by a “Sole Sales Agreement”, and in 1994 a new “Sole Sales Agreement” again superseded the previous contract. I can refer to those three agreements as the 1985, 1989 and 1994 agreements respectively.
6. The essence of the dispute before the judge and on appeal remains this: Did MIG operate as a distributor who undertook the obligations of a principal in chain, as buyer of the goods from CSH and as seller to the purchasers? Or did it act as an agent and in particular as one who “has continuing authority to negotiate the sale or purchase of goods on behalf of another…or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of” his principal? On behalf of CSH, Mr Peregrine Simon QC has emphasised the inconsistency of what he submits are separate contracts between purchaser and MIG and between MIG and CSH. On behalf of MIG, Mr Fergus Randolph has emphasised the fact that everything that MIG did it purported, on the documents themselves, to do as agent and agent only. It is common ground that the word “agent” can be carelessly and indiscriminately used, and that the test is ultimately one of substance rather than form. Was the judge wrong to find the substance to be one of agency? Did he, as Mr Simon submits, pay only lip service to the test of substance?
7. Mr Simon’s skeleton argument formulates the issue in these terms:

“It is and was common ground that MIG purported to act as agents and that the standard documentation created by them used the language of agency. However the substance of the relationship had few if any features of agency, but was consistent only with purchase and resale by MIG. It follows that MIG were not and could not have been agents."

The background facts

8. The judge observed (at para 9 of his judgment) that on this issue many of the essential facts were either not in dispute or were apparent from the documents before him. On this appeal Mr Simon has said that he does not challenge any of the judge’s findings of primary facts, only the inferences which he drew from them.
9. The 1985 agreement, in the form of a letter from CSH to MIG, was headed “Agency Agreement”. It contained the following language –

“We hereby confirm that Eurofibre…and Romac…[trade names used by MIG] are appointed and empowered to act as sales and forwarding agents, on behalf of our company [CSH] for sales to the United Kingdom market.

“We understand and agree that [Eurofibre/Romac] will negotiate on the behalf of [CSH] with companies in the United Kingdom and that having agreed terms with the said buyers, will put such terms into the form of a written contract between the buyer and our company [CSH] through the agency of [Eurofibre/Romac]…

“Once a contract is negotiated, on behalf of our company, [CSH] with any buyer in the United Kingdom, and is returned to [Eurofibre/Romac] duly signed by the buyer, then [Eurofibre/Romac] will issue our company [CSH] with confirmation of said contract and will see that the necessary Letters of Credit are supplied to [CSH] as and if required…”

10. The 1989 agreement was headed “Sole Sales Agreement” and contained (inter alia) the following terms –

“(1) APPOINTMENT AND TERRITORY

[CSH] appoints [MIG] as their sole sales and marketing agents for the United Kingdom and Ireland.

MIG, will handle all the negotiations and sales for [the products] into the UK, and Ireland markets. CSH will not supply any other company directly or indirectly, with the above products mentioned, whose end destination is the aforementioned territory…

“(3) PERFORMANCE

MIG must utilize all their endeavours to ensure that the production of these products, which CSH allocate for export to the UK, and Irish markets, is fully sold, up to mutually agreed levels. Furthermore MIG will provide CSH, with such Letters of Credit as are necessary to support all contracted quantities of product sold on behalf of CSH, to the end buyers in the UK, or Ireland.”

11. The 1994 agreement was so far as is material in identical terms, save that in the case of certain products MIG was to operate world wide and not merely in the UK and Ireland.
12. The judge described the pattern by which MIG sold CSH’s goods throughout the period of the relationship as virtually consistent, and to the following effect. When MIG had an order, it would send the details to CSH, who would confirm that it was feasible or suggest any necessary changes. When all was agreed, MIG would send the purchaser a contract and CSH a confirmation of contract and CSH would put in train the production of the goods.
13. A typical contract document took the following form. It was headed “Eurofibre Marketing Services”, described as a division of MIG. A contract number was given. The purchaser was named as the “Buyer” and CSH as the “Seller”, and beneath their names and addresses appeared the words “Through the agency of Eurofibre Marketing Services”. The goods were then described and there was a term as to “Specification” which read: “As per the agreed…working drawings/specification, as previously agreed”. Bold wording then referred to “attached sheets” for quantities, descriptions and prices. Each of such sheets was headed with the contract number and the names of purchaser and CSH. Back on the front page of the contract there then followed “Terms of Payment”, to which I will refer below, for they constitute one of the respects in which contract and confirmation of contract differed. At the foot of the page there was room for signatures, one for the purchaser, and the other for Eurofibre between the wording “By Authority as Agents for the Principal…Eurofibre…As Agents.”
14. On the reverse were standard “Conditions of Sale” in small print. They included the following:

“1. Interpretation

1.1 In these Conditions AGENT means MERCANTILE INTERNATIONAL GROUP PLC…At all times and for all purposes in connection with these conditions the Agent acts only as Agent and particularly as forwarding agent for the Seller by whom it is fully authorised to enter into the obligations contained in these conditions and any variation to them. The Agent does not hold itself out at any time or in any respect connected with the transaction as acting as principal in connection with the subject matter of the transaction nor does it act as such. ‘BUYER’ means the person who accepts a quotation of the Seller for the sale of the Goods or whose order for the Goods is accepted by the Seller…‘SELLER’ means the Supplier of the Goods from the Country of Origin…

2. If the Agent at any time opens any letters of credit or undertakes any other work or obligation on behalf of the Buyer or accepts any other security it does so only as agent for the Buyer and the Buyer hereby expressly authorises the Agent to act in such capacity…”

There were many other conditions, dealing inter alia with terms of payment, delivery, risk and property.

15. The confirmation of contract document was in similar format but began with the words: “We are pleased to confirm details of this order accepted on your behalf as follows”. It bore the same contract number, details of “Buyer” and “Seller”, legend “Through the agency of Eurofibre…”, and description of goods. It was again signed by Eurofibre, ie by MIG, “By Authority as Agents for the Principal…As Agents”. Attached sheets set out the same specifications, but the prices were different, although on the same basis of “CIF UK Port in Singapore Dollars”. From June 1996 the same Conditions of Sale were set out on the reverse: before that time, however, the confirmation had only contained the following two provisions:

“(1) At all times and for all purposes in connection with this contract, Eurofibre…or [MIG] or any of its subsidiaries act solely as agents and in particular as forwarding agents for the Buyer or Seller as the case may be and does not at any time or in any respect connected with this Contract act as principal nor hold itself out as acting as such.

(2) If at any time or for any purpose connected with this Contract, Eurofibre…or [MIG] or any of its subsidiaries open in its own name letters of credit on behalf of the Buyer, it nevertheless does so in its capacity as agents as aforesaid and it shall not be construed therefrom that Eurofibre…or [MIG] or any of its subsidiaries is acting in any other capacity than that of agent either in relation to the said letter of credit or to the Contract herein.”

16. I have mentioned that the prices were different in the two documents. There were some other differences as well, and it is on these differences, including those relating to price, that Mr Simon principally relies. Thus the payment terms agreed by MIG with the purchasers varied, but typically provided for standby letters of credit supporting a longer period of credit than that provided for in the confirmations sent to CSH, which typically provided for payment under a letter of credit payable at sight or up to 30 days from sight of documents. It followed that CSH was always paid by MIG before MIG was in turn paid by the purchaser. As the judge found (at para 53):

“The precise details of the methods of payment by the end buyers do not matter. The point on which CSH rely, and which is established by the evidence, is that the buyers’ obligations bore no relationship in method or timing of payment to the obligation upon MIG to pay CSH. MIG made arrangements whereby they would receive payment some time after paying CSH, and in the interim, while they might charge the buyer in respect of interest, the commercial risk was borne by MIG.”

17. In this connection it must also be mentioned that MIG’s letters of credit required that MIG be named on the bills of lading as a “notify party”; and that on documents presented under the letters of credit, such as invoices and packing lists, MIG was named by CSH as the “customer”.
18. Late in the relationship, MIG negotiated a number of so-called “frame” contracts with the most important of the purchasers, Wickes Building Supplies Limited (“Wickes”). I do not think these were typical purchaser contracts, for they covered supplies throughout a whole calendar year, 1999, and permitted Wickes to draw down goods as and when it required them. These contracts were confirmed to CSH, but the confirmations demonstrate more than the usual number of discordant features. Thus the contracts with Wickes made clear that it was committed to only 80% of the contracted quantities, with the 20% balance to be entirely at its option; but that clause was not repeated in the confirmation of contract. Moreover the contracts with Wickes contained a special “Contract – Addendum” page which did not feature in the confirmation. That page, however, was separately signed for Wickes and for MIG, and on these occasions MIG signed “for and on behalf of” itself. The addendum page provided for liquidated damages in the case of delay in delivery, and for demurrage in case documents were not presented at least 3 days before the arrival of a ship at its UK port, matters which did not figure among the terms confirmed to CSH; and also provided that prices might be increased for shipments in the second half of the year, a matter which was confirmed to CSH. Moreover, the confirmations contained a clause not included in the contracts, namely that quantities could be varied (sc by CSH) by plus or minus 10% in making up the containers.
19. Mr Simon also relied on the following further features of the relationships of MIG with the purchasers and with CSH to argue that MIG was acting as a real principal in relation to both. First, when purchasers complained about defective goods, MIG negotiated a refund in its own discretion referable to the price negotiated with the purchaser, not to the lower price confirmed to CSH. It did not always obtain a refund from CSH, even at the confirmed price. Secondly, MIG negotiated its own marketing support, rebate or discount arrangements with important purchasers such as Wickes. Thirdly, MIG did not account to CSH for any of the sale proceeds obtained from the purchasers.
20. These, then, were the primary facts on the basis of which Mr Simon asked the judge and this court to conclude that the true analysis of MIG’s relationships was as a principal, and not as an agent. He submitted that MIG’s mark-up, whose amount was unknown to and uncontrolled by CSH, was a prime characteristic of a party who acts as a principal rather than an agent; that the disparities between what he described as the terms of sale and resale were inconsistent with agency; that the contract documentation, while purporting by its standard wording to evidence contracts made through the agency of MIG directly between CSH and the purchasers, was proved by the disparate terms in substance to evidence contracts in chain; that the financial risk undertaken by MIG was incompatible with agency; that upon earlier payment by MIG, title in the goods passed to MIG, a further sign of the existence of separate contracts in chain; and that in general the judge had been over-impressed by the purported form, and had paid insufficient regard to the substance of the matter.

The authorities

21. In connection with these submissions, the court was referred to the following authorities. BOWSTEAD AND REYNOLDS on Agency, 17^th ed, 2001, at para 1-032, puts the matter thus:

“Agent and seller; agent and buyer. The above discussion raises the distinction between agency and sale. These relationships, unlike the others dealt with above, are mutually exclusive: in respect of a particular transaction a person cannot be acting as agent if he is a buyer or seller to his principal and vice versa. Sale is a commercially adverse relationship; agency involves a fiduciary relationship of trust and confidence. The solution to commercial disputes may frequently turn on whether the parties are to be regarded as parties to one or the other relationship…

“The distinction between agent and buyer for resale normally turns on whether the person concerned acts for himself to make such profit as he can, or is remunerated by pre-arranged commission. A supplier who himself fixes the resale price is likely to be a buyer for resale…Exceptionally…an agent [may be] remunerated by being allowed to keep the excess over and above a stipulated price. But the making of such a profit by an agent would normally be improper…

“Each transaction must be examined on its facts, considering the extent to which an agent’s duties are appropriate. Much turns on the extent to which the principal can call for an account, for the duty to account is a typical feature of the agent’s position. The ways in which the parties describe themselves are not conclusive. “There is no magic in the word ‘agency.’ It is often used in commercial matters where the real relationship is that of vendor and purchaser.””

22. Ex parte White, re Nevill (1871) LR 6 Ch App 397 is the source of and illustrates that last quotation. There it was held that a relationship which the parties had regarded as one of “agency” was in truth one of seller and buyer. The issue arose because it became important to decide whether monies generated by the onward sale of the goods belonged to the supplier or to the “agent”. It seems to me that an essential fact for present purposes was that there was “no written document shewing the relationship between the parties, or stating the terms on which the business was to be carried on between them” (at 399) and therefore the court had to proceed entirely by analysing the course of dealing between them. That showed that the supposed “agent” had acted entirely on his own account, save for this one fact: that he had credit from the supplier until the end of the month after that in which he had sold the goods to their ultimate purchasers. Otherwise, as James LJ explained (at 400):

“It does not appear that he ever was expected to return any particular contract, or the names of the persons with whom he had dealt. He pursued his own course in dealing with the goods, and frequently before sale he manipulated them to a very great extent by pressing, dyeing, and otherwise altering their character, changing them as much as wheat would be changed by being turned into flour; and he sold them on what terms he pleased as to price and to length of credit. No question appears ever to have been raised as to whether he was entitled to do this; and we must take it that he did not commit any breach of duty in so doing. That is quite inconsistent with the notion that he was acting in a fiduciary character in respect of those goods. If he was entitled to alter them, to manipulate them, to sell them at any price that he thought fit after they had been so manipulated, and was still only liable to pay for them at a price fixed beforehand, without any reference to the price at which he had sold them, or to anything else than the fact of his having sold them in a certain month, it seems to me impossible to say that the produce of the goods so sold was the money of the consignors, or that the relation of vendor and purchaser existed between [the consignors] and the different persons to whom he sold the goods.”

23. Mellish LJ perhaps put the matter more schematically when he said (at 403):

“But if the consignee is at liberty, according to the contract between him and his consignor, to sell at any price he likes, and receive payment at any time he likes, but is to be bound, if he sells the goods, to pay the consignor for them at a fixed price and a fixed time – in my opinion, whatever the parties may think, their relation is not that of principal and agent.”

24. But later in his judgment (at 405) he indicated rather that ultimately the proper inference would depend on all the circumstances of the case:

“I do not say that it is not possible for parties to make a bargain under which the consignee may receive in his remuneration whatever the goods fetch above a certain price, and yet sell them as agent; but the question is, whether such a bargain is to be inferred in the present case. If A. hands over his goods to B., and B. is to pay him a certain price if he sells, but is at liberty to sell on what terms he pleases, and B. then sells to C., the natural inference from those facts is, beyond all doubt, that there is a sale made to B., and another sale from B. to C., and all the circumstances confirm the view that such was the nature of the dealing here.”

25. It took less than a decade for different facts to lead to a different conclusion. In Ex parte Bright, re Smith (1879) 10 Ch D 566 the question was whether goods in the possession of consignees could be claimed by their creditors as being in their reputed ownership, or rather could be preserved for their consignors. It was held that the consignees were agents and that their creditors had sufficient notice of the agency to exclude the operation of the concept of reputed ownership. In this case there was a written document governing the relationship of the supplier and its agent, inter alia that (at 567) –

“It is agreed that we shall offer and sell your goods throughout Great Britain and Ireland, at such an advance on your prices as we may deem right, so as to leave us a fair commission covering travelling expenses, &c.”

Jessel MR said this (at 570):

“There is nothing to prevent the principal from remunerating the agent by a commission varying according to the amount of the profit obtained by the sale. A fortiori there is nothing to prevent his paying a commission depending upon the surplus which the agent can obtain over and above the price which will satisfy the principal. The amount of commission does not turn the agent into a purchaser…But in addition to that we have a great number of other circumstances which shew that it was intended to be an agency…”

26. James LJ added a short judgment to deal with an argument based on Ex parte White. He said (at 572):

“I entirely agree. Ex parte White and the other cases which have been cited to us were decisions upon facts…”

27. More recently, this court has held that a “mark-up” was a telling factor pointing to a conclusion that a party was not an agent but a principal and thus not within regulation 2(1) as a “commercial agent”: see AMB Imballaggi Plastici SRL v. Pacflex Ltd [1999] 2 All ER (Comm) 249. AMB was an Italian manufacturer and Pacflex dealt with its products in England. The facts were found by the trial judge and only briefly restated at 251e/j. No contractual documentation is mentioned. The only significant document identified was a letter which offered Pacflex a choice: either to operate on a commission on the basis that contracts would be arranged directly between end-users and AMB or to operate on a mark-up on the basis of a purchase from AMB and a resale to end-users. Pacflex chose the latter alternative, but the matter was never formalised in an agreement, and therefore the parties’ rights and duties were never clarified. The judge however found that all business was in fact done on the basis of sale and resale, albeit Pacflex carried no stock and AMB delivered directly to the end-users. In these circumstances my Lord Waller LJ said this (at 252):

“The obligations specified [in the Regulations] sit comfortably in the context of an agent negotiating in the interest of a principal and uncomfortably in the context of someone fixing a selling price for himself and in his own interest, in particular a selling price which he might not want to pass on to his supplier up the chain…

“In my view the question whether a person is a commercial agent can be more straightforwardly stated by reference to the words used in the definition, and was rightly answered by the judge. If a person buys or sells himself as principal he is outside the ambit of the regulations. That is so because in negotiating that sale or purchase he is acting on his own behalf and not on behalf of another. All the regulations point in the direction of the words ‘on behalf of’ meaning what an English court would naturally construe them as meaning. The other person on whose behalf the intermediary has authority to negotiate the sale or purchase of goods is called the ‘principal’; the duties are consistent with true agency and not with buying and reselling; ‘remuneration’ is quite inconsistent with ‘mark-up’, particularly ‘mark-up’ within the total discretion of the re-seller.”

28. Peter Gibson LJ said this (at 255e):

“The plain implication of the language of the directive and of the regulations is that if the sale or purchase of goods is negotiated by the intermediary in its own interest rather than on behalf of the principal, the intermediary is not a commercial agent. The paradigm example of an intermediary so negotiating is as a distributor purchasing goods from the manufacturer but reselling the goods for a profit on the mark-up.”

Peter Gibson LJ then considered a number of factors, such as the direct deliveries from AMB, which were relied on for a submission that Pacflex was a commercial agent. The high point of that submission was regarded as the letter which offered Pacflex the alternatives stated above. Peter Gibson LJ continued (at 255j/256b):

“But set against that is the crucial fact that the transactions between the parties were always on the basis that Pacflex purchased from AMB and sold to the end-purchaser, adding a mark-up well in excess of 5%. Indeed, it tried to conceal from AMB the extent of the mark-up.

“In these circumstances it seems to me plain that Pacflex was never acting as the commercial agent of AMB, on whose behalf it never purported to negotiate, nor did it have a contract or other authority to negotiate a sale on AMB’s behalf, still less did it have authority to do so which could be called continuing.”

29. Mr Simon relied on the weight which was there accorded to the mark-up factor. In my judgment, however, that is to mistake the real significance of that decision. It was a finding of the trial judge, assisted no doubt by the mark-up factor, that the basis upon which the parties did business was that of sale and resale. There was, as both Waller and Peter Gibson LJJ stressed, nothing to indicate that Pacflex had any authority, or even purported to have any authority, to enter into contracts as an agent on behalf of AMB. The combination of those two circumstances, which were entirely consistent with one another, made any attempt to find a relationship of principal and agent an impossible one. Without such a relationship, a finding that Pacflex was a commercial agent within the meaning of the Regulations could not succeed.

Discussion

30. In the present case, unlike Ex parte White and Pacflex, there is documentation which at any rate purports to describe the relationships between CSH, MIG and the purchasers and to do so in terms whereby direct contracts are brought into existence between CSH and the purchasers through the agency of MIG and with the authority and knowledge of CSH. In such circumstances, it seems to me that Mr Simon’s submission ultimately depended on him saying that such documentation was a sham. In answer to a direct question from the court, however, Mr Simon denied saying that, submitting only that in substance the documentation did not reflect the true position, which was that there were separate contracts of sale and resale in chain.
31. In my judgment, however, if the parties were not agreed that the documentation was a sham, then I do not see how it is possible to ignore its effect. It was the absence of such documentation, moreover, which was critical in Ex parte White and Pacflex. In its absence, the fact that the supplier and consignee in the first of those cases regarded themselves as conducting an “agency” was to little effect: what the court there had to analyse were the facts relating to the parties’ course of business, which was all one way. In Pacflex, the analysis was done by the judge and to a large extent lies behind the summary of the court of appeal’s judgments: but there was in truth no getting away from the finding that the course of dealing was that of sale and resale or from the absence of any definition of the alternative process of authority and agency. In the present case, in a lengthy and careful judgment, Andrew Smith J has considered all the material, not only the documents but also the evidence of many witnesses, and has concluded both that the 1985, 1989 and 1994 agreements authorised MIG to negotiate and conclude contracts in CSH’s name and on its behalf and that the contracts and confirmations of contract used consistently throughout the period of over twenty years in question reflected the agency relationship which had been originally defined in the 1985 agreement.
32. Thus he pointed out that the 1985 agreement (see para 9 above) unambiguously authorised MIG to act as an agent for CSH and did not contemplate that MIG might be supplied with goods in its own right; that it stipulated that there were to be written contracts between purchasers and CSH, through the agency of Eurofibre or Romac (in fact Eurofibre’s name was always used), and confirmations of contract issued by MIG to CSH, and that MIG was to see that the necessary letters of credit were supplied to CSH; that that was what happened throughout the relationship; that when the 1985 agreement had been superseded by the 1989 agreement the parties continued to use the same contract and confirmation of contract documentation, and the obvious inference was that they did not regard the altered and briefer language of that agreement as changing the nature of their relationship; and that when the 1994 agreement in turn superseded the 1989 agreement, the same remained true. As for the wording of the 1989 and 1994 agreements, the expression “sales and marketing agents”, the concept of MIG’s duty to “handle all the negotiations and sales” and the reference to “product sold on behalf of CSH, to the end buyers” themselves connoted a person acting on behalf of another. I agree with all of that.
33. On this appeal Mr Simon accepted that the language of the 1985, 1989 and 1994 agreements and of the contract forms, and the facts that MIG never took physical possession of the goods and never held any stock pointed to agency. He nevertheless submitted that the other facts he relied on were strong indications that the relationship was not one of agency. In my judgment that is not so. If the question is asked whether the contracts between the purchasers and CSH purportedly evidenced by the contract forms, and what is more repeatedly performed by CSH’s deliveries over more than twenty years, were valid and legally effective contracts binding on CSH and the purchasers respectively, that question only lends itself to one possible answer. I am not dealing here with any specific problem unknown to the court in this present litigation as to whether here or there some term might be said to be have been agreed beyond the actual authority of CSH. But speaking generally, I do not see how either the purchasers or CSH could argue that these decades of contracts did not evidence binding contracts, negotiated by and through the agency of MIG on behalf of its principal CSH. MIG was undoubtedly authorised to make such contracts, did make them, and made them expressly as agents for and on behalf of its principal, CSH. Moreover, CSH knew that MIG was making such contracts, received the confirmations of them, and even though it will not have known the prices negotiated by MIG, rested content that they were above the prices required by it. In those circumstances, CSH never interfered to complain that MIG was purporting to act as its agent, making contracts in its name and on its behalf, while not being authorised to do so. On the contrary it clearly permitted and encouraged MIG to hold itself out as its agent for the purpose of negotiations and making sales in its name.
34. I would therefore conclude, in agreement with the judge, that MIG had continuing authority to negotiate the sale of goods on behalf of CSH, its principal, or to negotiate and conclude the sale of goods on behalf of and in the name of its principal, CSH; and was therefore a “commercial agent” within the meaning of regulation 2(1).
35. In my judgment, that conclusion holds good whatever view might be taken of the factors relied on by Mr Simon as being inconsistent with MIG being CSH’s agent. In truth, and in substance, those factors might lead a court to conclude that there were collateral agreements between MIG and the purchasers, and/or between MIG and CSH: but I do not see how, once it is accepted that the basic contractual documents are not a sham, those factors can prevent the conclusion stated above.
36. Nevertheless, I shall go on to consider those factors and what inferences can be drawn from them. The most important in Mr Simon’s list is MIG’s mark-up, leading to a different price under the contracts from that under the confirmations of contract. Nevertheless, Ex parte Bright shows that such an arrangement is not inconsistent with agency. It is true that the arrangement in that case was spelled out in terms, which is not the case here. Even so, the effect is the same, and any inference that might in other circumstances have been drawn from the mark-up, as perhaps it was in Pacflex, is here overwhelmed by the underlying documentation. As it is, the findings of Andrew Smith J are clear: “CSH never had any interest in having this information and never asked…I…reject any suggestion that this was sinister or improper, or that MIG were concealing matters which they should have disclosed” (para 44). The judge also rejected any argument that the size of the mark-up was inconsistent with agency (para 47). The effect therefore of the parties’ course of dealing was as if they had expressly agreed that MIG could keep as its remuneration the mark-up which it was able to negotiate. It also follows, it seems to me, that under such an arrangement it is perfectly natural for purchasers to be credited upon the return of defective goods with the marked-up price, and for MIG to protect its interest in the mark-up by being prepared to offer purchasers special rebates, discounts or other special terms such as liquidated damages for delay in delivery or demurrage in the case of late presentation of documents, none of which is reflected in the confirmations to CSH. All such terms go towards making inroads, or potential inroads, into MIG’s mark-up: in other words the mark-up or remuneration is not the gross figure but the net. The fact that the judge also held, on a point on which there has been no cross-appeal, that remuneration by way of such mark-up is not “commission” as that is defined by the Regulations, viz “remuneration...which varies with the number or value of business transactions”, is neither here nor there. I would also add that the “frame” contracts were not typical contracts.
37. This conclusion might still leave open questions which do not arise on the issue before the court, such as whether some excessive mark-up undisclosed to CSH might be argued to fall outside the latitude allowed to MIG and to constitute a breach of fiduciary duties owed to CSH.
38. As for matters concerned with payment, I have already commented, as the judge held, that these were contemplated by the 1985 agreement and therefore by the successive agreements as well. In any event, given the arrangement permitting MIG to keep a mark-up for itself as its remuneration, the payment arrangements, as well as the invoicing and such like, were perfectly natural. It remained the fact that deliveries were always effected to the purchasers, and that MIG never kept goods in stock. On the contrary, the process from beginning to end was one in which the purchasers’ individual orders were placed with CSH, discussed, amended and agreed in advance of contract, and then secured in the contract forms referred to above.
39. As for the passing of title in the goods, I agree with the judge that, on the basis that the contracts with the purchasers are contracts with CSH, title passed to those purchasers when the full purchase price under those contracts had been paid.
40. None of this necessarily entails that MIG may not have made collateral contracts with either the purchasers or CSH. To the extent that a relationship of agency is in any event a contractual one, there can be no surprise in finding that collateral arrangements have been added on. A del credere agent is one who guarantees the price of goods purchased by a third party: it does not stop him being an agent. It is perhaps less usual to find an agent making personal arrangements with the third party: this is because of the fiduciary nature of the relationship with his principal and the need to avoid conflicts of interest and to make complete disclosure and obtain his principal’s consent to anything which might be inconsistent with his fiduciary duties. But with open agreement, even such relatively unusual arrangements might be possible: and in case of error or an improper failure to disclose, there might of course be a breach of those duties. In a different case, circumstances of this kind might lead to an inference not that there has been a breach of a fiduciary relationship but that there never was such a relationship. That, however, is not this case. In any event, there has been no finding of any breach of fiduciary duties.

Conclusion

41. For all these reasons, in my judgment MIG was a commercial agent within the meaning of regulation 2(1) and this appeal should be dismissed. It follows that MIG can pursue a claim for compensation under Part IV. Such a claim is not before this court. It is possible to visualise that all kinds of questions might arise in that context, such as the relevance of the one year termination notice period, any possible breach of fiduciary duty, the significance of the mark-up arrangement and the general question of what “damage he suffers” for the purposes of regulation 17(6) in the unusual circumstances of this case. All such and other questions, however, are for another day.

Mr Justice Wilson:

42. I agree.

Lord Justice Waller:

43. I also agree.
Order: Appeal dismissed; appellant to pay respondent’s costs in and of the appeal; costs to be assessed. (Order does not form part of the approved judgment)