England and Wales Court of Appeal (Civil Division) Decisions

IN THE SUPREME COURT OF JUDICATURE
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM MANCHESTER DISTRICT REGISTRY
(MERCANTILE COURT)

		Royal Courts of Justice Strand London, WC2
		29 September 2003

1. LORD JUSTICE SCHIEMANN: Before us is an application for permission to appeal a judgment of HHJ Kershaw, sitting as a High Court Judge. The appellants are or were employers of commercial agents. The appellants are manufacturer of fishing tackle. The respondents were acting as sales agents for the appellant and the agency contracts were for fixed periods which were periods of 6 months. In March of 1999 the respondents informed the appellants that they would not be able to sell products which the appellants intended to introduce into one of their ranges. The appellants regarded this conduct on the part of the respondents as a breach of good faith entitling the appellant to terminate all the agency agreements. So the appellants decided not to renew the contracts.
2. The judge found that the agreements came to an end pursuant to the clause in the agreement which provided for them to come to an end on 30 June 1999. The appellants claimed compensation for damages pursuant to 17(6) of the Commercial Agents (Council Directive) Regulations 1993 which provides that:

"Subject 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."

3. Regulation 18 provides as follows:

"The 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."

Regulation 16 provides:

"These Regulations shall not affect the application of any enactment or rule of law which provides for the immediate termination of the agency --

(a) because of the failure of one party to carry out all or part of his obligations under that contract . . . "

4. The defendants said that this situation had indeed arisen and that the principal had terminated the agency because, in the circumstances of the present case, the effluxion of time amounted to termination of the agency. As a matter of construction of Regulation 17, the judge took the view that it applied both where the principal terminates the agency and where the agency expires by effluxion of time. That, Mr Conor Quigley QC now accepts, was a correct interpretation of the law. The judge held in paragraph 26 that paragraph 18(a) only applied where the contract was terminated by the principal and this was not such a case.
5. In my judgment, that is an arguably wrong construction, and that termination having been given a wide meaning under Regulation 17, a principal can be regarded under Regulation 18(a) as having terminated an agency contract when he fails to renew it. I accept that that is an arguable proposition.
6. But the judge went on to say that, even if he was wrong and what had happened could be described as termination by a principal, there was no default attributable to the agents which would justify immediate termination, and that therefore, regulation 18(a) had no application. He goes on to say in paragraph 36 that, because of the background to this particular case, what the agents had done was something which was understandable -- the background being set out in his judgment which I need not repeat here. He goes on to say that he does not accept that the defendants had the motives which they allege for what they did. He found that they intended to replace the claimants so far as possible by direct employees. He says:

"I find that it engineered a situation which it believed (correctly) that the claimants would find intolerable."

7. The alleged reason for the non-renewal of the contract was, as I have indicated, that the claimants refused to market some of the defendant's produce, namely Abu Garcia floats and feeders of a new type. I found this very much a borderline case, but have come to the conclusion that, on balance, permission should be granted.
8. We have had no argument as to the application of the compensation provisions in the present case, but I understand the point made by Mr Conor Quigley, that where you have an exclusive agency giving the agent the right to insist that he is the only person who markets the other person's produce, and the manufacturer wishes to introduce a new range, it would certainly be extremely unsatisfactory if in those circumstances an agent could insist on carrying on selling some of the manufacturer's goods but not others. One has only to contemplate people coming into the agent's shop and the agent saying: yes, indeed, we are their agents but we do not sell all of their things. This might well be commercially distressing to the employer. We do not know what relation, if any, that situation has with the compensation to which agents would be entitled in these types of circumstances.
9. It appears possible, in any event, that the judge took the view that the proper construction of Regulation 18(a) implies an investigation into the mind set of the principal when he terminates, in this wider sense, the agency. I do not know whether there is any law on that particular point. I see the force of Mr Conor Quigley's point that there must be some way in which a manufacturer of goods can bring this type of agency to an end. After some hesitation, I agree that it would be right to give permission.
10. LORD JUSTICE RIX: I agree, and I merely add in relation to my Lord's second ground that Mr Quigley submitted in the course of the argument this morning that the judge's finding as to Pure Fishing's motive in paragraph 35 of his judgment was, in any event, not open to him on the arguments presented for him, as well as being, in any event, wrong on the evidence before him. It may be that, in this respect, Mr Quigley will need to look at Pure Fishing's grounds of appeal to ensure that the argument is put there as widely as he wishes to advance it.

Order: Appeal allowed