QUEEN'S BENCH DIVISION
7 Rolls Building
London EC4A 1NL
B e f o r e :
| ALAN RAMSAY SALES & MARKETING LIMITED
|- and -
|TYPHOO TEA LIMITED
Mr Robert Thomas QC (instructed by Fox Williams LLP) for the Defendants
Hearing dates: 9th, 10th , 11th & 12th February 2016
Crown Copyright ©
Minimum periods of notice for termination of agency contract
15(1) Where an agency contract is concluded for an indefinite period either party may terminate it by notice.
(2) The period of notice shall be—
(a) 1 month for the first year of the contract;
(b) 2 months for the second year commenced;
(c) 3 months for the third year commenced and for the subsequent years;
and the parties may not agree on any shorter periods of notice.
(3) If the parties agree on longer periods than those laid down in paragraph (2) above, the period of notice to be observed by the principal must not be shorter than that to be observed by the commercial agent.
(4) Unless otherwise agreed by the parties, the end of the period of notice must coincide with the end of a calendar month.
(5) The provisions of this regulation shall also apply to an agency contract for a fixed period where it is converted under regulation 14 above into an agency contract for an indefinite period subject to the proviso that the earlier fixed period must be taken into account in the calculation of the period of notice.
Entitlement of commercial agent to indemnity or compensation on termination of agency contract
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.
(2) Except where the agency contact otherwise provides, the commercial agent shall be entitled to be compensated rather than indemnified.
(3) Subject to paragraph (9) and to regulation 18 below, the commercial agent shall be entitled to an indemnity if and to the extent that—
(a) he has brought the principal new customers or has significantly increased the volume of business with existing customers and the principal continues to derive substantial benefits from the business with such customers; and
(b) the payment of this indemnity is equitable having regard to all the circumstances and, in particular, the commission lost by the commercial agent on the business transacted with such customers.
(4) The amount of the indemnity shall not exceed a figure equivalent to an indemnity for one year calculated from the commercial agent's average annual remuneration over the preceding five years and if the contract goes back less than five years the indemnity shall be calculated on the average for the period in question.
(5) The grant of an indemnity as mentioned above shall not prevent the commercial agent from seeking damages.
(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.
(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.
(8) Entitlement to the indemnity or compensation for damage as provided for under paragraphs (2) to (7) above shall also arise where the agency contract is terminated as a result of the death of the commercial agent.
(9) The commercial agent shall lose his entitlement to the indemnity or compensation for damage in the instances provided for in paragraphs (2) to (8) above if within one year following termination of his agency contract he has not notified his principal that he intends pursuing his entitlement.
Grounds for excluding payment of indemnity or compensation under regulation 17
18. 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; or
(b) the commercial agent has himself terminated the agency contract, unless such termination is justified—
(i) by circumstances attributable to the principal, or
(ii) on grounds of the age, infirmity or illness of the commercial agent in consequence of which he cannot reasonably be required to continue his activities; or
(c) the commercial agent, with the agreement of his principal, assigns his rights and duties under the agency contract to another person.
Prohibition on derogation from regulations 17 and 18
19. The parties may not derogate from regulations 17 and 18 to the detriment of the commercial agent before the agency contract expires.
Without prejudice privilege
"Written or oral communications which are made for the purpose of a genuine attempt to compromise a dispute between the parties may generally not be admitted in evidence. The policy behind the rule has been described as follows:
"It is that parties should be encouraged as far as possible to settle their disputes without resort to litigation and should not be discouraged by the knowledge that anything that is said in the course of such negotiations (and that includes, of course, as much a failure to reply to an offer as an actual reply) may be used to their prejudice in the course of the proceedings. They should … be encouraged fully and frankly to put their cards on the table … the public policy justification, in truth, essentially rests with the desirability of preventing statements or offers made in the course of negotiations for settlement being brought before the Court of trial as admissions on the question of liability."
The juridical basis of the rule is part contract and part public policy. In part it depends upon an implied agreement by the parties to the effect that what is said in settlement negotiations will not subsequently be relied upon in court. But it cannot be wholly explained on this basis. The first letter passing between the parties marked "without prejudice" will be protected by without prejudice privilege even though it was unsolicited and thus there cannot be said to be any implied agreement between the parties. And the three party situation, where without prejudice letters written between A and B may be inadmissible in proceedings between A and C, has nothing to do with contract. It has been said that it cannot be explained purely on public policy either, as there is no public policy basis in refusing to let the judge see without prejudice material on issues of costs.
Recent authorities have emphasised that the rule is concerned with excluding evidence of admissions against interest in relation to issues that will be before the trial judge. It follows that a number of exceptions to the rule have developed in circumstances where admission of the without prejudice correspondence in evidence does not infringe this principle."
"84…I wish to say a few words on the situation where (unlike in this case) words such as "without prejudice" are expressly used. If they are used in the context of an attempt to compromise a dispute, then the "without prejudice" rule, which I have already described, applies. Indeed, in an article of great learning and continuing value, 'Without Prejudice' Communications — their admissibility and effect (1974) U.B.C. Law Review 85 (on which Robert Walker LJ also drew in Unilever v Proctor & Gamble  1 WLR 2436, Mr David Vaver (now Reuters Professor of Intellectual Property Law at Oxford) concludes at page 90 that the express use of the term "without prejudice" was developed by the legal profession by about 1830 as a result of the distinction drawn by previous court decisions (to two of which I have referred) between admissions of liability and offers of compromise. Even where there is a dispute, not every offer of compromise is necessarily intended to be without prejudice, and the express use of the phrase not only puts the matter beyond doubt in a situation where there is an offer to compromise an existing dispute, but is also capable of throwing some light on the answer to the objective question whether such a situation existed. But its use is by no means conclusive. Neither a dispute nor a concession or offer to compromise can be conjured out of mere words.
85 Mr Vaver submits at page 134, and I agree with him, that the "without prejudice" rule of admissibility should be "strictly confined" to "the area of its legitimate utility … in the facilitation of disputes". In that area, concerning admissibility in court or disclosure, the court is, as Lord Griffiths stated in Rush & Tompkins, giving effect to a rule of public policy. But there are, as Mr Vaver recognises, other contexts in which the phrase "without prejudice" may be deployed by one or more parties, in a way which can have some effect on their legal relations (rather than on admissibility or disclosure). When Mr Guppy in Dickens' Bleak House (chapter IX) insisted after the event that his unsuccessful move "to file a declaration — to make an offer" of marriage to Miss Esther Summerson had been "without prejudice", he was not suggesting that the offer had been made to compromise some dispute between them, merely that he did not want to be embarrassed by later reference to it, and Miss Summerson was fully entitled therefore to qualify her response: "I will never mention it," said she, "unless you should give me future occasion to do so."
86 The use and potential significance of the phrase "without prejudice" in contexts where there is no dispute or attempt to compromise is considered in Mr Vaver's article at pages 132 and 164–169. At page 132, he identifies two relevant questions, the one what effect (if any) may have been intended, the other whether the court ought to give effect to that intention. At pages 164–169, he points out that the intention is likely to have been to deprive a communication or act of all or a particular legal consequence which it would otherwise have or to reserve or preserve a course of action which might otherwise be prejudiced. He cites as examples Oliver v. Nautilus Steam Shipping Co. Ltd.  2 KB 639 and Unsworth v. Elder Dempster Lines Ltd. [1940 1 KB 658, and, in the context of limitation, Cory v. Bretton (1830) 4 Car. & P. 462; 172 ER 783, where the provision in a letter that it was "not to be used in prejudice of my rights …" was read as meaning that an apparent acknowledgement of indebtedness in the same letter was "clearly a conditional statement," as well as In re River Steamer Company (1871) LR 6 Ch.App. 822, 831–2, where the phrase "without prejudice" meant that the debtor could not be regarded as having entered into the new contract — an acknowledgement being at the date of these last two cases only capable of restarting the limitation period if read as implying a fresh promise to meet the old debt. In any such case, it is a matter of construction and substantive law (rather than admissibility or privilege) whether effect will be given to the intention. But, as Mr Vaver points out, the phrase may also be used unthinkingly or superfluously, in which case it falls simply to be ignored: cf also Nicholson v. Southern Star Fire Insurance Co. Ltd. (1927) 28 SR (NSW) 124, Re Brisbane City Council and White (1981) 50 LGRA 225, where the phrase was "futile" in the context of an originating process, and the Unilever case, where Robert Walker LJ at page 2448A referred to "the uncontroversial point that 'without prejudice' is not a label which can be used indiscriminately so as to immunise an act from its normal legal consequences, where there is no genuine dispute or negotiation". In his Treatise on the Anglo-American System of Evidence (2nd Ed. 1923) paragraph 1061, Wigmore echoed Dickens in noting the confusion resulting from the unthinking use of the phrase as a "shibboleth", and the Law Reform Committee made the same point with judicious understatement in its sixteenth report on Privilege in Civil Proceedings (Cmnd. 3472: December 1967) paragraph 23.
87 In the light of this analysis, it is wrong to assimilate the express use or effect of the phrase "without prejudice" in a context where there is no dispute or attempt to compromise a dispute with the significance of the "without prejudice" rule which applies, or of the "privilege" which exists, where there is an attempt to compromise a dispute."
"17. My conclusions are these. There are two bases for the operation of the without prejudice rule. The first rests on public policy and that policy is to encourage people to settle their differences. However, in order for that head of public policy to be engaged there must be a dispute. The concept of dispute is given a wide scope so that an opening shot of negotiations may fall within the policy even though the other party has not rejected the offer. That is the explanation for Standrin. In order to decide whether this head of public policy is engaged, the court must determine on an objective basis whether there was in fact a dispute or issue to be resolved. If there was not then this head of public policy is not engaged. On facts of this case, in my judgment the judge was right to say there was no dispute at the time the communications took place. The other basis for the rule is contractual, that is by contract the parties may extend the usual ambit of the without prejudice rule. In Cutts v Head the dispute was over so the justification was purely in terms of contract. In Unilever the possibility of extending the scope of the rules [was] expressly envisaged and the decision in Unilever is treated as an authoritative exposition.
18. Mr Berry submitted that although the parties could by agreement extend the ambit of a without prejudice rule, they could only do so in circumstances in which there was a dispute either existing or imminent. If that is the case, then it seems to me to be hard to see what it adds to the public policy justification. Freedom of contract is a basic principle of English law. If A and B agree for valuable consideration that their communications will not be used in civil proceedings in court, I find it difficult to see why, as a matter of principle, the court should not uphold their agreement. Confidentiality clauses are the stuff of commercial life. Moreover, it is often open to two parties by agreement to immunise their acts from what would otherwise be their legal consequences. A non-reliance clause in a contract would immunise what would otherwise be a misrepresentation and an entire agreement clause would immunise what would otherwise be a collateral warranty. This must however be done by agreement. One person cannot unilaterally impose a rule on another. That, in my view, is the better explanation for cases such as Daintrey.
"The question boils down to this; was there a contract in this case? It is not a good start that the communications are headed, "Subject to contract" which is generally taken to mean that no legal consequences are to flow from the communications…Mr Berry has pointed to many usages of the phrase, "Without prejudice" apart from the settlement of extant or contemplated disputes. One such usage is that the user of a statement does not mean to give up any right that he may have. In my judgment, that is the way in which the phrase is used in this case."
"29. A good instance of the working of the rule can be seen in the "opening shot" cases, in which an initial proposal in negotiations before commencement of proceedings may be protected by the privilege. Were it not so, a party to a dispute could never safely make, by way of negotiation, an initial offer in response to a claim: see South Shropshire District Council v Amos  1 WLR 1271 , a Lands Tribunal case, which concerned "without prejudice" negotiations in a dispute that arose long before reference to the tribunal as to the amount of compensation payable in respect of a discontinuance of business use order made under section 51(1) of the Town and Country Planning Act 1971 . Parker LJ, giving the judgment of the court upheld, at pp 1276d – 1278a, the ruling of Gatehouse J that "without prejudice" negotiations could begin with an "opening shot", that is, an initial offer from one party in dispute with another setting out his proposal for settlement of his or the other's claim giving rise to the dispute, and could continue with the ensuing exchanges, all before the commencement of proceedings.
32 The question remains how proximate, if at all, must unsuccessful negotiations in a dispute leading to litigation be to the start of that litigation, to attract the "without prejudice" rule. Must there be, as Mr Oldham contended, an express or implied threat of litigation underlying the negotiations, or, failing any such threat, some proximity in time to the litigation eventually begun? In answering that question, the courts are logically driven back, as Mr Nicholls submitted, to the public policy interest behind the rule, of encouraging parties to settle their disputes without "resort" to litigation or without continuing it until the needless and bitter end. If the privilege were confined to settlement communications once litigation had been threatened or shortly before it is begun, there would be an incentive on both sides to escalate their dispute with threats of litigation and/or to move quickly to it, before they could safely start talking sensibly to each other. That would be a slippery slope to mutual hardening of positions and commencement of litigation-hardly the encouragement to settle their disputes without resort to litigation that Oliver LJ had in mind in Cutts v Head  Ch 290 , 306.
34 However, the claim to privilege cannot, in my view, turn on purely temporal considerations. The critical feature of proximity for this purpose, it seems to me, is one of the subject matter of the dispute rather than how long before the threat, or start, of litigation it was aired in negotiations between the parties. Would they have respectively lowered their guards at that time and in the circumstances if they had not thought or hoped or contemplated that, by doing so, they could avoid the need to go to court over the very same dispute? On that approach, which I would commend, the crucial consideration would be whether in the course of negotiations the parties contemplated or might reasonably have contemplated litigation if they could not agree. Confining the operation of the rule, as the judge did, to negotiations of a dispute in the course of, or after threat of litigation on it, or by reference to some time limit set close before litigation, does not, with respect, fully serve the public policy interest underlying it of discouraging recourse to litigation and encouraging genuine attempts to settle whenever made.
35 Most of the judicial observations on the rule and the public policy underlying it have been made in cases where the communications in question were made after litigation had been commenced. However, as I have mentioned, in Bradford & Bingley plc v Rashid  1 WLR 2066 they antedated the start of proceedings by about two years; and in South Shropshire District Council v Amos  1 WLR 1271 the Court of Appeal was not deterred from upholding Gatehouse J's acceptance of negotiations as privileged long before referral of the matter to the Lands Tribunal."
"Without in any way underestimating the need for proper analysis of the rule, I have no doubt that busy practitioners are acting prudently in making the general working assumption that the rule, if not "sacred" (Hoghton v. Hoghton (1852) 15 Beav. 278, 321), has a wide and compelling effect. That is particularly true where the "without prejudice" communications in question consist not of letters or other written documents but of wide-ranging unscripted discussions during a meeting which may have lasted several hours.
At a meeting of that sort the discussions between the parties' representatives may contain a mixture of admissions and half-admissions against a party's interest, more or less confident assertions of a party's case, offers, counter-offers, and statements (which might be characterised as threats or as thinking aloud) about future plans and possibilities. As Simon Brown L.J. put it in the course of argument, a threat of infringement proceedings may be deeply embedded in negotiations for a compromise solution. Partial disclosure of the minutes of such a meeting may be, as Leggatt L.J. put it in Muller v. Linsley & Mortimer  PNLR 74 , 81, a concept as implausible as the curate's egg (which was good in parts)…
…to dissect out identifiable admissions and withhold protection from the rest of without prejudice communications (except for a special reason) would not only create huge practical difficulties but would be contrary to the underlying objective of giving protection to the parties, in the words of Lord Griffiths in the Rush & Tompkins case  AC 1280, 1300: "to speak freely about all issues in the litigation both factual and legal when seeking compromise and, for the purpose of establishing a basis of compromise, admitting certain facts." Parties cannot speak freely at a without prejudice meeting if they must constantly monitor every sentence, with lawyers or patent agents sitting at their shoulders as minders."
"43 It is plain that, even a letter which is bona fide marked without prejudice can be relied on in court in some circumstances. Thus in In re Daintrey; Ex p Holt  2 QB 116 it was held that an undoubtedly without prejudice letter could be relied on in court to establish an act of bankruptcy on the part of the writer. Albeit that Vaughan Williams J's reasoning appears to me to amount to little more than assertion, the decision itself has been cited with express or implied approval in the Unilever  1 WLR 2436 and Ofulue  AC 990 cases.
44 It may be that the decision in In re Daintrey  2 QB 116 rests on the notion that the without prejudice rule can only be asserted to prevent a communication being relied on as an admission or a concession, as I think Hoffmann LJ in the Muller case  PNLR 74, 79 would support. However, as mentioned, that is a difficult and controversial area, in which it is unnecessary to tread further in this judgment. In my view, at least one reason In re Daintrey was rightly decided is that, given that the without prejudice rule is based on public policy, it has to yield on occasions to another rule or principle which may apply.
45 In In re Daintrey  2 QB 116 the without prejudice rule could not prevail over the statutory bankruptcy principles. In this case, by the same token, I incline to the view that the rule would not have prevailed over the clear statutory policy of the threats jurisdiction contained in section 21. If, by writing a genuinely without prejudice letter, one could with impunity make threats which otherwise would clearly fall within the ambit of section 21, it would render that section close to being a dead letter, except for the poorly advised."
"Moreover, we think that the rule has no application to a document which, in its nature, may prejudice the person to whom it is addressed. It may be that the words "without prejudice" are intended to mean without prejudice to the writer if the offer is rejected; but, in our opinion, the writer is not entitled to make this reservation in respect of a document which, from its character, may prejudice the person to whom it is addressed if he should reject the offer, and for this reason also we think the judge is entitled to look at the document to determine its character."
"There was a dispute, for there was an action pending between the parties. There was an offer, i.e., the offer of a composition, which was intended to apply, amongst other things, to the petitioner's claim in the action; but the document, the letter of the debtor to the petitioner, was, in our opinion, more than this: it was a clear act of bankruptcy, and it was notice to the petitioner of such act of bankruptcy, and it seems to us that a notice of an act of bankruptcy cannot be given "without prejudice" because the document in question was one which, from its character, might prejudicially affect the recipient whether or not he accepted the terms offered thereby. For the reasons already given we think that such a document does not fall within the rule which excludes offers for peace written without prejudice, and ought to have been admitted in evidence. If admitted, it conclusively proves the act of bankruptcy."
"I am unable to accept your offer because as discussed with you I need to resolve the position of Alan Ramsay Sales & Marketing Limited's contractual obligations to Typhoo Tea Limited before I can consider any offer to me personally.
ARSM's engagement with Typhoo is governed by the [Regulations] and therefore if you wish to terminate ARSM's agency, it is my understanding you will need to give 12 months' notice in writing of the effective date of termination and pay compensation for the loss of agency. If it is your intention to terminate the agency, then compromise any claims that ARSM may have for contractual notice and compensation under the Regulations, by payment of a reasonable sum, I invite you to make proposals. I can then consider your proposals…
In the meantime, [ARSM] continues to discharge its duties as Typhoo's sales agent and will refuse any further attempt to vary the existing terms of engagement"
"I cannot begin to make any proposals until I have a clear understanding of when Typhoo Tea intends to terminate the agency contract with [ARSM] and on what terms ie specific dates and plans for account and administrative handovers.
In the meantime ARSM remain Typhoo's agent and will continue to fully discharge its obligations as Typhoo's agent. I say again that I am amenable to reaching an amicable settlement of ARSM's rights pursuant to the agency. I would again invite Typhoo Tea to make reasonable proposals for settlement of the agency including the contractual notice period and compensation for the loss of the agency…
I look forward to hearing from you"
"Thank you for your email
With effect from February 11th 2013, Typhoo will give ARSM 3 months' notice to terminate services provided by ARSM to Typhoo.
This means that the final date of provision of services will be 11th May 2013"
"I have had no response to this email [of 18 March].
Payments due to ARSM will finish on 11th May 2013"
"Spoke with Alan today, without prejudice.
He is awaiting response from his lawyer so he can respond to us legally, he has said he will have a response by latest Tuesday next week.
First time in 11 years that ARSM contract has ended without the principal paying to terms
ARSM likely to survive after change/withdrawal of the Typhoo contract of the Typhoo contract
Wants to end the relationship amicably with both parties walking away happy"
"I refer to your email dated 26 March 2013, and your purported termination of the Agreement on notice, with effect on 11 May 2013.
Your email is expressed to be without prejudice. It is not and will be relied upon.
The Agreement requires that you give 12 months notice in writing. I treat your purported notice to terminate the agreement with effect on 15 May 2013, as a repudiatory breach of the Agreement, which I accept as terminating the Agreement forthwith.
ARSM is discharged from any further obligations to Typhoo under the Agreement or otherwise.
Please take this letter as notice of ARSM's claim for damages for breach of contract and take this letter as notice pursuant to Regulation 17(9) of [the Regulations] to claim compensation for termination of the ARSM's agency and other entitlements flowing from the agency.
Offer of re-engagement
ARSM recognises that, notwithstanding its release from any further obligation to Typhoo, Typhoo may require ARSM to assist with the orderly handover of the accounts that ARSM sold to on behalf of Typhoo. Further ARSM was authorised in respect of the Agreement to man Typhoo's stand and to negotiate the sale of Typhoo products on behalf of Typhoo, at the Nisa Today Trade Show on 8, 9 and 10 April 2013.
Without prejudice to the termination of the Agreement today, or to any rights flowing from that termination, AR-SM offers to provide the services that is has provided under the terms of the Agreement, up to and including 11 May 2013, to include manning the Typhoo stand on 8, 9 and 10 April 2013 and assisting with the orderly handover of the accounts for which ARSM has had responsibility during the term of the Agreement in consideration for which Typhoo will pay to AR-SM, the sum of £36,063 (representing payment for AR-SM's services in respect of the period 25 March 2013 – 10 May 2013 inclusive) by no later than 24 April 2013.
The offer of re-engagement will remain open for acceptance until 5 p.m. today."
"the intention of trying to reach a resolution of the dispute that has arisen as a result of your termination of the Agreement.
Notwithstanding my proposed re-engagement until 11 May 2013, I remain prepared to compromise ARSM's claims pursuant to [the Regulations] for compensation and other entitlements and or damages for breach of the Agreement. If Typhoo wishes to make reasonable proposals for settlement of these claims, then please do so now, so that I may consider with my lawyers.
In the absence of your reasonable proposals, within the next 7 days, my solicitors have instructions to prepare a letter of claim…
This letter will be referred to on the issue of costs at the appropriate time, should you deny liability. I look forward to hearing from you."
"Typhoo (or its management) appears unaware of the termination of ARSM's agreement with Typhoo, by email dated 28 March 2013 timed at 15.25, because it continues to hold out ARSM as its agent.
You have not responded to my offer of re-engagement dated 28 March 2013.
The Nisa Trade Show begins on Monday 8 April 2013. I understand that Typhoo expects ARSM to be in attendance on its behalf at the…show on the 8, 9 and 10 April, notwithstanding the termination of the Typhoo agreement with ARSM on 28 March 2013 and your failure to respond to my offer of re-engagement stated therein.
Without prejudice to the termination of the agency on 28 March 2013, I will unless I hear from you to the contrary assume that Typhoo wishes to re-engage ARSM from 29 March 2013 until 11 May on the terms stated in my email dated 28 March 2013 and on this basis, ARSM will expend money attending the …Show on Typhoo's behalf."
Was the correspondence subject to without prejudice privilege?
Acceptance of repudiatory breach and affirmation
(1) In order for a repudiatory breach to bring the contract to an end, the innocent party must accept the repudiation, as "an unaccepted repudiation is a thing writ in water" (per Asquith LJ in Howard v Pickford Tool  1 KB 417 at 421). Acceptance of a repudiation must be clear and unequivocal and there must be a "conscious intention to bring the contract to an end, or the doing of something which is inconsistent with its continuation" (per Lord Hope DPSC in Societe Generale v Geys  UKSC 63;  1 AC 513 at ); see Chitty on Contracts 31st edition at [24-003] and [24-013].
(2) In those circumstances, mere inactivity or acquiescence will generally not be regarded as acceptance for this purpose. However, there may be circumstances where a continuing failure to perform will be sufficiently unequivocal to constitute acceptance of a repudiation: see Chitty at [24-013] again; Vitol S.A. v Norelf  AC 800 at 811 per Lord Steyn.
(3) If the innocent party who is entitled to treat himself as discharged from the contract by the other party's breach, elects, with full knowledge, to treat the contract as continuing, he will be taken to have affirmed the contract. Affirmation can be express or implied. It will be implied if, with knowledge of the breach and of his right to choose whether to accept a repudiation or to affirm the contract, the innocent party does some unequivocal act from which it may be inferred that he intends to go on with the contract or that he will not exercise his right to treat the contract as repudiated: see Chitty at [24-003].
(4) The innocent party is not required to make his election immediately after he learns of the repudiatory breach, but will have a reasonable time in which to decide what to do. How long will depend on the facts of the case, but if he does nothing for too long, he runs the risk that he will be taken to have affirmed: see Chitty at [24-002]; per Rix LJ in Stocznia Gdanska SA v Latvian Shipping Co (No. 2)  EWCA Civ 889;  2 Lloyd's Rep 436 at .
"An act of acceptance of a repudiation requires no particular form: a communication does not have to be couched in the language of acceptance. It is sufficient that the communication or conduct clearly and unequivocally conveys to the repudiating party that that aggrieved party is treating the contract as at an end."
"It is now possible to turn directly to the first issue posed, namely whether non-performance of an obligation is ever as a matter of law capable of constituting an act of acceptance. On this aspect I found the judgment of Phillips J. entirely convincing. One cannot generalise on the point. It all depends on the particular contractual relationship and the particular circumstances of the case. But, like Phillips J., I am satisfied that a failure to perform may sometimes signify to a repudiating party an election by the aggrieved party to treat the contract as at an end. Postulate the case where an employer at the end of a day tells a contractor that he, the employer, is repudiating the contract and that the contractor need not return the next day. The contractor does not return the next day or at all. It seems to me that the contractor's failure to return may, in the absence of any other explanation, convey a decision to treat the contract as at an end. Another example may be an overseas sale providing for shipment on a named ship in a given month. The seller is obliged to obtain an export licence. The buyer repudiates the contract before loading starts. To the knowledge of the buyer the seller does not apply for an export licence with the result that the transaction cannot proceed. In such circumstances it may well be that an ordinary businessman, circumstanced as the parties were, would conclude that the seller was treating the contract as at an end."
"Taking the present case as illustrative, it is important to bear in mind that the tender of a bill of lading is the pre-condition to payment of the price. Why should an arbitrator not be able to infer that when, in the days and weeks following loading and the sailing of the vessel, the seller failed to tender a bill of lading to the buyer he clearly conveyed to a trader that he was treating the contract as at an end? In my view therefore the passage from the judgment of Kerr L.J. in the Golodetz case  2 Lloyd's Rep. 277 , 286, if it was intended to enunciate a general and absolute rule, goes too far. It will be recalled, however, that Kerr L.J. spoke of a continuing failure to perform. One can readily accept that a continuing failure to perform, i.e. a breach commencing before the repudiation and continuing thereafter, would necessarily be equivocal. In my view too much has been made of the observation of Kerr L.J. Turning to the observation of Nourse L.J.  Q.B. 108, 116-117, that a failure to perform a contractual obligation is necessarily and always equivocal I respectfully disagree. Sometimes in the practical world of businessmen an omission to act may be as pregnant with meaning as a positive declaration.
…. My Lords, I would answer the question posed by this case in the same way as Phillips J. did. In truth the arbitrator inferred an election, and communication of it, from the tenor of the rejection telex and the failure, inter alia, to tender the bill of lading. That was an issue of fact within the exclusive jurisdiction of the arbitrator."
Compensation pursuant to Regulation 17
"9. As this part of the Directive is based on French law, I think that one is entitled to look at French law for guidance, or confirmation, as to what it means. Article 12 of the French law says that the agent is entitled to "une indemnite compensatrice en reparation du prejudice subi". The French jurisprudence from which the terms of the article is derived appears to regard the agent as having had a share in the goodwill of the principal's business which he has helped to create. The relationship between principal and agent is treated as having existed for their common benefit. They have co-operated in building up the principal's business: the principal by providing a good product and the agent by his skill and effort in selling. The agent has thereby acquired a share in the goodwill, an asset which the principal retains after the termination of the agency and for which the agent is therefore entitled to compensation: see Saintier & Scholes, Commercial Agents and the Law (2005), pp 175–177.
10. This elegant theory explains why the French courts regard the agent as, in principle, entitled to compensation. It does not, however, identify exactly what he is entitled to compensation for. One possibility might have been to value the total goodwill of the principal's business and then to try to attribute some share to the agent. But this would in practice be a hopeless endeavour and the French courts have never tried to do it. Instead, they have settled upon compensating him for what he has lost by being deprived of his business. That is the "prejudice subi". The French case law makes it clear that this ordinarily involves placing a value upon the right to be an agent. That means, primarily, the right to future commissions "which proper performance of the agency contract would have procured him": see Saintier & Scholes, pp 187–188. In my opinion this is the right for which the Directive requires the agent to be compensated.
11. Having thus determined that the agent is entitled to be compensated for being deprived of the benefit of the agency relationship, the next question is how that loss should be calculated. The value of the agency relationship lies in the prospect of earning commission, the agent's expectation that "proper performance of the agency contract" will provide him with a future income stream. It is this which must be valued.
12. Like any other exercise in valuation, this requires one to say what could reasonably have been obtained, at the date of termination, for the rights which the agent had been enjoying. For this purpose it is obviously necessary to assume that the agency would have continued and the hypothetical purchaser would have been able properly to perform the agency contract. He must be assumed to have been able to take over the agency and (if I may be allowed the metaphor) stand in the shoes of the agent, even if, as a matter of contract, the agency was not assignable or there were in practice no dealings in such agencies: compare Inland Revenue Comrs v Crossman  AC 26. What has to be valued is the income stream which the agency would have generated.
13. On the other hand, as at present advised, I see no reason to make any other assumptions contrary to what was the position in the real world at the date of termination. As one is placing a present value upon future income, one must discount future earnings by an appropriate rate of interest. If the agency was by its terms or in fact unassignable, it must be assumed, as I have said, that the hypothetical purchaser would have been entitled to take it over. But there is no basis for assuming that he would then have obtained an assignable asset: compare the Crossman case. Likewise, if the market for the products in which the agent dealt was rising or declining, this would have affected what a hypothetical purchaser would have been willing to give. He would have paid fewer years' purchase for a declining agency than for one in an expanding market. If the agent would have had to incur expense or do work in earning his commission, it cannot be assumed that the hypothetical purchaser would have earned it gross or without having to do anything."
"Elmdale, on the other hand, was in terminal decline. Like many United Kingdom shoe manufacturers, H & H were unable to compete on style and price. Sales, and with them Mr Lonsdale's commission income, fell year by year. In 1997–1998 his gross commission was almost £17,000 but by 2002–2003 it had fallen to £9,621. In 2003 H & H ceased trading and sold the goodwill of the Elmdale brand to a competitor. "
"Again, I am taking a commercial view, putting myself in the position of advising a client, and in that situation if there is a possibility of termination in the foreseeable future there is a possibility that the purchaser might not be able to operate the agency sustainably, and those are contingencies that I would advise the client to build into the valuation."
"Following the year end a material contract has been cancelled which will have the effect of reducing turnover by approximately £400,000 in the following year. Whilst the contract represented a significant proportion of turnover, it was at relatively low margin so that the effect on profitability is expected to be fairly minimal."
"Q. Therefore, that must reflect what you told [the accountants] and what you expressed to them is your view of the profitability of the agency.
A. It reflects the advice they gave me at the time, yes, based on the discussions that we had; yes.
Q. What do you say was the advice they gave you?
A. That prospective future clients would potentially look at my accounts and it would be dangerous to say that it would affect the profitability of the business.
Q. This was made with the deliberate intention of giving the impression to anybody who looked at your accounts in the future that the loss of the Typhoo agency was not significant.
"A. Potentially, yes.
Q. So why did you make it if you did not believe it?
A. I did believe that Typhoo was profitable. I would suggest I made a mistake in the account."
Wage costs other than equivalent of Mr Ramsay
Equivalent of Mr Ramsay
Motor, travel and accommodation
"Furthermore, in the case of an agent who has more than one agency, the costs must be fairly attributed to each. He cannot simply say, as Mr Lonsdale did in this case, that the marginal cost of the Elmdale agency was little or nothing because he had to see the same customers and go to the same exhibitions for Wendel."
Conclusion on compensation under Regulation 17
Damages for termination with insufficient notice
Non-payment of retainer for 25 April to 11 May 2013