Q’s and A’s on Agency Law – May 2013

Your principal could only take the action which you have described if you had previously agreed that that practice was acceptable to you on an ongoing basis, either by virtue of your having signed a relevant agency contract (which contract contained such a stipulation in it), or on the basis that you had knowingly assented to this happening for some time before, and so that it had now got to the point where it was accepted by “custom and practice” that the principal could act in this way. If you have agreed to the practice which you have described in your question, there is nothing in the Regulations which will prevent the principal from doing what it is doing, as this may very well be deemed as a basis for determining the amount of remuneration, which the parties had agreed as between themselves. The above made clear, and on the other hand completely, if this is a case where you have not ever agreed to this practice (and the fact that you are asking your question suggests that this is indeed a new development), then you would have every right to object and I would strongly advise that you do so, clearly, firmly, promptly and in writing - without your having given your consensus to it, there is nothing in the Regulations which would entitle your principal to act in this way, and, if the principal nevertheless persists in its actions, I would regard this potentially as eventually tantamount to a repudiatory breach of contract (i.e.- an attempt by your principal to unilaterally vary a term and/or condition of your agency). Finally, be aware that any delay on your part in following up this type of situation appropriately and, by virtue of that, asserting your rights, may potentially irretrievably adversely affect your position, to the point where you may actually lose whatever rights you may have had.

Lawyers drafting agreements on behalf of principals will generally insert a provision such as this, in the hope that it may then work to take the agent outside the scope of what is regarded as being a “commercial agent”, as per the definition set out in the 1993 Regulations - however, given (a) that the meaning given to the word “negotiate” is generally interpreted very widely, and that (b) if what happens in practice is effectively (by obvious consent between the parties) in contradiction of what the agreement provides for in this respect, the relevant provision in the contract may in this specific instance be one which will not cause you any issues in terms of establishing as to whether or not you were a commercial agent.

First of all, and whereas the principal is entirely free to raise this objection if it wants to do so, it is probably completely unnecessary, in that all that should be required to satisfy the principal’s objective of ensuring that you personally carry out the selling function is to stipulate in a contract that that is what is required and agreed, and to also include a stipulation similarly making clear that you cannot (therefore) sub contract out any of your duties to a third party (or employ someone to work for you, who then undertakes any selling function) without the principal’s prior written approval. Secondly, and as to whether what the principal is stipulating is bad from your point of view I do not see that, from a legal perspective (and therefore setting aside whatever may be any relevant tax issues and considerations), there is any downside - if anything, operating as a sole trader (as opposed to a limited company) may potentially make the pursuit of certain claims on termination possible (and which may not otherwise have been) and/or more straightforward (depending on the circumstances), and so that I do not see that the principal is properly seeing the woods for the trees, in demanding this requirement.

In the absence of your having any agreement with your principal which includes a clause expressly providing for the sort of eventuality you are hoping might prevail in this instance, the answer is that, pursuant to Regulation 8 (and assuming that the benefits of that statutory provision had not previously been effectively excluded by agreement between you and your principal), you are only entitled to claim commissions in respect to future transactions (i.e.:- transactions which are concluded after the termination of your agency) where the transactions in question take place within a reasonable period following the termination, and where also those transactions came about primarily as a result of your actions whilst you were the agent, as opposed to the prior or subsequent efforts of any other party (including the principal itself). In addition to the above, you need to be careful (from the point of view of presenting a credible and sustainable overall picture in respect to all of your claims on termination) that there is no perceived element of “double counting” and I would say that, based on what you are describing in your question, and quite apart from the fact that I doubt that the circumstances which you have described will in any way fully satisfy both of the Regulation 8 tests, the ongoing business likely to prevail from this particular customer may very well add some (significant) value to your compensation/indemnity claim on termination, and so that you may see some financial benefits nevertheless, and in another way.

The provisions of the Regulations appertaining to notifying a former principal of an agent’s (or the Estate of an agent’s) intention to pursue a claim for compensation or an indemnity are clear and, in the absence so far of any Court case offering as a precedent any suggestion of significant latitude, those regulatory provisions are strictly applied. That rule is that the agent (or his or her Estate - as the case may be) has to have notified within 12 months of the date of termination that the agent (/Estate) intends bringing a claim for compensation/indemnity, and if any such notification is not given at all, or is not given within the statutory time limit (or is given within the relevant time limits, but not sufficiently clearly) then it does rather appear as the law currently stands that, no matter what the circumstances, no claim for compensation or an indemnity (as appropriate) can be pursued, and it may very well not matter that (and as I say) there were very good reasons or a very decent explanation as to why the relevant notice was not given at all or on time. In the light of the above, I would need to explore with you further as to what was discussed with the company’s representatives following your husband’s death, and whether or not you somehow gave any (or any sufficient) notification of your intention to pursue compensation/an indemnity - the notification does not have to been in writing (although very obviously it definitely should be, to avoid any doubt), and whereas how you notify needs to be sufficiently clear (and we have a very strict process here, for making sure that our clients give the clearest possible notifications, covering off all possibilities), there may be a form of words used (by way of a notification) which may potentially be deemed as acceptable. In this instance, however, and unless there was any valid notification given by you or by anyone else on behalf of your husband’s Estate within the relevant 12 months period, then it may very well be too late now, to bring a claim for compensation/an indemnity.

Whereas the basis for assessing the amount payable to an agent in respect to a compensation claim is different compared with the basis for assessing the quantum of an indemnity claim (i.e.:- the former is based on a concept which has been set down by the House of Lords in the landmark Lonsdale case in 2007, with the basis for assessing the latter [an indemnity] being set out instead in Regulation 17 of the 1993 Commercial Agents Regulations), if it is the case that it can be shown that the principal has been left with significant ongoing benefits by the agent as at the point of termination then that fact may be very relevant for the purposes also of assessing the value of the agency in the context of establishing the amount of a compensation entitlement, in the same way that it would very obviously be very relevant in assessing the amount of any indemnity entitlement (where an indemnity entitlement is what is provided for in a contract between the parties [principal and agent], as opposed to a compensation entitlement). In essence, therefore, and in different ways, being able to show that you have left a principal with substantial benefits going forward is likely to be advantageously relevant for you, irrespective as to whether your relevant claim on termination of your agency is to compensation or to an indemnity.