Q’s and A’s on Agency Law – March 2012

Depending on whether the other necessary facets of the notification were complied with (and there are indeed several potential issues always to be aware of with that, such as - for example - ensuring that the correct principal is notified by the correct agent), and based on the decision of the High Court in the case of Hackett -v- Advanced Medical Computer Systems Limited (in 1998), it will not matter that you didn’t specify whether you were intending to pursue a claim for compensation or an indemnity. What will however matter is whether what you wrote would convey to the objectively reasonable reader that you intended pursuing a claim under Regulation 17, and whereas, and as I say, I would need to see what exactly you sent by way of your relevant notification, not distinguishing as between compensation and an indemnity does not nullify a notice under Regulation 17(9). If of course there is any doubt as to the effectiveness of what you wrote, and if the first anniversary of the termination date of your agency has not yet passed, it may very well be appropriate to promptly re-send a correctly worded and otherwise validly drafted notification, for the avoidance of any doubt. In passing, it is worth highlighting another (more recent) case decision (in 2009) in the matter of Claramoda Limited v Zoomphase Limited, where - for the purposes of establishing when the first anniversary of the termination date of the agency had passed, in circumstances where no clear notice of termination had ever actually been given - it was held by the Court that the key indicator in determining whether and when an agency had been terminated, was to establish up to until what date the agent had continued in his role on behalf of the principal, with thus the principal’s “continuing authority” to negotiate on its behalf.

Firstly, and in respect to each individual agency held by your late friend, it would need to be established as to whether there was any written agreement. In each instance that there was such an agreement, that relevant contractual document would then need to be scrutinized to see as to whether it provided for an indemnity entitlement (as opposed to a right to “compensation”), and in those instances where there was included such an indemnity entitlement, the rationale set down by the House of Lords in the Lonsdale case, and to which you have referred in your Question, would not then (and in any event) be the correct frame of reference. Secondly, it would need also to be established as to what was the status of the agent, at the point when your friend died - in other words, was he operating as a sole trader, in partnership with somebody else or operating through a limited company? - the point here is that it is ordinarily only the estates of “sole trader” agents which can pursue claims for compensation/indemnities, in the event of the death of that agent in question. Following on from this, please take note that the recent case of Barnett Fashion Agency Limited -v- Nigel Hall Menswear Limited makes clear that an effective change of status by an agent from (say, and as an example:-) a sole trader to a limited company (or for that matter, from a limited company back to a sole trader) can only be effective via a properly drafted “assignment”, which assignment effectively includes the principal in question as a signatory party to its terms. Finally, the above points all made, the death of an agent triggering a claim for compensation is not necessarily less valid and potentially any less valuable than any other claim for compensation - in other words, in the cases of compensation (as opposed to an indemnity) arising as a consequence of the death of an agent, the same Lonsdale case rationale would still be applied, and based on the assumption that, had the agency not ceased in the circumstances which it did do, that it would otherwise have continued. Very finally, it is interesting to note that where there are written agreements in place between a principal and an agent which operates as a partnership or through a limited company, there may be included in that contract a clause such as one which provides that the agency will automatically terminate in the event of the death of Mr X or Ms Y (and where Mr X or Ms Y was maybe a partner in the agency business, or a director of the limited company which is the agent), and, if there is any such provision, then a claim for compensation/indemnity would also then in principle arise (upon the death of the relevant individual).

A principal owes to its agents various obligations, and these are set out in Regulation 4 of the Commercial Agents Regulations - they include the obligations to act in “good faith” (which term is obviously very broad and non specific), and to provide the agent with “the necessary documentation relating to the goods concerned” (which presumably means - for example - providing brochures and such like). Moreover, Regulation 5 makes clear that a principal’s obligations towards its agents pursuant to Regulation 4 (and like an agent’s obligations towards his principal pursuant to Regulation 3) cannot be watered down, at all. The above said, there are basically four broad divisions in assessing principals’ conduct towards their agents, which I would describe, as follows:- Firstly, principals conducting themselves towards their agents in a way which the agents may regard as being unfair, and/or which the agent may not regard as being either considerate of its (the agent’s) interests, or even in the long term best interests of the principal - as regards this first sort of principal’s conduct, the point to note is that (subject to what I explain below) a principal is not however required to treat an agent in a way which effectively ignores the needs of its own business, and in a way therefore which threatens to fetter its (the principal’s) ability to conduct itself in how it considers are its best commercial interests - that said, and in pursuit of its obvious entitlement to pursue its goals and to maximize its own profitability, the case of Simpson -v- Grant & Bowman (2006) makes clear that a principal must act with commercial propriety towards the agent. Secondly, there is the category of principals perpetrating minor or one off breaches of its obligations, and which do not ultimately matter, or which may be unlikely to consequentially mean anything - for example, and in the absence of perhaps exceptional circumstances, a principal failing in one particular instance to send out all relevant documentary information to an agent in respect to a particular product, or to have had anyone available on a particular day to discuss a proposed deal which was at that time being negotiated with a particular customer. Thirdly, there is a category of where principals perpetrate a series of apparently one off minor breaches which, when taken together, may begin to formulate a situation whereby that principal is overall failing to properly support, and thus comply with its obligations towards, its agent. This is a scenario where (a) over a period of time, you may very well have the right to pursue consequential rights against the principal (either in respect to damages for lost earnings, or for compensation/an indemnity if the agency is (constructively” terminated in appropriate circumstances), and (b) you should investigate what rights you may thus have, without delay. Fourthly, there are instances where a principal’s conduct is straightaway very obviously potentially in fundamental breach of its obligations towards the agent (and in respect to which the affected agent, and in order to protect his consequential rights, may very well be required to appropriately react and respond, very quickly), and these are where (for example) the principal, without any contractual entitlement so to do, and without the agent’s necessary prior agreement, proposes to change some fundamental aspect of the agent’s written or unwritten contract - such as the extent of the territory area, the rate of commission, or (as another example) making an account a “house account”. As I say, these are examples of potentially fundamental breaches of obligation by the principal, and which (depending on the circumstances) may very well then entitle the agent to ultimately regard his contract as having effectively been terminated (entitling the agent to seek compensation/an indemnity). Following on from the above, and in respect to your particular issues, I would clearly need to know more from you in terms of information, before being able to categorize the principal’s conduct; one thing which you have described, however, and which may (for example) require investigation immediately, is where you say that the principal is attempting to force you and your colleagues to accept changes - in this, what would need to be established is whether you mean that the principal is pursuing its own agenda in way which is forceful (but legitimate) but falls short of anything constituting a breach of any of its obligations, or where instead, and on the other hand, the principal is attempting to force you and your colleagues to accept changes to the terms of your contract, without any basis or entitlement to do so, in which case you may very well have some very obviously enforceable rights, which potentially cannot be overridden without appropriate financial consequence from the principal’s point of view.

No, if your agency was never actually terminated on account of the alleged breach, then I would not expect that your principal’s argument would succeed, and this is based on the decision of the Court in the case of Cooper And Others -v- Pure Fishing (UK) Limited, reported in 2004, when the principal failed in its argument that it was not obligated to have to pay compensation following the expiry of fixed term contracts on the grounds that, although it did not exercise such supposed rights prior to expiry of the agency contracts (and as it might have done), it nevertheless had grounds to terminate forthwith. The effect of that decision was that (a) had such grounds to terminate before the expiry of the fixed term and forthwith been valid, and (b) had the principal duly exercised its rights prior to expiry, no compensation claim may then have been pursuable by the agents.