Sub-agents were not entitled to claim compensation under reg.8 Commercial Agents (Council Directive) Regulations 1993 SI 1993/3053 since the Regulations only applied to a commercial agent who was contractually bound to the principal.
Appeal by the defendant ('TEL') from the decision of HH Judge McGonigal dated 28 January 2003 on a preliminary issue as to the status of the claimant sub-agents. TEL entered into a selling rights agreement with Swallow Corporate Sales Ltd ('SCS') under which SCS sold TEL products on commission. The agreement required SCS to promote and sell the products on terms and conditions and at prices established by TEL, and gave TEL an absolute right to decline or cancel orders. Some of the claimants worked for TY UK Ltd, a company partly owned by Mr Swallow, as self employed sales agents under contracts which could be terminated with notice. From 1 June 1997 those claimants entered into sales agency agreements with SCS. Those agreements were superseded by ones that took effect from 1 June 1998. Each of the claimants entered into one or other or both of those agreements which were on similar terms. The earlier agreement under the heading "Termination" provided that it was to "remain in effect" until SCS ceased to be the sole agent. The sales agency agreements recited that SCS was the sole authorised agent of TEL for the sale of its products. The agent was to make every reasonable effort to promote and sell the products in his territory on terms and conditions and at prices established by SCS and be paid commission. The selling rights agreement was not renewed at the end of the three year term and SCS dropped out of the picture. By these proceedings the claimants sought compensation from TEL under Commercial Agents (Council Directive) Regulations 1993 SI 1993/3053 which gave effect to Council Directive 86/653/EEC. The judge tried the following relevant preliminary issue: whether TEL was the claimants' "principal" and whether the claimants were TEL's agents within the meaning of Art.17 of the Regulations. The judge found that the claimants were agents under Art.17 and were accordingly entitled to compensation under the Regulations.
HELD: (1) It was common ground that the claimants were "self employed intermediaries" who negotiated "the sale of goods on behalf of another person". On the judge's findings of fact they did so with TEL's authority and were accordingly commercial agents of TEL as defined in reg.2(1) of the Regulations. However, there remained the further question of whether there had to be a contract between the claimants as commercial agents, and TEL as the principal, before the substantive provisions of the Regulations applied. (2) The substantial rights and obligations laid down in the Regulations were only intended for those in a contractual relationship. The Regulations assumed the necessity for a contract. It was clear from the Regulations that to obtain the benefit of the protection of the Directive, the commercial agent must have been entitled to remuneration for his services from the principal. For that purpose there must have been a direct legal, contractual or quasi contractual relationship between the principal and the commercial agent. A sub-agent in whose case such a relationship was lacking could not qualify for protection merely because he was self employed and had authority delegated to him by the principal's agent to buy or sell goods on behalf of the principal. The Directive was concerned only with legal relationships between the principal and his agent. (3) In the present case there existed no such legal relationship between the claimants and TEL, and accordingly the claimants were not entitled to compensation under the Regulations.
John Hand QC and Oliver Segal instructed by C W Harwood & Co (Leeds) for the claimants.