A step forward in agency law

Stephen Sidkin and Julie Madelin examine the difficulties in the Commercial Agents Regulations. Stephen Sidkin is a commercial law partner and Julie Madelin a commercial litigation solicitor at Fox Williams.

In 1996 it was clear from a spate of decisions that the English and Scottish courts had difficulty coming to terms with the amended Commercial Agents (Council Directive) Regulations 1993.

The cases - Page v Combined Shipping and Trading; Skingsley v KJC Carpets; King v T Tunnock - resulted not just in a degree of awkwardness, but in bad decisions. Now it seems progress is being made on both sides of the border.

In King, the sheriff found that the pursuer was a commercial agent coming within the regulations. Further, the defenders had terminated his agency agreement without giving the prescribed statutory notice.

But the idea of the pursuer receiving substantial compensation in addition to a payment in lieu of notice was something that the sheriff could not accept. He made it clear that the entitlement of an agent to compensation under regulation 17(6) was to be interpreted in the light of the other regulations.

In contrast to the decision subsequently taken in the English Court of Appeal in Page, the sheriff was confounded by how long the agency agreement would have continued had notice not been given. He was not prepared to assume that it would have continued until the pursuer's retirement and felt that compensation could only be awarded in two situations: where the agent had obtained a long-term contract with a customer to buy goods from the defenders, which had been terminated by the defenders before the expiry of the term, and; where the agent had made an investment on the principal's advice and had been unable to amortise the investment before termination of the agency agreement.

As neither situation applied, compensation was not awarded. However, the sheriff went on to point out that, if it had been, it would have been by reference to the amount payable to employees by way of the compensatory award for unfair dismissal.

The pursuer appealed against this decision and there was a cross-appeal by the defenders. which was abandoned, while the pursuer's appeal was heard earlier this year.

The sheriff principal has ordered that the sheriff make a finding on the level of compensation which would have been awarded. The sheriff principal will then invite each party to put forward written submissions before making his own decision. It is to be hoped that the sheriff principal will give a useful interpretation of regulation 17 (7)(a).

An almost simultaneous decision of the Exeter Industrial Tribunal shows, in one respect at least, that the regulations are also being properly interpreted in England. In McEvilly and ors v Crown Products, proceedings for compensation under regulation 17 (6) were issued in the industrial tribunal. The respondent had acquired a company that engaged the applicants as commercial agents. The respondent decided the acquired company should dispense with the self-employed sales force and have an employee sales team to market its products instead.

The acquired company gave notice terminating the agency agreements and the applicants issued proceedings against the respondent (rather than their former principal) in the industrial tribunal.

The respondent put forward three arguments. First, that the tribunal had no jurisdiction to hear a claim. Second, that thc tribunal did not have jurisdiction in respect of claims brought by self-employed persons. Third, that proceedings should have been brought against the former principal.

The chairman refused to take submissions from the applicants on the basis that the tribunal did not have jurisdiction to hear a claim under the regulations.

He held that a party must be self-employed and not an employee to proceed under the regulations (though self-employed extends to companies under Department of Trade and Industry guidance notes).

Indeed, regulation 2(1) defines commercial agents as just that. Further, the jurisdiction of the industrial tribunal is derived from various statutory provisions relating to employment, summarised in the Industrial Tribunal Act 1996. These provisions do not include the regulations.

The chairman decided that the only way in which a claim could conceivably be brought would be to rely on the industrial tribunal's Extension of Jurisdiction (England and Wales) Order 1994. However, this conveniently leads full circle to the fact that the agents in this situation were self-employed, and only employees can bring a claim under the Extension of Jurisdiction Order. Accordingly, the claims were dismissed.