Management/Agent Contracts. What protection for commercial agents?

“Commercial agents are a down-trodden race and need and should be afforded protection against their principals.”

With these sweeping words, Lord Justice Staughton sought to protect agents in Graham Page v Combined Shipping and Trading (24 May 1996). The decision of the Court of Appeal granting the appellant agent a Mareva injunction has been interpreted as clearing confusion over much of the Commercial Agents Regulations.

But, on analysing at the judgment, is this really the case? Combined Shipping and Trading depended on funding from its South African parent company. When the parent company decided to disinvest in the UK, the agent accused it of repudiating its agency agreement, entered into for a minimum of five years. The agent also feared disinvestment would result in the principal's assets leaving the UK.

An application for a Mareva injunction initially failed but the appeal was successful. In assessing whether an injunction should be granted, the Court of Appeal concentrated on what constitutes 'proper performance' in terms of termination that deprives the agent of commission which proper performance of the contract would have procured. It would seem from the judgment that proper performance is to mean usual or standard performance.

On this basis the court said the agent had an arguable case for recovery of substantial damages. But it seems it only considered half the picture. It does not appear to have enquired whether, after termination, the principal would get substantial benefits from the agent's activities. This is despite the fact that this issue is a major part of the Commercial Agents Regulations.

In view of the circumstances, where the parent company was disinvesting from the UK, the Court of Appeal might have considered whether the principal would receive substantial future benefits in a situation in which the principal's activities were likely to be closing down. Without these benefits the opportunity for significant compensation would be limited.

The Court of Appeal may not have considered this point, instead concentrating on the argument that the principal could determine the commission the agent might earn during the term of the agency agreement. But this does not excuse the apparent failure to look at the whole of the regulations.

Another case heard almost simultaneously was Skingsley v KJC Carpets. Heard in Bristol County Court, the case concerned an agent whose agreement had been terminated by the carpet company. The agent had acted for the company for six-and-a-half years before the contract was terminated, when he was 61 The district judge accepted that regard should be made to how compensation is assessed in German courts.

This is an unusual view to take. The law in Germany concerns providing an indemnity (not compensation) to agents on termination. Despite this, the judge decided he would follow the German example and award the agent compensation equivalent to four years' average commission. The agreement in this case was for an indefinite term and the court tried to determine how long the agreement would have continued. It took account of the agent having only four years to go until reaching statutory retirement age. As the district judge remarked, the facts fitted the presumption of four years rather well. Compensation of £45,000 was awarded.

As well as adopting this view on how compensation should be calculated, there was also a failure to address the issue that the notice of termination of the agreement was not in line with the regulations. In the absence of a provision in the agreement, the regulations require notice of termination to expire at the end of a calendar month. This did not happen in this case. Failure to address this point meant that the agent did not recover his full entitlement of this head of loss.

On the basis of these decisions, a terminated agent may claim the commission he would have received had the agreement continued until the end of its term. But in both cases these are questionable. The result is that the confusion which exists about Commercial Agents Regulations continues.