AGENCY

Lonsdale (t/a Lonsdale Agencies) v Howard & Hallam Ltd: [2006] EWCA Civ 63

CA: Jacob, Moore-Bick and Hallett LJJ: 8 February 2006

The claimant was a commercial agent for the defendant, a shoe manufacturer, selling its products to shoe shops from 1990 to 2003. The defendant terminated the agency, after giving notice to the claimant, when its business closed due to rising costs and falling sales. The claimant sought compensation under regulation 17(6) of the Commercial Agents (Council Directive) Regulations 1993, which implemented article 17(3) of Council Directive 86/653/EEC. His entitlement to compensation was accepted but the amount was disputed. The defendant paid him £7,500. He began proceedings claiming £19,670, the equivalent of two years’ gross commission averaged over the last five years of his agency minus the amount he had already received. The judge ruled that he was entitled to £5,000 compensation for the loss of the value of the agency, taking into account the fact that at the date of termination the defendant’s business was in serious decline.

The claimant appealed.

The Court of Appeal held:
Article 17(3) of Directive 86/653 and regulation 17(6) of the Commercial Agents (Council Directive) Regulations 1993 gave the agent the right to full compensation for any damage that he had actually suffered as a result of the termination of his relations with his principal and not a right to a payment that was fair and reasonable in all the circumstances of the case. The damage suffered by an agent for the purposes of regulation 17(6) would normally be the loss of the agency business including the goodwill he would have enjoyed had his agency not come to an end, so that the compensation should reflect the value of his business at the date of termination. Where the principal’s business continued the agent was entitled to obtain the value of the goodwill he had built up which would otherwise pass to the principal free of charge, but where the principal’s business terminated or was in serious decline at the date of termination of the agency that would inevitably affect the value of the goodwill the agent had lost. In all the circumstances, the judge directed himself correctly and properly took into account that the defendant’s business was in serious decline, and, while his award reflected a very broad brush approach, it was not clearly too low on the evidence before him.

The appeal was dismissed.

Appearances: Philip Moser (Morgan Cole, Oxford) for the claimant; Oliver Segal (Harvey Ingram LLP, Leicester) for the defendant.