B e f o r e :
HIS HONOUR JUDGE RICHARD SEYMOUR QC
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Between:
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TONY VICK
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Claimant
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- and -
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VOGLE-GAPES LIMITED
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Defendant
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Oliver Segal (instructed by Morgan Cole) for the Claimant
Jason Coppel (instructed by Howes Percival) for the Defendant
Hearing dates: 22,23,24,25 and 26 May 2006
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HTML VERSION OF JUDGMENT
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Crown Copyright ©
HIS HONOUR JUDGE RICHARD SEYMOUR Q.C.:
Introduction
- The defendant company, Vogle-Gapes Ltd., to which I shall refer in this judgment as "the Company", was incorporated in October 1999 to take over the business carried on up to that point by a firm which traded under the style "Town and Country". The Company still uses that name as a business name. The business of the Company is in reality a development of a business originally established in 1962 by Mr. Barry Page. In this judgment I shall refer to that business, both in its original form, and once it came to be carried on by a firm, as "the Business". In the first instance the Business sold handbags and other leather goods to retailers and to the public. From 1975 the Business started to design its own products. It was successful in this field of endeavour until about 1988, when it began to feel the effects of competition from, amongst others, manufacturers based in the Far East, which had lower costs of production. The Business then diversified into areas such as shoes, belts and corporate clothing. However, that sector, too, proved vulnerable to competition from overseas manufacturers. In about 1992 Mr. Barry Page decided that production of the goods which he sold should be transferred to the Far East. At the same time there was a further change in the focus of the Business towards tool belts and gloves for the hardware industry and gloves and footwear for gardeners. It is in those sectors that the Company still carries on business.
- The business established by Mr. Barry Page has, certainly in recent years, been a family business. Mr. Barry Page retired as the managing director of the Company in October 2005, but he has been succeeded by his son, Nick. Mr. Nick Page was, until he took over as managing director, the sales director. Another son of Mr. Barry Page, Mr. Jamie Page, has also been involved in the business of the Company on the information technology side.
- In 1993 four people were employed in the business which Mr. Barry Page had founded. The decision was made to employ three salesmen, bringing the total number of employees to seven. There are now a total of 25 employees, including a sales force of ten.
- The claimant, Mr. Tony Vick, was first associated with what became the Company when he was employed in September 1996 as a salesman. His status changed in 1999 when he gave up his employment and became a self-employed sales agent for the Business. Whilst employed as a salesman in the Business Mr. Vick made a good impression. He was considered to be effective and to have a good rapport with customers. In those circumstances Mr. Barry Page and Mr. Nick Page were amenable to the suggestion of Mr. Vick that the nature of the arrangement should alter and he should become self-employed. An agreement in writing dated 1 February 1999 was entered into between "Town and Country" and Mr. Vick. In this judgment I shall refer to that agreement as "the Agency Agreement" . It will be necessary to refer to some of the terms of the Agency Agreement in some detail later in this judgment. However, at this stage it is material to record that the Agency Agreement came to an end in April 2004 in circumstances about which there was a degree of dispute. The case for Mr. Vick in this action was that the Agency Agreement was repudiated by the Company, he accepted that repudiation and, as a result of that, he was entitled to be paid compensation. He also claimed other sums which were said to have fallen due, but not to have been paid, under the terms of the Agency Agreement. The case for the Company was that, far from it being the Company which repudiated the Agency Agreement, it was actually Mr. Vick. He was said to have done that by purporting to treat the Company, in a letter dated 2 April 2004 to Mr. Barry Page, perhaps as clarified in a telephone conversation with Mr. Page on 6 April 2004, as having repudiated the agreement. Alternatively, so it was contended, if Mr. Vick did not repudiate the Agency Agreement in that way, he had repudiated it by his conduct which showed, so it was asserted, that he did not intend to be bound by the terms of the Agency Agreement. That repudiation was said to have been accepted by the Company by a letter dated 15 April 2004 written by Mr. Barry Page to Mr. Vick.
The pleaded claims of Mr. Vick
- As matters turned out, the precise allegations made in the Particulars of Claim on behalf of Mr. Vick and the precise answers given to those allegations on behalf of the Company in the Amended Defence and Counterclaim proved to be of significance in the trial. It is therefore material to set out the way in which the material parts of the case of both Mr. Vick and the Company were pleaded. I deal first with the pleaded case of Mr. Vick.
- It is convenient to start the consideration of how Mr. Vick's case was pleaded by looking at his case as to how his agency came to an end. What was pleaded was:-
"19. In the circumstances, it is the Claimant's primary case ("the Primary Case") that the Defendant terminated his agency without notice, in breach of Regulation 15, on about 15 April 2004 (alternatively on the date the letter of 7 April 2004 was received by the Claimant).
20. Alternatively, if, which is denied, it is held that the Claimant's letter of 2 April 2004 did amount to a unilateral termination by the Claimant of his agency, the Claimant's secondary case ("the Secondary Case") is that he terminated the agency on about 2 April 2004, by reason of the Defendant's said breaches of the agency agreement set out at paragraphs 8 - 12 above."
- I shall come to Mr. Vick's Primary Case in more detail later, but for the present it is material to consider how the secondary case was put. The reference to alleged breaches of the agency agreement being set out in paragraphs 8 - 12 of the Particulars of Claim was an error. The paragraphs intended to be referred to were in fact 7 to 11. They were in the following terms:-
"7. In breach of the terms pleaded at paragraph 3 above and/or of Regulation 7(1) and/or 7(2), the Defendant, in a letter dated 30 January 2004, purported unilaterally and unreasonably to vary the Territory and Market with effect from 1 March 2004, primarily by introducing a large number of additional excluded customers, and thereafter has failed to pay commission to the Claimant in respect of orders to those additionally excluded customers.
8. The Claimant did not accept that the Defendant was entitled to make the said variation and, inter alia, in a letter dated 25 February 2004 (and incorrectly marked "Without Prejudice") sought compensation and reminded the Defendant of the existence/effect of Regulation 7 in respect of his continued entitlement to commission.
9. Further at around this time, the Defendant was failing in any event to pay to the Claimant commission due in respect of all material orders, pursuant to its obligations under the Contract and Regulations (and was late in paying such commissions as it did pay to the Claimant). These matters were raised with the Defendant in correspondence from the Claimant on 19 and 28 March 2004.
10. The Claimant is unable fully/properly to particularise these claims for commissions due on sales made during the agency prior to disclosure herein.
11. Further, in breach of its obligations under Regulation 4, the Defendant, in this same period (early 2004), by requiring its employed staff to visit customers in the Territory without the knowledge or consent of the Claimant, who undermined the Claimant's efforts on behalf of the Defendant to those customers, and then itself inaccurately and unfairly undermining the Claimant 's efforts in writing to the Claimant."
- In the event, the allegations pleaded in paragraph 11 of the Particulars of Claim were not pursued. The customers in respect of sales to whom it was contended that Mr. Vick was entitled to commission which was not paid proved to be two, in the end, namely Otter Nurseries in respect of two sales in early 2004 and Charlie's Stores more generally. Although those non-payments of commission were relied upon as being repudiatory breaches of the Agency Agreement and there were more general allegations of late payment of commission, the real focus of the allegations which formed part of the Secondary Case that the Company had repudiated the Agency Agreement was the contention that it had done that by varying Mr. Vick's "Territory" and "Market". Those expressions were defined in the Agency Agreement and I shall come to the definitions later in this judgment. The various pleaded references to "Regulations" were to Commercial Agents (Council Directive) Regulations 1993, SI 1993 No. 3053, (to which I shall refer in this judgment as "the Commercial Agents Regulations") and again I shall come to them later in this judgment.
- In the Amended Defence and Counterclaim the response to the allegations in paragraphs 19 and 20 of the Particulars of Claim was to be found, so far as is presently material, in paragraphs 20, 21 and 23:-
"20. Paragraph 19 is denied. The Claimant terminated the Contract within the meaning of the Regulations. The Defendant will rely upon a subsequent letter dated 26 July 2004 from the Claimant's solicitors to the Defendant in which they alleged that "[t]he correspondence that passed between our client and you post the end of January 2004 evidences that you, as Principal, acted in such a manner as to make the agency no longer workable, thereby entitling our client to terminate such agency".
21. As to paragraph 20, it is admitted that the Claimant terminated the Contract but denied that the Defendant had acted in breach of contract such as to justify such termination, or at all.
23. If which is denied, the contract was terminated by the Defendant within the meaning of reg. 15, it is denied that the Claimant is thereby entitled to damages in respect of the Defendant's failure to give due notice. The Defendant will say that the Claimant was not entitled to notice of termination by virtue of his own repudiatory breach of contract. The Defendant will say that the Claimant had acted in repudiatory breach of clauses 3.1.1, 3.1.2, 3.1.3, 3.1.4, 3.1.5, 3.1.6, 3.1.7 and 3.1.10 of the Contract, and will rely upon the following facts and matters:
(a) Despite repeated requests by the Defendant, the Claimant was failing to devote sufficient effort to what the Defendant described as "merchandising", whereby an agent would visit retail customers and re-stock stands/displays showing the Defendant's products. The Claimant was not making sufficient visits to customers in this Territory and/or was not carrying out his merchandising responsibilities during those visits he did undertake.
(b) As a result, the Claimant's performance in generating "transfer orders ex-warehouse", which principally derived from repeat orders for the purpose of filling stands/displays, was the worst of any of the Defendant's salesforce. The "transfer orders ex-warehouse" procured by the Claimant fell by almost 50% in the last year of his agency (comparing the figures for October 2003 to March 2004 with those for October 2002 to March 2003).
(c) (As the Claimant was aware), certain of the customers in the Claimant's territory had informed the Defendant that they no longer wished to deal with the Claimant.
(d) The Claimant was refusing to follow ordering procedures laid down by the Defendant in the interests of increasing efficiency and maximising customer satisfaction, whereby orders should have been transmitted to the Defendant immediately on being placed by the customer using an IPAC handheld computer. In relation to the IPAC, the Claimant told Amanda Perrey of the Defendant during the week of 17 October 2003 to "shove it up your arse". Shortly afterwards, the Claimant told Richard Pyrah, the Defendant's UK Sales Manager that he could "stuff the IPAC" and that he was not bothered because "it would cost T&C 100K to get rid of him".
(e) From May 2003 onwards, and despite being requested to do so by the Defendant, the Claimant failed to complete and pass to the Defendant weekly activity reports which would have given the Defendant a clearer account of his activities and enabled the Defendant to issue instructions appropriate to maximise sales in his territory.
(f) The Claimant unreasonably failed to co-operate with the Defendant in its attempts to resolve its concerns regarding his performance. He refused to discuss matters and instead abused the Defendant's employees using foul language (and see paragraph 9 (e) above).
(g) The Claimant failed to inform the Defendant of other agencies which he held, in breach of clause 3.3 of the Contract."
- The alleged justification of the Company for varying the "Territory" and "Market" of Mr. Vick was dealt with in paragraph 9 of the Amended Defence and Counterclaim. After a general denial of the allegation of acting in breach of the Agency Agreement in relation to the variations, the following specific matters were pleaded as being relied upon:-
"(a) In the letter dated 30 January 2004, the Defendant informed the Claimant that, pursuant to clause 7 of the Contract, and as from 1 March 2004, his territory was varied so as, in effect, to exclude the counties of Wiltshire and Dorset, and that the outlets set out on a list attached to the letter were no longer included within the Market to which he was entitled to sell.
(b) The Defendant was entitled to vary the Claimant's territory pursuant to clause 7.1 of the Contract.
(c) The Defendant was entitled to vary the Market to which the Claimant was entitled to sell pursuant to clause 7.2 of the Contract.
(d) In both cases, the Defendant acted reasonably in the light of concerns that the Claimant was failing to maximise sales opportunities within his territory (although, strictly, that was a requirement only of clause 7.1).
(e) The Defendant only took action pursuant to clause 7 of the Contract having tried and failed to engage the Claimant in constructive dialogue about how sales, in particular of what were known as "transfer orders ex-warehouse", could be improved in his territory. On the last such occasion before the 30 January 2004 letter, the Claimant told Barry Page and Richard Pyrah of the Defendant, at a meeting on 21 January 2004 at the Sarum Show, Salisbury, to "fuck off' and that "under European law it will cost you 90k to get rid of me".
A small number of the customers excluded to whom the Claimant was no longer permitted to sell after 1 March 2004 were customers which he had previously acquired for the Defendant whilst acting as its agent. He is entitled to commission on sales to those customers prior to the termination of the contract pursuant to clause 5.1 of the Contract. It is denied that the Defendant breached the Contract by failing to pay commission to the Claimant on such sales prior to its termination; no commission was due prior to the termination of the Contract on the payment schedule laid down by clause 5.3."
- The only other plea in the Amended Defence and Counterclaim which it is appropriate to set out at this stage is that in paragraph 11, in response to the allegations in paragraph 9 of the Particulars of Claim:-
"As to paragraph 9, it is admitted that the payments of commission by the Defendant were, on occasion, late. This was a matter which the Defendant had discussed with the Claimant. The Defendant had explained that the delays were caused by difficulties in obtaining information from wholesalers as to the orders which had been placed, and offered to revert to a system previously used by the parties which would have eliminated those delays (see, in particular, a letter dated 22 March 2004 to the Claimant from Richard Pyrah of the Defendant)."
The factual background
- Mr. Vick was in fact the only sales agent ever engaged by the Company. All of its other sales staff at any point have always been employees.
- When Mr. Vick worked for the Company as a salesman, that is to say, before the making of the Agency Agreement, the area which he covered was the South West of England and South Wales. After the making of the Agency Agreement he covered the same area and also the Channel Islands. For the purposes of the activities of Mr. Vick the South West of England initially comprised the counties of Cornwall, Devon, Somerset, Avon, Wiltshire and Dorset, while South Wales comprised the counties of Dyfed, Powys, West Glamorgan, Mid Glamorgan, South Glamorgan and Gwent.
- The products distributed by the business carried on by the firm and then by the Company at the times material to this action reached the ultimate retail customer in one of two ways. Some stocks of products were held by wholesalers and orders could be placed by customers through wholesalers. However, the other route by which products could be supplied was in response to direct orders placed with the firm or the Company.
- Many customers were dealt with at local level by salespersons soliciting orders. However, some large customers were dealt with at a central level. These included large supermarket chains such as Tesco Stores Ltd. There were also customers who were large on a regional, but not a national level. These customers were mostly dealt with by the salesperson with responsibility for the relevant region.
- The role which Mr. Vick took on both as a salesman for the Business and, later, as a sales agent, involved him not only in seeking sales of the products of the Business, but also in an activity called "merchandising". "Merchandising" in the sense in which that term was used at the trial of this action comprises keeping neat and tidy display stands provided by the Business to its customers and, more particularly, keeping them filled with a stock of the relevant products. How this would happen, as I understand it, is that on a visit to a customer of the Business the salesman would check the relevant display stands and notify the customer what stock needed to be replaced. The customer would then be persuaded to order stock to replace what was missing from the display stands. The stock so ordered would be supplied from stock held by a wholesaler used by the Business. Within the Business orders for stock placed in this way were called "Transfer orders ex warehouse" abbreviated on occasions to "TOEW". The evidence was that Mr. Barry Page and Mr. Nick Page considered that TOEWs were an important aspect of the success of the business and a good way of achieving relatively easy sales.
The Agency Agreement
- In the Agency Agreement the Business was called "the Principal" and Mr. Vick was called "the Agent". The first clause of the Agency Agreement contained a number of definitions. Some of those definitions are important to the issues in this action, and so it is material to set them out:-
"1.1 In this Agency Agreement the following expressions have the following meanings:
1.1.1 "Commission" means the amount set out in Appendix 1;
1.1.2 "Market" means the retail outlets in the Territory excluding those outlets set out in Appendix 2;
1.1.3 "Products" means the products of the Principal set out in Appendix 3;
1.1.4 "Quota" means such numbers of Products for such period as shall from time to time be notified by the Principal to the Agent;
1.1.5 "Territory" means [customers within the Market included within] the geographical area outlined on the map attached to this Agreement."
- Appendix 1 to the Agency Agreement was in these terms:-
"Commission shall be paid at 8% of the Net Sales Value on sales of Products within the Territory.
Net Sales Value means the price (before deduction of any discount for prompt settlement) actually charged to the customer (less any value added or other sales tax and less any packaging, carriage, and point of sale material included in the invoice."
- The only retail outlets not included within the Territory by Appendix 2 to the Agency Agreement were those of Great Mills. The products listed in Appendix 3 were gloves, garden tool holders, footwear, hardware tool holders and knee pads. I have already explained the geographical extent of the Territory.
- In the context of the issues in this action the following were the material provisions of the Agency Agreement, in addition to the definitions in clause 1:-
"2.1 The Principal appoints the Agent as its sole agent for the sale and marketing of the Products for the Territory.
2.2 The appointment of the Agent shall [be for a period of [6 months] and thereafter shall] continue on an annual agreement until either party serves on the other [three months written notice] to terminate this Agreement such notice period to expire at the end of a calendar month....
3.1 The Agent shall:
3.1.1 carry out lawful duties that he has undertaken to the Principal to carry out;
3.1.2 act in the interests of the Principal;
...
3.1.4 act towards the Principal in good faith;
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3.1.7 carry out any reasonable instructions given to him by the Principal;
...
3.1.12 ensure that sales of the Products within the Territory reach the Quota.
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3.3 If the Agent wishes to become an agent or distributor or employed representative for any goods which do not compete with the Products the Agent shall give prior notification to the Principal:
3.3.1 of the type of goods;
3.3.2 of the area being represented;
3.3.3 of any changes to that agency or distributorship or employment which have or could have an effect on the Agent's performance of this Agreement or of the occurrence of any event allowing that agency distributorship or employment to be terminated
...
4.1 The Principal shall:
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4.1.2 act towards the Agent dutifully and in good faith;
5.1 The Agent will be paid Commission on the following sales of the Products by the Principal
5.1.1 if the sale of the Products was concluded as a result of the Agent's action;
5.1.2 if the sale by the Principal is to a customer whom the Agent had previously acquired as a customer for the Products;
5.1.3 if the sale is to a customer within the Territory.
5.2 Commission will be paid to the Agent on sales of Products concluded after termination of the Agency if
5.2.1 the sale was mainly attributable to the Agent's efforts prior to termination of the Agency and the transaction was entered into within one month of the Agency terminating (which the Agent and the Principal consider to be a reasonable period); or
5.2.2 if the order for the sale reached the Principal or the Agent prior to termination of the Agency and the transaction is within clauses 5.1.1, 5.1.2 or 5.1.3 above.
5.3 The Agent will be paid Commission on sales made within clauses 5.1 or 5.2 [to the extent to which payment has been received by the Principal at the end of the month following the month of payment] [invoiced to customers at the end of the month following the month of invoice]....
7.1 If in the reasonable discretion of the Principal, the Agent is failing to maximise sales opportunities within the Territory, the Principal may by one month's written notice to the Agent amend the Territory.
7.2 The Principal may by one month's written notice to the Agent amend the Market by adding or deleting specific customers or categories of customers."
The Commercial Agents Regulations
- It was common ground at the trial before me that it was important to the determination of the issues in the action to have regard not only to the terms of the Agency Agreement in the events which happened, but also to consider the impact upon the facts of the case of the Commercial Agents Regulations. For present purposes the material provisions of the Commercial Agents Regulations are these:-
"7(1) A commercial agent shall be entitled to commission on commercial transactions concluded during the period covered by the agency contract:
(a) where the transaction had been concluded as a result of his action; or
(b) where the transaction is concluded with a third party whom he has previously acquired as a customer for transactions of the same kind.
7(2) A commercial agent shall also be entitled to commission on transactions concluded during the period covered by the agency contract where he has an exclusive right to a specific geographical area or to a specific group of customers and where the transaction has been entered into with a customer belonging to that area or group.
8. Subject to regulation 9 below, a commercial agent shall be entitled to commission on commercial transactions concluded after the agency contract has terminated if
(a) the transaction is mainly attributable to his efforts during the period covered by the agency contract and if the transaction was entered into within a reasonable period after that contract terminated; or
(b) in accordance with the conditions mentioned in regulation 7 above, the order of the third party reached the principal or the commercial agent before the agency contract terminated.
...
16. These Regulations shall not affect the application of any enactment or rule of law which provides for the immediate termination of the agency contract -
(a) because of the failure of one party to carry out all or part of his obligations under that contract; or
(b) where exceptional circumstances arise.
17(1) This regulation has effect for the purpose of ensuring that the commercial agent is, after termination of the agency contract, indemnified in accordance with paragraphs (3) to (5) below or compensated for damage in accordance with paragraphs (6) and (7) below.
17(2) Except where the agency contract otherwise provides, the commercial agent shall be entitled to be compensated rather than indemnified.
...
17(6) Subject to paragraph (9) and to regulation 18 below, the commercial agent shall be entitled to compensation for the damage he suffers as a result of the termination of his relations with his principal.
17(7) For the purpose of these regulations such damage shall be deemed to occur particularly when the termination takes place in either or both of the following circumstances, namely circumstances which -
(a) deprive the commercial agent of the commission which proper performance of the agency contract would have procured for him whilst providing his principal with substantial benefits linked to the activities of the commercial agent; or
(b) have not enabled the commercial agent to amortize the costs and expenses that he had incurred in the performance of the agency contract on the advice of his principal.
...
18 The indemnity or compensation referred to in regulation 17 above shall not be payable to the commercial agent where -
(a) the principal has terminated the agency contract because of default attributable to the commercial agent which would justify immediate termination of the agency contract pursuant to regulation 16 above; or
(b) the commercial agent has himself terminated the agency contract, unless such termination is justified -
(i) by circumstances attributable to the principal, ...
19 The parties may not derogate from regulations 17 and 18 to the detriment of the commercial agent before the agency contract expires."
- Mr. Vick's case was that the Company determined the Agency Agreement without notice in circumstances in which it was not entitled to do so and was thus entitled to the compensation for which Regulation 17 (6) and (7) of the Commercial Agents Regulations provide. The case for the Company was that there was no such entitlement because either Mr. Vick himself terminated the Agency Agreement or because it was entitled to treat him as having repudiated the agreement and to bring the agreement to an end by acceptance of the repudiation. In the first event, so it was asserted, the right to compensation was excluded by Regulation 18 (b), none of the exceptions to that provision being applicable, so it was said. In the second event, the right to compensation was excluded by Regulations 16 and 18(a). It was countered on behalf of Mr. Vick that, if it was indeed he who had terminated the Agency Agreement, he had been entitled to do so by reason of the repudiatory breaches of it by the Company, and thus the exception in Regulation 18(b)(i) applied to preserve his right to compensation.
- Before grappling with these alternative analyses it is appropriate to indicate my findings as to the facts of the case.
The material facts
- Mr. Vick gave evidence on his own behalf at the trial. Broadly speaking his account of matters during the period of the Agency Agreement was that he acted properly in the execution of his duties to the Company under the Agency Agreement, which was treated as continuing in force between him and the Company after the incorporation of the Company in October 1999 and its takeover of the Business. He was shown a number of documents which appeared to record criticisms or concerns in particular about his merchandising of display stands of customers of the Company, but he did not accept that any of the concerns or criticisms expressed were justified. It was also suggested to him that his sales performance certainly by 2003 left something to be desired, but he did not accept that either. He did not agree that in 2003 and 2004 his attitude to the Company was to the effect that he would carry out his obligations under the Agency Agreement in the manner he saw fit and that the Company would just have to put up with it. All of these matters were said, on behalf of the Company to be part of the background to the termination of the relationship between the parties and to justify, if it were necessary for the Company to justify, a termination by it of the Agency Agreement.
- In addition to his own evidence, there was called on behalf of Mr. Vick as a witness Mr. Andrew Fox, who until June 2002 had been the Sales Manager of the Company. Further, there was put before me as uncontested a witness statement from Mr. Spencer Goodall, who was the immediate predecessor of Mr. Fox. Save in relation to one matter, concerning the increase in the amount of the commission paid to Mr. Vick from 8% to 9%, I did not find the evidence of Mr. Fox of any assistance in relation to the matters which I have to decide. The evidence of Mr. Goodall did not appear to bear in any helpful way upon any issue in dispute before me.
- On behalf of the Company Mr. Barry Page, Mr. Nick Page, Mr. Richard Pyrah, Mrs. Amanda Finney and Mr. Paul Bissell were called to give evidence. Mr. Pyrah was appointed Sales Manager of the Company after the departure of Mr. Fox. Mrs. Finney was, and is, employed by the Company on what was called Sales Order Processing. Her evidence was really directed to one, rather minor, issue to which I shall come. Mr. Paul Bissell was the managing director of a customer of the Company who was called to give evidence as to his perception of the quality of the service provided by Mr. Vick to the Company.
- Before indicating the evidence which I accept, it is appropriate to make reference to the contemporaneous documentation which was put before me and the evidence of the various witnesses in relation to such documentation.
- Under the Agency Agreement, on its face, Mr. Vick was entitled to be paid commission in respect of sales to customers within the area for which he was responsible, whether or not he was involved in the particular sale. However, it was the case of the Company that a special arrangement varying the written terms of the Agency Agreement had been made in respect of a customer called Charlie's Stores ("Charlie's"). The evidence of Mr. Nick Page was that Charlie's, which seems to have been based in Newtown, Powys, was on the boundaries between the "Territory" of Mr. Vick and the areas covered by the sales person who dealt with the Midlands, Kate Parker, and the sales person who covered North Wales and the North West of England, Mike Powell. He said that he agreed with Mr. Vick that Charlie's would be covered by Mike Powell and that Mr. Vick would not deal with it. Subsequently, according to Mr. Nick Page, he understood that Mr. Fox had agreed with Mr. Vick that Kate Parker would handle Charlie's. It followed that Mr. Vick was not entitled to commission on sales to Charlie's and no commission was ever paid. Mr. Vick's evidence was that he knew that someone else was dealing with the business of Charlie's and that he himself was not. He obviously knew that he was not being paid commission on sales made by the Company to Charlie's. He never in terms complained about that before the commencement of this action. Indeed, he never made any express claim in respect of commission on sales of products to Charlie's until he made his witness statement dated 2 May 2006. He told me that he was not sure whether he was entitled to commission in respect of sales of products to Charlie's until he read the Agency Agreement, inferentially in the context of formulating his claims in this action. Because no claim in respect of commission on sales to Charlie's was ever formally pleaded, there was never any formal response to it on behalf of the Company. The issues in respect of Charlie's only became crystallised during the course of the evidence. The total alleged value of sales to Charlie's in relation to which Mr. Vick claimed commission was £ 3,487.34.
- In relation to sales to customers within his "Territory" which were completed by a delivery from a wholesaler Mr. Vick obviously knew of the sale if he had himself been directly involved in obtaining it, for example a TOEW. However, there were sales which were effected by a retailer placing an order directly with a wholesaler, which the wholesaler met from a stock of the products of the Company which the wholesaler held. In those circumstances neither Mr. Vick nor the Company would be aware of the sale unless the relevant wholesaler informed the Company about it. I think that it was common ground that from October 2002 wholesalers used by the Company did provide information to the Company about such sales and appropriate commission was allowed. However, before that, according to Mr. Nick Page, the information just was not available. His evidence was that he discussed the situation with Mr. Vick sometime in about the summer of 1999 and it was agreed between them that in order to compensate Mr. Vick for loss of commission to which he was entitled on sales made by wholesalers the details of which were unknown, the Company would increase the rate of commission paid to him from the 8% for which the Agency Agreement provided to 9%, an increase in the rate of commission of 1/8, or 12.5%. Mr. Nick Page told me that it was understood that this arrangement would only continue until such time as appropriate information could be obtained from wholesalers to enable an accurate calculation of the commission due to be made. He said that he confirmed the arrangement made in a letter dated 6 August 1999 to Mr. Vick. In that letter he wrote:-
"Just a short note to confirm our telephone conversation as follows:
With effect from 1 August 1999 we will pay commission on all direct deliveries, within your territory, invoiced by Gibbs Palmer (Midlands).
In addition to compensate for loose stock orders, which appear to be going towards Gibbs Palmer (Midlands) rather than your existing wholesalers, your commission will be raised by 1%.
As discussed could you send copies of any Gibbs Palmer transfer orders to the office for our records and to enable us to monitor this.
I trust the above goes some way to assisting with shifts in business and I look forward to continued area development."
- Mr. Vick was asked about this arrangement and this letter. He said in cross-examination that he did not recall the letter. He said that he was almost sure that his commission did not increase until after 1 March 2000 in the circumstances with which I deal in the next paragraph of this judgment.
- Mr. Fox told me that he had a high opinion of Mr. Vick and his work on behalf of the Company. That, he told me, was what prompted him in effect to reward Mr. Vick for his efforts as from 1 March 2000 by increasing the rate of commission paid to him from the 8% for which the Agency Agreement provided, to 9%. He notified Mr. Vick of that decision in a letter dated 16 February 2000. The letter also dealt with another matter. That was that a company called Wyevale had a number of garden centres spread across the country which were dealt with, so far as ordering from the Company was concerned, at a national level. Nonetheless merchandising was still required to be done in the garden centres operated by Wyevale, and to reflect that it was agreed to pay a commission on the sales to Wyevale in Mr. Vick's area, but at a lesser rate than applied to customers dealt with directly by Mr. Vick. The text of the letter dated 16 February 2000 was this:-
"Regarding your commission I am pleased that commencing 1st March 2000, you will receive:
9% commission on all direct and wholesale accounts within your area.
9% commission on all direct deliveries into your area.
9% commission for Tillington/GCA direct deliveries into your area.
5% commission for Wyevale direct deliveries into your area.
I have also arranged for a presenter, stapler, repair kit etc. to be forwarded to Wendy [Mrs. Vick].
Many thanks for journey plans which have been received into the office, if you could continue to forward them two weeks in advance it would be appreciated.
As a final note, congratulations on the excellent over achievement of last year's sales and this year's budget for January. Can't wait to see February's figures!!"
- Mr. Nick Page was asked in his turn about this letter. He said that the 9% commission arrangements were consistent with those already in place following his discussion with Mr. Vick the previous summer save for the new arrangements in respect of Wyevale.
- Mr. Vick did not act as an agent only for the Company. In 1999 he acted for a company called Lincoln, which dealt in wrought iron products, a company called Plum Products, which dealt in wood products, and a company called Ward Plysu, which dealt in plastics. The agency for Ward Plysu came to an end in 2001, and those for Lincoln and Plum Products in 2002. In 2000 Mr. Vick obtained an agency for a company called AFK Marketing, which also dealt in wood products. That agency, as I understand it, is continuing. In 2001 Mr. Vick obtained an agency for a manufacturer of pumps, Gemini, but that only lasted until 2002. Between 2002 and 2004 he had an agency for a paint company, AKZO Nobel. In September 2002 Mr. Vick obtained an agency for a plastics company, Elho. That agency is continuing. Mr. Vick's other continuing agencies are for Burton McCall, a hardware company, and for DLF Trifolium, a garden seed company. The first of these agencies commenced in November 2002 and that for DLF Trifolium started in January 2004. It appears that Mr. Vick did not in fact comply with the letter of clause 3.3 of the Agency Agreement in relation to any of his other agencies. However, Mr. Pyrah told me in his evidence that he was aware of Mr. Vick's agencies for Burton McCall, AKZO Nobel and Elho and was not concerned about them.
- It was common ground that the rate at which commission was paid by the Company to Mr. Vick after October 2002 was 9%.
- Mr. Fox acknowledged that Mr. Vick was not very good at merchandising. That said, Mr. Fox thought that his deficiencies in that area were compensated for by his talents as a salesman. Nonetheless, the failures of Mr. Vick in the sphere of merchandising were the subject from time to time, at least from May 2001, of comment at management meetings held by the senior executives of the Company. These included, whilst he was employed by the Company, Mr. Fox, as well as Mr. Barry Page, Mr. Nick Page, and others. In March 2002 it was suggested at a management meeting that Mr. Fox should meet Mr. Vick to discuss with him the need to carry out merchandising. Mr. Fox did visit Mr. Vick. The upshot of the visit as reported at a management meeting in May 2002 was that Mr. Vick asserted that he had merchandising under control and would employ his son-in-law just to merchandise for the Company. In the event that did not happen. When he was asked about that in cross-examination Mr. Vick said that he could not afford to employ his son-in-law to work for him, having regard to how much that would have cost and how much money he was making from acting as a sales agent for the Company.
- On 8 November 2002 Mr. Nick Page wrote a memorandum to Mr. Vick following a meeting with him at a trade show in Cheltenham. The expressed purpose of the memorandum was to confirm the discussion between them at their meeting. From the heading in the memorandum what was discussed was merchandising. The material part of the memorandum was in these terms:-
"I know that we have spoken on a number of occasions and that Andy Fox has covered this with you on [sic] prior to Richard assuming the role of Sales Manager. I am pleased that you will now agree to rectify this with the employment of a family member to assist you.
I do not wish to continue to go over old ground, but merchandising can greatly enhance your potential earnings whilst ensuring that we provide our customers with higher levels of service that they are increasingly coming to expect.
Which ever way you wish to look at it your level of ex-warehouse transfer orders are the lowest consistently with in the company. This is of concern and does highlight the potential business lost not only for you in the form of lost commission but to us in the form of lost sales.
I would also ask for your support with Richard, as he stated at our meeting he is determined to do a good job for T&C and immediate responsibility for the sales team rests with him however, his performance is reflected at the end of the day by the ability of the sales team and I would be grateful for your full support for Richard in particular with regards to weekly reports and office requests.
Sorry I could not stay to help you break the show down!! but trust we can move forward more positively."
- Mr. Vick was asked about that memorandum in cross-examination. He accepted that he may have been lax on one or two accounts, but said that he did the majority of the merchandising on the more important of the customers of the Company. The Company designated customers according to a scale starting at A and going down to D. The further down the alphabet one got the less important the customer was and so the less effort it was appropriate to put into merchandising. Mr. Vick said that he did merchandise the A and B customers. He also said that he preferred not to use the mechanism of TOEWs because he felt that whether he was paid commission on such orders depended upon the accuracy of the records of the supplying wholesaler and wholesalers in practice were dilatory in forwarding relevant records to the Company. Consequently he preferred to place direct orders with the Company on behalf of customers rather than go through wholesalers. I think that the problem with wholesalers not forwarding relevant records, until October 2002, was accepted on behalf of the Company.
- In about February 2003 the Company decided to introduce a new tool for salespeople. It was a hand-held computer called an iPAQ. The idea was that details of all the products of the Company and of all customers in each sales area would be loaded onto the iPAQ. Each time a salesperson visited a customer and obtained an order that order would be entered into the iPAQ. A copy of the order could be printed out at once for the customer and the order itself could be forwarded through a mobile telephone link directly to the Company's computer. It was thought that this tool would save salespeople time and increase efficiency. It was also intended that a salesperson would enter into the iPAQ details of visits paid to customers on occasions upon which no order was obtained, just as a record of the visit having been made.
- Mr. Vick is a gentleman of mature years. It seems to have been anticipated within the Company that he might not take readily to using the iPAQ. Consequently a decision was made that it should be introduced with the employed sales force of the Company first. Only once the system had been demonstrated to be working satisfactorily would Mr. Vick be asked to adopt it and be issued with an iPAQ.
- Meanwhile the issue of merchandising activity, or the lack of it, on the part of Mr. Vick continued to exercise the Company. At the same time, according to the evidence of Mr. Nick Page, the perception within the Company was that from about April or May 2003 the volume of sales generated by Mr. Vick was declining. It is convenient to revisit this latter question later in this judgment. It was accepted by both sides at the trial that the volume of sales in the area for which Mr. Vick was responsible was accurately recorded, at least from October 2002, in the monthly commission statements produced by the Company. It will be necessary later in this judgment to analyse and to compare the figures shown in those statements from May 2003 onwards.
- In June 2003 Mr. Vick attended a sales meeting. Afterwards he had a conversation with Mr. Barry Page. Mr. Page confirmed the substance of the conversation in a letter to Mr. Vick of 9 June 2003. The letter was to this effect:-
"To confirm our conversation after the sales meeting.
We are concerned about the general decline and the lack of merchandising in your area.
You have been telling us for sometime that you intend to address the situation, firstly with your wife and of late your son-in-law, but nothing to date has materialised.
You need to rectify the situation very quickly as we feel it will have a big impact on our business in the South West. We have already seen the success that our competitors are having and to say that they have only moved forward in your area is very disturbing and would not be a lie.
Your transfer order ex-warehouse is the worst in the whole of the company and indicates that you are not fulfilling your obligations to T&C. I must remind you that, when we agreed that you could be an agent, you assured us that you would continue to give the same level of service that you gave when you were employed by us, which has not been the case.
I know that Nick and Richard have spoken to you in the past about the above and would have hoped by now that you would have rectified the situation in order to protect our business and your agency.
I would like you to come back to me a.s.a.p. with suggestions/proposals on how you intend to address the problems."
- Mr. Vick did not respond to that letter in writing. He accepted in cross-examination that he did not speak to Mr. Barry Page about the content of the letter over the ensuing two months, or, as I understood it, at all. Mr. Vick's view, expressed to me during his cross-examination, was that, whatever the Company thought, he thought that he was doing a reasonable job.
- It appears that there was a training day, or possibly two, on the iPAQ for sales people organised in August 2003. Mr. Vick was invited to attend, but did not do so. The Company's perception by this time was that Mr. Vick was difficult to communicate with and unresponsive.
- Mr. Vick was issued with an iPAQ in the summer of 2003. He did not find it satisfactory. He was not able to use it to perform the functions for which it was intended, at least on a regular and reliable basis. The problem, he told me, was that various of the products of the Company were not in fact logged in the iPAQ. Many of his orders he continued to send through by telephone or by facsimile transmission. According to the evidence of Mrs. Finney, when Mr. Vick sent through an order manually it fell to her to log it on the Company's computer. In other words, a consequence for her as an individual of Mr. Vick not using the iPAQ to transmit an order was that she had more work to do. Her perception, she told me, was that Mr. Vick did not use the iPAQ properly, particularly because he did not understand that it was necessary to use the formal corporate title of each customer as logged in the iPAQ when placing an order. Mr. Vick told me in his evidence that he only ever received about one hour's training in how to use the iPAQ anyway. It is unnecessary for the purposes of this judgment to reach any conclusion as to the source of the difficulties which Mr. Vick had in using the iPAQ. Mr. Vick formed the view that the machine with which he had been issued initially was defective. So it was that in about October 2003 he was issued with a replacement iPAQ. That one did not seem to him to be any better.
- Mrs. Finney gave evidence about a conversation which she had with Mr. Vick about his use or non-use of the iPAQ. She was indefinite as to when the conversation in question took place, but she was firm in her evidence that there had been such a conversation. At one point in her cross-examination Mrs. Finney suggested that the relevant conversation had been in February/March 2003, although I think that it was clear from her evidence that she fixed that date by reference to the date of issue of iPAQs. Mr. Vick denied the relevant part of the conversation. The conversation in question was referred to in a memorandum dated 17 October 2003 written by Mr. Nick Page to Mr. Richard Pyrah following a visit which Mr. Page had made to Mr. Vick's area over the previous couple of days. What Mr. Page wrote was:-
"I know that you were aware that I intended to spend a couple of days on Tony's area to see at first hand the condition of some of his accounts, and attached is a list of accounts visited and comments. I picked accounts in South Wales as I assumed that being close to his home they would be the better ones.
I have to say that the general condition was very disappointing, plan-o-grams over 5 years old, fixtures shabby (a lot of old grey stands!!!), a lot of damaged packaging collecting dust and in most cases our display stands were being used for other manufacturers products.
I also bumped into Andy Rowe who has recently met with South West Buying Group, whilst they did not have a problem with Tony they felt he was unable to look after them from a merchandising point of view they feel he was promotions orientated and did not want to get his hands dirty with merchandising. It looks as though we will loose [sic] this business totally!!
Please could you seriously have a chat with Tony at the Mills Show it appears that he fails to see the issues and concerns that we continue to highlight to him that we must address!
Also on a separate note we are having major problems with the ipaq (Tony told Amanda early in the week that she can, I quote, "shove it up her a..."). It would be courteous for Tony to apologise to Amanda urgently.
I am afraid that Tony seems to blame the office week in week out, Amanda and Jamie despite spending time running through the system on several occasions he still is being very bloody minded! Please could you talk him through this again."
- It was suggested by Mr. Oliver Segal, who appeared on behalf of Mr. Vick, that in referring to the conversation with Mrs. Finney about where the iPAQ might be stored Mr. Nick Page was resurrecting an incident already six months old, if it had ever happened at all, and was thus just trying to make trouble for Mr. Vick. That Mr. Page denied.
- Mr. Pyrah did meet Mr. Vick at the Mills Show, as requested by Mr. Nick Page. Following it Mr. Pyrah wrote a letter to Mr. Vick to confirm what had been discussed. The letter was in these terms:-
"Following our discussions at the Mill Trade Show on Tuesday 21st October 2003, I felt the need to confirm in writing our discussions as follows:
Mobile Sales Manager - iPaq
I am sure that you are aware that there has been considerable investment made by the company introducing this new technology and that Nick wanted to make sure this device was fully operational before you took it on. This is now working extremely well provided that it is fully embraced by the user. The issues that you continually refer to are not a fault with the system but your reluctance to use the system as it was intended. The customer data held on the iPAQ is controlled by you (provided you check your database regularly). There is now the facility to enter new customer details and amend details as necessary.
The other area that I have concern over is reporting. I am no longer able to ascertain call rates/history etc. as you do not complete any reports, therefore the iPaq must be used to record all visits done for Town & Country. I have to complete monthly reports and this is causing me some embarrassment and I would be grateful if you could address this urgently.
The last point, is that on average the iPaq saves approx. 1.5 hours of paperwork each day and this must be of benefit to you. We shortly, will no longer be able to accept manual orders as these have to be re-entered onto our system at head office causing further work for an already busy team - your appreciation and understanding would be gratefully appreciated.
Merchandising
I know that both Barry and Nick have spoken to you regarding this matter on several occasions. My understanding, following your change from fully employed to agent, is that, as far as Town & Country are concerned, you would continue to provide the same level of customer support and contact.
I have recently become more concerned, especially after my meeting at Hurrans and the comments they made with reference to the two stores on you [sic] area.
You mentioned that at the Spread Cheltenham show last year that you would address the merchandising issue and I am afraid that I do not yet see any evidence of this.
Please could you confirm how you intend to address this. I must report to Barry and Nick shortly.
CDS/SW Buying Group
I am also concerned with the loss of business within the major key accounts, the first being CDS and the second being the South West Buying Group.
Briers are being aggressive throughout the country but have so far only been successful in gaining the above two accounts from us.
Barry & Nick are once again concerned about this matter and I need to address the reasons we have been unsuccessful in maintaining this business. Please detail the reasons to me before my next management meeting on Tuesday nth November.
Finally, I am not good at putting pen to paper and I am as you are aware determined to do a good job for Town & Country and feel that you must support myself and the company in achieving our goals and that this letter is meant to be constructive and pave the way to develop your area further."
- Mr. Vick did not reply to the letter in writing. He told me that he did discuss its contents with Mr. Pyrah. He also said that in the discussion at the trade show which preceded the writing of the letter he had told Mr. Pyrah that he considered his merchandising to be very good.
- Mr. Pyrah's account of the conversation which he had had with Mr. Vick following the writing of his letter of 27 October 2003 was that Mr. Vick had told him he could stuff the iPAQ and that he, Mr. Vick, was not bothered because it would cost the Company £ 100,000 to get rid of him. Mr. Vick's account of the conversation was that he had told Mr. Pyrah that the iPAQ was not working and he was fed up with it. He said that he told Mr. Pyrah that he, Mr. Vick, was doing a good job merchandising and that if they, the Company, were not happy, they would have to get rid of him and it would cost them £ 100,000.
- It was then decided that the way forward from the perspective of the Company was to invite Mr. Vick to a meeting on 5 December 2003 to debate all outstanding issues. Mr. Nick Page wrote a letter dated 18 November 2003 to Mr. Vick about the meeting. He said:-
"I write to advise you that I am very disappointed in your lack of response to Richard's letter dated the 27 October 2003.
As we are all extremely busy and as Barry is away at present I have arranged a Sales Meeting for 5 December 2003.
I think it appropriate that you meet with myself, Barry and Richard on that date to address all the issues and to see if we can move forward in a responsible and positive manner.
Meanwhile I would appreciate you looking at the issues that have been previously pointed out to you and it would help if you produced a positive programme on how you intend to address them."
- Mr. Vick did not respond to Mr. Page's letter of 18 November 2003. He did not produce any such programme as Mr. Page referred to in the letter. And he did not attend the meeting on 5 December 2003. He said that he was ill on the day in question, a Friday. He telephoned and left a message to that effect. He did not consult his doctor about his illness. He just rested at home over the weekend.
- A management meeting took place on 15 December 2003 at which the situation concerning Mr. Vick was discussed. Following that meeting Mr. Pyrah sent a memorandum dated 19 December 2003 to Mr. Barry Page in which he wrote:-
"My feelings are that it cannot carry on the way it is and I feel there is [sic] only 2 options. Tony guarantees that he will correct all the issues in a reasonable time frame or Tony's area is drastically reduced taking off Wiltshire, Dorset and selected key accounts, Tillington members etc.
Other issues
1. Briers success within the area.
a) CDS
b) South West Buying Group
c) Mole Valley
d) Mill (38k)
2. Hurrans x 2 Kate now has to call on.
3. Leekes Nick has to manage.
4. Taking on other agencies without notifying anyone.
5. Merchandising support.
6. Not attending Xmas Sales Meetings.
7. I am sure Al has issues with regards to Wyevale, Tillington etc.
On Monday 22nd December an Agenda confirming the meeting and detailing subjects of discussion is sent to him by post we can then talk further on the Monday before the meeting."
- The references to Leekes and Hurrans were to customers of the Company in the area covered by Mr. Vick whom the Company believed were not prepared to deal with it through Mr. Vick any more.
- An analysis of the sales to outlets of various nationally managed accounts in the area for which Mr. Vick was responsible in the financial years 2002/3 and for the first two months of the year 2003/4 (the financial year of the Company began on 1 October) was prepared by Mr. Al Sheppard, the Company's National Accounts Manager, and sent to Mr. Barry Page under cover of a memorandum dated 22 December 2003. In each analysis there was a comparison with the previous year. The picture painted by the figures was very varied. One outlet had increased its purchases by 538%, from £ 277.81 to £ 1,772, between 2001/2 and 2002/3. That was the largest single percentage increase. However, as between 2001/2 and 2002/3 in each case there had been an increase in turnover. The average increase was 135%. The picture was different for the succeeding period. The largest decreases were of 100%, that is to say to no sales at all, from the previously modest levels of £ 242.40. In fifteen cases there had been a decline in sales as compared with the previous period, while in 11 cases there had been an increase. The average was of an increase of 2%.
- Although the exercise was not carried out in advance of the meeting with Mr. Vick on 6 January 2004, to which I am about to come, it is convenient at this point to consider his turnover of sales in the period May 2003 to March 2004 as revealed by his commission statements and to compare the turnover each month with that of the same month in the preceding year and notice the percentage difference. The picture is as follows:-
| |
|
|
|
|
|
| |
Month and Year |
Turnover (£ ) |
Turnover previous year (£ ) |
Difference (%) |
|
| |
May 2003 |
29,102.14 |
31,661.33 |
- 8.1 |
|
| |
June 2003 |
23,857.37 |
27,065.39 |
- 11.86 |
|
| |
July 2003 |
23,942.22 |
17,310.23 |
+ 38.31 |
|
| |
August 2003 |
60,968.12 |
34,261.37 |
+ 77.95 |
|
| |
September 2003 |
22,130.80 |
31,396.31 |
- 29.52 |
|
| |
October 2003 |
62,547.18 |
64,462.63 |
- 2.98 |
|
| |
November 2003 |
45,800.35 |
42,363.18 |
+ 8.11 |
|
| |
December 2003 |
8,976.69 |
45,419.30 |
- 80.24 |
|
| |
January 2004 |
39,037.13 |
62847.06 |
- 37.89 |
|
| |
February 2004 |
29,561.51 |
36,852.09 |
- 19.79 |
|
| |
March 2004 |
52,596.30 |
73,911.35 |
- 28.84 |
|
| |
|
|
|
|
|
- Thus apart from November 2003, when there was a slight recovery, the trend was consistently downwards, as compared with the previous year, from September 2003.
- Mr. Barry Page and Mr. Richard Pyrah met Mr. Vick at a place called Chateau Impney on 6 January 2004. The meeting appears to have been quite short. Mr. Barry Page in his cross-examination put it as lasting fifteen or twenty minutes. Mr. Page's evidence and that of Mr. Pyrah was that the principle of a reduction in the area covered by Mr. Vick was raised at this meeting. Mr. Vick in his cross-examination said that he did not recall that. The meeting was on any view not a happy one. Mr. Vick told me that he believed that he was doing a very good job for the Company. He said that he could not see where Mr. Page and Mr. Pyrah were coming from. The outcome was that a further meeting was arranged at a trade show in Salisbury for 21 January 2004. In a memorandum dated 7 January 2004 to Mr. Nick Page and others Mr. Barry Page reported on the meeting of the previous day in this way:-
"Richard and I had a meeting with Tony at Chateau Impney.
He was very belligerent and really did not want to discuss any issues. He was not interested in our complaints.
Have arranged a further meeting 21 January.
I am very concerned that if we cannot resolve the issues at our next meeting we really need to explore our alternatives. "
- According to Mr. Barry Page, the next meeting on 21 January 2004 was very short. Mr. Vick's account of it in cross-examination was that he told Mr. Page and Mr. Pyrah that he was not prepared to change the way he worked. Mr. Page, according to Mr. Vick, then said that there was no point in further discussion and he would do as he liked because the Company was his. Mr. Vick then said, he accepted, that if the Company wanted to get rid of him he would expect to be paid compensation of 2 years loss of earnings, which would have amounted to about £ 90,000. Mr. Barry Page and Mr. Pyrah in their evidence gave an account of the meeting similar to that given at the time by Mr. Page in a memorandum dated 22 January 2004 to Mr. Nick Page and others, which was:-
"Myself and Richard met Tony at the Sarum Show, Salisbury.
We put our suggestions forward and Tony was totally unwilling to discuss the situation or offer any alternative remedies.
He told us both to f..k off and under European law it will cost 90K to get rid of him. He said that he was already talking to his solicitors and if we want to take him on he would fight all the way. He walked away from the meeting saying "see you in court".
I suggest that we arrange a meeting a.s.a.p. to discuss the situation."
- In the event what happened was that Mr. Barry Page wrote a letter dated 30 January 2004 to Mr. Vick. The letter was in these terms:-
"As you know, for sometime we have been concerned with the situation with regard to the maintenance of accounts; the call rates and results in your area compared to that of other areas.
Our last two meetings have not resulted in any action from you or any proposals coming from you as to how you intend to improve the situation, we are of the view that we have given you ample time, and were willing to work with you, to see your area improve.
The Agency Agreement you signed with us permits, under clause 7, variations to be made by us of both the Territory and the Market. We have concluded that, in light of your failure to come up with any proposals, it is appropriate that we exercise our discretion under clause 7. Therefore, please take this letter as notice to you that as from 1st March 2004:
1. Your Territory is varied and will comprise the following: Powys, Dyfed, West Glamorgan, Mid Glamorgan, Gwent, Avon, Somerset, Devon, Cornwall and the Channel islands and for avoidance of doubt as set out on the map attached
2. The Market is varied so that the retail/wholesale outlets set out on the list attached are not included within the Market and should not be serviced by you.
We are sorry that we have felt it necessary to take this action. However, despite our best efforts to persuade you to take action to improve and maintain your area you seem not to be interested in seeking an improvement. You have left us with very little choice but to take the above action."
- The list attached to the letter contained 55 locations of customers in the counties which were intended to continue to form part of the area covered by Mr. Vick. The customers in the list included Leekes and Hurrans, the customers whom the Company considered were not prepared to deal with it through Mr. Vick.
- Mr. Vick did not respond immediately to the letter of 30 January 2004. Mr. Barry Page wrote to him again on 17 February 2004, not having heard from him in the interim. What Mr. Page wrote was:-
"With the re-organisation of the areas also affecting John and Kate I would like to see a smooth handover of the accounts that you will no longer be calling on.
We need to arrange a meeting to discuss the handover and the issues for the transition to the new areas and to ensure that our customers experience very little or no disruption. We also need to discuss the level of merchandising that will be required in your area.
Venue to be Town and Country Offices. For your convenience listed below are a number of suggested dates and I would be grateful if you would advise, at your earliest convenience, which one would be suitable.
20th February 2004
26th February 2004
27th February 2004
As from 1st March 2004, Under Clause 3 of the Agency Agreement, the following will apply:
1. You will need to produce journey plans and these to be sent to the office on a weekly basis.
2. A weekly written report to Richard Pyrah, UK Sales Manager notifying him of progress in your area and any information pertaining to Town & Country's business."
- Mr. Vick never in terms replied to that letter. He certainly did not make himself available for any meeting on any of the suggested dates. He told me in cross-examination that he arranged his visits to customers so far in advance that he was not able to attend a meeting at just a few days notice.
- On 19 and 23 February 2004 the Company received orders from a customer called Otter Nurseries, a customer within the area for which Mr. Vick was responsible, for various goods which were agreed to be supplied at cost price, so that the customer could give them away to its own customers as a promotion. The total value of the two orders was some £ 7,000. The Company did not pay any commission to Mr. Vick in respect of those sales. Mr. Vick came to know of the sales, in which he had no direct involvement, and he made reference to them, and to his belief that he was entitled to commission in respect of them, in correspondence with the Company. The first such communication was a memorandum faxed to Mr. Pyrah on 22 February 2004. In that Mr. Vick wrote:-
"Richard regarding the sales figures for my area for January we spoke at the Home Hardware Show.
There is an amount of £ 3,500 missing for a direct delivery to Otter Nurseries and they have also had the same in February which should be on my figures."
- Mr. Vick did reply to the letter of Mr. Barry Page of 30 January 2004 in a letter of 25 February 2004. Before writing his reply Mr. Vick had taken advice from the Professional Sales Association, a trade association of those involved in acting as commercial sales agents. That fact possibly explains why the letter which he wrote was headed "Without Prejudice" and contained a number of assertions as to his legal entitlements. I need not set out the parts of his letter which contained, in effect, legal submissions. The remainder of his letter was in these terms:-
"With regard to your letter dated 30th January 2004, I would like to make the following points:
I have never agreed with you that the accounts on my area are not properly maintained. I have worked for you for nearly 9 years and in that time my turnover has increased year by year from around £ 40,000 to £ 500,000, and is probably the best area for sales in the country per head of population.
As I am your only Sales Agent and not fully employed by the company, my time is therefore split between yourselves and other Principals of which you were aware when you offered me the agency 5 years ago.
My area, in general, continues to grow as most of my major garden centre customers have increased range and space in their centres.
You say you are willing to work with me but I do not receive copy orders and very little other communication from the office. Also, I am continually chasing you for commissions owed (due the end of the month following invoice) as per our contract.
There are also sales on my area, direct and indirect, which I am not being paid or credited against target. Under the terms of our contract I would like to inspect your records to ascertain these amounts.
I understand under our contract you can change parts of the area as you have indicated in your letter dated 30th January, however, under Regulation 17 of the Commercial Agents Regulations 1993, I would be entitled to be compensated for the loss of commission on that area.
..."
- Mr. Nick Page replied to Mr. Vick's fax to Mr. Pyrah of 22 February 2004 in a memorandum of 1 March 2004 as follows:-
"Further to your fax dated 22"d February 2004 regarding Otter Nurseries.
This giveaway was organized by the Tillington Group negotiator and Squires Garden Centre and was part of a Town & Country part funded promotion.
As with Squires these items have been sold at a standard cost basis and will be given away by Otter.
Therefore, under the circumstances as before with these types of promotions sales are not credited to the area and as such do not attract commission.
If you disagree with this or you are suggesting that you generated this order please liaise with Barry."
- Mr. Barry Page replied to the letter dated 25 February 2004 from Mr. Vick in a letter dated 5 March 2004. For present purposes the material parts of that letter were these:-
"You seem to have missed the point. Regulation 17 refers to the termination of an Agency Agreement and so has no relevance in this situation. We are not terminating your Agreement, but it has been varied in accordance with the terms of the Agreement to which you freely entered into [sic].
...
Nevertheless since the Agency continues it is not necessary to consider Regulation 17 or King and Tunnock. It is however extremely important that arrangements for the ongoing Agency relationship are made and is of paramount importance and concern.
I am disappointed that you chose to ignore my letter of the 17th February 2004 offering you a choice of three dates to meet and handover Dorset and Wiltshire in a proper manner conducive to the wellbeing of Town and Country and also to discuss your area in detail for the continuance and further growth of your area.
I have listed below three more dates for us to meet and I suggest you contact Richard Pyrah our UK Sales Manager to confirm and arrange a meeting.
o Friday 12th March 2004
o Thursday 25th March 2004
o Friday 2nd April 2004"
- In his turn Mr. Vick replied to Mr. Barry Page's letter of 5 March 2004 in a letter dated 19 March 2004. In it Mr. Vick sought to argue points of law in a passage which I need not quote. The substantive part of the letter, so far as this part of this judgment is concerned, was this:-
"I did not ignore your letter dated 17th February, 2004, otherwise Richard would not be receiving my journey plan or a weekly report. However, if you need a meeting, I suggest you give me at least a month's notice, not two days, as my time is always well planned in advance, and expect me to travel to Leicester and cancel various meetings with customers is not reasonable. You obviously do not read the information I sent to you i.e. journey plan, as you would know that w/c 8th March, 2004, I was in the Channel Islands working on your behalf Furthermore, the other dates you suggest I am already booked up. If you require a meeting I suggest you telephone me and arrange to come and see me. With regard to the handing over of accounts, you have all the information you require on the Ipaq system. I have no further information.
This agreement appears to becoming [sic] very one sided - you only answer and do things you require not vice-versa. Under the Agency Agreement I have asked to inspect your books or be supplied with enough copies to enable me to check you are paying me all that is due in commission. Under agency law I am still not getting information such as copy orders etc. from the office. Payment is overdue every month and from now on I will be invoicing you for interest on these amounts as is my right under the Late Payment of Commercial Debts (Interest) Act 1998.
Two orders for Otter Nurseries worth over £ 7,000 have not appeared on my sales or commission statement and under our agreement all orders delivered to customers on my area are due commission.
I suggest you put these things right before we have a meeting."
- At this time Mr. Vick spoke to Mr. Pyrah about the timing of his commission payments. Mr. Pyrah wrote to him a letter dated 22 March 2004 following a telephone conversation. Mr. Pyrah proposed a change in the system of payment, to which Mr. Vick did not, in the event, agree. The remainder of the letter was in the following terms:-
"On another point and a subject of which I have written to you before. I have visited several customers on your area and I am still concerned with the lack of merchandising general condition of the Town and Country display unit and lack of stock on the displays, in particular Sunnydale GC Cw[m]bran (these stands went in on Nov 3rd and there is no record of you ever visiting since) St. Johns GC Newport, Banbury's GC Barnstaple, which I would like you to call on at your earliest to rectify the situation and report back to me as soon as possible bearing in mind that we are fast approaching a very important time for our business.
I have spoken to Barry on this subject and he confirms to me that one of your your [sic] obligations for being appointed an agent was to maintain the service that you supplied to our customers while you were previously employed full time by the company.
I am also aware of the success our competitors are having in your area, which is contrary to the situation in all other areas of the country and would like your comments on how you intend to deal with this ever-increasing problem and I need to remind you that I have yet to receive a list of known competitor stockists either solely or jointly.
With Easter approaching I need to point out the importance for our customers to have full stocks and that the products are displayed in a conducive manner to effect and increase consumer sales and to reflect the image of the company.
We are also aware that our competitors are targeting the Channel islands which if successful could have big implications on your commission and a big impact on our sales."
- Mr. Vick's reaction to that letter was not conciliatory. He wrote a letter dated 28 March 2004 in which he said:-
"I refer to your letter dated 22nd March, 2004, and my comments are as follows:
1. The commission system is definitely not to be changed.
2. Sunnydale Garden Centre - I have visited this centre on 4 occasions since they received their 2 mtrs. If you had bothered to ask Philip the owner he would have confirmed this. Also, his stands are completely full and promotions.
3. Banbury's Garden Centre - Again, I have visited 3 times this year and they have the complete range of our gloves merchandised on his own stands and also promotions.
4. St. Johns Garden Centre - We have never been a sole supplier. They have always stocked their own gloves plus another two suppliers. He has just moved his stock onto new fixtures and will give us extra room asap. He also has several promotions and again I have called on 3 occasions this year, if you had bothered to ask Phil Silk
5. With regard to competitors, the only one who has some customers is Briers because they are based on my area. We have not lost any business via my main wholesaler Mill, who are up on last year and they have always stocked two glove companies.
6. Channel Islands - Where you get your information from I don't know. I was there two weeks ago and I deal with all the main people in the Islands and there is not one Briers glove on the Island The only other gloves are one small Garden Centre who stock a small amount of First Choice.
As I said before, I have not changed the way I have worked in 9 years for you and my customers are all serviced regularly, as they always have been, and you have always been satisfied with this practise.
The only problem I see is that Town & Country staff i.e. yourself; your new rep, Nick and Al, all coming onto my area and upsetting the customers with all your visits. Do you want to lose customers to the opposition because you are going the right way about it?
It is also customary and good manners to inform me when visiting my area.
If you concentrated on doing your job i.e. giving me the information and back-up like my other Principals do, instead of trying to find fault and making snide remarks, I am sure it would be better all round
Finally, I have just received the figures for February, which is a month behind, and note that the following are missing off the figures:
Home Hardware
Curtis Holt
Clemsons
Otter Nurseries
These accounts should be included in my figures and on my commission statement. If these figures were correctly entered on my area I would be over target for the year.
I trust you will remedy this with a revised sales analysis."
- The correspondence between Mr. Barry Page and Mr. Vick continued with a letter dated 29 March 2004 from Mr. Page in response to the letter dated 19 March 2004 from Mr. Vick. The letter was quite long, but it was important.
"In reply to your letter dated 19th March.
Your letter suggests that we are being unreasonable in our efforts to try to arrange meetings and that your time is more valuable than either mine or Richard's. Just for the record whilst we have been trying to arrange meetings with you since early January you have not offered any dates whatsoever, or alternative suggestions or meetings and have clearly ignored my continued efforts to meet and resolve the issues.
With reference to my letters of the 17 February 2004 and 5 March 2004 in each of those letters I gave you three dates (6 in Total) from which to arrange a meeting and to which I received no response. We are aware how important it is for you to continue with your work and that was the reason that Richard and I met you on two separate occasions in your area to discuss the problems in January.
At the first meeting, on the 6 January 2004 at Chateau Impney when we reiterated our concerns, you offered no comments or suggestions and made it clear that you had no interest in any discussion. I then proposed that we arrange another meeting to give you the opportunity to consider and prepare a plan for the future.
Subsequently arrangements were made, with your agreement, for the 21 January 2004. Despite the efforts and the time that Richard and I spent driving to and from our arranged meetings yet again there were no suggestions or plans presented by yourself of how to resolve the issues. We then presented our proposals to you and were informed in no uncertain manner that you were not interested in continuing with the discussions. I then pointed out to you that we had an Agency Agreement signed by yourself and the changes were in line with that Agreement. You [sic] reply was that the Agreement you had signed with Town and Country was "not worth the paper it was written on and none of your concern. It was clear that you had no intention of acting reasonably. It was, by now, obvious that we were left with no alternative but to implement the changes that are now in place.
We have continued to show our willingness to work with you but are finding it very difficult as you appear to have no interest in resolving the issues. You failed to respond to our requests or suggestions to find a solution in order to protect yours and our interests in the area and, if left unresolved, will only further damage our company.
I have written to you previously with concerns about the poor maintenance of the accounts you service. You assured us that you would employ a merchandiser to fulfil your obligations and this was to be your wife. At a later date you informed us that your son-in-law would now be working as a merchandiser which was as long ago as January 2003, yet again in March 2003, again in August 2003 and then again in October 2003. We feel you have had enough opportunities with the two meetings at which you declined to discuss the issues, and then two letters each proposing three separate meetings (6 in total) to which I received no response. You have demonstrated your unwillingness to rectify or even discuss the situation.
Had you accepted any one of those opportunities, we would by now, have resolved many of the issues including your request to view the record of the payments of your commission.
I now offer three more dates from which to arrange a meeting once more:
4 May: 5 May: 6 May 2004.
It would be reasonable to expect you to choose one of the dates within the next 7 days to allow us the benefit of planning our days.
With regard to the payment you refer to in your letter for Otter Nurseries, I believe Nick Page the Sales and Marketing Director has written to you on this subject. However just to be clear this was a promotional item that was sold to the customer for a give away and charged at cost price to promote our products in your area. No commission is due in line with previous promotional activity and something you are fully aware of.
With regard to the fact that you state in your letter you have no further information with regard to the customers in Devon and Wiltshire. This is extremely disturbing as you and I both know that Customer Record Cards are kept, and always have been, and are very important in the continuity of our business. The people now covering these areas have to have these historical records to understand the products, customer purchasing and the frequency of calls. I have asked you for these previously, but to date they have not been received by me.
I also need to point out that you are our representative in the area and I am not at all happy with the fact that you are totally unresponsive and feel that you are quiet [sic] happy for the situation to continue which leads me to believe that the situation may be far more serious. I intend to visit our customers in your area shortly in the hope of finding that my fears and concerns are unfounded"
- Mr. Vick told me in cross-examination that he had not received the letter dated 29 March 2004 when he wrote a letter dated 2 April 2004 to Mr. Barry Page to which I am about to come. Mr. Page told me in his evidence that he felt that in fact Mr. Vick had received it, but it suited him not to respond to it in the letter of 2 April 2004. The letter of 2 April 2004 is at the root of the principal issues in this action. The letter was in these terms:-
"As you have not responded to my letter dated 19th March 2004, I feel it necessary to write to you again.
Under both the 1993 Regulations and our contract you have failed in your obligations as a Principal:
1. To act dutifully and in good faith to your agent, contra to Regulation 4.
2. There has been little or no communication between the office and myself again contra to Regulation 4 and also Regulation 12.1.
3. Failed to pay me commissions due on certain orders and customers, contra to Regulations 7, 10 and 11.
4. Lost orders, which were sent to you by me, contra to Regulation 4.
5. Customers complaining to me about Town & Country staff acting arrogantly in their stores and are considering closing accounts, contra to any definition of best practice and Regulation 4.
In general, I am out selling on your behalf spending money to obtain orders, which you are not paying me for. You have made this agency untenable and unworkable. You are, therefore, depriving me of earning a living and fundamentally breaching my contract.
It is in this light that I am using the PSA to instruct Solicitors to take action against Town & Country for the loss of the whole of the agency and to inspect your books for the last five years to ascertain the level of any unpaid previous commissions owed. I have the legal right to this information under Regulation 12.2.
If I have not heard from you with the offer of full payment by 15th April, 2004, they have been instructed to proceed with legal action."
- That letter was said on behalf of the Company to be a notice of termination of the Agency Agreement given by Mr. Vick. That was disputed by Mr. Vick. His case was that it was an indication of a claim to compensation in respect of the loss of his customers in the counties of Dorset and Wiltshire, plus the 55 other customers listed in the attachment to the letter Mr. Barry Page wrote to him on 30 January 2004. Alternatively, so it was contended on his behalf by Mr. Segal, if the letter on proper construction was a notice of termination given by Mr. Vick of the Agency Agreement, he was entitled to give that notice by reason of the repudiatory breaches of the Agency Agreement committed by the Company.
- It was common ground between Mr. Vick and Mr. Barry Page that Mr. Page attempted to speak to Mr. Vick on the telephone twice on 5 April 2004. He was not able to do so, but left messages that he had called. On the next day they did in fact speak on the telephone. Mr. Vick's account of what happened was that Mr. Page said that he had received Mr. Vick's letter of 2 April 2004 and in the light of it there was no point in them meeting. Mr. Page's account was that he said to Mr. Vick that he wanted to meet him to discuss the letter of 2 April 2004, which he interpreted as a resignation on the part of Mr. Vick, but Mr. Vick said that it was too late and matters were in the hands of his solicitors.
- On 7 April 2004 Mr. Barry Page wrote to Mr. Vick in response to his letter of 2 April 2004. What Mr. Page said was:-
"Thank you for your letter of 2 April the contents of which disturb me greatly. I have to confess that I do not understand the points you are making in your paragraphs numbered 1 to 5 and I have no evidence here of what you are complaining about.
I did speak to you on Tuesday, at long last, and I did offer to come down to meet you to talk about the situation during the course of this week, at any time and any location. However, you refused to take up this offer and told me in no uncertain terms that as far as you are concerned the matter was closed and now in the hands of your solicitors.
The purpose of this letter is, in the light of that conversation, together with your comments in your letter of 2 April (that you think the Agency is untenable and unworkable and that your solicitors are going to take action against us for "loss of the whole of the Agency") that with effect from 2 April, you are no longer acting as our agent, and that we should therefore act accordingly. We cannot see that there is any other interpretation to be made because of the contents of your letter and the telephone conversation we had. If we are wrong in making this assumption, then could you kindly speak to me or e-mail me immediately on receipt of this letter.
You state that you have placed the matter in the hands of your solicitors, and if this is so then please could you ask them to communicate, not with ourselves, but with our solicitors who are Howes Percival [whose address was then set out]."
- The evidence of Mr. Vick was that he did not receive the letter dated 7 April 2004 until about 10 April. Mr. Page's evidence was that he sent it by facsimile transmission on 8 April.
- Mr. Vick did not respond to Mr. Barry Page's letter of 7 April 2004 until 15 April 2004. He told me that he wished to seek the advice of the Professional Sales Association before he replied. His reply was to this effect:-
"With reference to your fax dated 7th April, 2004, my recollection of events seems totally different to yours.
You telephoned me twice on Monday, 5th April, 2004, and on both occasions I was busy with customers. You phoned again on Tuesday morning, 6th April, 2004, and left a message on my answerphone suggesting that we had a meeting that week. I returned your call on Tuesday morning whereupon you told me you had just received my letter dated 2nd April, 2004, and now there was no point in us having a meeting. You then asked me if I was still acting as your agent in the South West and I confirmed to you that I was, although it was and still is very difficult to do so. I would like to point out that this was the first time that we had spoken in three months.
If you had read the letter correctly it stated that if I did not receive full payment for the loss of the agency plus all outstanding commission by 15th April, 2004, then the matter would be placed in the hands of the solicitors. This has not occurred as yet and I was hoping that we could reach a reasonable solution.
I have never suggested or stated that I intended resigning from the agency. I am still acting as your agent in the South West and unless you intend to terminate the contract will continue to do so. If however, you persist in your actions in trying to unilaterally alter my terms and conditions without my agreement, then I may be forced to do so because of your fundamental breaches of our contract.
With regard to the statement in your letter referring to points 1 to 5, I feel it is self-explanatory and are covered in the regulations governing sales agents. If you are in any doubt over this legislation I suggest you discuss these provisions with your solicitor."
- The last letter to which I need refer is the reply of Mr. Barry Page to Mr. Vick's letter of 15 April 2004. It too was dated 15 April 2004. Mr. Page wrote as follows:-
"Thank you for your letter of 15 April. We asked you to come back to us "immediately" which you have not done.
We did read your letter correctly in that the only possible interpretation we could put on your request for "full payment for the loss of the agency plus all outstanding commission" was that you felt that you were terminating the agency. We had not terminated the agency, all we were doing was varying its terms in accordance with what we were permitted to do under the Agency Agreement. We agree that we advised you that we were altering your terms and conditions, but your agreement to that alteration occurred when you signed up to the Agency Agreement in the first place. The Agency Agreement permitted us to alter. We did so but you were not prepared to accept the alteration and claimed that the agency had been lost. In our view your actions so far have shown that you have repudiated the agency and nothing in your letter of 15 April leads us to think otherwise.
As regards points 1 to 5, merely referring us to the legislation is particularly unhelpful. Your letter of 2 April claimed that we have not acted dutifully and not acted in good faith. You have given us no examples of this, which is why we said that we did not understand what you were saying and in particular we said we had no evidence of this. Merely to refer us to the legislation does not give us the evidence of what you are complaining about!
There is little point in continuing correspondence between us. We were entitled to vary the terms of the Agency Agreement. You did not accept that variation and claimed that our actions led to the loss of the whole of the agency. We treat that as you terminating the agency and we have acted accordingly."
- I regret to have to say that I was unimpressed by Mr. Vick as a witness. I formed the view that he was a truculent individual who was accustomed not merely to standing up for what he conceived to be his rights, but to doing so in forceful, nay crude, terms, if he thought it appropriate to make a point. I am completely satisfied that he did indeed tell Mrs. Finney that she should stow his iPAQ exactly where she told me that he had. She struck me as a straightforward lady of reasonable firmness and courage who might not have been offended by the language in question used by a friend in a humorous context, but who was surprised and shocked to find a man she did not know well, and considerably her senior in years, talking to her like that. I accept her evidence without hesitation. I find, so far as it may be material, that that conversation took place when Mr. Nick Page recorded it as having taken place, that is to say in the week ending 17 October 2003. A little later it was Mr. Pyrah's turn, when Mr. Vick told him that he could stuff the iPAQ and that it would cost the Company £ 100,000 to get rid of Mr. Vick. I was impressed by Mr. Pyrah as a witness and accept his evidence also without reservation. It appears, and I find, that Mr. Vick convinced himself that, as a self-employed agent, he was in a strong position to decide how he would perform his functions under the Agency Agreement and to resist any pressure from the Company to do anything which did not suit him. Thus he was not interested in making any effort to work with the iPAQ, and did not feel that he had to make any. I am sure that he was keen to emphasise to the representatives of the Company that it would cost it a large sum of money to get rid of him. That that was his response to Mr. Pyrah's letter of 27 October 2003 I am quite certain. It was a response which he gave to Mr. Barry Page and Mr. Pyrah at their meeting on 21 January 2004, as I find, combined on this occasion with what Lord Denning once described as an emphatic version of "You be off"(see R. v. Barnsley Metropolitan Borough Council ex p. Hook [1976] 3 All ER 452 at 454J - 455A) . So far as the meeting on 21 January 2004 was concerned, Mr. Vick hardly disputed that he had stated his opinion of how much it would cost the Company to get rid of him.
- I was very impressed by Mr. Nick Page as a witness. He struck me as a thoroughly honourable and honest man. I have no doubt that in his evidence to me he was accurate, reliable and fair. There was a sustained attempt on behalf of Mr. Vick to depict Mr. Nick Page as a Machiavellian character, deviously plotting the downfall of Mr. Vick over a long period because he disliked him and disliked the idea of having a self-employed agent working for the Company. I think that it is clear from the terms of Mr. Nick Page's letters to Mr. Vick, and his memoranda about him, that he had no animus against Mr. Vick and was anxious to deal with him in a straightforward fashion, at the same time as promoting the interests of the Company. I accept his evidence that he agreed with Mr. Vick that Mr. Vick would not cover Charlie's, although it was strictly on the "Territory" of Mr. Vick, and that he would not be paid commission in respect of sales to Charlie's. I also accept the evidence of Mr. Nick Page as to the agreement made with Mr. Vick as to the increase in his rate of commission to 9% and the circumstances in which that agreement was made. I prefer that evidence to the evidence of Mr. Fox to the effect that the increase to a rate of 9% was a reward for good service. I formed the impression that Mr. Fox did not have a reliable recollection of events which took place now, after all, some seven years ago. Mr. Vick was not an employee and Mr. Fox accepted that he himself had had no authority to agree to an increase in the percentage rate of his commission. Such an increase required the consent of Mr. Nick Page. I was satisfied that his recollection of what he agreed to and why was accurate. Mr. Vick's evidence on the point was not a vigorous challenge to the recollection of Mr. Nick Page and, interestingly, did not in terms support the evidence of Mr. Fox as to what prompted the increase in rate. Although such may not have been expressed in terms at the time, I find that it was obvious to the parties, and represented their actual, but unexpressed intention, that the arrangement for the increase in the rate of commission to 9% should only endure as long as the problem which it was intended to address, namely lack of information from wholesalers as to sales handled by them from customers of Mr. Vick, continued.
- I was also very impressed by Mr. Barry Page. He seemed to me to be a businessman of a rather old-fashioned sort, who was keen to have regard to the interests of the employees of the Company and those of Mr. Vick, as well as to the efficient and effective running of the Company. In my view Mr. Barry Page put up with a lot more from Mr. Vick than a younger, less emollient man would have done. I accept without reservation the evidence of Mr. Barry Page.
- It was plain, as it seems to me, that Mr. Vick became increasingly difficult and unresponsive to the approaches of the Company over, in particular, merchandising, using the iPAQ and responding to competitor activity in his "Territory". I find that Mr. Pyrah, Mr. Nick Page and Mr. Barry Page all sought to deal constructively with Mr. Vick in relation to these issues, but met with no worthwhile response. There was no useful reply to Mr. Pyrah's letter of 27 October 2003. There was no response at all to Mr. Nick Page's letter of 18 November 2003. Mr. Vick did not attend the meeting arranged for 5 December 2003. He made no helpful suggestions at, or following, the meeting on 6 January 2004, notwithstanding that, as I find, the issue in principle of a reduction in his "Territory" and in his "Market" was then raised with him. His attitude at the meeting on 21 January 2004 was confrontational. One can well understand how it was that the senior management of the Company came to the conclusions that something had to be done, that Mr. Vick was not interested in being involved in a helpful way in considering what should be done, and that the reduction of the "Territory" and the "Market" along the lines of what was eventually set out in the letter dated 30 January 2004 was what was necessary. However, it was submitted by Mr. Segal on behalf of Mr. Vick that it was not open to the Company as a matter of law in the circumstances of the case to reduce the "Territory" and the "Market" of Mr. Vick under the Agency Agreement, and to that issue I shall shortly turn.
- Before coming to deal with the issue of the ability, or not, of the Company to reduce Mr. Vick's "Territory" or his "Market", I should record my findings about what happened after Mr. Vick sent his letter dated 2 April 2004 to Mr. Barry Page. In particular it is necessary to make findings about what was said between Mr. Vick and Mr. Barry Page during their telephone conversation on 6 April 2004. On this question I accept the evidence of Mr. Barry Page that, whilst he offered to go down to Mr. Vick's area to meet him for a discussion, Mr. Vick said that it was too late and the matter was in the hands of his solicitors. That version of events Mr. Page recorded in his letter to Mr. Vick of 7 April 2004. Mr. Vick did not respond until 15 April 2004, by which time, he told me, he had taken further advice from the Professional Sales Association. While in his letter of 15 April 2004 Mr. Vick did dispute the account of the conversation between him and Mr. Barry Page on 6 April 2004 set out in Mr. Page's letter of 7 April 2004, it seems to me to be clear that the major purpose of the letter of 15 April 2004 was to seek to resile from the position which Mr. Vick had adopted in his letter of 2 April 2004 that the Agency Agreement was at an end, which position he had repeated on the telephone on 6 April 2004. It looks as if, perhaps with the aid of advice, by the time he came to write his letter of 15 April 2004 Mr. Vick had come to realise that he might have overplayed his hand in his letter of 2 April 2004 and in his conversation with Mr. Page on 6 April 2004. At all events, I am satisfied that the letter of 15 April 2004 was self-serving and intended to soften the position which Mr. Vick had adopted. It was not an accurate account of what Mr. Vick either intended in writing his letter of 2 April 2004 or of what he considered to be the effect of his conversation with Mr. Page on 6 April 2004.
The reduction in the "Territory" and in the "Market"
- Because of the way in which Mr. Vick's case that, if by the letter of 2 April 2004 he did bring the Agency Agreement to an end, he was entitled to do so, was pleaded, the issue whether the Company was entitled to take the step which it did by the letter of 30 January 2004 assumed great importance. In his written opening submissions Mr. Segal set out Mr. Vick's case in a passage which he repeated in his written closing submissions. That passage, with emphasis added in the version reproduced in the closing submissions, was to this effect:-
"20. The Claimant contends that the only reasonable construction (contra proferentem if necessary) of clause 7, in the light of the Regulations and in any event, is that:-
Where, judged objectively, the Defendant is entitled to conclude that the Claimant is - not de minimis, but significantly - 'failing to maximise sales opportunities" within the Territory/Market, the Defendant has the right to make an objectively reasonable and proportionate reduction in the geographical area and/or specific customers serviced by the Claimant, which reduction must in all events not amount to the substitution of the Agreement by an essentially different contract.
21. Any other construction would be contrary to the obvious intentions of the parties and/or inconsistent with both business efficacy and the perspective of the officious bystander (it is in all events to be recalled that the parties entered into the Agreement on the express understanding, indeed for the sole purpose, of the Claimant being self-employed and representing more than one principal), and/or is precluded by the Regulations.
22. To take some examples that might be pertinent to this action:-
a. If the Defendant reasonably perceives that the Claimant is not working as hard or as effectively as he should/could in respect of a small group of customers or over a short period of time, it cannot have been the intention of the parties that the Defendant should per se be entitled to make a significant and permanent reduction to the Territory/Market
b. Even if the threshold level of inattention and/or incompetence on the part of the Claimant is objectively determinable by the Defendant, the Defendant could not remove such a significantly large part of the Territory/Market as entirely to change the basis of the Agreement."
- The general nature of the argument of Mr. Segal was that in construing any of the provisions of the Agency Agreement, and in particular clause 7, it was necessary to have regard to the obligation of the Company in clause 4.1.2 of the Agency Agreement to act towards Mr. Vick dutifully and in good faith. In other words, any power of the Company to do some act which could have repercussions upon Mr. Vick was only to be exercised dutifully and in good faith. I do not think that Mr. Jason Coppel, who appeared on behalf of the Company, dissented from that proposition. I am not sure that, without the agreement of the parties on the point, I should have reached the same conclusion, that is to say, that all express terms of the Agency Agreement which permitted the Company to do something were to be read as subject to the obligation in clause 4.1.2, but for the reasons which I shall explain, my doubt on the point did not prove to be material in the circumstances of the present case.
- Mr. Segal submitted that the obligation to act towards Mr. Vick dutifully and in good faith was at least as wide as the obligation implied on the part of both an employer and an employee in a contract of employment to act towards the other with mutual trust and confidence. The content of that obligation was considered by the House of Lords in Malik v. Bank of Credit and Commerce International SA [1997] ICR 606. The formulation approved by the House of Lords was that the relevant party (in that case the employer):-
"shall not, without reasonable and proper cause, conduct itself in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee."
- I accept those submissions of Mr. Segal. However, it is material to notice that, in the formulation approved by the House of Lords, a number of elements fall to be considered on the way to reaching a conclusion as to whether the obligation has, on particular facts, been breached. The first is that whatever has been done which is said to have amounted to a breach of the obligation must have been done without reasonable and proper cause. If what was done was done reasonably and for good cause, it is not a breach. Second, what was done which was said to have been a breach must have been calculated and likely either to destroy or to seriously damage the relationship of trust and confidence. It appears that what is required is deliberate, rather than inadvertent conduct, but that the conduct in question need not be targeted at the other party to the contract, as opposed to someone else. As Lord Steyn said in Malik v. Bank of Credit and Commerce International SA at paragraph 60:-
"The motives of the employer cannot be determinative, or even relevant, in judging the employees' claims for damages for breach of the implied obligation. If conduct objectively considered is likely to cause serious damage to the relationship between the employer and the employee a breach of the implied obligation may arise."
- Mr. Segal submitted that an aspect of the obligation to act dutifully and in good faith towards Mr. Vick involved the need for any decisions made by the Company concerning him to be both genuine and rational. I accept that also. In his written closing submissions he set out his contentions to the effect that the decision of the Company to vary Mr. Vick's "Territory" and his "Market" in the manner set out in Mr. Barry Page's letter of 30 January 2004 was not rational, was not made with reasonable and proper cause, and was calculated and likely seriously to damage the relationship of trust and confidence between the Company and Mr. Vick as follows:-
"15. In this case, C's right to commission on sales to customers in the Territory was not simply important, it was the essence of his entitlement under the contract. But for clause 7, a drastic reduction to that entitlement would clearly not simply be a breach of contract, but the termination of the contract and the substitution of it by another: see by analogy Hogg v. Dover College [1990] ICR 39.
16. There is no warrant in this case for D to reduce C's territory and customer base in the way that they did - D's figures are not accepted - C's evidence was that he calculated he would suffer a reduction of 40% and he gave figures for a few key accounts, not challenged, which added up on their own the loss of over 25% of his commission income. However, even if the reduction was only 25 - 40%, it was still, as recognised by RP and BP (though he tried to disavow it at trial) as "drastic".
17. D's case as to specific customers was: it had lost 2 (in circumstances which, even on D's evidence, were hardly unambiguously down to C) and that one other, Hurrans, had asked for another rep dealing with all its other stores to deal also with those in C's area, which had been implemented in October 2003 and another, Leekes, had asked that N Page should deal with the principal buyer - also implemented some time pre-30/1/04 - but that C welcome to continue visiting and merchandising.
18. There was, as at 30/1/04, no single outstanding request by a customer for C to be replaced.
19. D led no evidence that customers in Dorset or Wilts were more or less satisfied with C.
20. As at 30/1, C's turnover - the single most important indication of success - was at least stable (after many years of increase), which was in line with the employed field staff"
- Those submissions of Mr. Segal concentrated upon the performance of Mr. Vick as perceived by him and the effect upon him of the variations indicated by Mr. Barry Page's letter of 30 January 2004. However, in my judgment they were misdirected. I am completely satisfied that the variations to Mr. Vick's "Territory" and "Market" were not made by way of punishing him for some misdemeanour. Had they been imposed as a punishment, no doubt it would have been appropriate to consider as the first relevant matter the impact of the changes upon his income. However, he had no assured right to any level of income, no matter what the circumstances in the marketplace, so in fact, in my judgment, the impact upon Mr. Vick's earnings of the alterations to his "Territory" and "Market" was but one of the considerations to be taken into account, and not one which was obviously more important than other relevant considerations.
- The first question which logically arises under clause 7.1 of the Agency Agreement is whether the threshold condition, that in the reasonable discretion of the Company Mr. Vick was failing to maximise sales opportunities within the "Territory" , was satisfied in the circumstances of the present case. Mr. Segal barely suggested that it was not - at paragraph 10 of his written closing submissions he seemed implicitly to accept that that condition was satisfied. I am certainly satisfied that the Company had good reason for holding the opinion, and did hold the opinion, that Mr. Vick was, as at 30 January 2004 failing to maximise sales opportunities in the "Territory". The issue of the failure of Mr. Vick effectively to merchandise customers of the Company was by that time a long-running sore, and one which he had said that he would address by employing his wife or his son-in-law to do merchandising. In fact he had done nothing. He had failed, at least, possibly refused, to adopt the new technology of the iPAQ which was viewed within the Company as an aid to obtaining sales because of the instant access to the Company's computer which it provided, a factor which it was thought would impress customers. He had failed to respond to the letter which Mr. Pyrah wrote him dated 27 October 2003 or to the letter of 18 November 2003 which Mr. Nick Page wrote him, in each of which he was invited to set out his proposals for dealing with the matter of merchandising, the use of the iPAQ, and how to respond to competitor success on his patch. He then failed to attend the meeting arranged for 5 December 2003. At the meetings with him on 6 and 21 January 2004 he made no constructive suggestions about merchandising, iPAQ use or responding to competitor activity. He declined to engage in discussion of a possible reduction in his "Territory" or his "Market". It seems to me that the only possible conclusion was that Mr. Vick was failing to maximise sales opportunities.
- The next question, relevant to both clause 7.1 and clause 7.2 of the Agency Agreement in the light of the obligation of the Company in clause 4.1.2, was whether operating the powers conferred on it by clause 7.1 and clause 7.2 was calculated or likely to destroy or seriously damage the relationship of trust and confidence between the parties. I am entirely convinced that the intended purpose of the variations made in Mr. Vick's "Territory" and "Market" was not to destroy or seriously to damage the relationship between the Company and Mr. Vick. Did the variations objectively have that effect? That is difficult to say. Potentially one would imagine that they could have. However, on my findings Mr. Vick was not sufficiently interested in the possibility of variations being made to be prepared to discuss either the principle or the detail when the matter was raised with him on 6 January 2004. Again, his immediate reaction to the letter dated 30 January 2004 was not to complain that what was proposed was outrageous. So far as writing to the Company was concerned, he had no immediate reaction at all. He delayed in replying to the letter of 30 January 2004 until his letter of 25 February 2004. The reason for the long delay in reacting to the letter of 30 January 2004 was not really explained beyond Mr. Vick saying that he wanted to take advice from the Professional Sales Association. And when the response did come, it was not, "You can't do this.", but rather, "You will have to pay compensation". In other words, it appeared that Mr. Vick was entirely content to have his "Territory" and his "Market" reduced, as long as he was paid an amount of money which he considered appropriate. Provided that happened, it seems, he was quite content to continue working for the Company. It was not until 2 April 2004 that, on his pleaded case, he decided that the variations to his "Territory" and his "Market" amounted to repudiatory breaches of the Agency Agreement. However, strangely, there was no express reference in that letter to the making of the variations being a matter of complaint. At the trial Mr. Vick attempted to contend that the allegation that the Company had failed, "1. To act dutifully and in good faith to your agent, contra to Regulation 4." was intended to refer to the variations effected by the letter of 30 January 2004. I do not accept that. In my judgment that was a late attempt to seek to explain away why it was that what was the most significant of the matters alleged to be a repudiatory breach in the Particulars of Claim was not even mentioned in the letter of 2 April 2004. Another matter which is material to an objective consideration of the effect of the changes effected in Mr. Vick's "Territory" and in his "Market", as it seems to me, is that even after a reduction in his "Territory" and in his "Market", by clause 5.1.2 of the Agency Agreement Mr. Vick remained entitled to commission on sales to customers whom Mr. Vick had acquired as customers of the Company, and by clause 5.1.3 he remained entitled to commission on sales to customers in the "Territory". I see no justification for reading clause 5.1.2, as Mr. Coppel contended I should, as referring only to customers introduced by Mr. Vick whilst acting as agent for the Company, and thus as not including customers he had introduced whilst an employee. While, no doubt, the word "Territory" in clause 5.1.3 should be read, after a variation, as referring to the "Territory" as varied, the customers listed in the annexure to the letter of 30 January 2004 for whom Mr. Vick was no longer to be responsible remained in the "Territory" as varied. It thus appears that in fact the variations of his "Territory" and "Market" may, under the Agency Agreement, have had little effect upon Mr. Vick's income from commissions, save insofar as he might have sold more to the customers he was losing than his replacement or replacements did. Had there been argument about it, I think that I should have been inclined to find that Mr. Vick did not in fact treat the variations made to his "Territory" and his "Market" by the letter of 30 January 2004 as being any sort of breach, never mind a repudiatory breach, of the Agency Agreement. However, it was not argued on behalf of the Company that, if there were a repudiatory breach of the Agency Agreement as a result of the variations in Mr. Vick's "Territory" or his "Market", he had waived that breach or had affirmed the Agency Agreement after it, and I say no more about those matters.
- On the assumption that the variations to the "Territory" and the "Market" of Mr. Vick were potentially such as went to destroy or seriously to damage the relationship of trust and confidence between Mr. Vick and the Company, the question would remain whether those variations were made with reasonable and proper cause. I am completely satisfied that they were. It is no part of the function of the Court to second guess the commercial decisions of those carrying on a business. Thus it is not for me to consider what else might have been done by the Company to address the problems which it was having with Mr. Vick, or what I would have done if in the position of the senior management of the Company. The issue is really whether what the Company did do was what, in another context, might be called within the range of reasonable responses. On my findings Mr. Vick's sales in his "Territory" were on a downward spiral from about September 2003. That was a matter which needed to be addressed and which Mr. Vick had been invited to address, but he had declined to do so. Linked with it was the long-standing issue of merchandising and Mr. Vick's failures in that area. Again he had been invited to address that issue and had failed to do so. His attitude to criticism and to suggestions that he was not performing his duties to the Company in accordance with the wishes of the Company was hostile. Essentially he considered that his level of performance was satisfactory and that the Company would just have to put up with it, or pay him a large amount of compensation to get rid of him. His lack of co-operation at a fairly basic level with the Company was manifested in his approach to the use of the iPAQ. Plainly, in my judgment, something had to be done to try and persuade Mr. Vick to confront the important issues which had arisen concerning his approach to acting as agent for the Company and his declining level of success in attracting orders. Effectively the Company had only three options. It could do nothing and just let Mr. Vick set his own agenda as to what he was prepared to do. That, I think, was obviously not a realistic option because it produced no solution from the Company's point of view to the problems. It could terminate the Agency Agreement. That would mean that the Company was no longer at the mercy of Mr. Vick in relation to what he was prepared to do, and how, in the "Territory", but it would create other problems, specifically an urgent need to replace a representative who had been active in the relevant area, which was not a small geographical area, for some 8 years. The third option was to do what it in fact did, that is to say, to reduce the size of the "Territory" and to reduce the size of the "Market". That option had a number of attractions from the point of view of the Company. It enabled it to retain the services of Mr. Vick, who was an experienced representative who had in the past shown a commitment to the Company and had achieved considerable success in the past in obtaining orders. It meant that the Company did not need to find an immediate replacement for Mr. Vick, but could allocate the parts of the "Territory" and the "Market" taken away from him to other members of the existing sales force. For the reasons I have explained, although I do not think that this factor was considered or recognised by the senior management of the Company at the time, the effect of the changes on the earnings of Mr. Vick may have been modest. But the most obvious benefit of the new arrangements was that Mr. Vick would not have so many customers to cover as before, and thus would have more time, in theory at least, to devote to the customers whom he was left to service. How great this benefit would be is difficult to assess in detail, because Mr. Vick acted as an agent for other companies and would continue to visit customers of those companies. The evidence was that some of those customers of other companies for whom Mr. Vick acted were located in Dorset and in Wiltshire, but the matter of what additional time would have been available to Mr. Vick to visit his remaining "Town & Country" customers was not really investigated in evidence. Against these factors, the only consideration which Mr. Segal really urged upon me as making the changes in the "Territory" and the "Market" alterations made without reasonable and proper cause was the effect which it was contended that those changes would have had on the income of Mr. Vick. Even if the effects upon the income of Mr. Vick were going to be as drastic as Mr. Segal contended, and as it seemed from the evidence of Mr. Barry Page he assumed, the issue was really one of how the balance should be struck. On the one hand, on the assumption Mr. Barry Page was making, Mr. Vick was going to suffer a considerable reduction in his income. On the other, he had consistently declined to face up to important issues and it was his recalcitrance which had brought about the situation as it was as at 30 January 2004. That recalcitrance included not even being prepared to discuss the proposed reductions in his "Territory" and in his "Market". Had he been prepared at least to discuss that matter he could have been informed what was then in the mind of the Company and had an opportunity to make any points he wished in relation to that. I am sure that, had he been prepared to engage in dialogue, even at that late stage, Mr. Barry Page would have been receptive. However, that was not how matters turned out. The Company was left with having to make a decision without any worthwhile input from Mr. Vick. For the reasons which I have given I do not see how the Company can be criticised for acting as it did in the circumstances.
- I have reached the conclusion which I have expressed in the preceding paragraph on the basis that it is necessary to have regard to the provisions of clause 4.1.2 of the Agency Agreement in considering what use it was open to the Company to make of its powers in clause 7.1 and clause 7.2. I have already indicated my doubts as to the correctness of that approach. Those doubts become stronger if the issue is not simply whether some action taken in reliance upon the powers conferred by clause 7.1 and clause 7.2 was a breach of contract, but whether it was a repudiatory breach of contract. In general, in English law a repudiatory breach of contract is one which indicates an intention on the part of the contract breaker to abandon or refuse performance of the contract. Thus seeking to rely upon an express term of a contract, even mistakenly and wrongly, is not likely to indicate an intention to abandon or refuse performance of it. That was the effect of the holding of the majority of the House of Lords in Woodar Investment Development Ltd. v. Wimpey Construction UK Ltd. [1980] 1 All ER 571. The nature of the problem and the proper approach of the Court was explained by Lord Wilberforce in his speech at page 574B - E:-
"This gives rise to the first issue in this appeal: whether by invoking special condition E(a)(iii), and in the circumstances, Wimpey are to be taken as having repudiated the contract. Woodar so claim, and assert that they have accepted the repudiation and are entitled to sue Wimpey for damages.
My Lords, I have used the words "in the circumstances" to indicate, as I think both sides accept, that in considering whether there has been a repudiation by one party, it is necessary to look at his conduct as a whole. Does this indicate an intention to abandon and to refuse performance of the contract? In the present case, without taking Wimpey's conduct generally into account, Woodar 's contention, that Wimpey had repudiated, would be a difficult one. So far from repudiating the contract, Wimpey were relying on it and invoking one of its provisions, to which both parties had given their consent. And unless the invocation of that provision were totally abusive, or lacking in good faith, (neither of which is contended for), the fact that it has proved to be wrong in law cannot turn it into a repudiation. At the lowest, the notice of rescission was a neutral document consistent either with an intention to preserve, or with an intention to abandon, the contract, and I will deal with it on this basis, more favourable to Woodar. In order to decide which is correct Wimpey's conduct has to be examined."
- The decision in Woodar Investment Development Ltd v. Wimpey Construction UK Ltd. was not cited to me by Counsel and no argument was addressed to me as to the applicability of any principle to be derived from it to any issue in the present case. I have therefore reached my decision that on the facts the Company was not in breach of the Agency Agreement by seeking to vary the "Territory" and the "Market" of Mr. Vick on the assumption that the parties were correct in their agreement that the provisions of clause 7.1 and clause 7.2 of the Agency Agreement were to be construed in the light of the provisions of clause 4.1.2 and on the assumption that any unjustified use of the powers in clause 7.1 or clause 7.2 would have amounted to a repudiatory breach of the Agency Agreement on the part of the Company. I mention the decision of the House of Lords simply in order to explain why I have doubts that the approach of the parties was correct.
- At one point in his opening submissions Mr. Segal seemed to be submitting that the provisions of clause 7.1 and clause 7.2 of the Agency Agreement were unlawful in the light of the provisions of Regulation 19 of the Commercial Agents Regulations. There remained shades of that submission in his closing submissions. The nature of the argument was this. Regulation 19 prevents the parties to an agreement to which the Commercial Agents Regulations apply from derogating from the provisions of Regulations 17 and 18. But for the provisions of clause 7.1 and clause 7.2 of the Agency Agreement the only way in which a reduction in Mr. Vick's "Territory" or his "Market" could have been achieved was by a termination of the Agency Agreement and the substitution of some other agreement. On the termination of the Agency Agreement the compensation for which Regulation 17(6) and (7) provide would have been payable. Because clause 7.1 and clause 7.2 of the Agency Agreement enable something to be done which otherwise could not be done without terminating the Agency Agreement, without paying the compensation for which Regulation 17 (6) and (7) provide, they derogate from Regulation 17, which is prohibited by Regulation 19. The matter having been raised, Mr. Coppel answered it in his closing submissions.
- The submission of Mr. Segal was, in my judgment, misconceived. Subject to the provisions of the Commercial Agents Regulations, and to any other relevant legislative inhibition upon the freedom of the Company and Mr. Vick to contract, it was entirely up to them to decide what provisions they wished to have in their contract. They were the masters of their own contractual fate. It is in the nature of any contract to confer rights or to impose obligations which would not exist but for the making of the contract. It is not, as it seems to me, a derogation from a right to compensation upon the termination of a contract for the parties to agree to some provision in their contract which does not involve termination, but which, if they had not agreed it, could only have come about by the making of some further agreement. In fact the analysis that a variation to a contract can only come about by the discharge of the original agreement and the making of a new agreement is itself false. A novation does conceptually involve the discharge by agreement of the original agreement and the substitution therefor of a new agreement, usually not between the same parties, or, at least, not all of the same parties. An ordinary contract can, however, be varied by agreement between the parties to it without discharge of the original agreement. Thus, if the Agency Agreement, when made, had not included clause 7.1 and clause 7.2, those provisions could have been added by agreement between Mr. Vick and the Company without discharging the Agency Agreement and substituting for it some other agreement. Moreover, the Company and Mr. Vick could, by simple agreement between them, have agreed a variation to the "Territory" or the "Market" as defined in the Agency Agreement. What the Company could not have done, but for the inclusion of clause 7.1 and clause 7.2 in the Agency Agreement, was unilaterally to modify either the "Territory" or the "Market". But that does not mean, as it seems to me, that by agreeing to those provisions in the first place, as part of the consideration for the making of the Agency Agreement, the parties thereby derogated from the provisions of Regulation 17 of the Commercial Agents Regulations, which, in the light of what they in fact agreed in clause 7.1 and clause 7.2, were irrelevant to the operation of those clauses.
Late payment and non-payment of commissions
- The other matters pleaded in the Particulars of Claim as amounting to repudiatory breaches of the Agency Agreement which entitled Mr. Vick by his letter of 2 April 2004 to treat the Agency Agreement as at an end were the non-payment of commissions to which he contended that he was entitled and the late payment of commissions. As I have recorded, it was admitted in the Amended Defence and Counterclaim that, on occasions, for reasons outside the control of the Company, specifically the late provision of information by wholesalers, payments of commission were made late. The extent of the delays in payment was not much investigated in evidence. Mr. Vick asserted, but without any detail of when particular payments should have been made and when they were in fact made, that payments were habitually made late. When asked about it, the witnesses for the Company accepted only that there could have been delays of a few days from time to time. On the totality of the evidence I am not satisfied that the problem of late payment was perceived by the parties as at all significant. Mr. Vick did not even complain of late payment, rather than non-payment, of commission in his letter dated 2 April 2004.
- So far as was known to Mr. Vick at the time he wrote his letter dated 2 April 2004, the only transactions in relation to which he considered that he was entitled to commission in respect of which commission had not been paid were the two sales to Otter Nurseries for promotional purposes earlier in 2004. The commission to which Mr. Vick considered that he was entitled in respect of those sales was 9% of £ 7000, that is to say, £ 630. In fact, on my findings as to the agreement concerning the increase in commission to 9%, the proper rate of commission, if commission were payable, was the rate agreed in the Agency Agreement, 8%, and thus the sum involved was £ 560. On my findings in relation to what was agreed concerning Charlie's, that sum of £ 560 was the only amount of commission arguably due to Mr. Vick when he wrote his letter dated 2 April 2004 which he had not been paid.
- It is necessary to make findings as to whether Mr. Vick was indeed entitled to commission on the two sales to Otter Nurseries. I have indicated the position of the Company in relation to that alleged entitlement. However, no witness on behalf of the Company said in evidence that it had been specifically agreed with Mr. Vick that he would not be entitled to commission on sales of goods at a promotional price. Rather it just seems to have been thought that, as the Company was not making a profit on the sales, and Mr. Vick had had nothing to do with obtaining them, it was not appropriate for commission on the sales to be paid to him. When Mr. Vick was cross-examined about the matter of the Otter Nurseries sales he did not seem to think that the matter was necessarily straightforward. He said that there had never been any other sales at cost to customers in the "Territory". He told me that he thought that Mr. Nick Page should have arranged things with Mr. Vick before the sales were agreed and that, if Mr. Page had done so, he, Mr. Vick might have agreed to accept a reduced level of commission.
- In my judgment the two relevant sales to Otter Nurseries did, under the express terms of clause 5.1.3 of the Agency Agreement, entitle Mr. Vick to commission. They were sales to customers within the "Territory". Thus he was, and is, entitled, in my judgment to commission on those sales in the sum of £ 560.
- The next question is whether the failure or refusal on the part of the Company to pay that commission of £ 560 amounted to a repudiation of the Agency Agreement.
- In the ordinary way a mere failure or refusal to pay money under a contract does not amount to a repudiatory breach of the contract. It is not, without more, an indication of an intention to abandon or refuse performance of the contract. However, at least in relation to a contract of employment, a deliberate refusal to pay money due to an employee may amount to a repudiatory breach of the contract. The leading authority in this area is the decision of the Court of Appeal in Cantor Fitzgerald International v. Callaghan [1999] 2 All ER 411. In that case the leading judgment, with which Nourse and Tuckey LJJ agreed, was that of Judge LJ. The statement of principle in the case was contained in this passage from the judgment of Judge LJ at page 420F - H of the report:-
"In my judgment the question whether the non-payment of agreed wages, or interference by an employer with a salary package, is or is not fundamental to the continued existence of a contract of employment, depends on the critical distinction to be drawn between an employer's failure to pay, or delay in paying, agreed remuneration, and his deliberate refusal to do so. Where the failure or delay constitutes a breach of contract, depending upon the circumstances, this may represent no more than a temporary fault in the employer 's technology, an accounting error or simple mistake, or illness, or accident, or unexpected events ... If so it would be open to the court to conclude that the breach did not go to the root of the contract. On the other hand if the failure or delay in payment were repeated and persistent, perhaps also unexplained, the court might be driven to conclude that the breach or breaches were indeed repudiatory."
- Under a contract of employment the entire consideration moving from the employer to the employee takes the form of money or money's worth. If there is a deliberate refusal to supply any part of that consideration, it may not be particularly difficult to reach the conclusion that the employer has shown an intention to abandon or refuse performance of the contract. However, it is apparent from the passage which I have quoted from the judgment of Judge LJ that a non-payment which is not deliberate may well not lead to the same conclusion. It is, I think, clear, that in order to reach a conclusion on the facts of any particular case whether a non-payment of a sum due under a contract of employment amounted to a repudiatory breach of the contract on the part of the employer it is necessary to consider all of the circumstances, and in particular, whether there was a dispute about how much was due, how much of what was due was not paid, and the reasons for the non-payment.
- Mr. Segal submitted that I should apply the principles expounded by Judge LJ in relation to a contract of employment by analogy to the circumstances of the present case. Mr. Coppel objected that Mr. Vick was not an employee of the Company and had deliberately structured his relations with the Company so that he should not be.
- In my judgment it would be remarkable if the common law principles applicable to contracts of employment were different from the principles applicable to any other type of contract. It is an area in which there has been a significant amount of statutory intervention, and as a result of that a distinct body of law has arisen concerning contracts of employment, but that rather emphasises the fact that, but for that statutory intervention, the principles are the same. What, I think, is special about a contract of employment in relation to non-payment of money due to an employee possibly amounting to a repudiation of the contract, is the factual circumstance that the most important part of the contractual performance expected of the employer is payment of the agreed remuneration. Thus I find that the principles enunciated by Judge LJ in Cantor Fitzgerald International v. Callaghan are, in principle, applicable to other types of contract, such as the Agency Agreement.
- However, applying those principles to the circumstances of the present case it is plain, in my judgment that neither late payment of commission, so far as it occurred, and non-payment of the commission of £ 560 due, as I find, in respect of the Otter Nurseries sales, amounted to a manifestation on the part of the Company of the abandonment of the Agency Agreement or of its refusal to perform it. I recognise that a refusal to perform does not have to be total, but can be of an important part of the obligations assumed under the contract. Nonetheless, it is clear that the Company did not abandon the Agency Agreement or refuse to perform a significant part of its obligations. On the evidence which I accept, the extent of late payment of commissions due was slight and was the result of the delays on the part of the Company's wholesalers in providing information to enable commission entitlement to be calculated. So far as the Otter Nurseries commission was concerned, Mr. Vick claimed it and the Company did not pay it. However, the circumstances were out of the ordinary and the Company had a rational, if, as I find, incorrect, reason for the stance which it adopted. Mr. Vick in his cross-examination seemed to accept that the situation was not clear-cut. But for the poor state of relations between the parties by the time the claim to commission in respect of the sales to Otter Nurseries was made, the probability is that a solution acceptable to both parties would have been thrashed out in discussion. However that may be, what is decisive, as it seems to me, against the analysis that by refusing to pay a relatively modest sum, in the context of his other commission earnings, to Mr. Vick the Company had shown that it had abandoned, or was refusing to perform, the Agency Agreement is that in all other relevant respects the Company continued to perform the Agency Agreement after the time the issue about Otter Nurseries arose until the Agency Agreement came to an end in the circumstances to which I am about to turn.
The effect of the letter dated 2 April 2004
- For the purposes of the trial before me Mr. Segal formulated a list of issues. Of those the first was did Mr. Vick terminate his agency by his letter of 2 April 2004 and/or what he said to Mr. Barry Page on 6 April 2004. At various points in his submissions Mr. Coppel described the letter of 2 April 2004 as a letter of resignation, but that description concealed, rather than illuminated, as it seems to me, what the real issues were. The real issues were whether, by that letter, Mr. Vick purported to accept some repudiation on the part of the Company of the Agency Agreement, and whether he made it plain that he was himself refusing to perform the Agency Agreement further. His case was that he did not do either of those things, and that the letter was simply an intimation on his part of a desire to make a claim for compensation in respect of the reduction in his "Territory" and his "Market" effected by Mr. Barry Page's letter of 30 January 2004. The Company's case was that upon proper construction of the letter Mr. Vick was indicating that he regarded the Agency Agreement as at an end.
- In support of his submission that the letter was not a purported acceptance of a repudiation on the part of the Company, Mr. Segal contended that the letter was ambiguous and was treated as such by the Company in seeking clarification of it, first by Mr. Barry Page in his conversation with Mr. Vick on 6 April 2004 and then by the terms of his letter of 7 April 2004. Mr. Segal made reference to a decision of the Court of Appeal, Sovereign House Security Services Ltd. v. Savage [1989] IRLR 115, from which he sought to draw an analogy. However, that was a case of an equivocal verbal exchange in the heat of the moment, and it did not seem to me that any assistance was to be derived from it for the purposes of the present case.
- Mr. Coppel submitted that the terms of the letter were clear and that the letter could only be read as Mr. Vick resigning from his agency in response to what he claimed were breaches of the Agency Agreement on the part of the Company.
- In my judgment it is plain that by the letter dated 2 April 2004 Mr. Vick was purporting to accept the alleged repudiatory breaches of the Agency Agreement set out in the letter as bringing the agreement to an end. Five alleged breaches were set out in the letter, albeit all described in very general terms and without any particulars of what was being complained of. The effect of those alleged breaches was said to be, "You have made this agency untenable and unworkable. You are, therefore, depriving me of earning a living and fundamentally breaching my contract." That is the language of assertion of repudiatory breaches. As to what was to follow from the assertion that there had been such breaches, it was that Mr. Vick was going to take action against the Company "for the loss of the whole of the agency". The whole of the agency could only have been lost if the Agency Agreement were at an end. Any doubt that that was the position Mr. Vick was taking was removed by the threat that his solicitors had been instructed to proceed with legal action "If I have not heard from you with the offer of full payment by 15th April 2004". Full payment for loss of the whole of the agency again could only have been due if the Agency Agreement had come to an end.
- I have already indicated my finding that the Company had not in fact committed any repudiatory breaches of the Agency Agreement before Mr. Vick wrote his letter dated 2 April 2004. By the letter he was stating that he was not going to offer further performance himself of the Agency Agreement - his position was that "this agency [is] untenable and unworkable". In the circumstances he was himself refusing further performance of the agreement and thereby repudiating it.
Did the Company accept the repudiation of the Agency Agreement on the part of Mr. Vick?
- In the list of issues which Mr. Segal prepared it was assumed, by paragraph 7, that if I found, as I have, that Mr. Vick purported by his letter of 2 April 2004 to accept repudiatory breaches of the Agency Agreement on the part of the Company, and, if I found, as I have, that there were no repudiatory breaches on the part of the Company, the Company was successful in its defence of Mr. Vick's claim for compensation for termination of the Agency Agreement. In fact, as it seems to me, that analysis leaves out a necessary step before the stated conclusion could be reached. The indication on the part of Mr. Vick that he declined further performance of the Agency Agreement did not, of and by itself, bring the Agency Agreement to an end. It gave the Company an option. It could either accept the repudiation and treat the Agency Agreement as at an end, or it could affirm the agreement and seek to hold Mr. Vick to it. In fact, as it seems to me, the Company had little option but to accept the repudiation on the part of Mr. Vick, and did so. On my findings Mr. Vick, during his telephone conversation with Mr. Barry Page on 6 April 2004, indicated clearly that he considered that relations between him and the Company were at an end. The effect of Mr. Barry Page's letter dated 7 April 2004 to Mr. Vick was, as it seems to me, to accept that situation, unless Mr. Vick spoke to him or e-mailed him immediately on receipt of the letter. That Mr. Vick did not do, and the Agency Agreement, in my judgment, then came to an end. Mr. Segal in his closing submissions contended that the analysis which I have just set out was not contended for on behalf of the Company. So far as Mr. Coppel's closing submissions was concerned, that was correct, no doubt in the light of the position indicated in paragraph 7 of the list of issues. However, it was exactly the analysis contended for in paragraph 15 of the Amended Defence and Counterclaim.
The consequences of the ending of the Agency Agreement
- It was common ground that, if I found that Mr. Vick repudiated the Agency Agreement and thereby brought the agreement to an end, he was entitled neither to damages at common law nor to compensation under the Commercial Agents Regulations. So far as the latter was concerned, in Bell Electric Ltd v. Aweco Appliance Systems GmbH & Co. KG [2002] EWHC 872 (QB) Mr. Justice Elias had to consider the effect of Regulation 18 of the Commercial Agents Regulations in a situation in which a commercial agent terminated his agreement with his principal in circumstances in which he was not entitled to treat the principal as having repudiated the agreement at common law. That, of course, is this case, on my findings. The learned Judge's consideration of the issue was:-
"52. Mr. Coppel submits that in this case the agency contract was terminated by his client, the commercial agent, who was justified in so doing by circumstances attributable to the principal, within the meaning of reg. 18(b)(i). He submits that even if the claimant had acted precipitately so as to preclude himself from being able to recover damages at common law, nonetheless, looking at the matter as one of substance, the claimant had been justified in bringing the contract to an end because of the failure by the defendant to pay commission over such a lengthy period of time. Whatever technical rules might exclude his entitlement to recover under English law, they should not affect his rights under the regulations.
53. Mr. Tolley, for the defendant, submitted that the dual effect of regulation 16 and 18, when read together, is that when determining whether a termination is justified under 18(b)(i), it is necessary to apply precisely the same principles as operate at common law. In other words, if the agent is not justified in terminating the contract at common law, because he has affirmed the contract and made an election which leaves him only with his right to damages, then he cannot be any more justified within the meaning of reg. 18(b)(i) to terminate the contract pursuant to the regulations.
54. The drafting of the regulations gives no clear answer as to which construction is correct. Reg 18(a) in terms refers to the case where the principal is entitled to terminate the contract and says that such termination is justified if it would be permitted pursuant to regulation 16. In fact, it seems to me that an agency contract would never be terminated pursuant to regulation 16, since that does not provide any right to terminate which did not otherwise exist. On the contrary, all that provision is doing is preserving such existing common law rules as permit the contract immediately to be terminated because of the failure of the defaulting party to carry out his obligation under the contract. I take it that regulation 18 (a)(i) is intending simply to indicate that there will be no right to compensation where the principal has terminated the agency contract in circumstances where at common law he would have been entitled to do so because of the agent's failure to carry out his side of the bargain. One might have thought that 18(b) would be intended to preserve the right to compensation in precisely the same circumstances. Surprisingly, however, it does not in terms make reference to regulation 16 in the way in which reg 18(a) does. The reason for this may be that regulation 18(b)(ii) provides for justified termination for reasons which do not involve breaches by the principal at all. That would not have prevented some reference to regulation 16 in 18(b)(i), however, and in the circumstances that would have clarified the position. Nevertheless, in my judgment the better view is that regulations 18(a) and 18(b)(i) ought to be seen as the reverse sides of the same coin. In other words, the compensation is not payable if the principal terminates in circumstances which would be justifiable at common law because of the agent's conduct; but on the other hand it is payable if the commercial agent terminates in circumstances which are justifiable at common law because of the conduct of the principal. ..."
- I respectfully agree with the analysis of Mr. Justice Elias and consider that the agreement of the parties on the point as to no compensation being payable in the situation with which I am concerned is sound.
The Company's alternative case
- In the light of my findings it is not strictly necessary to deal with the Company's alternative case that, if the Agency Agreement was brought to an end by it by the writing by Mr. Barry Page of his letter of 15 April 2004, not having accepted any antecedent repudiation on the part of Mr. Vick, it was entitled to terminate by reason of the repudiatory breaches of the Agency Agreement alleged in paragraph 23 of the Amended Defence and Counterclaim. However, as the matters relevant to this alternative case were fully argued, it is convenient to indicate my findings in respect of it.
- Mr. Segal made a number of points in relation to the alternative case of the Company. The first was that, in effect, it was not open to the Company at all, because none of the reasons set out in paragraph 23 of the Amended Defence and Counterclaim was mentioned in the letter of 15 April 2004 and they were all known to the Company as at 15 April 2004. He submitted that a party was only at liberty to seek to justify terminating a contract by reference to reasons not stated at the time of the termination if the facts as to those reasons were not known to the party terminating at the time of the termination. He contended, without taking me to it, that that submission was supported by the decision in the well-known case of Boston Deep Sea Fishing and Ice Co. v. Ansell (1888) 39 Ch D 339. I reject that submission. As it seems to me, the correct principle is that stated in Chitty on Contracts 29th edition, paragraph 24-014:-
"The general rule is well established that, if a party refuses to perform a contract, giving therefore a wrong or inadequate reason or no reason at all, he may yet justify his refusal if there were at the time facts in existence which would have provided a good reason, even if he did not know of them at the time of his refusal."
- My attention was drawn to that passage by Mr. Coppel.
- A more substantial objection on the part of Mr. Segal was that the Company could not rely, as justifying termination of the Agency Agreement, upon breaches of the agreement which occurred prior to some affirmation of the agreement on the part of the Company. That submission I accept as sound in law. I do not think that Mr. Coppel contested it.
- In the circumstances of the present case, Mr. Segal submitted that the Company had certainly affirmed the Agency Agreement when it sought to use its powers under clause 7.1 and clause 7.2 on 30 January 2004 and thus could not rely upon any breaches of the agreement on the part of Mr. Vick which occurred prior to that date. Moreover, Mr. Segal submitted that the Company was continuing to affirm the contract right up to 2 April 2004.
- I do not think that it was in dispute that the Company could not rely upon any breach of the Agency Agreement of which it had knowledge, if, after it possessed the requisite knowledge, it affirmed the agreement. At all events I accept that such is the correct position in law. The last letter written on behalf of the Company to Mr. Vick before he wrote his letter of 2 April 2004 was Mr. Barry Page's letter of 29 March 2004. It was plain, as it seems to me, from the terms of that letter that the Company was in it still treating the Agency Agreement as being in place and seeking to persuade Mr. Vick to perform his obligations under it. By so doing, in my judgment the Company was affirming the Agency Agreement.
- All bar one of the matters pleaded in paragraph 23 of the Amended Defence and Counterclaim were well-known to the Company long before 29 March 2004. The issue of Mr. Vick's inadequacies in respect of merchandising had been canvassed over many months. The fall-off in his TOEWs was also well-known. The customers who no longer wished to be dealt with by Mr. Vick had been identified before the letter of 30 January 2004 was written, as had his disinclination to use the iPAQ with which he had been issued. Mr. Vick's obstructive attitude had been manifested since at least October 2003. The only area in which, on the evidence, there was any lack of knowledge, as at 29 March 2004, on the part of the Company of matters relevant to the alleged repudiatory breaches of the Agency Agreement pleaded in paragraph 23 of the Amended Defence and Counterclaim was as to the agencies which Mr. Vick held for other companies. Even in relation to that, it was just one agency, that for DLF Trifolium, of which Mr. Pyrah was unaware. Failure to disclose that agency does not seem to me to have been a repudiatory breach of the Agency Agreement. It was not an agency for a competitor of the Company. Moreover, Mr. Vick had not formally disclosed any of his other agencies, but the Company had made no complaint when it found out about them. The failure to disclose does not seem to me to indicate an abandonment of the Agency Agreement on the part of Mr. Vick or a refusal on his part to perform important obligations under it.
- In the result, had it been material, I should have found that the Company's alternative case, that it was justified in terminating the Agency Agreement on account of breaches of that agreement on the part of Mr. Vick, failed.
The assessment of compensation for loss of an agency
- In the circumstances it is not necessary for me to address the question of the assessment of compensation for loss of Mr. Vick's agency. However, I was told that this case is the first case in which the issue of how such compensation should be assessed has arisen since the decision of the Court of Appeal in Lonsdale v. Howard & Hallam Ltd. [2006] ICR 584. Moreover, no expert evidence in relation to the assessment was put before me. I was just invited by Mr. Segal to do my best in the light of the guidance of the Court of Appeal in Lonsdale v. Howard & Hallam Ltd As I have come to the conclusion that, had it been appropriate for me to assess compensation in this case, I should have assessed it at the nominal sum of £ 2, I think that it is convenient, for the assistance of litigants in other cases, to explain why.
- If and insofar as it was appropriate to assess damages at common law for wrongful termination of the Agency Agreement, the exercise would essentially involve assessing the income which, but for the termination of the agreement the agency was likely to produce per month, per annum, or as the case might be, deducting the expenses of producing that income, and multiplying the relevant net income by the period considered as that over which the agency would have continued but for the premature termination. In principle that exercise could be approached on a loss of income basis or on a capitalised basis. The latter would, in essence, be an assessment of the value of the goodwill of the agency business. In any event, in the present case, the calculation would have been complicated by the fact that Mr. Vick acted as agent for a number of principals and continued to act for those others. It may be that, as a result of losing the agency for the Company, he would have been able to take on a further agency or agencies, or have been able to devote more time to his existing other agencies and thereby generate more income from them. If any of these was a possibility, it would probably have had to have been taken into account in the assessment of damages. However, what is certain is that the Court would not have been able to undertake the assessment of damages without evidence of some sort, and, in the circumstances of this case, expert evidence as to future income potential, likely future expenses, the likely duration of the agency and so forth. None of that evidence was led.
- To an English lawyer, the language of Regulation 17(7) of the Commercial Agents Regulations is curious. It deems damage to have occurred for the purposes of Commercial Agents Regulations in one of two alternative scenarios, namely circumstances which:-
"(a) deprive the commercial agent of the commission which proper performance of the agency contract would have procured for him whilst providing his principal with substantial benefits linked to the activities of the commercial agent; or
(b) have not enabled the commercial agent to amortize the costs and expenses that he had incurred in the performance of the agency contract on the advice of his principal."
- As Regulation 17(7) deems damage to have occurred in the circumstances there set out "For the purpose of these regulations ", it would seem that it is this deemed damage to which the entitlement to compensation in Regulation 17(6) relates. The compensatable damage is thus either loss of the commission which proper performance of the agency contract would have procured or unamortized costs incurred on the advice of the principal. However, the first sort of compensatable damage appears from Regulation 17(7) only to be payable if and to the extent that the principal will be provided with "substantial benefits linked to the activities of the commercial agent", so that if there are no such substantial benefits, there is no compensatable damage, while if there are substantial benefits, no matter how large or small, full compensation for loss of commission is payable. The second type of compensatable damage seems, in effect, to be that which would have been appropriate if the principal had warranted to the commercial agent that he would amortize the costs which he was advised to incur. All of this seems very alien and not to possess any obvious logical foundation.
- In Lonsdale v. Howard & Hallam Ltd. the Court of Appeal had to grapple with the correct approach to the assessment of compensation under Regulation 17 of the Commercial Agents Regulations. The leading judgment was that of Moore-Bick LJ. The other members of the Court of Appeal, Jacob and Hallett LJJ, agreed with the judgment of Moore-Bick LJ. For present purposes the material parts of the judgment of Moore-Bick LJ were these:-
"27. It is convenient to begin the discussion by considering the concept of compensation. Article 17(3) of the Directive and regulation 17(6) provide that the agent shall be entitled to compensation for the damage he suffers as a result of the termination of his relationship with his principal. On the face of it, therefore, they give the agent a right to receive compensation for any damage he has suffered; they do not simply provide for him to receive payment of an amount that is fair and reasonable having regard to all the circumstances of the case. This can be compared with the position which applies in relation to an indemnity. In that case article 17(2) of the Directive and regulation 17(3) specifically provide that the agent shall be entitled to an indemnity, limited in amount, if and to the extent that the payment is equitable having regard to all the circumstances of the case. No comparable provision is made in relation to payment of compensation, however, from which I think one can fairly conclude that the distinction is important because it goes to the heart of the task which the court is required to undertake when it has to assess how much the agent is entitled to receive by way of compensation in any given case.
28. To an English lawyer the expression "the damage he suffers as a result of the termination of his relations with his principal" is redolent of the language of breach of duty, but reference to other parts of the Regulations makes it clear that regulation 17(6) must have been intended to extend beyond the situation in which the agency is terminated by an unlawful act on the part of the principal. For example, paragraph (8) expressly provides for the payment of compensation in cases where the agency is terminated by the death of the agent and the effect of regulation 18(b) is that the agent's entitlement to compensation is not excluded in cases where he has terminated the agency himself on the grounds of age, infirmity or illness which prevents him from continuing his activities. This makes it necessary to ask what damage (using that word in its widest sense) the agent can be said to have suffered in those circumstances. One answer to the question is that he has suffered a loss of the goodwill attaching to the agency business that he would have enjoyed if his relationship with the principal had not come to an end. These provisions therefore support the conclusion that the purpose of the regulation is not to provide compensation for damage caused by a breach of duty (for which a claim could be made outside the terms of the Regulations in any event), but to provide compensation for the loss of goodwill for which a claim would not otherwise arise. In my view that conclusion is consistent with paragraph (7), both limbs of which contemplate that the agency has built up a fund of goodwill which, in the situation described in sub paragraph (i), will enable the principal to benefit from it through profits generated in the future or which, in the situation described in sub paragraph (ii), could have been expected to enable the agent to generate enough commission to amortise certain costs incurred in setting up the business. It is reinforced by regulation 18(c) which deprives the agent of any right to compensation if he transfers the agency to another person. In such a case it is reasonable to assume that he will have recovered any value attaching to the business as part of any payment he receives for the transfer. This view is also consistent with the description in the Commission's report of the philosophy which underlies the French law from which the Directive was apparently derived.
29. However, I do not think that it would be right to regard the loss of goodwill as the only damage in respect of which the agent may be entitled to receive compensation. Under regulation 17(7)(a) the agent is deemed to suffer damage, and must therefore be entitled to recover compensation, when the agency is terminated in circumstances which deprive him of the commission which proper performance of the contract would have enabled him to earn while providing the principal with substantial benefits as a result of his activities. In such a case the value of the business at the date of termination ought to reflect the agent's potential future earnings which are the rewards he was entitled to receive in respect of any benefit that his principal might obtain from his activities. In this type of situation, therefore, the agent should be adequately compensated if he is paid for the value at the date of termination of the business he has built up. However, the position envisaged in sub paragraph (b) of regulation 17(7) is rather different. If the agency is terminated in circumstances where the agent has not been able to amortise expenses he had incurred on the advice of the principal in setting up the agency, the value attaching to the business may or may not provide sufficient compensation. I see no reason to restrict the meaning of "damage" in those circumstances to loss of goodwill. In my judgment the agent is entitled to recover whatever loss he can show he has suffered which in a case of this kind might consist in whole or in part of the amount of the unamortised expenses. "
The learned Lord Justice then considered a number of authorities and continued:-
"38. With the exception of Duffen v. Frabo SpA [2000] Eu LR 167 and P J Pipe & Valve Co. Ltd. v. Audco India Ltd [2005] EWHC 1904 (QB) these decisions all point to the same conclusion, namely that the damage suffered by the agent as a result of the termination of his relations with his principal is normally the loss of the agency business, including whatever goodwill attaches to it. In my judgment that is the correct interpretation of regulation 17(6) and therefore the compensation which the agent is entitled to receive in such cases should reflect the value of the business at the date of the termination. Once that is recognised the task of assessing the amount of compensation in any given case is made easier because the court can concentrate on the facts and matters that have a bearing on the value of the business to the exclusion of those that do not. For example, at one point Mr. Moser sought to argue that compensation could, in an appropriate case, be assessed by reference to the benefit that the principal had obtained from the agent's activities prior to termination or to the value of the agency business at the date of termination, or even to both. However, if one is seeking to put a value on the agency business itself it is difficult to see what relevance can be attached to the benefits obtained by the principal prior to its termination. If the court had power to award the agent whatever amount it considered to be fair and reasonable in all the circumstances of the case as a form of severance payment, there might be something to be said for taking into account the duration and quality of the agent's performance as well as any enduring benefits to the principal, but in my view that is not what regulation 17(6) provides for.
...
44. It is of course true that neither Directive 86/653 nor the 1993 Regulations make it a precondition to the right of an agent to receive compensation that the principal should continue in business, but I do not think it follows that it is a matter that can be ignored altogether when it comes to assessing compensation. Although I would agree that the value of the rupture of the agency relationship is the source and justification of compensation, in the sense that the damage suffered by the agent is to be assessed by reference to the value of the business of which he is deprived by the termination of the relationship, I do not think that means that the Directive or the Regulations require one to shut one's eyes to what was likely to happen in the future when it comes to assessing compensation.
...
48. However, there is at least one type of case in which it is necessary to adopt a purposive approach in order to give effect to the intention of the Directive, namely, where the agency had a limited life and expired by effluxion of time. In that situation it might be said that at the termination of the relationship the agent had nothing he could sell and that no goodwill attached to the business. However, it is plain, as this court observed in Light v. Ty Europe Ltd. [2003] Eu LR 858, that the Directive is intended to provide a remedy in such cases. In my view the explanation lies in the fact that, although the agent had nothing he could sell, he had none the less built up a business to which goodwill attached in the ordinary way and which, if the relationship had continued, would have continued to produce profits in the form of commission. When the agency expires the benefit of that goodwill passes to the principal and if he is continuing in business is likely to be of value to him. As I see it, one purpose of the Directive and the Regulations is to enable the agent to obtain the value of the goodwill which he has built up and which would otherwise pass to the principal free of charge."
The learned Lord Justice then came to the facts of the case before him. He recorded that before the trial judge it had been agreed that the damage in respect of which the claimant was entitled to receive compensation was the loss of the goodwill attaching to his agency. He continued:-
"55. The judge then noted that neither side had put before him any evidence of how commercial goodwill is conventionally valued or any evidence of its value in this particular case. He therefore proceeded to make an assessment by reference to such material as was before him which included evidence of the amount provided by the defendant of the amount of commission that Mr. Lonsdale had earned in each of the six calendar years immediately preceding the termination of the agency in June 2003....
The learned Lord Justice then set out other pieces of evidence before recording the conclusion of the trial judge that compensation of £ 5000 should be awarded.
57. Mr. Moser challenged the judge's decision both on the grounds that he had failed to apply the two years' commission guideline and on the grounds that he had failed to give sufficient weight to the duration of the agency (in this case 13% years) or for the fact that Mr. Lonsdale had performed satisfactorily. However, for the reasons I have already given, I do not think that either of those criticisms is well founded. I am unable to accept that there is or should be any guideline of the kind suggested by Mr. Moser; nor do I think that the duration of the agency or the quality of the agent's performance are necessarily important factors. Whatever the period of the agency in this case, and however well Mr. Lonsdale had performed, nothing could alter the fact that Howard & Hallam's business was in decline and with it the prospects for the agency. The judge was placed in a difficult position in this case because he was provided with very little material on which to base his decision and the valuation of commercial goodwill is not a matter with which he could be expected to be familiar. In most cases the court is likely to benefit from having the assistance of an expert witness (ideally a single joint expert) who can give evidence about the appropriate way of valuing a business of this kind, but I should not wish to encourage the view that that will always be necessary since in some cases the amount in issue will be too small to make that a sensible or proportionate course. If the parties cannot reach agreement it may be sufficient to place all the material before the court and invite the judge to make whatever he considers to be the appropriate order, as the parties did in this case. In such a case the judge is entitled to apply his common sense and adopt a broad brush approach."
- What emerges from the judgement of Moore-Bick LJ in Lonsdale v. Howard & Hallam Ltd., in my judgment, is that in assessing compensation for the purposes of Regulation 17(6) and (7) of the Commercial Agents Regulations the primary focus of attention should be the value of the goodwill of the agency at the date of termination. However, in some circumstances it may also be appropriate to have regard to unamortised expenses incurred on the advice of the principal. It is unclear whether Moore-Bick LJ envisaged that a claim in respect of unamortised expenses should be in addition to a claim based on loss of goodwill, or, as Regulation 17(7) seemed to contemplate, an alternative claim, presumably in a case in which the unamortised expenses were greater than the value of the goodwill. However, that was not an issue in the present case. The valuation of the loss of goodwill would seem to be essentially the same exercise as the assessment of damages for wrongful repudiation of an agency agreement, without the need to consider the question of the steps which the former agent had taken, or could reasonably have been expected to take, to mitigate his loss.
- It is plain, as it seems to me, that Moore-Bick LJ contemplated that in the ordinary case there should be proper evidence, probably expert evidence, of the value of the lost goodwill of the agent. As the learned Lord Justice pointed out, a judge could not be expected to be familiar with the valuation of commercial goodwill. I would add a further cautionary note. Judges with experience of how commercial goodwill can be valued should not seek to apply that experience in a case of this kind. The reasons are that, unless, as is unlikely, a judge has professional qualifications as a valuer, there is a real risk that his understanding or recollection of principles which he has encountered in previous cases are erroneous, and in any event it is unjust for a judge to seek to apply principles without sharing those principles and the proposed application of them with the parties. Yet in the course of sharing the judge's knowledge of the relevant principles and his proposed application of them with the parties he may appear to adopt a more participatory role in the process than is appropriate for the judge of the matters in issue in the case. The basic rule has to be, in the ordinary case, that the assessment of compensation for loss of the goodwill of an agency depends upon expert evidence. I do not understand Moore-Bick LJ to have been suggesting anything different. The only situation in which the learned Lord Justice seemed to envisage that an assessment might be made other than with the benefit of expert evidence was if the amount at stake on any view was so small that the cost of obtaining expert evidence would be disproportionate and the parties agreed that the judge should make the best assessment he could without the benefit of such evidence. That was the situation in the case before him, which the trial judge found was worth only £ 5000. It is unlikely to be the situation in any case in which there is a claim worth pursuing. It was not the situation in the case before me.
- What was being claimed in this case was a substantial sum, put at as much as £ 90,000 or £ 100,000. A claim of that amount merits expert evidence to justify it. Without expert evidence I do not know how, in any sort of detail, to approach the assessment of the value of the goodwill of Mr. Vick's agency for the Company. The past earnings of Mr. Vick from his agency could be proved as matters of fact. However, I would imagine that in the valuation of the goodwill of the agency anticipated future trends in earnings are more important than past earnings unless, as was not the case in respect of Mr. Vick's agency, the earnings were historically flat and likely to remain so. As the concept underlying the goodwill of a business is what someone is prepared to pay for the opportunity to carry it on, I assume that the price someone would be prepared to pay would take into account the costs of earning the income which the business is anticipated to produce. Where there is a single agency, obviously all costs incurred in the business are referable to that agency and what historically they have been can be established as a matter of evidence. However, Mr. Vick had a number of agencies, and I imagine that the costs which he incurred would need to be apportioned between them in some way. How that allocation should be made was not investigated in evidence. How a purchaser of the agency would take account of the costs associated with it, I do not know. It seems probable that a purchaser of the goodwill of Mr. Vick's agency would make some assumption about for how long the anticipated earnings from the agency would continue. What assumption I do not know, nor do I know how that issue might be approached. I imagine that the assumption is likely to depend upon how secure the income from the agency was perceived to be. It seems likely that, in valuing the goodwill of Mr. Vick's agency, a purchaser would apply some discount to the result of multiplying an annual figure of anticipated net profits by a number of years considered to be appropriate to assess the net present value of future profits. Whether that would be so, and, if so, what the discount would be, I do not know. I reject absolutely the suggestion of Mr. Segal on behalf of Mr. Vick that a litigant is entitled in any circumstances to put a Court in a position of having to make what is euphemistically described as "the best estimate it can" - in other words, to guess. In all cases, as it seems to me, it is for a litigant to prove his case, on damages as much as on any other aspect, and, if he does not, he simply fails. Thus, had it been necessary to address the issue of compensation for loss of Mr. Vick's agency in this case, I should have found that he had failed to prove any substantial loss and was simply entitled to nominal damages for wrongful repudiation of the Agency Agreement.
Compensation for failure to give notice
- There was a pleaded claim on behalf of Mr. Vick for compensation from the Company for terminating the Agency Agreement without notice. How the claim was put was that the Company could lawfully have determined the Agency Agreement by giving three months notice and, as it had not given that notice, Mr. Vick was entitled to be compensated for the earnings which he would have made in the notice period, in addition to the claim for compensation for loss of the agency altogether. This claim strikes me as misconceived. The error underlying it seems to originate in the fact that in a case in which an agency agreement was terminated by notice, but the provisions of Regulation 18 of the Commercial Agents Regulations did not apply, the agent would still be entitled to the compensation for which Regulation 17(6) provided. That analysis, which is correct, seems to have been misapplied to result in the conclusion that if no notice were given, and there was a claim for compensation under Regulation 17(6), there was in addition a claim for loss of earnings in the notice period which should have been allowed. The true position, as it seems to me, in a case in which an agency agreement has been wrongfully terminated without notice, is that the valuation of the amount of the goodwill payable as compensation under Regulation 17(6) includes, so far as appropriate (and it may well be that it is not appropriate to adjust the calculation in any way), the period which would otherwise have been covered by a notice.
Claim for commission under Regulation 8
- There was a pleaded claim for commission on behalf of Mr. Vick under Regulation 8 of the Commercial Agents Regulations. No evidence was led in relation to the claim. In the list of issues to which I have referred, as modified by the end of the trial, the only matters which I was asked to determine were Mr. Vick's claims in respect of commission on the sales to Otter Nurseries which I have mentioned and the sales to Charlie's. I have indicated my findings on those claims. Mr. Coppel in his closing submissions asked me to determine what would be a reasonable period after the Agency Agreement was terminated for the purposes of Regulation 8(a). He submitted that the period in question should be found to be that which the parties had agreed in clause 5.2.1 of the Agency Agreement, namely one month after the termination of the Agency Agreement. He submitted that there was no provision of the Commercial Agents Regulations which inhibited the making of an agreement between the parties about what should be a reasonable period. I accept those submissions. I therefore find that the appropriate period is that of one month from the termination of the Agency Agreement, on my findings a period expiring on 8 May 2004.
The Counterclaims
- Shortly before the commencement of the trial two counterclaims were added to the Defence by the Amended Defence and Counterclaim which the parties agreed might be served and for which I gave formal permission at the outset of the trial. One of the counterclaims was not in dispute. It was for a sum of £ 2,431.40 in respect of commissions overpaid to Mr. Vick in relation to Wyevale. As I have already explained, it had been agreed that he should be paid a commission of 5% on sales to Wyevale, but for two periods he was paid in error at 9%. The other counterclaim was in respect of overpayments of commission generally between October 2002 and March 2004. As from October 2002 accurate returns of sales by wholesalers to customers in the "Territory" were available to the Company and the commission paid to Mr. Vick was based on those returns. That much was not in dispute. Nor was it in dispute, as I understood it, that, notwithstanding the availability of the accurate returns, Mr. Vick continued to be paid commission on all sales at 9%. I think that it was also agreed that the difference between 9% and 8% on the relevant commissions was £ 7,146.42. The issue between the parties was whether Mr. Vick had been paid at 9% from October 2002 by mistake, as was the case for the Company, based on the agreement between Mr. Nick Page and Mr. Vick which I have found proved, or whether Mr. Vick was entitled, as he contended, to be paid at a rate of 9% in any event. In the light of what was agreed and my findings on what was in dispute, the counterclaims both succeed in full in the aggregate total of £ 9,577.82.
Set-off
- In the Amended Defence and Counterclaim there was added a plea that if the Company was found liable to Mr. Vick for any amount it would seek to set off against its liability the amounts found due to it in respect of its counterclaims. In the light of my findings the sum to be set-off against the sum of £ 9,577.82 which I have found to be the amount due to the Company in respect of its counterclaims is £ 560. The net balance due in favour of the Company is £ 9,017.82
Conclusion
- The claims of Mr. Vick all fail and are dismissed. There will be judgment for the Company in the sum of £ 9,017.82, together with interest, as to which I will hear Counsel.
