Light and Others v Ty Europe Ltd
| Jurisdiction | England & Wales |
| Judge | LORD JUSTICE WARD,Lord Justice Tuckey,LORD JUSTICE TUCKEY,MR JUSTICE LIGHTMAN |
| Judgment Date | 25 July 2003 |
| Neutral Citation | [2003] EWCA Civ 1238 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 July 2003 |
| Docket Number | A3/2003/0275 |
[2003] EWCA Civ 1238
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
LEEDS DISTRICT REGISTRY
(His Honour Judge McGonigal)
Royal Courts of Justice
Strand
London WC2
Lord Justice Ward
Lord Justice Tuckey and
Mr Justice Lightman
A3/2003/0275
Mr Conor Quigley QC and Mr J Dhillon (instructed by Messrs Eversheds, London EC4) appeared on behalf of the Appellant Defendant.
Mr John Hand and Mr Oliver Segal (instructed by Messrs C W Harwood & Co, Leeds) appeared on behalf of the Respondent Claimants.
I shall ask Lord Justice Tuckey to deliver the first judgment.
1.A commercial agent for the purposes of The Commercial Agents (Council Directive) Regulations 1993 means:
"a self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (the 'principal') …" (Regulation 2(1)).
Regulation 17 entitles a commercial agent to compensation from the principal "after termination of the agency contract".
2.The first question which arises on this appeal is whether a sub-agent of the principal, who therefore has no contract with him, has a right to compensation against the principal. The second question is whether an agency contract for a fixed term "terminates" at the end of the term so as to give the agent a right to compensation.
3.These questions arise on appeal from a judgment on preliminary issues of Judge McGonigal given in the Leeds Mercantile Court. He answered both questions in the affirmative but granted permission to appeal.
4.Ty Inc design and manufacture cuddly toys. Before 1 June 1997 its UK distributor was Ty UK Ltd, a company partly owned by Mr Swallow. Ty Inc became dissatisfied with their distributor but could only persuade Ty UK to relinquish its rights by, among other things, giving Mr Swallow sole selling rights for Ty products in the UK for three years from 1 June 1997. To this end Ty UK was liquidated and a new Ty company, Ty Europe Ltd, entered into a selling rights agreement with a new Swallow company, Swallow Corporate Sales Ltd (SCS), under which SCS would sell Ty products for Ty Europe on commission (usually 15%). This agreement required SCS to promote and sell Ty products on terms and conditions and at prices established by Ty Europe and gave Ty Europe an absolute right to decline or cancel orders. The selling rights agreement was not renewed at the end of the three year term and SCS dropped out of the picture. It has apparently ceased trading and has no assets.
5.Some of the nine claimants worked for Ty UK as self-employed sales agents before 1 June 1997 under contracts which could be terminated on notice. With effect from 1 June 1997 these claimants entered into sales agency agreements with SCS. These agreements were superseded by ones which took effect from 1 June 1998. Each of the claimants entered into one or other or both of these agreements which were on similar terms. The earlier agreement under the heading "Termination" provided that it would "remain in effect until" SCS ceased to be the sole agent; the later "until 31 May 2000".
6.The sales agency agreements recited that SCS was the sole authorised agent of Ty Europe for the sale of Ty products and that those products would be the items supplied to SCS by Ty Europe from time to time. The agent was to make every reasonable effort to promote and sell the products in his territory on terms and conditions and at prices established by SCS and be paid commission (usually 10%).
7.The judge found that when SCS came on the scene the sales agents were led to believe that it was simply a sales administration company. It was run initially from Mr Swallow's garage and called itself the Ty Sales Office. Mr Swallow described himself as Ty Europe's Sales Manager. Very little changed on the ground except that the order forms which the sales agents used were on Ty Europe as opposed to Ty UK paper and their commission was paid by SCS. The sales agents said (and the retailers to whom they sold believed) that they were now representing Ty Europe. The products were delivered directly by Ty Europe to the retailers who paid Ty Europe for them. Most queries relating to the sales were dealt with directly between the sales agents and Ty Europe.
8.The sales agents, including all but one of the claimants, were offered employment as sales representatives by Ty Europe from 1 June 2000, but the claimants declined such offers and started these proceedings against Ty Europe (the appellant) for compensation under the Regulations the following year.
9.The preliminary issues which the judge tried were:
1.In respect of the claimants' agencies (the subject of these proceedings) was the defendant the claimants' "principal" and were the claimants the defendant's agents within the meaning of the Regulations ("the sub-agency question").
2.Given that the agency agreements between the parties were entered into for a period of two years and that they expired on 31 May 2000, is compensation payable in principle pursuant to Regulation 17 of the Regulations where the agents' agreements pursuant to their express terms expired automatically at the end of that two year period ("the effluxion of time question").
10.Before the judge the appellant submitted that the claimants were not its commercial agents because their authority only came from SCS. Authority for the purpose of the Regulations could only be derived from an agency contract with the principal and there was no such contract. In rejecting these arguments the judge said:
"26.A statement that someone has authority to act for another describes, therefore, a factual state of affairs which results from a variety of legal relationships or from factual circumstances. Authority is often, but not always, derived from a contract. It is not necessary for an agent to have authority to act for a principal that there is a contract directly between that agent and the principal. Authority can be delegated to a sub-agent by an agent of the principal with the express or implied consent of the principal. Such assent may be implied where it is reasonable to presume from the facts that the principal and the agent intended that the agent should have authority to delegate his authority to a sub-agent.
27.I find as a fact that the Claimants had continuing authority to negotiate the sale of Ty products on behalf of Ty Europe. Whether they derived that continuing authority from the acts of Ty Europe accepting the orders the Claimants negotiated with the retailers or that authority was delegated to them by SCS does not matter for the purposes of Regulation 2(1) which defines 'agent' and 'principal' by reference to the existence of a state of affairs, namely that the agent has 'continuing authority'."
The judge then went on to consider whether other provisions in the Regulations gave the words "continuing authority" some special meaning and concluded that they did not.
11.On the effluxion of time question the judge followed decisions of Judge Alton in the Birmingham Mercantile Court ( Whitehead v Jenks & Cattell Engineering Ltd (unreported 2 February 2001) and Lord McEwan in the Court of Session ( Frape v Emreco International Ltd [2002] EuLR 10) and held that the word "termination" as it appears in Regulation 17 covers not simply termination by deliberate act of a party but also termination by the expiry of a fixed term.
12.Both parties have relied on a number of the provisions of the Regulations to support their arguments so I shall start by summarising them. They implemented Directive 86/653 which recites that its purpose is to harmonise the law concerning commercial representation within the community and to afford protection to commercial agents vis-à-vis their principals. The recitals add somewhat delphically:
"Whereas in this regard the legal relationship between commercial agent and principal must be given priority."
The English language version of the Directive is substantially reproduced in the Regulations —so-called "copy out" implementation. Nothing turns on such differences as there are and so I shall only refer to the Regulations.
13.Part I contains the definition of commercial agent to which I have already referred. Part II is headed "Rights and Obligations". The agent is to look after the interests of his principal and act in good faith. In particular he is to conclude the translations he is instructed to take care of and communicate all necessary information to and comply with reasonable instructions given by his principal (Regulation 3). The principal must also act in good faith. In particular he must provide the agent with the necessary documentation relating to the goods and obtain for him information necessary for the performance of the agency contract. He is to inform the agent of his acceptance, refusal or non-execution of any transaction which the agent has procured for him (Regulation 4).
14.Part III deals with remuneration. In the absence of any agreement between the parties the agent is entitled to customary or reasonable remuneration (Regulation 6). Rights to commission during the agency contract and after it has been terminated and when it should be paid are dealt with by Regulations 7 to 11. Regulation 12 requires the principal to supply the agent with commission statements and gives the agent the right to demand information from the principal and in particular an extract from his books in order...
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