Rossetti Marketing Ltd and Another v Diamond Sofa Company Ltd
| Jurisdiction | England & Wales |
| Judge | MR JUSTICE CRANSTON,Mr Justice Cranston,MRS JUSTICE SLADE |
| Judgment Date | 30 January 2012 |
| Neutral Citation | [2011] EWHC 2482 (QB),[2012] EWHC 354 (QB) |
| Date | 30 January 2012 |
| Court | Queen's Bench Division |
| Docket Number | Claim No: HQ08X04995,Case No: TLQ10/1187 |
[2011] EWHC 2482 (QB)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Justice Cranston
Case No: TLQ10/1187
Nigel Jones QC and David Lewis (instructed by Bankside Commercial Ltd) for the Claimant
David Uff and Daniel Metcalfe (instructed by Betesh Partnership Solicitors) for the First Defendant
Hearing dates: 8–14 June
INTRODUCTION
The claimant's case against the first defendant is for compensation under the Commercial Agents Regulations 1993 (based on European Directive 86/653/EEC), for sums due under contract and for damages for breach of contract. The agency was determined summarily on 4 June 2008. The dispute is between the claimant as agent and the first defendant as principal under an agency contract dating from early 2004. Neither the claimant nor first defendant seek any relief against/from the second defendant, and it seeks no relief of its own. The second defendant and the claimant are related entities and prior to early 2008 the second defendant acted as the first defendant's agent. The agency was then transferred to the claimant.
At pre-trial review on 15 April 2011 the judge ordered the trial of certain preliminary issues. In broad terms these issues are firstly, whether the Commercial Agents Regulations 1993 apply to this agency, whether under them an agent is permitted to act for multiple principals and whether these principals can include principals who are in competition with one other. There appears to be no authority on these issues under the Regulations or the European Directive on which they are based. A second category of issues is whether the change of agent in 2008 from the second defendant to the claimant gave rise to an assignment, a novation or a new contract of agency, and what the consequences of that are. After the hearing the only issue remaining in the third category of preliminary issues identified by the judge is the duration of the agency agreement.
The advantage of resolving the first category of issues is said to be to determine whether the claimant is entitled to make a claim under the Commercial Agents Regulations 1993 and whether the first defendant can pursue any breach of contract case against the claimant. The effect of resolving the second category of issues is said to determine whether the claimant's case under the Regulations can include compensation arising from the first period when the second defendant acted as its agent, and whether the first defendant can pursue any breach of contract case against the claimant arising in that first period. Determining the duration of the agency will assist in what is to happen with the first and second category of issues. Having heard the case I am not at all persuaded that the determination of preliminary issues was the right approach to handling the litigation. It would have been far better to have had a trial to resolve all the issues in what has no doubt become a very costly dispute.
BACKGROUND
The parties
In 2001 Richard Willan and Martin Thomas became co-directors and equal shareholders of the second defendant, Solutions Marketing Ltd ("SML"). Mr Willan had had 32 years experience in the furniture industry and had become chief executive of Christie Tyler plc. At that point Christie Tyler had a quarter of the UK market in furniture, that market being worth some two billion pounds. Mr Thomas had also been with Christie Tyler, on the product design side. In 2008 Mr Willan and Mr Thomas formed a new company, the claimant, Rossetti Marketing Ltd ("RML"), and SML's business was transferred to it. The precise details of why and how this was done are addressed later in the judgment.
As Mr Willan explained in his evidence the intention in forming SML was to represent Asian furniture manufacturers which wished to sell their products in UK markets. The manufacturers would benefit from SML's product knowledge and expertise in selling in these markets, in particular from its established contacts. SML's preferred approach was to sell in volume to large furniture wholesalers such as the Steinhoff group, buying groups such as Associated Independent Stores Ltd, and national retailers such as Land of Leather, Harveys (later wholly owned by the Steinhoff group) and Argos. In late 2005 Mr Willan's daughter, Mrs Clare Evans, began working as a sub-agent for SML, her role being to manage marketing to independent retailers while Mr Willan concentrated on the larger importers.
The first defendant, Diamond Sofa Company Ltd ("Diamond"), was one such Asian manufacturer of leather upholstery. Diamond is based in Thailand, its managing director being Panchanin Charoenyos. Mr Charoenyos is also managing director of Universal Sofa Company Ltd ("Universal"), another Thai company, which was engaged in the manufacture and distribution of furniture between March 2004 – October 2008. Whereas Diamond aimed its models at the middle of the market in terms of quality and price, Universal was able to price its models more competitively by using PVC and leather and by having a limited number of models and colours. Mr Charoenyos' wife, Pat, is also involved in these businesses. In his evidence Mr Charoenyos explained that he had been educated in the United Sates from the age of 16 until graduation from college. In the 1990s he worked for Diamond Sofa Company, based in the United States, acting as its buying agent in south-east Asia. He was also paid by Thai manufacturers to assist them to develop their businesses. Eventually, in 1999 he began manufacturing leather upholstery in Thailand himself, inspired by Italian designs.
When SML began acting as agent for Diamond in 2004, there were some 20 Asian furniture manufacturers having an interest in selling products designed for the Western market into the UK. They were predominantly producing leather upholstery furniture such as chairs and sofas. These were either "fixed" or "motion" (for example, reclining chairs). Because of the labour input into leather upholstery Asian manufacturers had a competitive advantage over manufacturers in the UK. Because Asian upholstery manufacturers exported their furniture to Europe in volume, it is shipped in containers.
The Asian leather upholstery manufacturers which feature in the case include Linkwise (later called Soffine), ArtPeak and Creative, all based in China, and Casarredo, based in Vietnam. Linkwise upholstery was towards the bottom part of the market, measured by factors such as quality and price, and thus attractive in the UK to a retailer such as Argos or Land of Leather. By contrast ArtPeak furniture was at the higher end of the market. Diamond itself manufactured middle market upholstery. Products of a similar style can be at different levels in the market, depending on quality and price. It is no part of my task in the present litigation to determine to what extent there was an overlap with the products of these different manufacturers but it is obvious that there was some at the different ends of the ranges.
From its formation SML's business plan was to act as agent for more than one of the Asian furniture manufacturers. As Mr Willan put it in evidence, he was looking to sell as much furniture for as many people as possible. Christie Tyler had had 25 percent of the market; it would be nice if SML could capture 5 percent. In Mr Willan's perception there was no difficulty with acting for multiple manufacturers. There were other agents in the UK who did so. Part of Christie Tyler's business model had been to create subsidiaries for its different factories, each with different management teams, so that if for whatever reason, including the personality of the parties, one could not satisfy a customer, another could. There is no convincing evidence that Mr Chareonyos ever knew the details of the Christie Tyler business model.
In Mr Willan's evidence, which I accept, retailers typically have 70 "slots" in any one retail outlet, displaying a range of different products. At any one time they may require upholstery for a few of those slots. The agent representing a number of manufacturers is in a better position to offer products to fill those slots. UK importers make their decision about what furniture to purchase on the basis of a range of factors such as style, quality and price, but also factors such as the speed, cost and guarantee of delivery. Similar styles could be higher or lower in the market. The market is fluid. Since all manufacturers attempt to sell what the market demands, if one manufacturer's range or specific products within a range are selling well other manufacturers may try to emulate them.
The 2004 agreement
In 2004 SML and Diamond entered into an oral agreement whereby SML would act as agent for Diamond in the sale of its leather upholstery in the UK and Irish markets. The character of the agreement is at the heart of the present litigation. At the time of the agreement Diamond was seeking new markets, since a move in the exchange rate between the US dollar and the Thai baht had led to a loss of business in the American market.
The agreement followed the meeting at the Cologne furniture fair in January 2004 between Mr Willan and Mr Thomas on the one hand, and Mr Charoenyos on the other. At that show Mr Willan represented Aimwood, a Malaysian cabinet manufacturer, on its stand, and Mr Thomas represented Linkwise, on its stand. In the same corridor of the same hall as Aimwood's stand was Diamond's stand,...
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Rossetti Marketing Ltd and Another v Diamond Sofa Company Ltd
...leather upholstery. Its furniture is aimed at what the Judge called 'the middle of the market in quality and price' – [2011] EWHC 2482 (QB), para 6. Diamond's managing director is Panchanin Charoenyos, who set it up in 1999, after having worked in the upholstery business in the United State......