Tigana Ltd v Decoro Ltd
| Jurisdiction | England & Wales |
| Judge | The Hon. Mr Justice Davis,Mr Justice Davis |
| Judgment Date | 03 February 2003 |
| Neutral Citation | [2003] EWHC 23 (QB) |
| Court | Queen's Bench Division |
| Docket Number | Case No: 02/TLQ/0531 |
| Date | 03 February 2003 |
[2003] EWHC 23 (QB)
IN THE HIGH COURT OF JUSTICE
QUEENS BENCH DIVISION
Royal Courts of Justice
Strand, London, WC2A 2LL
The Honourable Mr Justice Davis
Case No: 02/TLQ/0531
Antony White QC and Jacques Algazy (instructed by Wakefields) for the Claimant
Charles Hollander QC and Jasbir Dhillon (instructed by Baker & Mckenzie) for the Defendant
Hearing dates : 2 nd– 6 th December 2002
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
Introduction
By a written Sales Agreement dated the 1 st January 1999 and made between Decoro Limited ("Decoro": a company incorporated in Hong Kong) and Tigana Limited ("Tigana": a company incorporated in the Isle of Man) Decoro appointed Tigana its sales representative for the purpose of procuring sales of Decoro's leather furniture products in the United Kingdom and Eire, on the terms there set out. The initial term of the agreement was stated to be one year beginning on the 1 st January 1999. There was provision for renewal for further yearly terms if the parties mutually so agreed. In the event there was no such further agreement and the Sales Agreement accordingly expired by effluxion of time on the 31 st December 1999.
By its Claim Form, issued on the 20 th September 2000, Tigana claims commission and compensation said to be due to it under the terms of the Sales Agreement and by reason of the application of the Commercial Agents (Council Directive) Regulations 1993 ("the Agency Regulations") which came into force on the 1 st January 1994. The issues arising in this litigation include issues as to the true meaning and effect of certain of the Agency Regulations.
The background.
The background facts, as I find them to be, are as follows.
(a) Mr Coleman
Mr Stuart Coleman has since 1978 acted as a manufacturer's and seller's agent in the furniture business, with particular emphasis on the leather upholstery market. He became very well known in the trade in the United Kingdom and also had significant international connections. In the course of his business he had frequent dealings with major UK furniture groups such as DFS, Land of Leather, Queensway, Leatherland and many others. Mr Coleman's practice was to act on a commission basis for manufacturers (who were usually foreign based). His usual role was to seek to introduce the importer, and its goods, to prospective UK customers (who ordinarily would be retailers of considerable size or, sometimes, wholesalers) with a view to securing the placing of orders. Thereafter Mr Coleman would act as a point of contact between the importer and retailer, seeking to secure repeat or further orders, organising the necessary administration, ensuring that deliveries were made on time and helping to deal with any service and specification problems that might arise. Mr Coleman (operating, as I understand, primarily from his home address) traded under the name Stuart Coleman and Associates. In most years, he was a sole trader but there were occasions, as he told me, when his wife was in partnership with him. He also employed between two and three administrative and secretarial staff to assist him in his work.
The nature of Mr Coleman's business involved frequent trips abroad: not only to international trade fairs but also to the factory premises of manufacturers with a view to inspecting their methods of manufacture and to assessing their products. Frequently Mr Coleman would be accompanied by buying representatives of existing or prospective UK customers. Nevertheless, customers (who in the first instance would have little more to go on than the manufacturer's brochure and product specifications) would place considerable reliance on Mr Coleman's own views as to the marketability of particular furniture products.
In 1998 Mr Coleman held five agencies, all of which had lasted for a number of years. One was for an Italian furniture manufacturer called Ital Design. Another (relatively recently taken on) was for an Italian leather furniture manufacturer called Calia/Maxim. A third agency was for a Dutch manufacturer called Hetanker; a fourth was for an Italian manufacturer, specialising in marble topped furniture, called Stone International; and a fifth was for another Italian manufacturer called Presotto. The turnover of each in the United Kingdom was quite significant; the largest being Ital Design, which was, in 1999, in the region of £4million. In handling these agencies, Mr Coleman dealt with several of his contacts in the UK retail market. Not all required products from each of these manufacturers: although some took orders from more than one of them. On such orders Mr Coleman was paid a commission: the rate varied, depending on the nature of the product and whether it was a promotional or non-promotional sale. Although the commission might be as much as 10%, usually it was in the region of 5% (being in respect of promotional sales).
For the leather furniture industry the most important international trade fairs are those held at High Point, North Carolina, USA. Such fairs are held twice in each year, in April and October. Some manufacturers retain permanent show rooms at High Point.
(b) The introduction at High Point and subsequent events in 1998.
Mr Coleman (as was his practice) attended the High Point fair in October 1998. Before he went he had been told by an American agent, whom he had known for some time, that a new Chinese based company, with Italian backing, called Decoro had been taking the US leather furniture market by storm. Decoro was, and is, a company based in Hong Kong and China, with its manufacturing operations sited at Shenzhen in China. Mr Coleman, with his experience, was aware that the US leather furniture market was very different to the UK market: the preference in the USA, for example, was inclined to large studded suites which was not the UK fashion. On the other hand, leather quality was not of prime importance to the UK market: and Mr Coleman also perceived that, for larger pieces, Chinese manufacturers with their lower labour costs could produce pieces at very favourable prices compared to, for example, Italian manufacturers. Moreover, Mr Coleman understood that, in Decoro, there would be the benefit of Italian know how and designs. Mr Coleman accordingly resolved to make contact with Decoro's representatives at the October 1998 fair, which took place between around the 18 th and 24 th October.
This he did. He spoke to Mr Giovanni Pratti, Decoro's International Sales Director. Mr Pratti suggested that he return to speak to Mr Lucca Ricci, the president (and a shareholder) of Decoro. Later that day, Mr Coleman and Mr Ricci discussed the possibility of Mr Coleman's acting as Decoro's agent in the UK. The discussions ranged over model ranges, prices and production capacity. Mr Ricci was very keen on the proposal. The following day Mr Coleman introduced a number of UK corporate buyers to Mr Pratti and Mr Ricci, including representatives of Sterling Furniture, Dansk Design, Conroys and Cousens. Orders for some five containers of samples were taken. One buyer was heard to say, "What's the catch?" reflecting his surprise at the perceived value of the product. In addition, Mr Coleman telephoned Mr Paul Briant, Managing Director of Land of Leather, from High Point. Land of Leather is one of the UK's largest leather furniture retailers. On the strength of Mr Coleman's recommendation, Mr Briant ordered some $40,000 worth of pieces, leaving it to Mr Coleman to select the models and colour ranges.
There is no doubt, and I find, that each of Mr Coleman and Mr Ricci and Mr Pratti was at this stage very keen on the prospect of Mr Coleman's acting as Decoro's UK agent. Mr Coleman considered that products of the quality and value which Decoro were manufacturing would be capable of finding a ready market in the UK and, as he saw it, he had the right connections to enable Decoro to break into that market. For its part, Decoro wanted to expand into the UK market: but, as I find, it had at that time no presence at all there and perceived itself as requiring just such a person as Mr Coleman to enable its products to be introduced to UK retailers and wholesalers.
On his return to the UK from High Point, and before any formal agency contract had been agreed, Mr Coleman took steps to contact other potential customers in the UK whom (from his knowledge of them) he assessed as being likely to be interested in Decoro's products. These included Furniture Village, Barker & Stonehouse and Kingdom of Leather. All in due course placed orders. In addition Mr Coleman discussed Decoro's leather furniture with Julian Cox (a long-standing business contact) who was a director of Furnitureland. Furnitureland was to go on to become, for a while, Decoro's largest UK customer.
The intention was that orders placed in October and November 1998 should catch the Christmas and New Year sales markets. At various stages Mr Coleman communicated with the various customers, as well as with Decoro itself. Mr Coleman gave certain advice to Decoro, amongst other things concerning labelling requirements, referring to the Furniture and Furnishings (Fire)(Safety) Regulations 1988 (1988 SI No 1324).
(c) The agency contract
In the meantime, although orders were being solicited and placed with Decoro for the UK market, the terms of the proposed agency had not yet been finalised. At the initial meeting at High Point, Mr Ricci had proposed 2% for promotional models and 7% for highly priced models, those rates corresponding to the rates Decoro paid in the US market. Mr Coleman's counter proposal was...
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