Lonsdale v Howard & Hallam – The House of Lords

Last month there took place the long awaited hearing of the appeal to the House of Lords of last year’s decision of the Court of Appeal in Lonsdale v Howard & Hallam.

The appeal was made by footwear agent, Graham Lonsdale (with the support of the Professional Sales Association).  At both first instance and in the Court of Appeal judgment had been given that the terminated agent should receive by way of compensation under the Commercial Agents Regulations an amount representing the value of the agency at or immediately before the time of termination.

However, this was not to the liking of the PSA.  It believed that compensation should be by reference to a benchmark or tariff system of twice the average annual commission of the three years prior to termination or the gross amount of commission earned during the last two years of the agency.  Consequently the appeal was made to the House of Lords.

At the end of the hearing the Lords reserved their decision.  It is likely therefore that the decision will be given in mid-July or the beginning of October (after the Summer recess).  However, in view of the difficult questions (bordering on hostile) asked of the appellant’s barrister, I consider that, barring a complete volte face, the Lords will dismiss the appeal.  Nor is there now any reason to expect that there will be a reference of any issues by the House of Lords to the European Court of Justice. 

Instead it is thought very likely that the Lords will affirm the decision of the Court of Appeal.  On this basis it will be necessary to look at the value of the agency as an asset at the time of termination and also to have regard to the state of the principal’s business.  It may also be the case that the Lords will decide that an allowance is to be made for any customer connections that the agent continues to enjoy after termination.

Accordingly an agency is likely to attract a high valuation where the agent has contributed significantly to the principal’s business and where the principal’s business is doing well and will continue to have the benefit of the agent’s activities after termination.