It may sound obvious, however if you switch business mediums from a partnership to a company, or vice versa, ensure that your agency agreement is also transferred to the new entity.
In the recent case Barnett Fashion Agency Limited v Nigel Hall Menswear Limited [2011] EWHC 978, the agent had initially sued in wrong name – under a new company, rather than the original partnership which was the named party in the relevant agency agreement – and when the agent tried to start new proceedings against its principal under the correct name, it was struck out of court for an abuse of process. This is a rule based on the principle that a defendant should not be subjected to two sets of proceedings based on the same complaint. It is a rule analogous to that demonstrated in the film Double Jeopardy, in which the defendant murderer played by Ashley Judd, could not be tried again for the murder of her lecherous and fraudulent husband as she had already been convicted of the same crime. Whilst this is a far-reaching and fictional example, it is important to illustrate that the UK Courts are unwilling to allow a defendant to be “vexed” twice by suffering the stress, inconvenience and expense of facing a second set of proceedings.
In the initial proceedings, Barnett Fashion Agency Ltd (“BFAL”) was claiming compensation under the Commercial Agents (Council Directive) Regulations 1993 upon termination of their agency agreement with Nigel Hall Menswear Ltd (“Nigel Hall”). This was dismissed as BFAL had no standing to bring the claim – the agency agreement was in the name of David Barnett Associates, the original partnership prior to the incorporation of BFAL which had taken place for tax reasons. BFAL had been put on notice that it was the incorrect party at least 11 months before the trial started – it was the key part of Nigel Hall’s defence. The failure to amend their claim at this juncture is ultimately what sunk the claimant – the argument that it had transferred the agency agreement to BFAL failed as a matter of law, and also for the reason that Nigel Hall had at no point been informed of this purported transfer. The subsequent court action, brought under the correct individuals’ names, failed under the principle of “abuse of process” – the court undertook a “balancing exercise” to determine whether it was just for the defendant, who was now in some financial difficulty, to be forced to defend itself against the same complaint. Ultimately, the court decided that it would not be fair and therefore ruled in the defendant’s favour.
If any agent changes its business medium, it is crucial that the correct agreements are entered into by all the relevant parties – this is known as a ‘novation’ agreement. It essentially transfers all the rights and liabilities under a contract to the relevant third party. It is also crucial that you sue under the right name, whether it be as an individual or corporate entity. This may sound obvious, but as an agent who is entitled to a compensation payment on termination, you don’t want to lose out on a legal technicality! Similarly, don’t scrimp on advice – instruct lawyers who have sufficient experience in agency law and litigation.
Harry Jefferies is a trainee solicitor in the Commerce and Technology department at Fox Williams LLP. Harry can be contacted at hjefferies@foxwilliams.com.
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