Mr Devers was retained as an agent for Electricity Direct on 24 May 2000.  Mr Devers carried on his agency business as a sole trader under the name Powerforce Marketing.

The 24 May 2000 retainer letter stated that the agency agreement ran from 1 June on a temporary basis until 30 November 2000.  The letter also stated that subject to his performance during this period, a formal five year agreement would be entered into commencing on 1 December 2000.  Mr Devers was to work exclusively for Electricity Direct in respect of electricity supply and his agency was not confined to a defined territory.  He did not have authority to enter into contracts on behalf of Electricity Direct.

Towards the end of the six month probation period, Mr Devers was told by Electricity Direct that their agreement would continue to run.  Mr Devers took that to mean that the five-year contract was now in place.

On 5 August 2002, Electricity Direct was taken over by Centrica PLC.  Mr Devers was informed by telephone, then by letter on 10 March 2003 that the agency would be brought to an end.

The case addressed claims under the common law for breach of contract and under the Commercial Agents (Council Directive) Regulations 1993 (‘the Regulations’).

Breach of contract

The Court held that, having regard to the nature of the relationship and what had been agreed between the agent and the principal, Mr Devers was entitled to a reasonable period of notice.  On that basis, the Court concluded that three months was the required period of notice.  Further, the Court found that reasonable notice had not been given, therefore there was a breach of contract.

In assessing damages, Mr Devers had provided little evidence to support what commission payments he had received.  The Court calculated an average monthly figure based on the commission payments it did have evidence on, and awarded Mr Dever £2,550 for the notice period.

Claim under the Regulations

The Court looked at whether Mr Devers was entitled to make a claim under the Regulations, whether notice of the claim was given as required by the regulations and what compensation was owed if the first two requirements were satisfied.  It was held that Mr Devers was a commercial agent under the Regulations so was entitled to bring a claim, however the Court found that sufficient notice had not been given.

Entitlement

Electricity Direct argued that Mr Devers was not entitled to the benefit of the Regulations because:

  • he was not entitled to negotiate and so was not a commercial agent;
  • he was not entitled to negotiate the sale of goods, and for that reason was not a commercial agent; or
  • even if he was a commercial agent, his activities as such were secondary.

A. Negotiation

The Court turned to case law to identify the meaning of ‘negotiate’ in an agency context.  It agreed with the case law that ‘negotiate’ in the Regulations meant “to deal with, manage or conduct” which is “obviously a much wider meaning of the word than to negotiate a sale in the sense of engaging in the bargaining process or haggling over terms or price”.  Accordingly, the Court held that Mr Devers was entitled to negotiate.

B. Goods or services

In relation to the sale of goods point, the Court had to decide whether electricity was, for the purpose of the Regulations, properly to be characterised as ‘goods’.  The Court found that there was no persuasive authority on this question.  It concluded that, in its mind, electricity which runs from supplier to consumer is more closely analogous to goods than services.

 C. Secondary activities   

The Court looked to Schedule 1 of the Regulations to establish whether Mr Devers’ activities as a commercial agent were secondary.  The Court concluded that Mr Devers’ activities were not secondary.

Notification of a claim for compensation under the Regulations

Mr Devers relied upon a letter dated 3 April 2003 from his solicitors to Electricity Direct regarding the termination of the agent agreement, as satisfying the requirements for notice of a claim for compensation under the Regulations.

Electricity Direct raised two objections to this letter being effective notice.  The key one was that the letter did not intimate a claim for compensation under the Regulations.

The Court held that the 3 April letter did not fulfil the requirement of Regulation 17(9).  The Court said that notice does not need to follow exactly the language of the relevant Regulation or state specifically that it is given under that Regulation, or even refer to the Regulations by their full title.  However, it held that notice should, as a minimum, convey to the principal the fact that the agent intends to make a claim for compensation under the Regulations or “as a commercial agent”.

The Court indicated that by making it clear in the letter of notice that the agent intends to make a claim for compensation under the Regulations, or as a commercial agent, it is clear to the principal that the claim envisaged is a statutory one as opposed to a common law breach of contract claim.  The difference is key because the concept of statutory compensation is different to that of common law damages.

Compensation

As the Court had found that insufficient notice had been given, it was not necessary to look into what compensation should be awarded.  However, the Court indicated how it would have dealt with this point.  In assessing the compensation, the Court would have considered what Mr Devers expected to receive upon the assignment of his agency.

On this basis, it considered the earnings of the agency, the level of business generated and the poor outlook for such small agencies generally.  Accordingly, the Court concluded that it was unrealistic to suppose that anyone would have paid even a nominal sum to continue the agency.

Written by Agentlaw Team

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