Duffen was involved in the supply of products to the plumbing trade. Frabo SpA (“Frabo”) was a family run, Italian company which manufactured pipe fittings for the plumbing trade. With a view to entering the UK market towards the end of 1992, an agreement was reached between Duffen and Frabo to the effect that they would collaborate in the sale of Frabo’s products in the UK and Ireland through a new company – Frabo UK Limited. Frabo UK started to trade in June/July 193 but the venture was not a success and a decision was taken to wind the company up. Despite this failure, Frabo was prepared to maintain its collaboration with Duffen on the basis that Duffen be the exclusive agent for Frabo for the sale of Frabo’s products in the UK and Ireland.
The sales agency agreement was finalized on 25 July 1994. As part of the agreement Duffen was to be paid a monthly retainer for 3 years following the commencement of the agreement, as well as commission on sales above an agreed threshold. Following the initial period of 3 years, the agreement could be terminated thereafter by either side giving 12 months’ written notice. Duffen was also given various rights to terminate the agreement in the event of non-payment of commission by Frabo.
Disputes arose under the agreement and, on 11 December 1996, Duffen sent a fax to Frabo stating:
“I … hereby give you notice that you have committed a repudiatory breach … . My invoice was faxed to you on 24 October 1996 and subsequently sent by DHL and registered post. … You have failed to pay commission …
Pursuant to clause 6.3, I hereby give you notice that I terminate the agreement forthwith.”
Duffen sought to recover moneys allegedly due under the agreement and damages for the alleged repudiation by Frabo, together with compensation under Regulation 17(6). Frabo denied that any moneys were due and argued that the repudiation of the agreement was not due to themselves but to Duffen so that nothing was due to Duffen either under the agreement by way of damages or compensation or at all. Frabo also argued that any rights to payment under the agreement ceased upon its termination.
It was held that, although Duffen’s performance of the agreement was not as unsatisfactory as Frabo had contended, Duffen had not devoted the diligent attention that Frabo was entitled to expect. It was also held that the agreement provided for its own termination. Each of Duffen’s apparent breaches were capable of being remedied and did not, therefore, amount to repudiation on the part of Duffen. In addition, the Court found that the obligation to pay the retainer survived termination – Frabo had not discharged the burden of displacing the clause and therefore Duffen was entitled to recover a further 7 months’ commission. The Court also held that, prima facie, Duffen had suffered no loss since the a amount of prospective commission would have been lower than the expense of earning it.
As to compensation, the Court held that compensation should at least be payable in relation to the period to 31 July 1998 (which was the earliest date upon which the agreement might have expired). In view of the facts of the case, the relevant period should not be extended beyond that date. The Court also held that Regulation 17(7)(a) only came into play to the extent that Frabo could be said to have benefited from Duffen’s prior efforts. Since Duffen did not introduce one new customer to Frabo and was less than successful in nurturing existing customers, had Regulation 17(7)(a) been Duffen’s exclusive remedy, the compensation payable would have been nominal in any event. The correct approach was simply to look at the earnings which might have accrued to Duffen during the period to 31 July 1998 had he remained Frabo’s agent until then. Ultimately, the Court found that Duffen was unable to show that he had suffered damage as a result of the termination of relations with Frabo.
This briefing note is for general information. For advice in applying this general information to your specific circumstances, please contact Stephen Sidkin or any member of the Fox Williams’ agentlaw team (www.agentlaw.co.uk)
Written by Sarah Pooley