Raoul Sagal (“Sagal”) claimed that he had acted as a commercial agent for Atelier Bunz GMBH (“Bunz”) within the meaning of the Commercial Agents (Council Directive) Regulations 1993 (the “Regulations”) in order that he may claim compensation as a result of his termination.

Under the Regulations, a commercial agent is defined as:
“a self-employed intermediary who has continuing authority to negotiate the sale or purchase of goods on behalf of another person (the “principal”), or to negotiate and conclude the sale or purchase of goods on behalf of and in the name of that principal.”

Sagal sold the jewellery designed and manufactured by Bunz in the UK under an oral contract for three-and-a-half years. For this purpose, Sagal launched “Bunz UK”, which was marketed as “the UK branch of Bunz”.

In practice:

  1. Sagal placed orders for stock with Bunz only when he received orders for the same from his customers. He did not hold any stock and Bunz insured the UK sample collection held by him. 
  2. Bunz provided the stock to Sagal with a 20% discount on wholesale prices.
  3. Bunz allocated customer numbers to each customers.
  4. Sagal invoiced the customers under the name Bunz UK.
  5. Sagal accounted for his purchases from Bunz for VAT purposes.

On occasion Bunz agreed to a delay in payment by Sagal, pending reimbursement of Sagal by his customers.

Submissions – Sagal

Sagal’s representative argued that, except for the “paper trail”, the substance of the relationship indicated a commercial agency rather than a distributorship and the court should look at the substance, rather than merely the form used for administrative ease.

Sagal’s representative submitted that the following factors indicated the existence of a commercial agency:

  1. Sagal did not hold stock;
  2. Bunz insured the samples;
  3. Bunz took a risk that the customers would not pay;
  4. Bunz dictated the resale price; and
  5. Sagal provided lists of customers to Bunz.

Submissions – Bunz

The representative of Bunz argued that the relationship between Sagal and Bunz was a distributorship. It was claimed that, where the documentation is not a sham, as is the case here, it is not possible to ignore its effect. It was submitted that, under the terms of the arrangement between the parties, Sagal was buying from Bunz and then selling to customers under a separate contract.

Bunz’s representative argues that the resale price was not dictated by Bunz. Furthermore, the fact that Sagal carried out his own accounting and tax records indicates awareness that he was acting as a distributor.

On evidence it is clear that the relationship was one in which Sagal purchased goods from Bunz for resale. The written evidence confirmed that Sagal had no authority to negotiate contracts on behalf of Bunz.

The fact that Bunz occasionally agreed to allow late payment by Sagal in cases where his customers failed to make payment in a timely manner was an indulgence commonly seen in long-term relationships. It did not affect the contractual position. Furthermore, Sagal’s trading accounts and tax returns were not consistent with the existence of a commercial agency.

The picture presented by the documents is clear. Where this is the case, there is no reason for going behind the documents and evaluating the relationship between the parties as a matter of “substance”.

In conclusion, Sagal was not a commercial agent for the purposes of the Regulations.

Written by Marsha Aldridge

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