The claimant, Tony Vick, was employed by the defendant company, Vogle-Gapes Ltd, in 1996 as a salesman. In 1999 he gave up his employment and became a sales agent for Vogle-Gapes. The agency agreement came to an end in April 2004, the circumstances of which were disputed between the parties.
During the agency Vogle-Gapes became concerned with Mr Vick’s standard of performance and attempted to address the situation with him on numerous occasions. These attempts were ignored by Mr Vick who failed to respond to any of their communications or attend meetings to discuss the matter.
Finally on 30 January 2004 Vogle-Grapes wrote to Mr Vick and informed him that due to his failure to maximise sales opportunities they were reducing the extent of his territory and market; an action which was specifically provided for in the agency agreement.
A number of letters passed between the parties. Ultimately Mr Vick wrote to Vogle-Gapes on 2 April 2004 setting out alleged failures by Vogle-Gapes as principal which he argued made the agency “untenable and unworkable”. He also expressed his intention to claim for “loss of the whole agency”.
Vogle-Gapes told Mr Vick that they interpreted his letter to mean that he was terminating the agency agreement.
Mr Vick argued that by varying the extent of his territory and market Vogle-Gapes had acted in repudiatory breach of the agency agreement which entitled him to accept that repudiation in his letter of 2 April 2004 and claim compensation accordingly . Alternatively if it was a notice of termination he was entitled to do so by reason of the repudiatory breaches of Vogle-Gapes and he was therefore still entitled to compensation.
Vogle-Gapes maintained that the letter of 2 April amounted to a notice of termination by Mr Vick and that they had not acted in breach of contract such as to justify the termination and no compensation was payable. Alternatively they argued that they were entitled to terminate the agency agreement due to Mr Vick’s failure to meet the required standards of performance which amounted to repudiatory breaches.
Judgment
It was held that Vogle-Gapes were entitled to take steps to reduce the extent of Mr Vick’s territory and market.
It was argued by Mr Vick that Vogle-Gapes were not entitled to take this action as not only did he dispute failing to maximise sale opportunities but also the entitlement under the agency agreement to take this action had to be read in the light of Vogle-Gapes obligation to act in good faith. He further argued that under the agreement Vogle-Gapes were only entitled to make an objectively reasonable and proportionate reduction to the territory and market which they did not.
The Court held that Vogle-Gapes had good reason for holding the opinion that Mr Vick was failing to maximise sale opportunities within his territory and that such reduction was reasonable and proportionate. It was held their action taken to reduce the extent of his territory and market were made in good faith and rational taking in to account Mr Vick’s repeated failures to address the situation or respond to approaches by Vogle-Gapes to discuss the matter. The action taken was not, in the Court’s view, taken with the intended purpose to destroy or seriously damage the relationship of trust and confidence between the parties and was a reasonable response to Mr Vick’s failures to maximise sale opportunities.
In the letter of 2 April Mr Vick purported to accept the alleged repudiatory breaches of Vogle-Gapes. As Vogle-Gapes had not in fact committed any repudiatory breaches and as Mr Vick himself in this letter refused further performance of the agency agreement the letter of 2 April had the effect that Mr Vick was actually repudiating it.
Accordingly neither damages under common law nor damages under the Commercial Agents Regulations were payable to Mr Vick.
Although not binding in this case, the Court did address the question of the assessment of compensation for loss of Mr Vick’s agency with reference to the decision in Lonsdale v Howard &Hallam Ltd [2006] ICR 584. In assessing the amount of compensation that Mr Vick could have been entitled to under Regulation 17 the primary focus would have been the value of the goodwill of the agency at the date of termination, as assessed by expert evidence.
Written by Tom Custance
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