Mr Moore was recruited by Piretta PTA Ltd (“Piretta”) in January 1988, as a part of its sales drive in the UK for its range of Finnish fashion clothing. Moore initially signed a one year contract but he continued to work for Piretta thereafter without a formalised, written contract. On 18 February 1994 Mr Moore entered into a written agreement with Piretta, following the introduction of the Commercial Agents (Council Directive) Regulations 1993 (“Regulations”) in January 1994. The contract specified for the first time a provision for indemnity, as opposed to compensation, upon termination of the agreement. By a letter dated 30 October 1994, Piretta gave Mr Moore notice to terminate his agency agreement on 2 May 1995. Mr Moore claimed for an indemnity payment. The issue for the court to decide was whether Mr Moore was entitled to an indemnity, and, if so, the amount.
Deputy High Court judge Mr Mitting QC held that:
- Mr Moore had been retained by the company under an unbroken series of contracts;
- he was entitled to an indemnity calculated on the basis of his activities during the whole of his agency; and
- he had been instrumental in obtaining new business for Piretta and had substantially increased the value of the business of existing customers. Since Regulation 23(1) applied the Regulations to all agency contracts, whenever made, which were in existence from 1 January 1994, it was held that the Mr Moore was entitled to an indemnity calculated by reference to his activities during the whole of his agency (January 1988 to May 1995). The indemnity was calculated at £92,000, a figure far higher than the cap laid down in the Regulations. Mr Moore was, therefore, awarded a capped sum of £64,526.33.
The judge also held that it was the duty of the court, in construing the Regulations, to give effect to the purpose of the Directive. In order to do this, the judge looked to Germany where the right to an indemnity originated, for guidance in calculating Mr Moore’s entitlement. Since the purpose of the Directive is the harmonisation of Community laws, it is permissible for a court in one Member State to look into the law and practice of the country in which the relevant right originated. An indemnity payment is regarded as a payment for the goodwill established by the agent. This payment is capped by the Regulations at one year’s remuneration (generally calculated by taking the agent’s average annual remuneration over the preceding five years). The judge, in calculating the indemnity Mr Moore was entitled to, considered the value of the business brought in by the agent, along with the commission lost by the agent. Since the calculation exceeded the cap, he awarded one year’s remuneration (£64,526.33).
Following this judgment, principals should note that they cannot minimise their extent of liability by entering a series of fixed term agency agreements, since the Court will look at the agency relationship as a whole rather than just the latest agreement between the parties.
Briefing notes referring to this judgment:
- “A Tale of Two Cases” 11 April 1998
- “Compensation for Commercial Agents” 1 March 2001.
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 Steve Sidkin