AMB Imballaggi Plastici SRL v Pacflex Ltd

For an intermediary to be a commercial agent under the Commercial Agent (Council Directive) Regulations 1993, the statutory definition requires self-employed status, continuing authority, and authority to negotiate sales or purchases on behalf of a principal, or to negotiate and conclude them in the principal’s name. A person who buys or sells as principal and resells for personal profit acts on its own behalf and falls outside the Regulations. A discretionary mark-up is not remuneration in the agency sense. The existence of a possible agency arrangement or a course of supplying goods does not itself create continuing authority. The court left the secondary-activities question undecided, but identified substantial uncertainty in the drafting of the United Kingdom’s exclusion provisions and Schedule.

AMB supplied products to Pacflex. Pacflex sold them to end-users, usually purchasing from AMB and adding its own mark-up. AMB obtained judgment for the price of goods supplied. Pacflex counterclaimed for compensation under regulation 17 of the Commercial Agent (Council Directive) Regulations 1993, alleging that it was AMB’s commercial agent.

His Honour Judge Raymond Jack QC, sitting in the Bristol Mercantile Court, rejected that contention. Pacflex appealed. The principal issue was whether Pacflex fell within the statutory definition of commercial agent. A further issue concerned the exclusion of persons whose commercial-agent activities were secondary, but that issue arose only if Pacflex first qualified as a commercial agent.

Commercial agency

1. The appeal was dismissed unanimously. Waller LJ delivered the leading judgment. Gibson LJ agreed with the result and with Waller LJ’s reasoning, while Judge LJ agreed with both judgments.
2. The definition in regulation 2(1) of the Commercial Agent (Council Directive) Regulations 1993, which substantially follows article 1(2) of Council Directive 86/653/EEC, requires a self-employed intermediary with continuing authority to negotiate the sale or purchase of goods on behalf of a principal, or to negotiate and conclude the transaction in the principal’s name.
3. The words “on behalf of” bear their natural meaning. An intermediary acting in its own interest is not a commercial agent. The paradigm case is a distributor which buys goods from a manufacturer and resells them for profit. The statutory references to agency duties, remuneration and commission support the distinction between a true agent and a reseller. A mark-up fixed at the reseller’s discretion is not remuneration in the agency sense.
4. Pacflex’s transactions were consistently conducted by purchase from AMB followed by resale to end-users, with Pacflex choosing its own mark-up. Pacflex had no agency contract and no authority, continuing or otherwise, to negotiate sales on AMB’s behalf. Any contract implied from the course of dealing could extend only to AMB supplying goods after Pacflex had agreed to sell them. It could not create continuing authority to negotiate on AMB’s behalf. Pacflex therefore fell outside the Regulations.

Secondary activities

The question whether Pacflex’s activities were secondary did not arise for decision. Waller LJ nevertheless expressed doubts about the construction of regulation 2(3) and (4) and the Schedule. The Directive appeared to contemplate comparison between an agent’s commercial-agent activities and its other business, whereas the Schedule appeared to assess the arrangement with a particular principal. Its indicators also failed clearly to identify what was to be compared. Gibson LJ associated himself with those reservations, and Judge LJ agreed. Those observations were obiter.

Costs were to be assessed if not agreed. Leave to appeal was refused.

• Court of Appeal (Civil Division): dismissed Pacflex’s appeal and refused leave to appeal: [1999] EWCA Civ 1618.
• Bristol Mercantile Court: His Honour Judge Raymond Jack QC, 9 February 1998, rejected Pacflex’s claim to be a commercial agent entitled to compensation under the Regulations.