Edwards v International Connection (UK) Ltd

Whether a commercial agent’s activities are secondary under the Commercial Agents (Council Directive) Regulations 1993 depends principally on the purpose and characteristics of the agency arrangement. The inquiry is not determined by the way in which the arrangement was later performed.

The Schedule asks whether the agent was engaged to develop the principal’s market through the agent’s own effort, skill and expenditure. Its listed matters are indicators only. They assist the assessment but do not independently decide it, including the extent to which the agent devoted time to representative activities.

The claimant had acted for more than ten years as the defendant’s self-employed, commission-based sales representative in an exclusive West Country territory. His agreement was summarily terminated.

He claimed commission, notice damages and termination compensation under the Commercial Agents (Council Directive) Regulations 1993. His Honour Judge Knight QC held that he was a commercial agent, that the Regulations applied, and that the termination was wrongful. He awarded £24,000, plus £8,000 interest.

The defendant sought permission to appeal. Its sole proposed ground was that the agency activities were secondary and therefore outside the Regulations.

Application for permission to appeal refused. The county court was entitled to hold that the Regulations applied to the agency.

1. Lord Justice Moore-Bick held that the Schedule distinguishes agents engaged primarily to carry out commercial-agency functions from persons engaged primarily for another purpose who only incidentally perform such functions. The central inquiry is whether the arrangement was made to enable the agent to generate customers, obtain repeat orders and develop the principal’s market through the agent’s effort, skill and expenditure.

2. The question concerns the purpose and essential characteristics of the arrangement, not its later performance. The reference in paragraph 2(b)(i) to transactions normally being individually negotiated concerns the nature of the goods to which the arrangement relates. It does not require proof that transactions were in fact individually negotiated by the agent. The court treated the analysis noted in Tamarind International [2000] EuLR 708 as consistent with that construction.

3. Paragraphs 3 and 4 of the Schedule contain non-determinative indications. Their weight is for the judge, having regard to the critical features in paragraph 2. Paragraph 3(c), concerning substantial devotion of time to representative activity, also bears on the nature of the original arrangement; even if it concerned later performance, it could not decide the issue alone.

4. On the admitted terms and the judge’s sustainable findings, the sole purpose of the exclusive arrangement was to develop the defendant’s market. Direct orders were a matter of convenience and did not undermine that conclusion. The proposed appeal had no real prospect of success.

Both judges also reserved the burden-of-proof question. They indicated that it might be for a claimant to establish only the definition in Regulation 2(1), leaving a defendant to raise and establish the secondary-activities exclusion, but the point had not been fully argued.

• Court of Appeal (Civil Division): In [2006] EWCA Civ 662, the defendant’s application for permission to appeal was refused. The county court’s decision remained in force.
• Central London County Court: His Honour Judge Knight QC held that the claimant was a commercial agent under the Commercial Agents (Council Directive) Regulations 1993, that the agency had been wrongfully terminated, and awarded £24,000 plus £8,000 interest.