Vick v Vogle-Gapes Ltd

A commercial agent who treats an agency agreement as repudiated, without being entitled to do so, repudiates the agreement himself. The principal may accept that repudiation and thereby exclude compensation under regulations 17 and 18 of the Commercial Agents Regulations 1993.

Contractual powers allowing a principal unilaterally to vary the agent’s territory or market do not derogate from regulation 17 where the variation does not terminate the agency. Such powers must nevertheless be exercised with reasonable and proper cause where the contract requires the principal to act dutifully and in good faith. A refusal to pay a relatively modest disputed commission will not ordinarily be repudiatory where the principal continues substantially to perform the agreement.

The claimant was a commercial sales agent for the defendant under an agency agreement. The defendant varied his territory and market after concerns about sales performance, merchandising, use of an electronic ordering system and cooperation with the company.

The claimant alleged that the variation, late or unpaid commissions and other conduct were repudiatory breaches. He claimed compensation under the Commercial Agents Regulations 1993, unpaid commission and damages. The defendant contended that the claimant had repudiated the agreement by his letter of 2 April 2004 and subsequent conduct, and counterclaimed for overpaid commission.

The central issues were whether the variation was contractually and legally permissible, whether either party had repudiated the agreement, whether compensation was payable, and what commission and counterclaim sums were due.

1. Variation of territory and market. The defendant was entitled under clauses 7.1 and 7.2 of the agency agreement to vary the claimant’s territory and market. The threshold condition under clause 7.1 was satisfied because the claimant was failing to maximise sales opportunities. The changes were made with reasonable and proper cause. They were intended to address declining sales, inadequate merchandising and lack of cooperation, rather than to punish the claimant.
2. The contractual variation clauses did not derogate from regulation 17 of the Commercial Agents Regulations 1993. A variation which does not terminate the agency does not engage the compensation provisions applicable on termination. The parties were entitled to agree that the principal could make such variations unilaterally.
3. The claimant’s late-paid commissions and the failure to pay £560 commission on two Otter Nurseries sales were not repudiatory breaches. Applying the principles in Cantor Fitzgerald International v Callaghan [1999] 2 All ER 411, the court considered the extent and reasons for non-payment. The defendant had continued substantially to perform the agreement and had a rational, though incorrect, basis for refusing the disputed commission.
4. The claimant’s letter of 2 April 2004 purported to accept alleged repudiatory breaches and treated the agency as untenable and unworkable. As no such breaches had occurred, the letter repudiated the agreement. The defendant accepted that repudiation by its letter of 7 April 2004, after the claimant confirmed during the intervening telephone conversation that relations were at an end.
5. Following Bell Electric Ltd v Aweco Appliance Systems GmbH & Co KG [2002] EWHC 872 (QB), regulations 18(a) and 18(b)(i) were treated as opposite sides of the same principle. Compensation is unavailable where the agent terminates without circumstances which would justify termination at common law. The claimant therefore had no entitlement to compensation under regulation 17.
6. The alternative case that the defendant had terminated for the claimant’s repudiatory breaches also failed, because the defendant had affirmed the agreement after acquiring knowledge of those matters. The defendant’s counterclaims for overpaid commission succeeded in the aggregate sum of £9,577.82. After set-off of the claimant’s £560 commission entitlement, judgment was entered for the defendant in the sum of £9,017.82, with interest to be determined.