Sagal (t/a Bunz UK) v Atelier Bunz GmbH

Whether an intermediary is a commercial agent under the Commercial Agents (Council Directive) Regulations 1993 depends on whether it negotiates sales on behalf of the principal. An intermediary that buys goods as principal and resells them for its own profit is outside the definition.

Where the contractual documents clearly show separate contracts of purchase and resale, the court should not ordinarily go behind them to conduct a broader assessment of the relationship’s supposed substance. Business descriptions such as “agent” or “distributor” carry little weight. Administrative indulgences, including postponed payment, do not alter the contractual structure.

The claimant sold the defendant’s jewellery in the United Kingdom under an oral commercial arrangement lasting from July 2002 until February 2006. He claimed that the relationship was one of commercial agency and sought compensation and other relief under the Commercial Agents (Council Directive) Regulations 1993.

The defendant contended that the claimant bought jewellery from it and resold the goods to retailers under separate contracts. The central issue was whether the claimant was a “commercial agent” within Article 2(1) of the Regulations.

1. Claim dismissed. The claimant was not a commercial agent, so his claims under the Commercial Agents (Council Directive) Regulations 1993 failed.

2. The governing test was that stated in AMB Imballaggi Plastici SRL v Pacflex Ltd [1999] 2 All ER (Cmm) 249 and approved in Mercantile International Group Plc v Chuan Soon Huat Industrial Group Ltd [2002] EWCA Civ 288. An intermediary negotiating in its own interest, rather than on behalf of the principal, is not a commercial agent. The paradigm example is a distributor who purchases goods from a manufacturer and resells them at a mark-up.

3. The court rejected the claimant’s proposed broad “substance over form” approach. The observation in Mercantile International Group Plc v Chuan Soon Huat Industrial Group Ltd that substance rather than form is relevant did not permit clear, non-sham contractual documentation to be ignored. A distinction between the legal relationship and its documentation would be rare.

4. The transaction documents showed that the claimant purchased goods from the defendant and resold them to retailers. The defendant invoiced the claimant, issued payment demands to him, and treated him as liable for the purchases. The claimant’s trading accounts and VAT records supported that structure. Occasional agreements to postpone payment until a retailer paid were indulgences and did not change the contractual position.

5. P J Pipe & Valve Co Limited v Audco India Limited [2005] EWHC 1904 (QB) concerned whether an intermediary had authority to negotiate. That issue did not arise here, and the decision did not justify a broad approach to the contractual documents.

6. The alternative arguments concerning the two limbs of Regulation 2(1) were unnecessary to the decision. The distinction reflected the inclusion of agents authorised to negotiate, but not conclude, contracts in the principal’s name.