McQuillan & Anor v McCormick & Ors

A commercial agency may be subject to the Commercial Agents (Council Directive) Regulations 1993 where the parties expressly incorporate them, including by reference in correspondence. An exclusive territorial agency gives the agent the commission entitlement under regulation 7(2). A principal cannot unilaterally change agreed commission payment terms. Summary termination requires an established breach falling within regulation 18(a); disagreements, complaints, communications with the principal’s licensor and an agent’s compliance with instructions did not suffice. Compensation under regulation 17 is assessed by valuing the future income stream that could reasonably have been obtained for the agency at termination, allowing for the risk that the principal’s own distribution rights may end. The claimants recovered unpaid commission, regulation 8 commission, regulation 17 compensation and damages for failure to give the required notice.

Mr and Mrs McQuillan claimed against Mr McCormick and associated companies after their jewellery sales agency was terminated in February 2008. They alleged that they had been appointed as commercial agents for an exclusive territory and that the agency was governed by the Commercial Agents (Council Directive) Regulations 1993.

The issues included the identity of the contracting principal, the existence of territorial exclusivity, the applicability of the Regulations, unpaid commission, the justification for summary termination, compensation under regulation 17, commission on post-termination transactions and damages for inadequate notice.

1. Contracting parties and terms. The contract was made between Mr McCormick personally, trading as Pandora UK, and the claimants. If he had acted for an undisclosed principal, he would nevertheless have been liable on the contract. Pandora Jewelry Ltd was not a contracting party. The agreed terms included a 10 per cent commission, an exclusive territory and application of the Commercial Agents (Council Directive) Regulations 1993.
2. Regulations. The parties could expressly incorporate the Regulations. The agency was also within their scope because the claimants had continuing authority to negotiate and, if necessary, conclude sales, their activities were not secondary, and they were self-employed commercial agents. The exclusive territory entitled them to commission under regulation 7(2).
3. Termination. The principal breached the contract by withholding commission and attempting unilaterally to change monthly payments to quarterly payments. The alleged breaches by the claimants were not established. Communications with the principal’s licensor, an enquiry to the bank, disagreements about instructions, customer complaints and staff complaints did not justify summary termination. No ground within regulation 18(a) was made out.
4. Financial relief. The claimants were entitled to unpaid commission of £41,478.81. Regulation 17 compensation was assessed by valuing the future income stream of the agency. Applying the guidance in Lonsdale v Howard & Hallam [2007] UKHL 32, the court allowed for growth, expenses and the material risk that the distributor’s licence could end, and awarded £150,000.
5. The claimants were also entitled to £35,892.88 damages for failure to give the minimum two months’ notice under regulations 15(2) and 15(4), and £29,184.17 for commission under regulation 8. Interest under the Late Payment of Commercial Debts Act was refused, but interest was awarded under section 35A of the Senior Courts Act 1981. Judgment was entered for £256,555.86 before interest.