Crocs Europe BV v Anderson & Anor (t/a Spectrum Agencies

A breach of a commercial agent’s statutory duties under the Commercial Agents (Council Directive) Regulations 1993 is not automatically repudiatory. Regulation 3 states the agent’s obligations; it does not create contractual conditions, and regulation 5(2) leaves the consequences of breach to the governing law. The same approach applies to fiduciary duties. Neither every duty in an agency relationship nor every breach of a fiduciary duty necessarily justifies termination. Repudiation depends on an objective assessment of the seriousness of the conduct in all the circumstances. The court should consider whether the conduct goes to the root of the relationship or objectively shows an intention to abandon or refuse performance. A trial judge’s fact-sensitive assessment should stand on appeal unless clearly wrong or unsupported by evidence.

Crocs Europe BV appointed Spectrum Agencies as its UK commercial agent. An employee of the agency posted an internet item criticising Crocs’ customer-service failures. Crocs treated the posting as a repudiatory breach and summarily terminated the agency agreement.

The agency claimed compensation under regulation 17 of the Commercial Agents (Council Directive) Regulations 1993. Following a five-day liability trial, Sir Raymond Jack held that the posting was a breach of contract but was not sufficiently serious to justify termination, entering judgment for the agency: [2011] EWHC 3386 (QB). Crocs appealed, arguing that regulation 3 created a condition, that breach of the statutory or fiduciary duties automatically justified termination, or alternatively that the conduct was repudiatory. The central issue was whether the breach was sufficiently serious, viewed objectively and in all the circumstances, to justify summary termination.

The appeal was dismissed. Mummery LJ gave the leading judgment. Bean J agreed with his reasons, and Hughes LJ agreed with both judgments.

1. Statutory duties. Regulation 3 of the Commercial Agents (Council Directive) Regulations 1993 sets out the agent’s obligations. It does not create contractual conditions whose breach automatically terminates the agency agreement. Regulation 5(2) makes the consequences of breach a matter for the law governing the contract. Regulation 16 preserves existing common-law rules permitting immediate termination for failure to perform contractual obligations, while regulation 18 likewise depends on ordinary contractual principles. Bell Electric Ltd v Aweco Appliance Systems Gmbh & Co KG was applied in explaining that an agency contract is not terminated pursuant to regulation 16 itself.
2. Fiduciary duties. The principal-agent relationship is fiduciary, but not every duty within it is fiduciary and not every breach of a fiduciary duty automatically repudiates the contract. The available remedy depends on the nature of the duty, the circumstances of the breach and the parties’ expressed or inferred intentions. Bean J treated regulation 3 as analogous to obligations owed by an employee. The employment authorities, including Woods and Malik, supported a fact-sensitive application of general contractual principles. Bunge Corporation v Tradax Export SA concerned a different type of term, a precise time stipulation, and did not assist the condition argument.
3. Repudiatory breach. The correct question was how serious the conduct was in all the circumstances. The assessment is objective and asks whether the conduct went to the root of the relationship or evinced an intention to abandon or refuse performance. The Crawl was an undoubted breach, but it was jokey in style, limited and temporary in circulation, removed when the website closed, unsupported by evidence of harm, and did not involve bad faith or a real risk of dissemination to the world at large. The failure to give a requested assurance did not add sufficient seriousness.
4. Appellate review and result. The trial judge’s conclusion was a factual assessment supported by the evidence. It was not clearly wrong and was properly open to him. The breach did not justify summary termination, so Crocs remained liable for breach of contract. Damages remained to be assessed.

1. Court of Appeal (Civil Division) — dismissed Crocs Europe BV’s appeal and upheld the liability decision: [2012] EWCA Civ 1400.
2. High Court of Justice, Queen’s Bench Division — Sir Raymond Jack held after a liability trial that the agency’s breach was not repudiatory and entered judgment for the agency, with damages to be assessed: [2011] EWHC 3386 (QB).