Warren v Drukkerij Flach B.V.

Compensation under the Commercial Agents (Council Directive) Regulations 1993 is assessed by valuing the agency’s future income stream at termination. The valuation assumes a hypothetical purchaser able to take over and perform the agency, even if it is not assignable. It does not assume that the purchaser would pay a positive price or that the agency necessarily has value.

Where lack of value is raised, the judge must address it. The claimant bears the burden of showing on the balance of probabilities that the agency had some value, but need not identify an actual willing buyer. An appellate court will not disturb the first-instance valuation unless it falls outside the ambit of a reasonable view.

Mr Warren acted as a UK commercial agent for the appellant until he retired and gave notice terminating the agency. He claimed pipeline commissions under regulation 8 and compensation under regulation 17 of the Commercial Agents (Council Directive) Regulations 1993.

The Liverpool County Court awarded £5,771 for pipeline commissions and £18,800 compensation on 10 July 2012. On appeal, the appellant accepted liability for the pipeline commissions but argued that no compensation was payable, principally because the agency had no value and because the valuation approach was legally incorrect. The central issue was whether the hypothetical-purchaser valuation required the assumption of a positive price.

1. Disposition. The appeal was dismissed. Although the first ground identified an error in the judge’s approach, the evidence did not establish that the agency had no value.
2. Valuation principle. Applying Lonsdale v Howard & Hallam [2007] 1 WLR 2055, compensation under regulation 17 is assessed by valuing the future commission income stream which proper performance of the agency would have produced. The valuation assumes a hypothetical purchaser able to take over and stand in the agent’s shoes, even where the agency is not assignable.
3. The hypothetical-purchaser assumption does not mean that a positive price is assumed. If the agency is said to be valueless, that issue must be addressed expressly. The court must assess what value, if any, the agency had in the real-world circumstances at termination. Market conditions, costs, work required and other relevant features may affect the valuation.
4. A claimant must show on the balance of probabilities that the agency had some value. However, the claim does not fail merely because no identifiable purchaser was willing to buy it. A sustained but unsuccessful attempt to sell the agency might be relevant, but the evidence here fell well short of that.
5. The evidence concerning direct dealings between the principal and Clipper Tea was insufficient to compel the conclusion that the agency was valueless. The challenged evidence from the appellant’s witness, who was not available for cross-examination, could not properly be relied on for the first time on appeal.
6. The first-instance judge’s assessment of value was entitled to deference and could not be impeached because it fell within the ambit of a reasonable view. The primary regulation 18(b)(ii) argument was not pursued, and the appellant failed to establish that no compensation was payable.

1. Court of Appeal (Civil Division) dismissed the appeal against the compensation award.
2. Liverpool County Court awarded £5,771 for pipeline commissions and £18,800 compensation on 10 July 2012.