Alan Ramsay Sales & Marketing Ltd v Typhoo Tea Ltd

The court held that the emails of 18 and 26 March 2013 were part of a continuum of negotiations and were protected by without prejudice privilege because an extant dispute about termination already existed. Accordingly those emails could not be relied upon as constituting a repudiation of the agency agreement. The claimant's open email of 28 March 2013 was therefore a repudiatory acceptance but the defendant did not accept that repudiation. On the contrary the defendant affirmed the agency by conduct (permitting the claimant to act at the Nisa Trade Show, cooperating in an orderly handover and paying the monthly retainer), so the agency continued until it was terminated on 11 May 2013.

The claimant was entitled to compensation under Regulation 17 of the Commercial Agents (Council Directive) Regulations 1993 and to damages for termination with insufficient notice (nine months' unexpired notice) and for non-payment of the retainer for 25 April to 11 May 2013. In valuing compensation the court adopted the Lonsdale approach, accepted the claimant's expert on most points, applied a multiplier of 4 and assessed the multiplicand so as to give a Regulation 17 award in the region of £130,000; damages for the unexpired nine months were assessed at £45,459 and the unpaid retainer at £7,583.33.

Background and procedural posture: This is a first instance Commercial Court judgment. The claimant (a commercial agent) sued the defendant (Typhoo Tea Ltd) for breach of contract and for compensation under the Commercial Agents (Council Directive) Regulations 1993 (the Regulations), alleging wrongful termination of its agency. The claimant asserted a 12 month contractual notice period and claimed that defendant communications in March 2013 were repudiatory; the defendant contended the March emails were without prejudice settlement communications and that the claimant's response of 28 March 2013 was itself a repudiation which the defendant accepted.

Nature of relief sought: Damages for breach of contract (insufficient notice and unpaid retainer) and compensation under Regulation 17.

Issues framed:

• Whether the defendant's emails of 18 and 26 March 2013 were protected by without prejudice privilege and therefore inadmissible as evidence of repudiation;
• If the March emails were not privileged, whether they amounted to a repudiatory renunciation of the agency and, if so, whether the claimant validly accepted that repudiation on 28 March 2013;
• If the claimant's 28 March email was a repudiation, whether the defendant accepted that repudiation by conduct or otherwise, or alternatively affirmed the contract;
• Quantum: the correct valuation method for Regulation 17 compensation and damages for insufficient notice.

Reasoning and conclusions: The court reviewed the without prejudice doctrine, emphasising that privilege applies where there is an objectively existing dispute or a bona fide attempt to compromise. Applying the objective test (Barnetson and Bradford & Bingley v Rashid principles), the judge found an extant dispute existed by mid-February 2013 and that the March emails formed part of without prejudice negotiations. Even viewed on their own, the March emails were not sufficiently unequivocal in context to be treated as renunciatory. Consequently the claimant's open letter of 28 March 2013 which purported to accept repudiation was itself a repudiation. The court then applied well-established principles on acceptance and affirmation of repudiation (including Societe Generale v Geys and Vitol) and concluded that the defendant did not accept the claimant's repudiation but instead affirmed the contract by conduct: it allowed the claimant to represent Typhoo at the Trade Show, cooperated in handover and paid retainer money. The agreement therefore continued until termination on 11 May 2013.

On quantum, the court applied the Lonsdale approach to Regulation 17 (value of the agency as a going concern), accepted most of the claimant expert's methodology, allowed some adjustments for purchaser conservatism and fixed costs, and reduced the expert's multiplier from 5 to 4, producing an award in the region of £130,000. Damages for the nine months' unexpired notice were assessed at £45,459 and the unpaid retainer for 25 April to 11 May 2013 at £7,583.33. The court rejected the defendant's contention that proof of claimant's loss-making performance defeated recovery.

Wider comment: The judge noted the absence of authority directly on whether alleged repudiatory statements in without prejudice negotiations can be admissible or relied upon to terminate a contract and treated the public policy underpinning the without prejudice rule as determinative in this case.

This first instance claim succeeded. The court held (i) the defendant's 18 and 26 March 2013 emails were part of without prejudice negotiations and inadmissible as evidence of repudiation; (ii) the claimant's 28 March 2013 open email was a repudiation but the defendant did not accept it and in fact affirmed the agency by conduct, so the contract continued until termination on 11 May 2013; (iii) the claimant was entitled to compensation under Regulation 17 and to contractual damages for insufficient notice and unpaid retainer. The rationale was that an objective assessment showed an extant dispute for the without prejudice rule to apply, and the defendant's subsequent conduct was only consistent with affirming the agreement.