Kompaktwerk GMBH v Liveperson Netherlands BV

Permission to amend a statement of case may be refused where the proposed claim has no real prospect of success. Where the application turns on a short, discrete question of law or construction and the material is sufficient, the court should determine it rather than defer the issue to trial.

Under the Commercial Agents (Council Directive) Regulations 1993, a sale of software requires a permanent transfer of the right to use a copy. A limited, revocable licence renewed for successive periods is analogous to rental, not sale. A hosted software platform, dependent on the provider’s servers and continuing services, is a service rather than goods. A reseller contracting with customers in its own name is not a commercial agent.

Kompaktwerk sought permission to re-amend its claim against Liveperson to add claims under the Commercial Agents (Council Directive) Regulations 1993. The proposed claims included compensation on termination under Regulation 17, commission under Regulations 7 and 11, and claims relating to a resale arrangement.

The proposed agency concerned LiveEngage, a cloud-hosted software platform supplied to business customers under agreements providing limited, revocable licences for successive 12-month periods. The parties also had referral and resale arrangements. The central questions were whether the arrangements involved a sale of goods and whether the resale arrangement constituted commercial agency.

1. Permission to amend. The court adopted the approach in Easyair Ltd v Opal Telecom Ltd [2009] EWHC 339 (Ch). The court must assess whether the proposed claim is realistic rather than fanciful, avoid a mini-trial, and consider evidence reasonably expected to be available at trial. However, where the evidence is sufficient to decide a short point of law or construction, the court should grasp the nettle. That issue is decided on the balance of probabilities.
2. Compensation claim. The Regulations protect only agents falling within the statutory definition. The product must involve a sale of goods. The CJEU decision in Computer Associates UK Ltd v The Software Incubator Ltd, Case C-410/19 [2021] Bus LR 1442, concerned software supplied with a perpetual licence. The permanent transfer of the right to use a copy was an essential part of that reasoning. A 12-month licence which could be renewed only on payment of a further fee did not transfer ownership permanently. It was analogous to rental, not sale.
3. The court also held, independently, that LiveEngage was a hosted service. Customers received access to software held on Liveperson’s servers, with continuing services supplied by Liveperson. The ability of some customers to operate the platform through their own employees did not alter the essential character of the arrangement.
4. Commission claim. Because Kompaktwerk was not a commercial agent within Regulation 2(1), it had no statutory right to commission under Regulation 7. Any entitlement had to arise under the parties’ contracts.
5. Resale arrangement. Under the resale agreement Kompaktwerk purchased the services and resold them to customers in its own name. That was not agency. Mercantile International Group plc v Chuan Soon Huat Industrial Group Ltd [2002] EWCA Civ 288 was distinguished because the contracts there expressly established an agency relationship. It was impermissible to disregard the contractual character of the present resale arrangement in the absence of a sham.
6. The proposed amendments therefore had no real prospect of success. Permission to amend was refused and the related claims failed. The parties were directed to draw up an order, with consequential matters to be dealt with at a further hearing if necessary.

First-instance decision. The judgment does not state any prior appellate decision in this litigation.