S had been appointed as Diamond’s agent for the sale of Diamond’s leather upholstery products in the UK and Ireland. Four years later, S transferred its business to Rossetti. Shortly after the transfer, Diamond terminated the agency contract.
On a trial of preliminary issues, the High Court ruled that S and then Rossetti had been commercial agents and had the protection of the Commercial Agents Regulations. Those Regulations implement the European Union’s Commercial Agents Directive, which provides for the agent to be entitled to additional compensation beyond the ordinary common law position on termination of the relationship. The Court also decided that the transfer from S had amounted to an assignment and the agency contract had effectively lasted for four years, regardless of the change of agency. The agreement was therefore terminable on at least three months’ notice, as that was what the Regulations provided.
In addition, the High Court decided that the agents could act for more than one competing principal and that was not forbidden by the Regulations and the agreement between the parties had not prohibited the agent from representing a competing supplier. A requirement under the Regulations to act dutifully and in good faith did not stop the agent from representing more than one competing principal, but the agent must act openly, not take advantage and act loyally.
People often enter into agreements with agents informally. This case shows that if they want to stop their agents from representing competing suppliers, they need to set this out in a written agreement.
