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Food and drink sector commercial agent awarded £180,000 under the Commercial Agents (Council Directive) Regulations 1993

View profile for Peter Cusick
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The colourful and entertaining judgment of Mr Justice Flaux in Alan Ramsey Sales & Marketing Limited -v- Typhoo Tea Limited published on 8th March 2016 is essential reading for anyone advising on the Commercial Agents (Council Directive) Regulations 1993 especially those in the food and drink sector.

Alan Ramsey Sales Marketing Limited was a commercial agent run and largely owned by Mr Alan Ramsey who worked between 1978 and 2001 for what was then Cadbury Typhoo/Premier Brands before setting up his own company.  For the last 15 years he had operated in the food and drink sector predominantly in the cash and carry wholesale areas of that sector.  He had worked for a number of principals with non‑competing products.  From about 2006 until May 2013 those principals included Typhoo Tea Limited.

The claim related to the circumstances in which an agency agreement between the parties came to be terminated on 11th May 2013.

The lengthy judgment deals with a wide range of issues and is of great practical importance for lawyers and experts working in this field.

The first two issues determined by the Judge related to whether correspondence which had been entitled “without prejudice” was protected by privilege and whether the contract had been affirmed.  These are important issues that crop up in practice surprisingly often. I want to focus however on the second half of the Judgment where Mr Justice Flaux looked at the agent’s entitlement to compensation under Regulation 17 of the regulations.

The Judge relied heavily on the speech of Lord Hoffman in Lonsdale -v- Howard and Hallam Limited 2007.

Lord Hoffman in that case identified that part of the directive was in fact based on French law and therefore he looked to French law for guidance and set out those principles in is Judgment.  In essence he took the view that what must be valued is the value of the agency relationship which lies in the prospect of earning commission.  It is the agent’s expectation that proper performance of the agency contract will provide him with a future income stream and that was what had to be valued.

Mr Justice Flaux examined a number of very detailed points which had been put to him by the parties respective experts.  The Judge made clear findings on each of these points which will be very helpful for anyone attempting to identify appropriate compensation in similar cases.

He concluded that “the pre-tax multiplicand is £42,625. The parties will be able to calculate the post-tax figure. To that must be applied a multiplier of 4. The resultant figure, which will be in the region of £130,000, seems to me a fair reflection of the value of the agency and what a notional purchaser would have been prepared to pay for it”.

In addition to this compensation the Judge also awarded damages of £45,459 as a result of terminating the agency agreement without sufficient notice and a further payment due for services rendered by the agent at the end of the agreement in the sum of £7,583.33.

It is also worth bearing in mind that the Judgment followed a four day trial in February 2016 with QCs on both sides. The costs of that exercise would not be insignificant!

In summary therefore whilst this case provides a useful summary of the law on the two common practical issues of intertwined open and without prejudice correspondence and affirmation, its real importance lies in the detailed way in which the Judge went through the factors giving rise to the determination of the compensation payable to the agent in this case.