Compensation

Lonsdale v Howard & Hallam Ltd [2007] UKHL 32; [2007] All ER (D) 41 (Jul); TLR 10 July

The claimant had been an agent for the defendants for over 13 years until the agency was terminated as a result of the closure of the defendant’s shoe business. Under the Commercial Agents (Council Directive) Regulations 1993 (SI 1993 No 3053), on termination of his agency he was entitled to either an indemnity or compensation from his principals. The European Commission had published a report in 1996 which noted that a body of case law had developed in France which fixed, ‘by judicial custom’, the level of compensation for agents as two years’ commission. The EC had said that that ‘conformed with commercial practice’. The claimant submitted that the EC should be treated as having endorsed the French method of calculating compensation under article 17(3) of Council Directive (86/653/EC) as the appropriate interpretation of that article as a Community instrument and that all Member States which adopted article 17(3) were bound to treat twice gross commission as the normal compensation for termination of an agency. The judge and Court of Appeal in the present case had calculated the compensation payable under article 17(3) by reference to the value of the agency on the assumption that it continued. That value was the amount which the agent could reasonably expect to receive for the right to stand in his shoes, continue to perform the duties of the agency and receive the commission which he would have received.