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	Scottish Court of Session Decisions
You are here: BAILII >> Databases >> Scottish Court of Session Decisions >> Roy v MR Pearlman Ltd [1999] ScotCS 71 (10 March 1999) URL: http://www.bailii.org/scot/cases/ScotCS/1999/71.html Cite as: [1999] ScotCS 71, 1999 SCLR 803, 1999 SC 459

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On 30 June 1983 the pursuer and the defenders entered into an agreement ("the Agreement") whereby on certain terms and conditions the defenders appointed the pursuer to be their sole selling agent in Scotland for the sale of a range of products. Clause 8 of the Agreement provided -

Section (Clause) 2 imposed certain obligations on the pursuer as agent including obligations to "use his best endeavours to develop and extend the business of the Principal and to push the sale of the Goods" and to "act loyally and faithfully to the Principal in all matters". Clause 9 empowered the Principal to determine the Agreement without notice in certain events including if the agent "fails to observe or perform any of the covenants or conditions of this Agreement".

By letter dated 30 June 1997 the defenders' managing director wrote to the pursuer in the following terms:-

On 1 July 1997 the pursuer responded in the following terms:

In this action the pursuer makes the following claims against the defenders, namely (1) for £3,333.82 with interest from 30 December 1997, (2) for £3,333.82 with interest from 30 December 1997 and (3) for £13,335.28 with interest from 30 December 1997 or such other date as to the Court shall seem appropriate. His action is founded on the Agreement and the Commercial Agents (Council Directive) Regulations 1993.

In respect of claim (1) the pursuer, under reference to the defenders' letter of 30 June 1997, avers -

The pursuer also avers in respect of claim (1) -

In response to certain averments by the defenders, the pursuers avers -

The pursuer's plea-in-law in support of claim (1) is in the following terms -

In respect of claim (2) the pursuer avers -

The pursuer's plea-in-law in support of claim (2) is in the following terms -

In respect of claim (3) the pursuer, after referring to Regulation 17 of the 1993 Regulations, avers -

The pursuer's pleas-in-law in support of claim (3) are as follows:-

This case was heard by me at debate in respect of a challenge by the defenders to the relevancy of each of the pursuer's claims. The defenders do not in their pleadings formally admit that the 1993 Regulations applied to the relationship between the parties but no positive challenge was made to their application and the debate proceeded on the basis that the pursuer was a commercial agent within the meaning of Regulation 2(1) and that the Regulations governed the relations between him as commercial agent and the defenders as principals. The defenders contend on averment that on 30 June 1997 they determined the Agreement and that they were then entitled to do so in terms of Clause 9(c). They make certain averments of fact in support of that contention. Those averments are denied by the pursuer but no issue was taken at debate as to their relevancy.

Mr Bell for the defenders submitted that each of the pursuer's claims was irrelevantly pled and that the action should be dismissed. The pursuer's claim (1) was, in so far as concerned its first limb, formulated as a claim for payment under the contract, not for damages for its breach. As such, it was irrelevant, there being no entitlement under the contract to payment in lieu of notice. Any claim which the pursuer had by reason of the defenders' failure to give to him six months notice could only be a claim for damages. The distinction was important both in regard to mitigation of loss and to computation of damages. While a material breach of contract by the defenders amounting to a repudiation of the contract would not of itself bring the contract to an end, it presented the pursuer with a choice between two courses of action - (1) acceptance of such repudiation with a consequent claim for damages for breach and (2) rejection or ignoring of the repudiation so that the contract remained in force, in which latter event there could be no valid claim in respect of premature termination. The pursuer's averments, he argued, were on this aspect inconsistent and confused. Mr Bell referred to Bowstead & Reynolds on Agency (16th Edition) para.10-040, McGregor on Damages (16th Edition) paras.1254-5, Gunton v Richmond upon Thames London Borough Council [1980] I.C.R.755, especially per Brightman L.J. at p.776F-H. While some doubts about the reasoning of the majority in that case had subsequently been raised in Boyo v Lambeth London Borough Council [1994] I.C.R.727, it remained good law. In practical terms, as the pursuer's remuneration was commission earned on sales effected by him, he could obtain an entitlement to payment under the Agreement only if he in fact effected such sales. It was not open to the pursuer to accept, as he claimed to do, the repudiation but with effect only from the expiry of the six months period. The pursuer's pleadings were completely lacking in specification as to when he had accepted the defenders' alleged repudiation. Reference was made to Walker on Contracts (3rd Edition) para.32.9, Howard v Pickford Tool Co Ltd [1951] 1 K.B.417, per Asquith L.J. at p.421, Norwest Holst Ltd v Harrison [1985] I.C.R.668, Decro-Wall International S.A. v Practitioners in Marketing Ltd [1971] 1 W.L.R.361, Thomas Marshall Ltd v Guinle [1979] 1 Ch.227, Atlantic Underwriting Agencies Ltd v Compagnia di Assicurazione di Milano SpA [1979] 2 Ll.LR.240, Gunton v Richmond upon Thames London Borough Council and Boyo v Lambeth London Borough Council. If the Agreement had not been effectually terminated, none of the claims made by the pursuer in this action could have any foundation. Nor was there a proper basis for the pursuer's claim under Regulation 7 over a period running to 31 December 1997. Moreover, all the claims made by the pursuer were wholly lacking in necessary specification as to how they were computed. In addition, so far as the pursuer sought to found his claim under Regulation 17 on French law and practice, there were no averments which would allow evidence to be led as to the law of France. Matters of foreign law required to be averred and proved in a Scottish court as matters of facts (Macphail on Evidence para.2.02). In any event, harmonisation did not involve wholesale adoption of French law on this matter.

Mr O'Neill for the pursuer adopted for the purposes of his submissions a detailed written Statement of Argument which he had prepared. He maintained that Mr Bell's approach to the material issues (which relied on common law doctrines under national law) was wholly misguided in relation to the present claims. Those claims had to be viewed as claims made under Community law and were to be determined by the court acting as a "Community law judge". It was necessary for that purpose for the court to divest itself of the trappings of United Kingdom domestic law. A radical approach was required which might in some circumstances involve in effect the rewriting of a United Kingdom regulation (Litster v Forth Dry Dock & Engineering Co Ltd 1989 S.C.(H.L.)96). Mr O'Neill also referred to British Fuels Ltd v Baxendale [1998] 4 All.E.R.609. In the present case the language of the Regulations was copied literally from the English version of the Directive. Unless national law was expressly incorporated, there could be no assumption that that law and Community law were the same. The most recent pronouncements of the European Court of Justice made it clear that, with respect to the Commercial Agents Directive, Community law occupied the whole relevant field except where (as, for example, by Articles 16, 13.2 and 15.3 of the Directive) there was a reference to or saving of national law. In the absence of an express reference or saving, national law and rules arising under it had no part to play, except possibly as part of a comparative law exercise. It was appropriate to adopt a purposive approach having regard to the principle that the Directive and the implementing Regulations were designed to improve the position of commercial agents. Reference was made to Barbara Bellone v Yokohama SpA (Case C-215/97, Opinion of the Advocate General (29 January 1998) paras.30 and 39, Opinion of the Court (30 April 1998) paras.13-16). Regulation 15 of the 1993 Regulations prescribed minimum periods of notice. It was not open to an agent to accept a shorter period, even in a situation where the principal had repudiated the contract. The result was that, subject to Regulation 16 (which provided in limited circumstances for immediate termination), the contract was not capable of being brought to an end earlier than the expiry of the requisite period (in this case as at 30 December 1997). The common law of England concerning remedies where there had been unaccepted repudiation was at present in a state of flux and uncertainty (Gunton v Richmond upon Thames London Borough Council, Boyo v Lambeth London Borough Council). There were no clear rules in Scotland. The English decisions were not binding and should not be followed by this court. There was authority in Scotland that under employment contracts dismissal without notice was not properly a breach of contract on the part of the employer but brought into operation an implied condition that payment in lieu of notice was due (Gloag on Contract (2nd Edition) p.731; Morrison v Abernethy School Board (1876) 3 R 945). In any event, national rules were irrelevant to the issues arising under Community law. So far as concerned specification of the amounts claimed, the defenders had failed to comply with their obligation under Regulation 12 to provide information to the pursuer. In these circumstances the pursuer could do no more than estimate the amount of his claims. As to the applicability of French law and practice, the compensation provisions under Regulation 17 had been based on French law which had developed a body of case law concerning the right to and measure of compensation. Reference was made to a Commission report dated 23 July 1996. It was legitimate to have regard to and follow such law and practice in the interests of harmonisation

Mr Bell in response submitted that the Regulations did not displace the whole common law. They were not to be interpreted in a vacuum. The rules of the common law applied except in so far as displaced by or inconsistent with the Regulations. In any event, Regulation 15 required to be read with Regulation 16 which made savings with regard to immediate termination. Either Regulation 16(a) or 16(b) applied here. Mr Bell renewed and expanded upon his earlier submissions as to the irrelevancy and lack of specification of the pursuer's averments.

Part IV of the 1993 Regulations is concerned with the conclusion and termination of the agency contract. Within that Part are Regulations 15, 16 and 17. These, in so far as material, are in the following terms:-

Part III of the Regulations is concerned with remuneration. Within that Part are Regulations 7 and 8. These, in so far as material, are in the following terms:-

The 1993 Regulations were enacted for the purpose of implementing Council Directive 86/653/EEC on the co-ordination of the laws of the member states relating to self-employed commercial agents. The proper approach to the construction of such legislation is clear. As Lord Oliver said in Litster v Forth Dry Dock & Engineering Co Ltd at p.105 -

In the present case the terms of the English language version of the relevant Directive have been very largely replicated in the Regulations. There is, so far as concerns the issues in this case, no apparent conflict between the words used in these two instruments. Nor is there any apparent conflict between the words used in the Regulations and any judgment of the European Court of Justice drawn to my attention (I shall return to consideration of Barbara Bellone v Yokohama SpA).

Mr O'Neill's fundamental submission was that, in applying the 1993 Regulations, this court should exclude from its consideration (except possibly for comparative law purposes) the existing rules of domestic law which would apply in relation to rights and remedies arising on the purported termination without due notice of a contract of agency. In my view that submission is unsound. Regulation 15(2), giving effect to Article 15.2 of the Directive, prohibits the parties agreeing to any shorter periods of notice than those prescribed. It says nothing, however, about the rights and remedies available to the agent in the event of the principal (in circumstances to which Regulation 16 does not apply) failing to give any notice or giving shorter notice than is lawful. In particular, it makes no express provision that, in such an event, the contract (or the relationship) is to be treated as subsisting until the expiry of the due period. Nor, in the absence of authority (including any relevant decision of the European Court of Justice) can any such provision be implied. So far as drawn to my attention, there is no principle of Community jurisprudence which indicates such a result. In these circumstances this court must have resort to such domestic principles as will assist it in determining the appropriate consequential rights and remedies.

British Fuels Ltd v Baxendale, to which Mr O'Neill referred, itself makes it clear that regulations made in furtherance of a Directive do not, at least in ordinary circumstances, wholly displace the rules of domestic law in the relative field. That case was concerned with the effect of the Transfer of Undertakings (Protection of Employment) Regulations 1981 made in furtherance of Council Directive (E.E.C.) 77/187. Reference is made by Lord Slynn at pp.620-1 to domestic law, including the effect under English law of dismissal of an employee. The effect of the relevant regulations, it was held, was to transfer from the transferor to the transferee liability for the (domestic law) consequences of any dismissal. Likewise, the consequential rights and remedies arising on a purported termination without due notice of a commercial agency contract are, so far as not inconsistent with the Regulations, not displaced. The saving, by Regulation 16 or otherwise, of particular domestic rules does not, in my view, cause such displacement. I should add, however, that I am unable to accept Mr Bell's submission that Regulation 16 is, on the pursuer's narrative of events, applicable. That Regulation is relevant to this case only in respect of the defenders' claim that they were entitled to determine the Agreement in terms of Clause 9(c).

Of course, it may be that a provision of domestic law is inconsistent with a relevant Directive as properly interpreted. If that is so, the domestic rule will require to yield. That was the result in Barbara Bellone v Yokohama SpA where it was held that a domestic rule of Italian law which made the validity of an agency contract conditional upon the commercial agent being entered in an appropriate register was precluded by Council Directive 86/653/EEC. There is, in my view, no such inconsistency here.

As the European Court of Justice observed in Barbara Bellone v Yokohama SpA at paragraph 13, the Directive is designed to protect commercial agents. There is, however, no obvious protection to a commercial agent in denying to him, in circumstances where the principal has failed to give due notice of termination, the right to bring the primary obligations of the agency contract forthwith to an end. This is particularly so where remuneration under the contract, if it is ongoing, depends on actual sales being effected by the agent.

As Gunton v Richmond upon Thames London Borough Council and Boyo v Lambeth London Borough Council illustrate, there have been differing judicial views expressed as to the legal effect under English law of a wrongful dismissal of an employee. The most recent statement on the point, expressed in the context of the application of a Directive, appears to be that made by Lord Slynn in British Fuels Ltd v Baxendale where at pp.620-1 he said:-

The other judges concurred. In relation to wrongful termination of a contract of agency it is stated in Bowstead & Reynolds on Agency (16th Edition) at para.10-040 -

The authority cited for the proposition in the first sentence is Atlantic Underwriting Agencies Ltd v Compagnia di Assicurazione di Milano SpA where Lloyd J. applied in relation to contracts of agency the prevalent view of the effect of dismissal in contracts of employment.

In the circumstances of this case it is unnecessary to attempt to resolve such outstanding conflicts (if any) as there may be under domestic law as to the technical effect of a wrongful repudiation of a contract of agency and in particular of a notice by a principal purporting to terminate the services of an agent with immediate effect in circumstances in which six months notice was due. It is undisputed that the pursuer immediately responded to the defenders' notice of 30 June 1997 by his letter of 1 July in which he stated that he would cease as of that latter date to act as the defenders' agent in Scotland. He intimated that he was immediately putting in hand arrangements to wind up the relationship. There is no suggestion either in that response or otherwise that he sought to maintain the relationship or the primary obligations under the contract for a further six months or was even willing that they be so maintained. All the indications are to the contrary. The inevitable conclusion, in my view, is that the contract of agency came practically and legally to an end on or immediately after 1 July 1997, save only for the purpose of enforcing secondary or consequential rights under it. Accordingly any claim founded on the proposition that the agency relationship subsisted until 30 December 1997 or, save for those limited purposes, that the contract of agency so subsisted is, in my view, misconceived.

Under Regulation 7(1) a commercial agent is entitled to commission on commercial transactions concluded "during the period covered by the agency contract". On the above analysis that period on the undisputed primary facts ended on or immediately after 1 July 1997. Accordingly, in so far as the pursuer claims payment under Regulation 7 in respect of the period between then and 30 December 1997, his claim is, in my view, irrelevant. Regulation 8 provides that a commercial agent is entitled in certain events to commission on commercial transactions concluded "after the agency contract has terminated". In so far as the pursuer makes a claim under that Regulation only in respect of a period commencing on 30 December 1997, his claim appears to be understated, the agency contract having, for the purposes of Regulation 8, plainly, in my view, terminated several months prior to that date. Likewise, in so far as the pursuer's claim (1) proceeds on the averment that the parties' contract "has continued in full force and effect until 30 December 1997" it is, in my view, irrelevant.

An interesting question, however, arises as to the precise form of the remedy available to the pursuer under Scots law on termination of the Agreement without due notice. The Agreement makes no express provision for payment in lieu of notice. It is plain from the authorities earlier referred to that under English law his remedy would be one of damages for breach of contract. However, Mr O'Neill drew my attention to a passage in Gloag on Contract (2nd Edition) where the learned author, writing in 1929, stated at p.731:-

Two elderly cases are cited in support of that proposition. The earlier, Cooper v Henderson (1825) 3 S 619, is very briefly reported and does not address the question whether a claim made in respect of dismissal without due notice is properly one for debt under an implied term of the contract or one for damages. The later, Morrison v Abernethy School Board, concerned a contract regulated by the Education (Scotland) Act 1862 which provided that every schoolmaster at a public school (in the Scottish sense) was employed at the pleasure of the local school board. Lord Deas, at p.949, asked -

He continued -

Later, at p.952, he observed -

The other judges of the majority expressed similar views. Lord Justice-Clerk Moncrieff at p.96 put the matter thus-

So far as drawn to my attention, the approach adopted in Morrison v Abernethy School Board has not been the subject of recent judicial discussion. If that approach accurately represents the current law of Scotland in relation to contracts of employment generally, it may also be applicable to contracts of agency. Although in the latter case, where remuneration is not at a fixed amount, the measure of compensation may be more difficult to assess, that would be no sufficient reason in principle for refusing to apply it.

I am reluctant to decide at this stage which approach is correct - an issue which may have ramifications for other cases. It is at present unclear whether the different approaches would, in the particular circumstances of this case, give rise to any materially different result. It is better to decide such an issue if and when it becomes necessary to do so.

Under claim (3) the pursuer seeks compensation under Regulation 17(6). Although not referred to in his formal pleadings, it appears from the pursuer's Statement of Argument that he proposes to invoke practice in the French courts as an aid to establishing the appropriate measure of that claim. The justification advanced for doing so is that, as is apparent from a Report dated 23 July 1996 prepared by the Commission in implement of paragraph 17.6 of the Directive, the compensation provisions in the Regulations are ultimately based on pre-existing French law and practice. Mr Bell argued that the national law of another member state (in this case, France) was irrelevant to the interpretation and application of the Regulations; in any event, he argued, it was not competent to seek to rely on foreign law without averment and proof (as a matter of fact by testimony from experts skilled in the foreign law) of that law. I reject those arguments. I agree with the view of Mr John Mitting, Q.C., (sitting as a Deputy Judge of the High Court in England) expressed in Moore v Piretta Ltd at p177g -

Nor, in my view, is it necessary in the present context to have the content of such law and practice spoken to formally by experts in such a foreign system of law. French law and practice is not being invoked because an issue in this court requires to be determined in accordance with French law but because, in the context of a Directive which provides for a remedy drawn from French legal experience, assistance towards a harmonised approach may be obtained by having regard to the longer experience of the French courts in applying that remedy. That is more in the nature of a comparative law exercise, for the purposes of which a Scottish court is entitled to have direct regard to sources of foreign law. The particular sources which would be helpful in the context of the present case are best determined in the course of further procedure.

Mr Bell also criticised the pursuer's pleadings for lack of specification of the basis of calculation of the various claims made by him. There may be some substance in that criticism. However, the material necessary to formulate the pursuer's claims with more precision is in the hands of the defenders. Under the Regulations, if applicable, the pursuer is entitled to inspect the defenders' books; while the defenders do not formally admit that the Regulations apply, they make no positive case that they do not. The appropriate course would have been for the pursuer at an earlier stage of these proceedings to have sought recovery of such material with a view to giving better particularisation of his claims. However, I do not regard his failure to do so as being sufficient to justify dismissing his claims on that ground. If, and in so far as his claims are otherwise relevant for inquiry, they should proceed with appropriate steps being taken hereafter in this commercial action to ensure that in advance of any proof the defenders have adequate notice of the detail of the claims made against them.

For the foregoing reasons the pursuer's claim (1) in so far as based on Regulation 7 is, in my view, fundamentally irrelevant and will fall to be dismissed. The circumstance, relied on by Mr O'Neill, that the pursuer or his advisers perceive that the issue in this case is one which might at some stage justify a reference to the European Court of Justice (which prefers to adjudicate on established rather than hypothetical facts) does not warrant proof being allowed on a claim which this court holds to be fundamentally irrelevant. Certain of the pursuer's averments containing propositions of mixed fact and law are also irrelevant and will require, unless deleted voluntarily, to be excluded from probation. However, the pursuer's claim (1), in so far as resting on an implied term of the contract, is (standing Morrison v Abernethy School Board) best determined after inquiry. The pursuer's claim (2) adopts an inappropriate starting point but is not for that reason fundamentally irrelevant; it simply has the effect of unnecessarily restricting the scope of that claim. The pursuer's claim (3) is not fundamentally irrelevant, though it will require in due course to be particularised. Further consideration may also require to be given by the pursuer to the scope of that claim.

In the foregoing circumstances I shall put the case out By Order for further consideration of the appropriate order to give effect to the views expressed in this Opinion and of the steps thereafter to be taken for resolution of this dispute.