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Commercial Agents

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The Court of Appeal has, this morning, handed down an important judgment dealing with the valuation of claims brought under the Commercial Agents (Council Directive) Regulations 1993.

These Regulations (which, over a decade on, many people remain unaware of) provide a statutory right to compensation for any self-employed intermediary who sells goods on behalf of, and in the name of, a principal.

Historically, the view has been taken in many first instance decisions (based upon French jurisprudence) that a commercial agent ought to be awarded compensation of two years' earnings if his agency is terminated, unless there is a good reason to depart from the two year presumption.

The Court of Appeal (Moore-Bick LJ giving the leading judgment) overturned these previous cases, holding:

* the correct measure of damages is the loss of the agency business, including whatever goodwill attaches to it. This will often require expert evidence

* as a result, there can be no presumption that the starting point for compensation is two years' earnings, as that does not involve any reasoned attempt to ascertain the true extent of the agent's loss. All cases suggesting there is a presumption of two years' loss of earnings are wrongly decided

* likewise, there is no room for importing a 'just and reasonable' test into the assessment of compensation

This decision is a compulsory read for anybody dealing with commercial agency cases.

Lonsdale v Howard & Hallam Ltd