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 1 Lloyd's Rep 1 :  ECC 1, Court of Appeal - Oliver Segal QC
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The Commercial Agents (Council Directive) Regulations 1993 reg.3 did not create in an agency contract a condition whose breach would automatically terminate the contract.
The appellant principal (C) appealed against a judgment in favour of the respondent agent (S) in its claim against C for summarily terminating its commercial agency contract.
S had been the United Kingdom agent for the sale of C's footwear products. S's employees posted comments about C on a website. A link was sent to S's other employees and to third parties, including some of C's customers and distributors. The website was later taken down. S said that the comments were a joke about C's failure to respond to orders; C claimed that they disparaged the products which it had appointed S to sell and constituted a repudiation of the agency contract. The judge held that while S had breached the contract, the breach was insufficiently serious to be repudiatory.
C argued that (1) the judge had erred in holding that breach of the duty under the Commercial Agents (Council Directive) Regulations 1993 reg.3 only entitled the principal to determine the agency contract if it was sufficiently serious: reg.3 should be read as a condition, any breach of which would entitle the principal to terminate the contract; alternatively, reg.3 created a statutory duty, the breach of which repudiated the contract; (2) S's breach of fiduciary duty automatically entitled C to terminate the contract; (3) S's conduct had in any event been sufficiently serious to be repudiatory.
HELD: (1) Regulation 3 was not expressed as, nor did it create, a condition of the contract the breach of which would automatically terminate the agency contract. It did no more than set out the relevant obligations of the agent. Nor did the Regulations spell out that, as a specific consequence of breach, the agency contract was, or could be, terminated. Regulation 5(2) made that implication impossible by expressly providing that the consequence of the breach of that Regulation was a matter for the law governing that contract (see paras 45-46, 62 of judgment). (2) The general principles of fiduciary law did not support C's submissions of automatic termination of the contract by breach of fiduciary duty. The fiduciary character of the contractual relationship was clearly relevant, but was subject to the qualification that not all duties owed within a fiduciary relationship were properly classed as fiduciary duties, and not all breaches of duty properly classed as fiduciary either automatically or necessarily repudiated the contract. Breaches of fiduciary duty were capable of other consequences and remedies, depending on the nature of the duty, the circumstances of the breach and the parties' intentions in relation to the contract. An analogy with employees' duties did not assist C: there were cases in which an isolated act of misconduct had not justified summary termination of the contract (paras 47-49). (3) The judge had addressed the correct question, namely how serious, in all the circumstances, S's conduct had been. The evidence had been sufficient to support the judge's assessment that the breach was not as serious as C had contended and that S's conduct had not justified summary termination. The website had not in terms disparaged C's goods but had referred to its inability to meet delivery obligations, a state of affairs that was well known. Its style had been obviously jokey and its circulation limited and temporary. There was no evidence of harm suffered by C. The disparagement of C had been a breach of contract but not a breach going to the root of the agency relationship. It was a one-off incident that had not involved bad faith on S's part, was not shown to have involved a real risk of harm to C by dissemination to the world at large, and had not evinced an intention to abandon the agency contract (paras 50-52).