Shearman (t/a Charles Shearman Agencies) v Hunter Boot Ltd [2014] EWHC 47 (QB) (22 January 2014)

Shearman (t/a Charles Shearman Agencies) v Hunter Boot Ltd [2014] EWHC 47 (QB) (22 January 2014)

A contractual clause that entitles the principal to pay the agent whichever is lower—compensation or indemnity—on termination is not permitted under Regulation 17(2) of the Commercial Agents (Council Directive) Regulations 1993, as it creates a possibility of detriment to the agent and is inconsistent with the protective purpose of the Directive and Regulations. Such a clause is void, and the agent is entitled to compensation as the default remedy.

Citation
[2014] EWHC 47
Parties
Claimant: Charles Shearman (trading as Charles Shearman Agencies); Defendant: Hunter Boot Limited
Jurisdiction
England and Wales
Judgment Date
22 January 2014
Procedural Posture
Commercial Agency Contractual Dispute / Interlocutory Application for Summary Judgment on Contractual Interpretation Prior to Trial
Outcome
Clause 14 of the agency agreement is void; agent is entitled to compensation, not indemnity, if entitled to any payment.
Legal Topics
Commercial Agency, Compensation Vs Indemnity on Termination, Interpretation of EC Directive 86/653, Freedom of Contract, Protection of Commercial Agents
Commercial Law Contract Law European Union Law Commercial Agency Compensation Vs Indemnity on Termination Interpretation of EC Directive 86/653 Freedom of Contract Protection of Commercial Agents

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Parties

Charles Shearman (trading as Charles Shearman Agencies)

Claimant

Hunter Boot Limited

Defendant

Procedural Posture

Commercial Agency Contractual Dispute / Interlocutory Application for Summary Judgment on Contractual Interpretation Prior to Trial

Legal Issues

  1. 1 Whether a contractual clause allowing the principal to pay the lesser of compensation or indemnity on termination is valid under the Commercial Agents (Council Directive) Regulations 1993 and Directive 86/653/EEC
  2. 2 Whether such a clause constitutes an unlawful derogation to the detriment of the commercial agent

Ratio Decidendi

A contractual clause that entitles the principal to pay the agent whichever is lower—compensation or indemnity—on termination is not permitted under Regulation 17(2) of the Commercial Agents (Council Directive) Regulations 1993, as it creates a possibility of detriment to the agent and is inconsistent with the protective purpose of the Directive and Regulations. Such a clause is void, and the agent is entitled to compensation as the default remedy.

Court Disposition

Clause 14 of the agency agreement is void; agent is entitled to compensation, not indemnity, if entitled to any payment.

Orders

  • Clause 14 of the agreement is struck down in its entirety.
  • If the claimant is entitled to payment, it shall be by way of compensation, not indemnity.