Commercial Agents

The House of Lords has handed down its decision in Lonsdale v Howard & Hallam. This is an important case for those dealing with commercial agents.

The Commercial Agents (Council Directive) Regulations 1993 (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 House of Lords, upholding the Court of Appeal, has conclusive stated that English courts should not follow the French practice of awarding two years' losses as compensation. Instead, the correct measure of damages is to value the income stream which the agency business would have generated. This will often require expert evidence, and the best evidence of te value will be the price at which the agent could have sold his 'business' on the open market. The key passages in the judgment are paras. 10-13 and 21.