Agents permitted to act for multiple competitors.

13 November 2012

The Commercial Agents Regulations 1993 provides important benefits to those qualifying as a 'commercial agent'; in particular the benefit of compensation provision following the termination of the relationship. The issue of concern before the court in Rossetti Marketing Ltd v Diamond Sofa Company Ltd1 was whether or not an agent representing multiple competing companies would be able to take advantage of the provisions in the 1993 Regulations. Solutions Marketing Limited (SM) were an agency that acted to represent Asian furniture manufacturers in the UK. SM were appointed by Diamond Sofa Company Limited (DS) as their agents for the sale of their leather furniture in the UK. During this period SM continued to act as agent for other suppliers of competing products, and DS were well aware of the state of affairs. In 2008, SM transferred its business to Rossetti Marketing Ltd (RM), and when this occurred the agency agreement was also transferred. Shortly afterwards DS terminated the agency agreement, one of the reasons given for their decision to do so being that they were dissatisfied that RM was not fully committed to their company and represented too many competing manufacturers. Following the termination of the agency agreement RM claimed for compensation under the Commercial Agents Regulations. DS contended that the Regulations did not apply to an agent who represented multiple competing principals for two reasons: (i) that they would not fall into the category of a "commercial agent" as defined by the Regulations; and (ii) that as they were representing multiple competing companies they would inevitably be in breach of their duty under the Regulations to act dutifully and in good faith. Decision Doe the fact an agent acts for more than one principle prevent him from being categorised as a "commercial agent" in accordance with the definition set out in the 1993 Regulations? Unsurprisingly the judge rejected this argument from DS. The Regulations must be interpreted in the light of their wording as defined in Regulation 2. There is little support in the Regulations or preceding case law for the argument that to be a "commercial agent" an agent may only represent one principle at a time for the type of goods in question. As a result the Court held that the Regulations cannot be said to exclude from their scope a commercial agent acting for multiple competing principals. Does acting for multiple competing principals breach the obligation under the 1993 Regulations to act dutifully and in good faith? In considering the meaning of 'good faith' the court considered the Unfari Terms in Consumer Contracts Regulations 1999, where it has been held to connote fair and open dealing. In considering the meaning of 'dutifully', the judge considered that it could be interpreted as meaning the same thing as loyally and therefore was similar to the agent's common law fiduciary duty. The Court found that, just as an agent's fiduciary duties at common law will be defined by the terms of the contract, the same applies to the obligations under the Regulations. Clearly there are dangers where commercial agents act for competing principals, as an agent is bound to serve each as if he were the sole principle and cannot act where there is a conflict of duty. However, so long as there was no conflict of duty a contract could contain an express or implied term allowing the agent to act for competing principals. It was therefore held on the facts that RM had been a commercial agent for DS under the regulations, as there was an implied term in the contract that they could act for other principals. Comment This case is significant as it is the first authority to conclude that agents acting for multiple competing principals fall within the scope of the 1993 Regulations. A principle wishing to ensure that its agent does not act for competitors should make this clear to avoid an implied term to the contrary being read into the contract. Failure to do so could result in the agent, under certain circumstances, being able to act for a competitor. For additional information please contact Justin Emerson of Gepp & Sons on 01245 228113. The above is not legal advice; it is intended to provide information of general interest about current legal issues. 1 [2011] EWHC 2482