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Michael Edwards v International Connection (UK) Limited

27 Apr 2006

This case concerned the appeal to the Court of Appeal by International Connection (UK) Limited (“ICL”) against the order of His Honour Judge Knight QC in the Central London County Court.

Mr Edwards was a salesman, who specialised in the sale of fashion jewellery. ICL is a wholesale supplier of fashion jewellery. In March 1992 Mr Edwards met Mr Tramer, the managing director of ICL at a trade show, following which Mr Edwards was engaged, pursuant to an oral agreement, to promote and sell ICL’s products in Cornwall, Devon, Somerset, Dorset and Wiltshire (“the Territory”). Mr Edwards was given the exclusive right to act on ICL’s behalf in the Territory on a self-employed basis and received commission on all sales achieved in the Territory, whether orders were placed through him or directly with ICL.

On 2 September 2002, ICL summarily terminated Mr Edwards’ contact, as a result of which termination Mr Edwards duly issued proceedings. Such proceedings included claims pursuant to Regulations 7, 8, 12, 15 and 17.

At the trial, ICL denied that Mr Edwards was a commercial agent within the meaning of the Regulations and ICL denied that the Regulations applied to the relationship. This was on the basis that ICL contended that Mr Edwards had business interests of his own which prevented him devoting substantially the whole of his time to representative activities. The Judge at the trial found that Mr Edwards was a commercial agent within the meaning of the Regulations and that the Regulations did apply to the agreement based on the following findings:

  • that the purpose of the agreement was to develop a market for ICL’s products in the Territory on an exclusive basis;
  • that Mr Edwards did develop a market from an original base of two to three customers, to a total of some two hundred customers; and
  • that in respect of transactions generated by Mr Edwards, orders were normally individually negotiated and that orders sent by customers direct to ICL had been obtained by Mr Edwards, but were handled in that way as a matter of business convenience.

The sole ground of appeal by ICL was that the Judge was wrong to hold that the agreement between Mr Edwards and ICL was one to which the Regulations applied and that Mr Edwards’ activities were, in effect, secondary. ICL relied primarily on the following arguments:

  • that, in light of the way Mr Edwards had carried out his functions under the agreement, there was insufficient evidence to show that transactions carried out during the period of the agency were individually negotiated (an argument directed to paragraph 2(b)(i) of the Schedule to the Regulations); or
  • in light of the way Mr Edwards carried out his functions under the agreement, there was insufficient evidence to show that he had devoted substantially the whole of his time to representing ICL (an argument directed to paragraph 3(c) of the Schedule to the Regulations).

ICL argued that many orders were placed by customers direct with it and that, in many cases, such customers had little or no contact with Mr Edwards. In addition, ICL argued that the evidence as to the number of sales and the amount of income generated by Mr Edwards’ own business activities was sufficient to demonstrate that he must have devoted a significant proportion of his working time to his own business activities at the expense of ICL.

Lord Justice Moore-Bick rejected the arguments put forward on behalf of ICL, stating that they failed to take account of the fact that paragraph 1 of the Schedule to the Regulations identified the circumstances in which the activities of the agent are to be considered secondary. He went on to state that paragraph 1 of the Schedule is essentially concerned with whether the primary purpose of the arrangement between the agent and the principal is, or is not, of a kind that falls within paragraph 2. Further, paragraph 2 was not concerned with what is actually done pursuant to the arrangement but with the characteristics of the arrangement itself. Accordingly, having regard to the fact that Mr Edwards was engaged to promote and sell ICL’s products in the Territory and in the absence of a suggestion that the arrangement had any purpose other than to develop a market for ICL’s products, Lord Justice Moore-Bick held that the Judge was right to hold that the Regulations applied in this case.

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