King v T Tunnock Limited: IHCS 2000

The pursuer had been employed as a commercial agent by the defendant which carried on business as a baker. The pursuer sold only the defendant’s cakes and biscuits. The defendant decided to close its bakery business. The claimant sought compensation under regulation 17(6) to be assessed by reference to the value of the agency at the date of termination rather than on the basis of any future economic loss. He argued that compensation should be assessed without regard to events occurring after the date of termination and that when assessing the amount of compensation to which he was entitled the court should follow the established practice of the French courts in awarding two years’ gross commission.
Held: The agent was entitled to receive compensation for the loss of his business. Even in France the two years’ commission rule is only a benchmark and the court had to examine the particular circumstances of the case. Earning potential was an important factor in valuing an agency and there might be cases in which it would be necessary to adduce evidence of the valuation of agencies in the particular local market. There was no such evidence here and the court commented on the limited evidence before it as to the value of the business. Having regard to the duration and previous profitability of the agency the claimant would have expected to receive a capital sum equal to at least two years’ earnings in order to give it up and held that an award of that amount would not be unreasonable.
Lord Caplan
[2000] Eur LR 531, [2000] SLT 744, [2000] ScotCS 70, 2000 SC 424
Commercial Agents (Council Directive) Regulations 1993, Council Directive 86/653 17
Cited by:
CitedTigana Ltd v Decoro Ltd QBD 3-Feb-2003
The claimant sought compensation after its sales agency agreement with the defendant was terminated. He had opened up several substantial sales channels for the respondent’s products within the UK. There were difficulties in the products (leather . .
CitedLonsdale v Howard and Hallam Ltd CA 8-Feb-2006
The claimant sought damages after his agency with the defendants was terminated. The central issue was whether compensation was to be calculated at two years commission as derived from French practice or otherwise.
Held: ‘there is no clear . .
DisapprovedLonsdale (T/A Lonsdale Agencies) v Howard and Hallam Ltd HL 4-Jul-2007
The claimant sought compensation after his commercial agency was terminated. The court had found that the agency was declining in turnover, and reduced the compensation accordingly. There had been no written agreement for the agency, and six months’ . .
CitedBarret Mckenzie and Co Ltd v Escada (UK) Ltd QBD 1-Feb-2001
The court considered the method of calculation of compensation payable to a commercial agent on termination of the agency. The directive provided that the agent should be compensated, not indemnified, and the way an English court calculated . .

These lists may be incomplete.
Updated: 17 June 2021; Ref: scu.179835