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PSA - Thom Vaughn

ThomVaughnAbout Thom
I am a Solicitor who deals with commercial business disputes of a varied nature. A typical example is acting for an Irish client who successfully sued an Italian supplier of mechanical goods under a contract governed by English law. I help to resolve business disputes of all sizes, either by negotiation, mediation or formal court / arbitration proceedings where necessary. In addition, I draft supply, agency and distribution agreements and therefore assist at all stages for both companies and individuals.

Education
I obtained a Masters Degree in Public International Law from the University of Helsinki and was an Erasmus scholar at the University van Amsterdam.

Greatest professional achievement
I was an intern for the United Nations in Geneva in the dim and distant past with office views of the Palace of Nations. In my present role, my department has enjoyed notable success in developing the field of Commercial Agency Law where we are acknowledged leaders. We have brought key cases to trial on retirement, agent duties, outstanding commissions and compensation awards.

Greatest personal achievement
I am currently learning to speak Portuguese, a gradual but rewarding process.

After work
When not in work I enjoy taking part in 5k and 10k running events to maintain fitness and also regularly swim.

Indemnity or compensation?
In the UK parties have a choice when drafting a contract to elect for the indemnity provisions to apply. Regulation 17(2) provides, 'except where the agency contract otherwise provides, the commercial agent shall be entitled to be compensated rather than indemnified'. If the parties make no election within the contract, or there is only a verbal agreement and the point is not discussed, then the fall back position is that compensation shall apply. The majority of cases feature compensation entitlements. The UK regulations are unique in the European landscape in that they allow parties to choose compensation or indemnity. All other countries, save for France, provide for payment of an indemnity. Broadly speaking, there is no cap on compensation payments, whereas the indemnity regime is highly structured and a payment is capped at the average of the past 5 years’ commission income or a one year average for any lesser period.

How long do I have to pursue my claim to compensation or indemnity?
The Regulations specify that the period of notice shall be— (a)1 month for the first year of the contract; (b)2 months for the second year commenced; (c)3 months for the third year commenced and for the subsequent years; and the parties may not agree on any shorter periods of notice. Therefore, assuming that you have acted as agent for more than 2 years then lawful notice will expire on 31 May. This is subject to the following points: 1. If you have contracted for a greater period of notice, say, for instance, 6 months, then the period of notice will expire on 31 August; and 2. If the parties have agreed that the period of notice need not coincide with the end of a calendar month, then notice would expire on 14 May and 14 August respectively. It is important to remember that you are lawfully entitled to “work your notice” rather than being unceremoniously dumped at a moment’s notice, unless, of course, you reach an accommodation with the principal and are content to cease acting with immediate effect. Equally, you are obliged to continue acting dutifully and in good faith for the entire notice term – right until the very last day. You may wish to agree a form of wording with your principal for an announcement to be sent to the trade; typically something courteous and upbeat – “Inky Pens Ltd wish to thank Mr Quill for all of his hard work over the last 5 years. We will shortly announce his successor and you can be assured of our commitment to the same excellent levels of service”. Unless those sentiments simply don’t exist!

My principal terminated my agency on 14 February. How much notice am I entitled to?
The Regulations specify that the period of notice shall be— (a)1 month for the first year of the contract; (b)2 months for the second year commenced; (c)3 months for the third year commenced and for the subsequent years; and the parties may not agree on any shorter periods of notice. Therefore, assuming that you have acted as agent for more than 2 years then lawful notice will expire on 31 May. This is subject to the following points: 1. If you have contracted for a greater period of notice, say, for instance, 6 months, then the period of notice will expire on 31 August; and 2. If the parties have agreed that the period of notice need not coincide with the end of a calendar month, then notice would expire on 14 May and 14 August respectively. It is important to remember that you are lawfully entitled to “work your notice” rather than being unceremoniously dumped at a moment’s notice, unless, of course, you reach an accommodation with the principal and are content to cease acting with immediate effect. Equally, you are obliged to continue acting dutifully and in good faith for the entire notice term – right until the very last day. You may wish to agree a form of wording with your principal for an announcement to be sent to the trade; typically something courteous and upbeat – “Inky Pens Ltd wish to thank Mr Quill for all of his hard work over the last 5 years. We will shortly announce his successor and you can be assured of our commitment to the same excellent levels of service”. Unless those sentiments simply don’t exist!

“I have two different agencies selling furniture, which to the naked eye look similar; however, one is made from hardwoods and the other has a foil finish. The two ranges occupy different price points and retailers are happy to stock both alongside each other. In my eyes they do not compete and I can sell in both at the same time without compromising the interests of either principal; however, the foil furniture manufacturer is now questioning my involvement with the hardwood agency. Is there a risk that my agency could be terminated on the grounds that the ranges compete?”
This is a historic issue borne of the fact that many agents carry a smorgasbord of products intended to appeal the same customers they call upon. An example might be an agent selling to a sports shop and carrying a tennis racket range for one principal, football boots for another, and shuttlecocks for yet another. In this example it is easy to see that the agent can embark on a call without worrying about whether he will prioritise one range over another because they are all entirely distinct products and there will be no conflict in the mind of the buyer. The furniture example is more challenging and requires a closer analysis. The High Court considered this issue in the case of Rossetti Marketing Ltd v Diamond Sofa Company Ltd & Anor [2011] EWHC 2482 (QB) (03 October 2011) and found in favour of the agent on a preliminary issue, noting “An implied term of the agency contract between SML/RML and Diamond was that SML/RML could act for a number of principals, and those principals could be in competition with each other, in the manner defined earlier in the judgment.” However, this was successfully appealed and a strong Court of Appeal judgment means that the principal’s fully informed consent is required. The court found “The oral evidence established that, from 2006, Diamond knew about, and did not object to, SML acting for Cassaredo and Creative. However, it also seems that Diamond was led to believe that those companies' products did not clash with those of Diamond. Accordingly, while there may be said to have been informed consent on the part of Diamond to SML acting for Creative and Cassaredo in relation to non-clashing furniture, such as motion furniture (i.e. furniture with moving parts – headrests, footrests etc), there was no informed consent to SML acting for those two companies in relation to furniture which clashed with that of Diamond.” The judgment records its finding of the legal position on this point to be that: “An agent can act for two principals with conflicting interests in two types of case. The first is, as already indicated, where both principals agree. In such a case, it is for the agent to show that the principal not merely consented, but that the consent was given on a fully informed basis – i.e. that the agent had made full disclosure to the principal... The second type of case where an agent can act for competing principals is where …the principal must have appreciated that the nature of the agent's business (in that case a residential estate agent) is 'to act for numerous principals'. ...” The law is therefore very clear that fully informed consent is required to enable the agent to carry competing products for different principals. This probably means more than pointing out “well, he must know as he saw me on their stand at the Bread and Butter exhibition!”

“I have a written contract, which refers to a fixed 24 month term. Things are going well and that term has now expired. What is the contractual position now?”
Regulation 14 deals with this point and provides that “an agency contract for a fixed period which continues to be performed by both parties after that period has expired shall be deemed to be converted into an agency contract for an indefinite period.” Therefore your contract will simply continue to run until either party serves notice to terminate. The standard periods referred to in Regulation 15 will apply (up to 3 months) or conversely if you have committed to a greater period in the contract (i.e. 6 months) then this will apply. All of the other contractual terms will continue to apply, for instance payment at 10% of invoiced price (or whatever the rate is), and exclusivity in relation to the Midlands (or some other) territory.