Explora Group Plc v Hesco Bastion Ltd & Anor

This appeal is principally concerned with the terms on which a marketing agent, now in liquidation, is entitled to be remunerated for its work in achieving what may be described as an entry in the United States armed forces’ procurement catalogue. The principal, a manufacturer of gabions, a form of state of the art, lined, wire mesh bag or basket which when filled with local materials such as rock, clay, earth or sand can be used in fortifications or military engineering, says that nothing is due beyond the date when the agent, having gone into receivership, went out of business and assigned, or purported to assign, the relevant contracts to a phoenix company (30 April 2002). The assignee, who is the claimant in these proceedings, says that it is entitled to (the agent’s 15% share of) the fruits of the procurement contract which the agent negotiated with the US government, at least down to the end of that contract’s five year term (18 February 2003) and, further, that it remained and remains entitled to the fruits of that contract’s extension or extensions and even renewal. The principal says that the agent was not entitled to any commission save on specific orders which the agent obtained before it ceased business; that neither the US government contract itself nor benefits under it were assignable; and that even if, contrary to its primary case, there was any accrued right to commission on future orders in place before the agent’s failure and the consequential termination of the agency relationship, any such rights had been retained as “book debts” by the agent’s receivers, with whom it had already achieved a total settlement of all possible outstanding liabilities.

When the US procurement contract had been made on 19 February 1998, it was anticipated that it might generate sales in its first year of some $600,000. However, the advent of war, above all in Afghanistan and Iraq, has transformed the situation, and the principal’s sales of gabions to the US government has grown exponentially. A single order in December 2003 was for over $12 million. The litigation is thus of considerable importance to the parties.

At trial, Mr Justice Simon held that the US procurement contract had been entered into by the principal in trust for the agent, that the agent was entitled to its 15% share of the contract’s fruits from that time, irrespective of whether any individual order had been obtained by or with the help of the agent, that those fruits had been validly assigned to the assignee (and thus not compromised by the principal’s settlement with the agent’s receivers) and that therefore the assignee was entitled to the agent’s share from the time of the assignment (30 April 2002) down to the end of the five year contract (18 February 2003). He also held that neither the agent nor the assignee was entitled to any other commission, but he did not specifically address the US procurement contract’s extension or renewal, and, indeed, may not have known about them.

On this appeal, both the principal (who is the appellant) and the assignee (the respondent) say that the judge erred. The principal says that the assignee is entitled to nothing. The assignee says that the judge was right, as far as he went, but that he failed to deal with the question of the procurement contract’s extensions and subsequent renewal; and that he also failed to deal with the agent’s and thus the assignee’s rights, in respect of the period after the assignment, to commissions arising out of the general agency relationship, which went well beyond the US procurement contract alone. The general relationship was covered by an agency agreement dated 18 May 1995. The principal says that that agreement also covered the US procurement contract business, and is thus itself the source of many of its arguments for saying that the agent and the assignee were entitled to nothing further after the agency relationship failed and/or was terminated by the principal’s acceptance of the agent’s repudiation. A significant strand in the parties’ submissions therefore is whether the US procurement contract falls within the general agency agreement of May 1995 or outside it.

The manufacturer of the gabions is Hesco Bastion Limited (“Hesco”). It is based in Leeds, in England. It refers to its product as the Hesco Concertainer blast wall system. This consists of interconnecting open-top cubes of wire mesh with geo-textile linings which can be filled with local materials. Hesco describes its product as follows:

Hesco is owned by Mr Jim Heselden, the only director, and is run jointly by him and Mrs Tricia Laidler, the company secretary. He concentrated on production and left the commercial side of the business to her.

Hesco is the first defendant in these proceedings, and, in this appeal, the appellant.

Hesco’s marketing agent was The Trading Force Limited (“TTF”). The relationship did not go further back than 1994 and was regularised by a written Agency Agreement dated 18 May 1995 (the “1995 agency agreement”, as to which see further below). TTF operated out of London. TTF was run jointly by Mr David Ashburn and Mr Francis Le Carpentier, who were both directors and shareholders.

It was an oddity of the Hesco-TTF relationship that no sooner was the 1995 agency agreement put in place than it appears to have been overlooked or even forgotten. This was possibly because its focus was the UN forces in former Yugoslavia (Ifor) and such sales stopped after the Dayton Accord. Its schedule stated that the territory concerned was “The United Nations Peace Keeping Forces”, that TTF’s commission rate was 10%, and that the expiry date was 17 May 1996. It was not relied on by Hesco until relatively late in the proceedings, and the judge found that Mr Heselden and Mrs Laidler had clearly forgotten it (para 70), although he was not persuaded that that was also true of Mr Le Carpentier. Nevertheless, the judge found that, objectively, it continued to govern the basis of the parties’ relationship, albeit in amended form, “throughout” (para 72). That was not disputed on appeal, save that it remained in issue, as it had done at trial, whether the US procurement contract stood on its own.

On 1 August 1996, TTF secured the services of Mr Al Grice, a former engineering officer with the Canadian Armed Forces, to act on its and Hesco’s behalf in the United States and in particular in seeking entry into the military procurement arrangements of the US government. These were canalised through so-called Defense Supply Centers. One such centre was at Columbus in Ohio, hence its name was the Defense Supply Centre Columbus (“DSCC”). With Mr Grice’s help, TTF sought to enter into a procurement contract with DSCC for Hesco’s product. The judge said this about such a contract (at para 30):

I have emphasised those last words because they were controversial on appeal, in this sense: that although it was common ground that DSCC did market its catalogue items, Hesco was concerned to emphasise that that was not to the exclusion of TTF’s own marketing efforts. I do not think that it was in dispute that TTF did a good deal of marketing of Hesco’s product to US military forces potentially anywhere in the world, and I do not think that the judge was in any way unaware of that.

It appears that approval of a product by DSCC meant that if US forces wished to purchase such a product, they would do so from DSCC, and DSCC would be the purchaser from the contracted manufacturer or supplier. DSCC charged its customers its own price, which was some 30% higher than its purchase price. It seems therefore that DSCC acted as a principal. The judge cited the following description of DSCC’s function (at para 29):

On 4 September 1997 DSCC issued a standard form document to Hesco and TTF entitled “Solicitation and Offer”, which Hesco and TTF filled in, signed and returned on 30 September 1997 under a jointly signed covering letter which itself formed part of that return. That was a joint offer by them to DSCC, for at that time it was contemplated that the DSCC contract would be made jointly by them. In the event, DSCC wished to make use of only a single cage code under the name of Hesco alone, and so ultimately the DSCC contract was made in Hesco’s sole name. The judge said: “DSCC were only prepared to contract with Hesco” (para 38).

As a result Hesco wrote on 8 January 1998 the following important letter to TTF:

A central issue of the trial and of this appeal concerned the effect of that letter. In the meantime, in September 1997, at a meeting of the parties, it had been agreed between Hesco and TTF that the latter’s commission rate of 10% would be raised to 15% (across TTF’s various territories, including the United States, but with a continued reservation in respect of UK, Holland and Denmark where the agreed rate was 5%), in part in recognition of TTF’s good work in the past and currently and prospectively into the future with respect to the obtaining of a DSCC contract. Hesco’s submission, which at trial had been, at any rate on the basis of Mrs Laidler’s evidence, that any commission for DSCC sales remained entirely in the discretion of Hesco, by the time of this appeal had softened to one whereby it was accepted that the letter recognised that any sales obtained by TTF for Hesco to US forces would be compensated by commission at the rate of 15% and otherwise on the terms of the 1995 agency agreement. Explora’s submission was that the letter was a promise that, although the DSCC contract had been taken, at a late stage, in Hesco’s sole name, it would be operated as though it had remained a joint contract. Explora therefore maintained, at the highest, that the DSCC contract was entered into by Hesco as an agent for TTF as well as for itself and/or that the contract was put into trust for Hesco and TTF for their respective 85%/15% shares; and at the lowest, that the DSCC contract arrangement was entirely separate from the scope of the 1995 agency agreement in general.

The DSCC contract was finally concluded by the issue by DSCC dated 19 February 1998 of an “Award/Contract” which incorporated the earlier Solicitation and Award. The name of the contractor was given as Hesco. The terms of the contract are really to be found in the Solicitation and Offer document. Among those terms were provisions to the effect that the initial term of the contract would be for one year, with options for a second, third, fourth and fifth years. It will be necessary to make further reference to the terms of the DSCC contract below.

The options for yearly extensions of the DSCC contract were exercised, so that, when on 9 April 2002 TTF requested its bankers to appoint receivers, that contract was into its fifth year. On 12 and 19 April 2002, there were meetings between Hesco and TTF to review the situation. Mr Le Carpentier was seeking agreement to carry on with the relationship through a new company, such as Explora Group Plc, which he had incorporated in the meantime, and to whom he proposed transferring (inter alia) the DSCC contract (“Explora”). There was a dispute at trial as to what was said at these (and earlier) meetings, but the judge was satisfied that Hesco’s representatives gave away nothing so as to compromise their position. He found that they were prepared to use TTF’s receivership for their own commercial advantage.

Therefore, when on 30 April 2002 Explora entered into an agreement with TTF’s bankers and receivers, it was acting without the agreement of Hesco. The agreement on that day was called a Chargee Sale of Assets Agreement (the “CSA agreement”). Further reference will need to be made to it below, but in essence the bank agreed to sell to Explora certain scheduled contracts which included “marketing contracts”, inter alia with Hesco, and “sale contracts” which included the DSCC contract as an express item. The “retained assets” included “book debts” and any other assets or rights not expressly sold to Explora. The consideration for the sale was £150,000 (as “initial consideration”) of which only £1 was allocated to the sale and marketing contracts, although there was also provision for “deferred consideration” in the sum of a further £90,000.

Explora is the party referred to as the assignee in the Introduction above. It is the claimant in these proceedings, and in this court the respondent. In other litigation it has admitted competing with Hesco in selling a counterfeit product which is not Hesco’s and has consented to judgment for damages to be assessed for fraudulent counterfeiting.

On 14 June 2002 Hesco wrote to Explora, with a copy to the receivers, stating that it had no contractual relations with Explora, did not consent to Explora seeking to represent itself as Hesco’s agent, and giving notice to TTF’s receivers that, as TTF had ceased to trade as Hesco’s agent, any contractual relationship with TTF was at an end.

TTF has, with leave, been made a party to these proceedings as second defendant. However, the liquidator has chosen not to take any part in the litigation.

The agreement described Hesco as “the Principal” and TTF as “the Agent”. Clause 1 (“Territory”) said that TTF was appointed agent “to obtain firm enquiries” for the product in the territory. Clause 2 (“Period”) said that the agreement should remain in force until determined by either party on three months’ notice. Clause 3 (“Duties of the Agent”) said that it was the agent’s duty to “use his best endeavours to extend the sale of the Goods within the Territory”. Clause 4 (“Commission Terms”) provided in part as follows:

The schedule stipulated a commission rate of 10% and referred to clause 4(c), which in turn emphasised that the commission should be calculated on the FOB United Kingdom element of the product price.

Clause 8 (“Termination”) needs to be considered in full, as does the innominate clause 9:

It thus appears from the terms of the 1995 agency agreement that it could be terminated on three months’ notice without cause (clause 2) and otherwise forthwith inter alia for the reasons set out in clause 8, which included insolvency or an attempt to assign the benefit of the agreement without consent, which clause 5(g) had forbidden. As for commission, this was in some or other sense made contingent on payment for goods supplied as a result of enquiries obtained by or through TTF (clause 4(a)). In the event of termination “for any reason whatsoever”, commission would be payable in respect of enquiries received by Hesco prior to termination, presumably if obtained through TTF in accordance with clause 4(a), provided that this resulted in payment to Hesco within six weeks following termination.

Hesco submitted that these terms applied to the DSCC contract as to other aspects of TTF’s agency. On appeal, however, it came to acknowledge, which it had not at trial, that the provision for three months’ notice could not stand consistently with the circumstances in which the potentially 5 year DSCC contract had been entered into. In that respect, therefore, it was prepared to concede that, in the DSCC contract context, the provisions of the 1995 agency agreement had been varied. That did not, however, mean, Hesco submitted, that it could not terminate the 1995 agency agreement, together with any obligation with respect to the DSCC contract, for any reason within clause 8 or for any other reason amounting to a repudiation by TTF of the agency as a whole. However, clause 9 did not apply to the acceptance of a common law repudiation. In this connection Hesco relied on its letter to Explora, copied to TTF’s receivers, as a common law acceptance of TTF’s repudiation. Therefore, since right to commission under clause 4(a) was premised on payment to Hesco, TTF could have no right to commission in respect of any supply, whether pursuant to the DSCC contract or otherwise, which had not been paid for by 14 June 2002.

It is necessary to give further details about the making of the DSCC contract.

On 22 February 1996 there had been a meeting between Mr Le Carpentier and Mr Ashburn of TTF and Mr Heselden and Mrs Laidler of Hesco, following which Mr Le Carpentier had written to Hesco a letter dated 23 February which was his attempt at summarising a minute of that meeting. He began by describing it as “one of the best meetings we have had so far”. The letter refers to agreement that Hesco would provide to TTF a letter for the US military confirming TTF as Hesco’s “factory representative/agent”; and also to TTF’s agreement that it would use its best endeavours to obtain a national stock number (NSN) registration for Hesco’s product to facilitate its becoming catalogued as standard equipment in the US among other militaries. In relation to the US military in particular, Mr Le Carpentier emphasised both the requirement that TTF be shown to be Hesco’s factory representative and the significance for TTF as well as Hesco of the “[k]udos of registration with this most important market”. There was also discussion of Hesco’s discomfort with contracts referring jointly to Hesco/TTF at TTF’s address and it was agreed that “all future contracts” would be styled in the name of Hesco at Hesco’s address while providing for sales enquiries to be addressed to TTF at TTF’s address – “Thus keeping the sales administration and the contractual administration clear”. Hesco relied on this, in the context of the parties’ September 1997 offer to make a joint contract with DSCC, as indicating that contracts in the joint names of Hesco and TTF were nothing new.

In this connection, on behalf of Hesco Mr Nicholas Strauss QC has made two points. First, he has submitted that this letter demonstrates that the obtaining of a catalogue entry within the US (among other) military procurement agencies was part and parcel of TTF’s overall functions as Hesco’s agent. That is, it seems to me, a valid submission as far as it goes. Secondly, he has submitted that the making of joint contracts was nothing new to the relationship and that this was sought by Mr Le Carpentier as a matter of reputation for TTF as much as or more than anything else. In other words, no particular regard should be paid to the circumstance that the offer to DSCC was in Hesco’s and TTF’s joint names. In my judgment, however, this point if anything cuts against Hesco, since, whatever may have happened in the past, the agreement recorded in this letter in February 1996 was that future contracts would not be in joint names: and yet, when in September 1997 the offer was made to DSCC, Hesco was content to have it made in joint names, and when ultimately the contract was made in Hesco’s name alone, it recognised that this would not affect its obligations.

It appears that by June 1996 TTF had received confirmation that the US Defence Logistics Agency (DLA) was in the process of providing a NSN for Hesco’s product, and there is evidence that at any rate by December 1996 it was possible for US military forces to order Hesco’s product by reference to its NSN.

Meanwhile in August 1996 Mr Grice had joined TTF with a special brief to promote its and Hesco’s interests in the US. He and Mr Juha Moisio, another TTF employee (referred to in the papers as director, marketing) who had previously been concerned with seeking the NSN for Hesco’s product in the US, made a visit to DSCC in October 1996. This is I think the first mention of DSCC in the papers. Mr Grice’s trip report refers to a new process called On Demand Manufacturing (ODM) which appears to be a prototype of or preliminary stage of the contract which was ultimately entered into with DSCC. An ODM qualification survey document was prepared by Mr Grice in April 1997. Simon J quoted the following introduction from Mr Grice’s document:

On 20 June 1997 Mr Grice faxed an “update” from his office in the US to Mr Haselden at Hesco in which he explained that DSCC had now decided “to go direct to the long-term contract, without going through the ODM stage”. This was very good news, but because it would involve direct contractual obligations between TTF (as well as Hesco) and DSCC (“We’ll be legally obligated to Uncle Sam”), a detailed agreement between Hesco and TTF was also required. Once the DSCC contract was in place, there would be “long-term, predictable, and substantial income”.

That was the immediate background to the joint Hesco/TTF offer made to DSCC on 30 September 1997 on DSCC’s “Solicitation and Offer” form, to which I have referred above. This documentary process had been initiated by DSCC (the solicitation) by filling in part of the form, with an issue date of 4 September.

The offer was made jointly by Hesco and TTF described as “Hesco Bastion/Trading Force”. The address given was Hesco’s address in Leeds. The offer was signed both by Mr Heselden and by Mr Le Carpentier. The covering letter, which was also signed jointly, by Mr Heselden for Hesco and by Mr Le Carpentier for TTF, addressed certain matters in the offer form for the sake of clarity, and also because in places the form did not permit sufficient room. The second paragraph of the letter stated as follows:

Clause K30, referred to in that paragraph, had asked for the name and address of the owner and operator of the facility if other than the offeror. The answer given in the covering letter was as follows:

The offer gave Hesco’s banking details as the requested “Remittance Address”. I have already said that Hesco/TTF had ticked the boxes allowing for yearly extensions up to a fifth contract year. The option was in DSCC’s control. The option clause provided:

It is worth pointing out that the solicitation and offer form was a very substantial document, in all 44 pages long. When on 19 February 1998 the offer was accepted by DSCC and it issued its “Award/Contract” to Hesco (alone), the latter document was of only 6 pages but expressly incorporated the solicitation and offer.

It was in anticipation of the ultimate contract being issued to Hesco alone that Mrs Laidler had written Hesco’s letter of 8 January 1998, cited (at para 14) above.

The judge’s conclusions about the DSCC contract were contained at paras 79/82 of his judgment, which I need to set out in full:

In my view the proper contractual analysis is that Hesco and TTF initially intended to divide the obligations under the DSCC Contract and to share the benefits of the income stream from the DSCC contract. So far as TTF were concerned, the benefit was a commission of 15% payable to TTF on all sales made through DSCC for the period of the DSCC agreement. When that intention was frustrated, Hesco agreed that the change would not affect its obligations to TTF, as Mrs Laidler acknowledged in her letter of 8 January 1998. As a result, in my view Mr Purle QC was right to describe Hesco as entering into the DSCC Contract as agent or trustee for TTF, see for example Pallant v. Morgan [1953] Ch 43 and Banner Homes Plc v. Luff Developments Ltd [2000] Ch 372.

The nature of the DSCC Contract was that, at the moment the contract took effect, TTF were entitled to commission on all sales under it. In the event the DSCC contract was extended for an overall period of 5 years, expiring on 18 February 2003; and commission was payable on all sales from the moment the DSCC contract was awarded to Hesco. In contrast to the coexisting agency agreement, TTF’s right to commission crystallised on the date of the contract, and did not depend on TTF being out in the field obtaining orders. In commercial terms, by procuring the DSCC Contract they had obtained the order. Sales were not guaranteed; but such sales as were made under the contract gave rise to an entitlement by TTF for a share in the proceeds.

The DSCC Contract, constituting a distinct and different relationship between Hesco and TTF to the prior and co-existing relationship between them, was not subject to the terms of the May 1995 Agreement and was not subject to any express or implied inhibitions on assignment. ”

As stated above, the CSA agreement sold and assigned, to Explora, as of 30 April 2002, TTF’s ongoing business, inter alia its sale and marketing contracts. The critical clause was clause 2, which sold the “Transferred Assets”. The Transferred Assets were defined inter alia as “the Sale Contracts” and “the Marketing Contracts” but excluded the “Retained Assets”. The Sale Contracts were in turn defined as the benefit of “uncompleted sale contracts” including those set out in Schedule 10, which expressly referred to the DSCC contract, albeit by reference to the offer rather than the award. The Marketing Contracts were in turn defined as the benefit of “agreements…for the provision of marketing, sales, licensing and co-operation agreements” entered into by TTF, including those set out in Schedule 6, which expressly referred to “Hesco Bastion Limited…Undated”. The Retained Assets were in turn defined as including “Book Debts” (and otherwise included deposits, insurance and indemnities, premises and any asset or right not expressly sold). Book Debts had a broad definition, as follows:

Explora had the responsibility of chasing payment of Book Debts (clause 9), and was entitled to a fee for doing so amounting to 20% of the amount collected.

I have already referred to the fact that only £1 of the “Initial Consideration” of £150,000 was allocated to the Sale, Marketing (and Purchase) Contracts. However, a special arrangement was entered into for “Deferred Consideration” of £90,000. This was payable to the bank in the event of a “Payment Event” occurring within 3 months, but was otherwise returnable to Explora. Payment Event was defined as receipt by either TTF or Explora of “commission pursuant to the continuation of the Hesco Relationship after the Transfer Date, or receipt by [Explora] of any commission payable by Hesco, or the entry into a new agreement or the novation of the current agreement for the provision of marketing and sales services, to be made between Hesco and [Explora]”. Hesco Relationship was defined as “arrangements existing as at the Transfer Date between the [TTF] Group Companies and Hesco, pursuant to which any Group Company may be entitled to receive an agreed amount of commission on products sold to Hesco customers”.

On behalf of Hesco, it was submitted that if any commission would otherwise have been due to TTF after 30 April 2002, and even if such commission had been assignable, it had not been assigned to Explora, because it would fall within the broad definition of book debts and was therefore retained by TTF for the benefit of the bank. On behalf of Explora, it was submitted that such commission fell within the equally broad definition of transferred assets.

The judge ruled that the legal effect of the CSA agreement depended on the business that was purported to be transferred. As for business and contracts which ultimately derived from the 1995 agency agreement, the purported assignment without the consent of Hesco was a breach of its clause 5 and entitled Hesco to terminate under clause 8 (para 92). As for business and contracts deriving from the DSCC contract, on the other hand, since that was a form of joint venture relationship which lay outside the 1995 agency agreement, there was no prohibition on assignment (para 93). He did not separately address the submission that there had been in any event no relevant assignment under the CSA agreement at all. He did, however, deal with a submission that Explora’s claim had in any event been settled in the claim which the receivers (qua TTF) had made against Hesco, holding that TTF’s claim was plainly limited to the claims listed in invoices issued prior to 10 April 2002 and that when that claim was settled the present claim made by Explora was being advanced in relation to a different period (para 99). There is no appeal from that holding. Finally, the judge dealt obiter with Explora’s submission that even where there had been a prohibition on assignment, the CSA agreement could take effect by constituting TTF as the trustee of the right to receive commission coming due after 30 April 2002. The judge held that there was no evidence of the intention to create a trust between TTF and Explora in the present case (para 98).

Prior to the hearing of this appeal, the parties agreed the following list of issues (I have varied their order, and wording, slightly so as to reflect the course of submissions during the hearing):

It became reasonably clear during the hearing of the appeal, as a result of listening to the development of the parties’ submissions, that their pre-hearing formulation of the issues, while on the one hand perhaps overly complex, at the same time had failed to isolate what gradually came to assume the role of the essential question for debate: namely, whether the condition upon which TTF’s commission became due for the purpose of the DSCC contract was its obtaining of orders for Hesco’s product, or its obtaining of the DSCC contract itself. The fundamental issue debated was whether the 1995 agency agreement embraced the DSCC contract, or whether the DSCC contract stood apart: but it was difficult to engage in that question without also seeking to understand what was the essential condition which triggered TTF’s right to commission under the DSCC contract: was it the making of that contract, or the obtaining of orders under it?

These issues were overlain and, to my mind, somewhat obscured by further questions as to whether Hesco had entered into the DSCC contract as agent or trustee for TTF, and/or whether Hesco held that contract as a constructive trustee for TTF. It was the judge’s view that Hesco had done so, and that that was the critical matter: citing Pallant v. Morgan and Banner Homes (see under para 37 above). However, in circumstances in which it was common ground that there was a contractual relationship, even if one of principal and agent, between Hesco and TTF, and that one of the terms of that relationship was that TTF shared, as to 15%, in the fruits of the DSCC contract, it seemed to me unnecessary to view the question in terms of constructive trusts. It may be that at trial, when the factual analysis was more open, the matter appeared differently: it may be that there was uncertainty as to whether Hesco and TTF were in contractual relations with respect to the DSCC contract. Thus, at one extreme Mrs Laidler gave evidence that the payment of commission to TTF in respect of product supplied to DSCC under the DSCC contract was entirely a matter of discretion. The judge asked her: “…are you saying that commission and that income depended on whether you agreed to pay it or not, rather than on some other criteria?” And she answered: “Ultimately yes I am saying that” (Day 4.75). At the other extreme, Mr Le Carpentier was saying that, although TTF did work hard to make a success of the DSSC contract, it had no obligation to do so and that the parties had entered into an oral contract to the effect that TTF would be entitled to 15% commission on all sales to DSCC “ad infinitum” simply by virtue of TTF’s efforts and success in obtaining the DSCC contract for Hesco. The judge rejected both these extremes, and there is no appeal from those findings. As the matter came to be argued in this court, however, it was common ground that TTF had a marketing role (and indeed a greater role than mere marketing) in connection with the DSCC contract, and that the parties were in contractual relations with one another with respect to the DSCC contract. For TTF, those contractual relations were essentially to be found defined in the terms of the solicitation and offer document and in Hesco’s critical letter of 8 January 2002 in which it recognised “our obligation” to TTF. For Hesco, on the other hand, the contract was to be found in the 1995 agency agreement, varied from time to time as territories and commission rates might alter, and now varied again so far as might be necessary to incorporate the DSCC contract.

It was in any event common ground that over more than four years of the DSCC contract, Hesco had been paying TTF at the rate of 15% in respect of all sales made by Hesco to DSCC, without any attempt to identify whether particular sales were due to enquiries obtained as a result of TTF’s marketing efforts, or were due to the DSCC’s own marketing efforts, or simply arose out of the status of Hesco’s product as an approved and registered item of the DSCC catalogue.

In these circumstances it seems to me that, whether or not Hesco was in some sense a trustee for TTF of the DSCC contract or of TTF’s 15% agreed interest in its fruits, a question which might of course be of considerable interest if TTF had to fight, as it does not, with Hesco’s creditors for its rights, nevertheless as between Hesco and TTF the answer has to be found by determining the parties’ mutual contractual rights, rather than in doctrines of equity.

On behalf of Explora, Mr Charles Purle QC did not dissent from this analysis and did not ultimately insist in pushing on this court the judge’s reliance on an equitable analysis. Consistently with this approach, it is noticeable that in both Pallant v. Morgan and Banner Homes a contractual analysis was not possible. That, it seems to me, is, if not an essential basis of the resort to equity in such cases, at any rate a critical feature of it. Thus in Pallant v. Morgan the parties’ arrangement failed to have contractual content as being too uncertain, but nevertheless it was held that the defendant had bid at auction on behalf of the plaintiff as well as himself, so that he was to be regarded as holding the property on trust for the both of them jointly: see at 50. Thus in Banner Homes, where the Pallant v. Morgan equity was extensively discussed, Chadwick LJ concluded that if there is an agreement which is enforceable as a contract, there is unlikely to be any need to invoke the Pallant v. Morgan equity (at 398B). The essence of the equity is that it would be unconscionable for the defendant to hold property, for which the plaintiff would have competed but for his reliance on an arrangement with the defendant to share it with the plaintiff, free of an equity in favour of the plaintiff (ibid at 399). In the present case, however, TTF was of course never in a position to compete with Hesco for the DSCC contract.

Moreover, even where equity is clearly at any rate potentially in play, as in the context of fiduciary relationships, there is House of Lords authority to the effect that, in a commercial setting, it may be inappropriate to analyse a problem in terms of equitable as distinct from contractual obligations: see Kelly v. Cooper [1993] AC 205; and not all joint ventures necessarily involve fiduciary duties: see Snell’s Equity, 31^st ed, 2005, at para 7-10, citing Global Container Lines Ltd v. Bonyad Shipping Co [1998] 1 Lloyd’s Rep 528 at 546/547.

It seems to me, therefore, that in circumstances where, as the judge held, and as has not been disputed on this appeal, the 1995 agency agreement remained, although perhaps overlooked or even forgotten, nevertheless effective in the background throughout the parties’ relationship, one essential question is whether that agreement governed orders under the DSCC contract as well; or whether the circumstances in which the DSCC contract was entered into created in that context a new contractual relationship which was so different from the 1995 agreement that it could not fit into it as a mere variation of it. And in reviewing that question, it is equally necessary to make up one’s mind as to what TTF’s right to commission under the DSCC contract was founded upon.

In this connection, Mr Strauss on behalf of Hesco made a strong submission to the effect that the DSCC contract was merely another incident on the road-map of the 1995 agency agreement. As new territories or circumstances became relevant to the parties’ relationship, so that agreement was varied to embrace and take such matters into account. Mr Strauss relied in particular on the meetings of 22 February 1996 (see paras 28 above) and of September 1997 (see para 15 above). The obtaining of the DSCC contract, important as it may have been, was just one of those things which TTF was employed, as Hesco’s agent, to undertake; and for which it was rewarded both in terms of its own reputation and in terms of an increase in its rate of commission to 15%.

Powerful as this submission was, ultimately, however, it did not persuade me. I would seek to put my reasons as follows. First, the immediate background of the making of the DSCC contract was that it was agreed between Hesco and TTF that they would contract with DSCC jointly. As their covering letter dated 30 September 1997 stated, in two places, the offer to DSCC was made jointly. The two parties had “joint and individual responsibilities”, and the individual areas of responsibility were spelled out in clause K30. Although in the end the DSCC contract was made by DSCC with Hesco alone, Hesco’s letter of 8 January 1998 confirmed “our agreement of working together” and assured TTF of Hesco’s recognition of its “obligation” to TTF. In its context, this can only mean that Hesco and TTF had agreed that they would work together as though the DSCC contract had been made as a joint contract. The covering letter enclosed Mr Grice’s April 1997 ODM survey document (see para 30 above) and referred to it as containing further details of the two companies and “their relationship”. That earlier document had described Hesco and TTF as “partner companies”. The judge found that “joint venture” correctly described the relationship between Hesco and TTF so far as the DSCC contract was concerned. As the judge at trial, who had listened to the evidence of the main protagonists, he was best situated to form that judgment.

Secondly, even though the DSCC contract may have been made with Hesco as the sole contractor, it incorporated the joint offer of both Hesco and TTF. Mr Purle on behalf of Explora submitted that it followed that Hesco was therefore contracting on behalf of TTF as well as itself and that TTF was therefore liable to DSCC under the terms of the contract as much as Hesco. The judge agreed that “TTF owed duties not only to Hesco but also to DSCC as well”. He may well be right, but I am not necessarily persuaded that that was so, and in any event it would probably be for US law to determine. It is perhaps as or more likely that TTF had to look to Hesco alone for performance: but if so, Hesco was contracting that TTF would perform the functions that TTF had offered to perform and for which Hesco had offered to accept joint responsibility. This to my mind confirms that the parties’ “agreement of working together” (to quote from Hesco’s letter of 8 January 1998 again) has to be understood as embracing the matters set out in the offer document. It seems to me to follow that TTF could not walk out on Hesco within the period of the DSCC contract, any more than Hesco could walk out on TTF.

Thirdly, although the court was not asked to consider what Hesco’s duties to TTF might have been in connection with the DSCC contract, it was accepted by Mr Strauss during the hearing of the appeal that it was not open to Hesco to give three months notice to determine the 1995 agency agreement, under its clause 2, during the currency the DSCC contract. In other words, Mr Strauss accepted that, even if, as he submitted, the 1995 agency agreement applied to the DSCC contract, nevertheless in this context clause 2 would have to be regarded as (expressly or implicitly) varied. There would be no right to terminate the underlying agency during the five years of the DSCC contract. It is not clear to me whether that would mean that the 1995 agency could have been determined by notice under clause 2 in all other respects, or whether it could not have been determined at all as long as the DSCC contract was running. It seems to me that there are difficulties here, which were not explored. In any event, the fact that the 1995 agency agreement could not be applied in a straightforward way to the DSCC contract to my mind is consistent with and supports Mr Purle’s submission that the parties’ relationship with each other in connection with the DSCC contract could not be fitted within and was separate from the 1995 agency agreement.

Fourthly, it seems to me that TTF’s duties to Hesco with respect to the DSCC contract went beyond the duties which it had accepted under the 1995 agency agreement. Clause 1 of the 1995 agreement said that TTF was agent “to obtain firm enquiries in the territory”. For this purpose TTF promised under clause 3 to serve Hesco “diligently and faithfully” and to “use his best endeavours to extend the sale of the Goods within the Territory”. Whatever that meant, there was however no submission by Mr Strauss that it embraced the specific functions which TTF undertook under the joint offer to DSCC, and which it will be recalled embraced “design input and advice…Liaison on deployment, training, field and logistic support”.

Fifthly, and in my judgment this is a matter of special significance, it is very difficult to fit the DSCC contract relationship within clause 4(a) of the 1995 agreement relating to commission terms. It will be recalled that clause 4(a) provides that TTF will receive commission upon payment to Hesco for sales “enquiries for which shall have been obtained by or through the Agent”. That, however, was not what was agreed at the time of making the DSCC contract, or what was practised during its currency. In one sense, it might be said that nothing was agreed at the time of making the DSCC contract. There was no explicit agreement as to how TTF would be remunerated for sales under it. There was certainly no express agreement by reference to the 1995 agreement, which Hesco had forgotten about. TTF wanted a special agreement (see Mr Grice’s fax of 20 June 1997), but in the end had to make do with Hesco’s letter of 8 January 1988 and “our agreement of working together…our obligation”. What, in the DSCC context, did that mean? The parties had never before had to consider circumstances where TTF brought to Hesco a long-term contract under which sales were anticipated, might or would flow irrespective of TTF’s further marketing activities, and where the contracting party (DSCC) itself had a marketing function.

Mr Strauss has cited to us authorities in which the courts have had to consider the condition upon which commission has become payable: see in general Bowstead & Reynolds on Agency, 17^th ed, 2001, at paras 7-003ff, Powell, The Law of Agency, 2^nd ed, at 364/369. The issue could arise where the agent has during the course of his agency effected an introduction which has eventuated in a transaction following the termination of his agency. Given the general principle that an agent must prove that the event has occurred upon which remuneration becomes due, the courts have sometimes had to distinguish between the condition which earns the commission, and further circumstances upon which it becomes payable. Thus in Sellers v. London Counties Newspapers [1951] 1 KB 784 the employee earned his commission by obtaining orders for advertisements, even though his commission was not payable until the advertisement had been published. For these purposes, it did not matter that the advertisements had not been published until after his employment had ceased. The majority of the court of appeal there doubted and declined to follow older cases which had suggested that there must be clear and unequivocal words to entitle an agent to recover commission in such circumstances (at 798/9, 802). In Gold v. Life Assurance Company of Pennsylvania [1971] 2 Lloyd’s Rep 164 Donaldson J applied Sellers to the case of an insurance salesman who was held to be entitled to commission in respect of policies secured before the termination of his agency, even though the commission was only payable on premiums paid after its termination.

By common consent, the nearest case to the one presently in issue, even if it in no way could be said to replicate it, and the only authority in this series which counsel asked us to consider in the course of the hearing, is Roberts v. Elwells Engineers Ltd [1972] 2 QB 586. The agreement there was made orally and was that the agent would be paid commission on orders from customers introduced by him (“Such orders as were executed by the company as a result of my introduction of the customer, I would be paid 2 ½ per cent”). There came a time when he was given three months’ notice. It was agreed that that was an appropriate period (at 593B; Lawton LJ appears to have been in error in suggesting a repudiatory termination without notice at 598H), but there was a dispute about what was due to him. The principal said that he was due nothing in respect of orders received from the customers in question after the end of the three months’ notice. The agent said that he was due commission on such orders for all time – to the “crack of doom”. This court held that the correct answer was somewhere in the middle. Because the contract was oral and “so much was left unsaid”, it was open to the court to supplement it by the course of dealing (at 593G). That showed that, although commission was earned on orders from customers introduced by the agent, the agent had to visit the customers at his own expense to keep them satisfied. Lord Denning then reasoned as follows:

The remainder of Lord Denning’s observations were really concerned with the nature and quantum of the remedy. He held that a declaration was not an appropriate remedy, essentially, I think, because it could give no insight into the amount due, which was not a straightforward debt. Thus Lord Denning said (at 595F/596B):

As for the assessment of the compensation, Lord Denning went on to add the following (at 596C/E):

Edmund Davies LJ agreed with Lord Denning. Lawton LJ emphasised that the agreement was that commission “was not to be paid on orders obtained by the plaintiff but on orders received from customers introduced by him” (at 598A). Bilbee v. Hasse, cited by Lord Denning, was similarly a case in which the commission agreement was “upon all orders executed by us and paid for by the customers arising from your introduction” and Lopes LJ held that commission was payable on orders received after the termination of employment. Levy v. Goldhill was a case where the agreement applied to “repeats on any accounts introduced by you” and was to similar effect.

Both parties relied on Roberts: but what light does it throw on the present case? In my judgment Roberts shows, first, that a critical question is whether the commission is earned on introduction or on orders. If it is the former, it does not matter that the orders, let alone their execution and payment for them, may not arrive until after the termination of the agency. In the present case the express contract is, if anything, even briefer than in Roberts. Moreover, in the absence of express guidance, it is not possible to say unequivocally whether the commission is due on introduction or on order. However, it seems to me that this case is much closer to the introduction line of cases than to any other. What was crucial was obtaining the contract with DSCC. Moreover, although individual orders might originate with DSCC’s customers, so far as Hesco was concerned its sole customer for these purposes was DSCC. It was TTF who had brought DSCC to Hesco, and with the DSCC contract came an expected stream of orders, estimated, within the contract terms itself, at the time of DSCC’s award in the sum of some $600,000 in the first year. Moreover, Hesco and TTF were jointly obliged, at any rate vis a vis each other, in relation to the DSCC contract from the moment of its making. And, even though TTF had marketing responsibilities, it was entirely on the cards that orders would flow from Hesco’s own marketing.

Roberts also shows that, even though it may be a term of an agency contract that the agent shall have marketing responsibilities, nevertheless, where the commission is earned on introduction, the impossibility of carrying out marketing activities after termination of the agency does not mean that commission has not already been earned. Mr Strauss submitted that because TTF had marketing (and indeed other) responsibilities in connection with the DSCC contract, therefore it must follow that the carrying out of such responsibilities was a condition of the earning of commission. He cited Chitty on Contracts, 29^th ed, 2004, Vol I, at paras 24-035/037 to support a submission that there is a general presumption that contractual promises are interdependent. As that discussion illustrates, however, there remains the familiar question of construction as to whether a term of a contract is a true condition of it. However, Roberts shows, in a closely relevant context, that a marketing obligation need not be a condition of an agent’s right to commission. Marketing may be an obligation, but not a condition of the earning of commission.

Thirdly, the analysis in Roberts provides explanations or mechanisms for addressing a submission strongly relied on by Mr Strauss to this effect: that if TTF had repudiated its obligations immediately after the making of the DSSC contract, then it would be unimaginable to think that it could go on taking commission over the next five years for orders which its marketing had done nothing to secure. There is a separate argument made by Mr Strauss, addressed below, that the agent’s repudiation in any event, as a matter of law, prevents recovery of any commission. But, assuming for the sake of argument that to be incorrect, in my judgment the submission presently under consideration loses its impact once Roberts is to be understood as demonstrating that (1) ex hypothesi the critical introduction or “order” may be the DSCC contract itself; (2) the value of that introduction is in any event time limited by reference to the period of the contract; (3) it would be open to find that orders given by DSCC during that period were not effectively caused by TTF’s obtaining of that contract; and (4) the assessment of compensation would in any event be limited by allowances that would have to be made for TTF’s savings or Hesco’s additional expenses.

Fourthly, Roberts illustrates that in such circumstances it is legitimate to have regard to the course of dealing to supplement the express terms. In the present case, it is clear that throughout the four years and more during which the parties operated the DSCC contract, TTF earned commission without having to show that individual orders arose out of enquiries generated by its own marketing. In the absence of express provision, this seems to me to amount to an agreement by course of dealing. I do not rely on this, but it seems to me to confirm a conclusion at which I would otherwise arrive, namely that TTF’s right to commission was earned on obtaining the DSCC contract for Hesco and was not conditional on individual orders from DSCC. The value of that commission where TTF’s role was ended prior to the end of the DSCC contract remains a matter for assessment.

Mr Strauss nevertheless submitted that payment of commission on all orders obtained from DSCC was consistent with clause 4(a) of the 1995 agency agreement because such orders were to be regarded as originating from enquiries obtained by or through TTF. They were to be so regarded, he submitted, because, in the words of his skeleton argument “TTF had obtained the DSCC contract and was continuing to work the market”. That, however, is simply to revisit the same point already discussed. It is another way of formulating the submission that “continuing to work the market” was, in addition to obtaining the DSCC contract, a condition of earning commission. But, as in the case of Roberts, I do not so regard it. Moreover, if it was to be so regarded, then, again, in the language of clause 4(a), which is an “orders” based clause, rather than a “customer introduction” based clause, it would have been necessary to see whether individual orders flowed from enquiries obtained by or through TTF. After all, there was another prime “marketer” operating the DSCC contract, and that was DSCC itself. If clause 4(a) operated, why should TTF be rewarded for DSCC’s successes? The only reason for rewarding TTF for every DSCC order would be to regard every order under the DSCC contract as originating ultimately and critically from the fact that TTF had obtained DSCC as a customer under the DSCC contract in the first place. But that would be to turn commission on orders from DSCC, uniquely, into a customer introduction based commission, rather than an orders based commission. In my judgment, clause 4(a) is not apposite for that role.

It follows that in my judgment the Hesco/TTF relationship with regard to the DSCC contract is quite different from the position under clause 4(a) of the 1995 agency agreement. That is plainly an agreement for commission earned on orders. That is therefore a further, highly significant, reason for thinking that the DSCC contract cannot simply be fitted into the 1995 agreement as some variation of it.

There remains the question of the rate at which TTF was to be rewarded for the DSCC contract. Mr Strauss submits that the 15% agreed at the meeting in September 1997, in anticipation of the DSCC contract, shows that the obtaining of it was simply part and parcel of, even if varying, the underlying arrangement, viz the 1995 agency agreement. For the reasons set out above, however, it seems to me that that overall submission cannot be made to fit. There is, however, no difficulty in fitting the rate of 15% into the new arrangement made between the parties in relation to the DSCC contract. That is the figure which the parties have used over the years, and it is common ground that it applies to the DSCC contract. It seems to me that the fact that it may also be applicable to other territories which lie within the ambit of the 1995 agreement, while assisting Mr Strauss’s overall argument as far as it goes, cannot carry the day, even when taken together with Mr Strauss’s overall submission.

I am now in a position to address individually and state my conclusions as to the first four issues set out above.

There was certainly a contractual relationship between Hesco and TTF in relation to the DSCC contract, but it was not a relationship governed by the terms of the 1995 agreement. Despite the jejune language of the letter of 8 January 1998, it was not suggested that, if the relationship was separate from the 1995 agreement, it was too uncertain to have contractual effect. The agreement was a separate agreement, under which the parties agreed to co-operate (work together) to service the DSCC contract, with their roles defined as stated in the covering letter of 30 September 1997. The agreement was to last for as long as the DSCC contract lasted, potentially for five years. Hesco and TTF were to share the proceeds as to 85%/15%. TTF’s share or “commission” (an expression used throughout the argument, by agreement, as a shorthand for TTF’s remuneration with respect to the DSCC contract, however it was properly to be called) was earned by the obtaining of the DSCC contract but was quantifiable and payable by reference to DSCC’s orders. There may well have been obligations between Hesco and TTF by reference to each other’s defined roles, if, for instance, there had been trouble with the DSCC relationship: but the court was not asked to consider such an eventuality. The case was conducted on the basis that the relationship with DSCC prospered (as indeed it did), survived the receivership and liquidation of TTF, and survived the expiry of the five years, thus raising questions as to the position with respect to extensions and renewals of the original contract (see below).

The question refers to the “DSCC market”, possibly as a form of short-hand: but I would not regard the DSCC contract as a form of “territory”. It was a contract with the US government. As such, it could lead to supplies to US military establishments or forces anywhere in the world, but the supply would be to the US government. It was unlike a commission agent’s ordinary territory or market, for the contract contemplated that the DSCC would conduct its own marketing operations through its own catalogues. As such, the DSCC contract left open the possibility that there would be other sales by Hesco in the US, at any rate to civilian customers, which would not go through the DSCC contract.

The existence of a contractual relationship between Hesco and TTF does not automatically exclude the possibility of a trust relationship as well. However, given a contractual relationship and the importance, in matters of contract, of the autonomy of the parties, it is much less likely for there to be any need, in order to do justice or avoid unconscionable conduct, to impose a constructive trust on top of contract. Nor am I able to agree with the judge that the circumstances of this case demonstrated a Pallant v. Morgan equity, nor did Mr Purle seek to persuade us that they did.

However, Mr Purle was still anxious to demonstrate that there was a trust relationship, in order to support the submission that TTF’s rewards deriving from such a relationship extended to the future fruits of the DSCC contract, where it was extended or renewed, as well as to the original rewards of its first five years: see Don King Productions v. Warren [2000] Ch 291 at 322, and the principle of Keech v. Sandford (1726) Sel Cas Ch 61 there applied. That is the subject matter of issues 3 and 4.

In my judgment TTF was prima facie entitled to share in the fruits of the DSCC contract down to the end of its five year period, as stated above. There are further issues below as to whether, as a matter of law rather than contract, TTF was entitled to anything further after what Hesco alleges to be TTF’s repudiation of its obligations as a result of transferring its ongoing business to Explora and/or Hesco’s acceptance of that repudiation; and as to the assessment of that remuneration. For the present, I am concerned with whether the termination of the DSCC contract after its fifth year is the limit of TTF’s prima facie entitlement, or whether TTF was also entitled to participate in the fruits of the DSCC contract’s extensions or renewals.

Simon J gave 18 February 2003 as the terminus of TTF’s entitlement, but I do not think he then knew about the situation after that date. Since trial there has been some further disclosure about that situation. On 13 February 2003 the Defense Supply Center Philadelphia (“DSCP”, which had taken over from the DSCC) issued an “Amendment of Solicitation/Modification of Contract” whereby DSCP offered Hesco a 90 day extension of the DSCC contract, until 16 May 2003. Mrs Laidler signed this document on 17 February 2003. It is not clear what happened after 16 May 2003. A fax from DSCP said that it was intended to have “the next contract in place by the time the 90 days passes”. It is not known whether DSCP was aware of TTF’s failure in the meantime, for Mr Le Carpentier was seeking to maintain links with the US military, albeit through other companies, including Explora. There may have been further extensions after 16 May 2003, but none has been disclosed. On 5 December 2003 DSCP issued a contract or purchase order to Hesco for $12,198,169.40. It did not refer to the DSCC contract number. On 15 December 2003 DSCP issued a further contract or purchase order to Hesco in the sum of $174,696.94, which again did not refer to the original contract number.

As stated above, Mr Purle seeks to rely on Don King and the principle in Keech v. Sandford. In Don King two major boxing promoters entered into an express partnership agreement for the promotion and management of professional boxers in Europe, under which there was an express assignment to the partnership of all existing contracts between the defendant and boxers whom he managed. The assignments could not take effect as such because they involved contracts for personal services and most of them contained express covenants against assignment. However, they could take effect as declarations of trust of the benefits of the contracts in question. The boxing promoters then entered into a second partnership agreement which provided that each would hold their promotion and management contracts to the benefit of the partnership. The partnership was then dissolved. It was held that each of the partners held the benefit of the relevant contracts in trust for the partnership, including all renewal or replacement agreements obtained by either partner down to completion of the partnership’s winding up (at 322G, 340/342).

It seems to me, however, that these authorities do not assist Mr Purle. Don King was a case which involved express partnerships and express trusts. In the present case there was neither. Explora’s case at trial of a constructive trust based on the Pallant v. Morgan equity is not pursued, and cannot be made to fit the authorities which impressed the trial judge. Even if Hesco’s agreement that it would work together with TTF on the DSCC contract, as if that agreement had been made jointly with them both, means that Hesco should be treated in some way as the trustee for itself and TTF of the benefit of that contract, it was a contract expressly limited to a maximum of five years. By the time that contract ended on 18 February 2003, TTF was no longer in business. Whatever might have been the position if TTF had at that time still been active and had up to then still been actively performing in connection with the expiring contract, there was nothing in the business relationship between Hesco and TTF which in my judgment would have made it then inequitable for Hesco to extend or renew its contract with DSCC or DSCP for itself. In terms of the Roberts formula, TTF’s obtaining of the original contract for Hesco would not have been any longer the efficient cause of any further contract or orders obtained by Hesco after the expiry of the five year contract.

There was a somewhat half-hearted submission by Mr Purle that TTF had not repudiated its contractual relationships with Hesco by transferring its ongoing business to Explora. He maintained that TTF was able, as it were, to delegate its functions, to other companies: as long as the Hesco/DSCC relationship was being serviced in some form or another, as it happened by essentially the same personnel, then there could be no repudiation. On 19 June 2002 an associate company in the group of companies which included TTF, TFL Defence Ltd, wrote to Hesco setting out the marketing activities undertaken for Hesco around the world. It said that such activities had continued “throughout the entire TFL Group, during the take over by The Explora Group Ltd, on 30 April 2002. Some internal transfer of responsibilities has taken place…” Similarly, there was a somewhat half-hearted submission by Mr Strauss that the contractual relationships had come to an end already as of 30 April 2002, and even before Hesco wrote on 14 June 2002 to terminate them.

In my judgment, however, both submissions had great difficulties, and Mr Strauss ended by acknowledging in his reply that his attempt to bring the end of relations forward to 30 April 2002 had not even been in issue at trial and was no longer pursued. As for Mr Purle’s submission, I see no way in which TTF can claim to be performing an agent’s duties vicariously, by some form of informal assignment of responsibilities. In any event, in connection with that area of the relationship which was covered by the 1995 agency agreement, clause 8(e) was an express prohibition on assignment of the benefit of the agreement without Hesco’s consent, for which the opening words of clause 8 permitted Hesco to terminate without notice. As for the DSCC contract relationship, TTF’s role was written into the relationship and its failure and purported transfer of its business including its responsibility for the DSCC contract could not help but be a repudiation. As the judge said, by 14 June 2002 TTF was plainly unable to perform its contractual obligations and was not entitled to insist that those obligations should be performed by Explora.

Mr Strauss submits that in any event TTF was not entitled to any commission, whether under the 1995 agency agreement or otherwise, once it had repudiated its obligations as of 30 April 2002, a fortiori after its repudiation had been accepted as of 14 June 2002. Therefore, TTF’s cross-appeals in respect of (a) commission under the 1995 agency agreement for the period down to 14 June 2002 and/or under clause 9; and (b) in respect of commission under the DSCC contract relationship down to 18 February 2003 or beyond must in any event fail. The submission was primarily put in respect of the clause 9 period after Hesco’s termination; but at times it seemed to extend more widely to embrace the issue stated above.

Mr Strauss’s bedrock for his submission was this court’s decision in Rock Refrigeration Ltd v. Jones [1997] 1 All ER 1. There the employee defendant’s contract of employment had contained restrictive covenants expressed to take effect after termination “howsoever arising” and “howsoever occasioned”. It was submitted that such covenants were unenforceable because unreasonably wide in that they purported to apply even in the event of the employer’s repudiation. A majority of this court held that even if the covenants did on their true construction apply in the event of the employer’s repudiation, they could not as a matter of law and irrespective of their reasonableness or otherwise be enforced against the employee following the termination of the contract. Therefore, since there had been no repudiation by the employer on the facts of the case, for the employee had simply left his employment, the covenants were enforceable. The majority’s decision was an application of General Billposting Co Ltd v. Atkinson [1909] AC 118, which had decided that an employer could not rely on restraint of trade covenants following the acceptance of his repudiation. Phillips LJ, however, doubted whether General Billposting could properly be said to reflect the modern law on the effect of repudiatory breach in the light of developments since 1909: he specifically mentioned Heyman v. Darwins Ltd [1942] AC 356, where the House of Lords held that an arbitration clause could survive the acceptance of a repudiation, and Photo Production Ltd v. Securicor Transport Ltd [1980] AC 827, where the rule of construction triumphed over earlier doctrine which had prevented repudiating parties from relying on clauses properly in their favour.

In my judgment, whatever may be the case, in terms of precedent, in relation to covenants in restraint of trade, it would be against principle to think that commission earned before the termination of a contract, although not yet payable at the time of termination, ceased to be commission which had been earned. As Chitty states (at para [24-051]:

If, therefore, as in Sellers or in Roberts, the agent has done what he was required to do in order to earn his commission before the termination of the contract, termination does not divest him of his right. Although in Sellers the principal wrongly terminated the contract, in Roberts he gave an appropriate notice and was entitled to terminate: nevertheless the right to continuing commission had been earned and survived the termination, subject to due assessment. Where the termination is not only lawful on the part of the principal but also arises out of an unlawful repudiation by the agent, the principal is of course entitled to set off a claim in damages: but even a party in repudiation is entitled to keep what he has already earned. Therefore, subject to due assessment and to any possible set-off and counterclaim, TTF’s rights as at 14 June 2002 in relation to the DSCC contract remain as they then stood.

I have considered Lord Justice Longmore’s different solution to this question, engendered by asking whether a term should be implied in favour of the earning of commission where the contract is terminated prior to an order being placed. I do not, however, think that Mr. Purle did rely on an implied term, nor is it obvious that Roberts is to be explained as turning on an implication. I quite see that if commission is only earned on orders, as distinct from introduction, then only an implied term can assist the agent. My analysis, however, depends on commission being earned on, as it were, introduction, or, as here, on the making of the DSCC contract. In such a case, no implication is needed. As will appear under issue 8(a) below, however, this question is not ultimately critical.

The position under the 1995 agency agreement is, however, different and complicated by clause 9. The first question is whether clause 9 on its true construction covers circumstances where TTF was itself in repudiatory breach. In my judgment, it does. Clause 9 follows immediately upon clause 8, headed “Termination” which, after a reservation in favour of “other rights and remedies…at law”, permits termination forthwith inter alia if the agent “is in breach of any of the terms of this Agreement”. That probably means any repudiatory breach. In any event, clause 9 then goes on to refer to “determination of this Agreement for any reason whatsoever”. I can see no reason why in the circumstances that should not quite naturally include a repudiatory breach entitling Hesco to accept such repudiation as bringing the contract to a close. Therefore clause 9 on its own terms applies to termination following repudiatory breach. In any event, Hesco terminated following TTF’s purported assignment of the benefit of the agreement to Explora, a breach expressly within clause 8(e) and therefore clearly within clause 9.

In these circumstances clause 9 regulates the commission due on enquiries in the pipeline. If the enquiries had been “actually received” by Hesco prior to determination, then commission was payable, but only if in addition Hesco had received payment (“cash”) within six weeks of the date of termination. Whether this clause is to be regarded as an extension of the agent’s rights to commission, or as a limitation on them, depends on one’s point of view as to the effect of clause 4(a). If one regards it as providing for commission being earned on “enquiries…obtained by or through the Agent” but payable once cash had been received by Hesco (rather as in Sellers), then clause 9 is a limitation: for it prevents commission being due if payment is received outside six weeks from termination. If, however, one regards clause 4(a) as providing for the earning of commission only upon payment to Hesco, then clause 9 extends the right until six weeks after termination. I would be inclined to read clause 4(a) in the former way. But even if I am wrong about that, I see no difficulty about giving to clause 9 its mutually intended effect.

Mr Strauss also invoked the general principle that contracts will not usually be interpreted in such a way as to permit a party to benefit from his own wrong, in the sense of being entitled to rely on his own breach to avoid the contract or to obtain a benefit under it: see Chitty at para 12-082. However, I do not see this principle as being applicable to the present situation. TTF was not seeking to avoid its responsibilities under the 1995 agency agreement, to the contrary; nor was it seeking to rely on its own breach in order to obtain a benefit under the contract.

Therefore, prima facie, and subject to further issues below, the judge should have covered the matter of commission earned other than from the DSCC contract: TTF would have been entitled in any event to commission on payments received by Hesco from 30 April 2002 to 14 June 2002 on orders generated by or through enquiries obtained by TTF, and in addition to commission on such enquiries obtained prior to 14 June which had led to payment to Hesco within 6 weeks of 14 June.

The judge considered that there was no right to assign the benefit of the 1995 agency agreement, irrespective of the express prohibition on such assignment contained in clause 5(g). He said that “This was not a contract in which it made no difference who discharged the agent’s obligations” and gave reasons for that finding based on the evidence in the case, eg that it was important to Hesco that it was represented by an agent who was well-regarded in the market (at para 74). Nevertheless, he also held that no such objections could be made to the assignment of TTF’s rights in respect of the DSCC contract (at para 93), where there was no express prohibition.

It would seem, perhaps, that the judge there overlooked the considerable role which was given to TTF in respect of the DSCC contract. In any event, Mr Strauss submits that the judge’s conclusion with respect to the position under the 1995 agency agreement even in the absence of an express prohibition on assignment applies equally to the situation in respect of the DSCC contract. He relied on what was said by Lord Browne-Wilkinson in Linden Gardens Trust Ltd v. Lenesta Sludge Disposals Ltd [1994] 1 AC 85 at 103/106 and especially at 105, submitting that Lord Browne-Wilkinson there assimilated an assignment of accrued fruits of a building contract with an assignment of rights to future performance under it, on the basis that a building contract is a complex arrangement under which a contractor wishes to ensure that he deals only with the particular employer with whom he has chosen to contract. He submitted that that was applicable to both aspects of the present case.

In the present case, however, there is no express prohibition on assignment in the context of the DSCC contract and therefore the question of construction which arose in Linden Gardens, as to the width of the prohibition imposed on the employer under a building contract found in the words “shall not…assign this contract”, does not arise in that context, even if it does in the context of clause 5(g) of the 1995 agreement. In the circumstances two different questions arise: (1) Does the clause 5(g) prohibition against the assignment of “the benefit of the Agreement” extend to an assignment of its fruits? (2) And, in the case of the DSCC contract, does the nature of the parties’ agreement mean that, even in the absence of an express prohibition of assignment, no assignment of TTF’s share of the fruits of the parties’ agreement can take effect?

The second question, which logically comes first, is clearly discussed in Chitty at 19-053ff under the heading of “Personal contracts” and “Commercial contracts”. The rule is that the benefit of a contract is only assignable “where it can make no difference to the person on whom the obligation lies to which of two persons he is to discharge it”: citing Tolhurst v. Associated Portland Cement Manufacturers (1900) Ltd [1902] 2 KB 660, 668, affirmed [1903] AC 414, an authority relied on by Simon J himself (at para 74) in support of his decision in relation to the 1995 agreement. However, a distinction is to be made between assignment of the benefit of a contract as a whole and the assignment of money due under it. Thus even in so personal a contract as the commission of the writing of a book, although neither author nor publisher can without consent assign the right to the other’s future performance in terms of writing or publishing, that does not prevent the author assigning the right to be paid royalties. This is confirmed by Lord Browne-Wilkinson in Linden Gardens at 105B, where he distinguishes between the writing and the fee for writing, just as he distinguishes in general between the assignment of rights to future performance and the assignment of the fruits of a contract.

Applying these principles to the case of the parties’ agreement with respect to the DSCC contract, I do not see why in principle TTF could not assign the fruits of that agreement. This is a different question from the issue of construction which was the subject-matter of the decision in Linden Gardens. The question there, and it arises also in connection with clause 5(g) of the 1995 agreement, is whether it makes sense to construe a prohibition against assignment as confined to rights of future performance and thus as permitting assignment of the fruits of the contract. In that case the House of Lords held that it did not make sense: it would, said Lord Browne-Wilkinson, have been “a perverse intention” which was not to be attributed to the parties, although it could have been achieved “by careful and intricate drafting” (at 106B/C). His reasons included the following (at 105D/G):

Here the prohibition on assignment is against the agent, in favour of the principal, and the language of clause 5(g) is against the assignment of “the benefit of the Agreement”. The CSA agreement nevertheless purported to assign the benefit of the agreement. In Linden Gardens Lord Browne-Wilkinson construed the prohibition on assignment “of the contract” as a prohibition of assignment of the benefit of the contract (at 103G). Although the 1995 agency agreement is in no way as complicated as a building contract, and therefore some of the detailed reasoning in Linden Gardens is not applicable, I nevertheless incline to the conclusion that among the reasons why a principal would wish to prohibit his marketing agent from assigning the benefit of his agency contract would be the avoidance of disputes with third parties as to whether or in what amount commission is due. A principal and his agent have to live together and will have an incentive to work such disputes out, and indeed to avoid them. Moreover, they will have their daily experience to guide them. All that is lost with the outside assignee. I would therefore agree with the judge’s conclusions in respect of both the 1995 agency agreement and the parties’ agreement with respect to the DSCC contract, albeit for somewhat different reasons.

In sum: the prohibition on assignment under the 1995 agency agreement included assignment of the fruits of the agreement, but in the case of the DSCC contract, where there was no express prohibition on assignment, there was nothing to prevent TTF assigning its share of its fruits to an assignee.

The judge did not deal with issue 8(a) in his judgment.

In essence Mr Strauss submits that TTF’s right to commission was retained by the receivers as “Book Debts” and therefore never passed to Explora at all. In effect, either the commission had not been earned at the time the contracts under which they might have been earned came to an end, or, if they had been, then they were retained by the receivers. Mr Strauss relies on the width of the definition of book debts as including “without limitation all forms of indebtedness, obligations, rights of set-off and counterclaims whether or not…falling within the legal definition of a book debt”.

I have referred at paras 39/41 above to the CSA agreement’s structure and provisions. Ultimately, the difference between Mr Strauss and Mr Purle on this issue seemed to resolve itself into debating which provision should be given primacy: the transfer of the benefit of the sale and marketing contracts, or the retention of book debts?

This is a short point on which I think that in the end Hesco has the better of the argument. It is true that in a situation where the transferred contracts are specifically identified in schedules, but book debts are given such a wide meaning that there is the possibility of overlapping definitions, the intention of the parties is well capable of being more likely to be found in the specific than in the general. This is a well known approach to construction. It also reflects the structure of the agreement, which in form is a sale of transferred assets to Explora. The transferred assets are themselves defined as excluding the retained assets. Therefore it may be said that the assignor bears the burden of showing that the item in dispute falls within the exclusion of book debts. However, what seems to me to be ultimately critical is that there is no necessary inconsistency between the assignment of the benefit of the sale contracts, further defined as “uncompleted sale contracts”, or of the marketing contracts, (or of purchase contracts, also transferred but not in issue and further defined as “uncompleted purchase contracts”), and the retention, as a book debt, of TTF’s entitlement to commission which had already been earned as of the date of transfer, ie 30 April 2002. This itself reflects the distinction drawn in Linden Gardens between the assignment of the rights to future performance of a contract and the assignment of the fruits of performance, also referred to as the assignment of the benefits arising under a contract (see at 104H/105C). The latter, the assignment of the fruits of performance or of benefits under a contract, can itself, it seems to me, be divided between the assignment of existing fruits or of future fruits. In the present case, book debts in its wide definition seems apposite to distinguish both between present and future fruits, as well as between the rights earned from past performance and the rights of future performance. If, therefore, as I think, commission had been earned under the 1995 agency agreement once an enquiry had been obtained by or through TTF, and under the agreement in respect of the DSCC contract once that contract had been made, it seems to me to follow that such fruits of those contracts, if in existence as of 30 April 2002, should be treated as book debts, rather than as part of the future performance of sale and marketing contracts the benefit to which had been assigned.

This is a critical issue, and means that Explora ultimately fails, or very substantially fails, in its claim to recover the commission sued for in these proceedings. It means that Hesco’s appeal succeeds and TTF’s cross-appeal fails, unless there is any commission due under the 1995 agency agreement which was not in existence as a book debt as of 30 April 2002 but arose from a relevant enquiry between 30 April 2002 and 14 June 2002 and survived the limitation found in clause 9.

Whether that means that TTF has any claim which survives the settlement of the receivers’ litigation against Hesco, referred to in the judge’s para 99, I do not know. It is not a matter which has been debated in this court.

In these circumstances, I feel entitled to deal with issue 8(b) relatively briefly. The judge thought that if the commission in respect of the DSCC contract had not been assignable even in the absence of an express prohibition, then it would have been irrelevant that it had been expressly assigned by TTF to Explora. He rejected Mr Purle’s submission that the ineffective assignment would have taken effect as a trust in favour of Explora (para 98). I would merely say that I do not see why such a trust would not take effect: see Linden Gardens at 108D, Don King at 320A/B, Chitty at 19-045. Therefore, if there is any commission still due under the 1995 agency agreement which falls within the assignment under the CSA agreement, TTF holds that in trust for Explora.

At the time appointed for the hand-down of these judgments, Mr Strauss asked the court to reconsider this issue 8(b) on the ground that during his oral reply the court had indicated that it did not need to hear him further in relation to it. He says – and I accept - that he would have wished to make further submissions not found in his written submissions, to the effect that, even if the right to commission was assigned, nevertheless there was no intention to create a trust in favour of Explora. His essential additional argument was to rely on a paragraph within the definition of Transferred Assets within clause 1 of the CSA, not otherwise cited to the court, as follows:

Mr Strauss relied on the words beginning “and any asset the transfer [etc] of…which…would or might cause or occasion a breach of third party rights”. He submitted that any assets whose assignment was even arguably contrary to a covenant against assignment were within these words as involving at least a possible breach of “third party rights”. He also submitted that consistently with this view, paragraph 9 of Schedule 1 to the CSA, another term not otherwise cited to the court, provided TTF with an indemnity from Explora “against any claim by reason of the infringement of any third party’s rights…”

It seems to me that this is a bad point. First, it is a point which is relevant, if at all, to issue 8(a) rather than issue 8(b). If the debts in question were assigned, it seems impossible to suppose that there was no intent to render TTF a trustee of the debts in question. However, there was no application for the court to reconsider its judgment under issue 8(a), even if it became obvious in the course of Mr Strauss’s further submissions that that was where the logic of his point was taking him and that he was really attempting to say that there simply had been no transfer in the first place. That illustrates the danger of allowing a party to seek the exceptional jurisdiction to reopen argument after a draft judgment has been distributed to the parties. Secondly, the clause is in my judgment dealing with assets in which third parties have an interest, not with a covenant against assignment. Thirdly, given that the 1995 agency agreement is a specifically scheduled transferred asset, it seems to me to be impossible to say that post 30 April 2002 debts under it fall outside the transfer just because of even an argument against assignability. This conclusion seems to me to be fortified by the indemnity provisions under clause 9 of Schedule 1.

Mr Strauss further wished to submit that the conclusion stated in para 104 above, that TTF holds any post 30 April 2002 book debts under the 1995 agency agreement in trust for Explora, was not supported by any reason, and was wrong in the light of what Lightman J had said in Don King at 321D. I respectfully do not agree. I have referred above to what the judge, Simon J, had said in para 98 of his judgment, where he cites the same passage from Don King and says cautiously that a court “will be hesitant to allow a “procedural short-cut””, ie to allow a litigant to get round the prohibition against assignment merely by joining the assignor/trustee. The court will be hesitant (see also Hayim v. Citibank NA [1987] AC 730 at 748F). However, in this case TTF has been a party to this action from the start, but was joined on terms that it wished to play no part in it: TTF plainly did not wish to make any claim in its own name. The points on non-assignability and intention to create a trust points were equally plainly on the pleadings, but that did not tempt TTF to show any interest in the relevant claims.

That has been confirmed in the period since the distribution of our draft judgments. They have been copied by our direction to both the administrative receivers and to the liquidators of TTF, who have been expressly requested by Explora to enforce the post 30 April 2002 claim under the 1995 agency agreement (which we are informed is worth about £50,000). The liquidators have ignored the request, and the receivers, who have instructed Mr James Potts to appear on their behalf at the adjourned hearing at which Mr Strauss has asked us to reconsider our judgments, have through him made it expressly clear that they make no claim to commission under the 1995 agency agreement and accept that this claim belongs to Explora. In the circumstances, the suggestion that this court should leave this claim in some black hole is, as Mr Strauss himself accepts, wholly unmeritorious. Hesco owes it to TTF, a party to this action, and TTF is entitled to deal with it as it wishes. I would agree that mere procedure should not permit a failed assignee to ignore the prohibition on assignment. But equally, in circumstances such as these, the court must be prepared to deal with the issues and claims as presented to it, without creating unnecessary and disproportionate procedural complexities.

But for the fact that Mr Strauss had been stopped in his reply on this issue, I would not have been willing to reconsider para 104 of my judgment. In deference, however, to my concern that there should be no possibility of any feeling on the part of Hesco that the additional oral submissions he would have made in reply went disregarded, I have added these paragraphs (paras 105/110) to my original draft. I would not like it to be thought, however, that the jurisdiction to reconsider a draft judgment remains anything but exceptional.

This question does not arise. The issue was debated by the parties in terms of Roberts, as to which see above. In that context, I would have thought that the claim was not in debt, but essentially in restitution. It was regarded by Lord Denning as there a claim in damages solely because the principal had refused to pay, albeit in such circumstances he said that “damages is undoubtedly the right description” (at 596A). The same could I suppose be said to apply here. The case is not discussed in Goff & Jones, The Law of Restitution, 6^th ed, 2002. At any rate it would not be for the full 15% on the value of supplies down to 18 February 2003, for in the first place an assessment would have to be made, as of termination ie 14 June 2002, of the likelihood of supplies being ordered by DSCC up to 18 February 2003 (at 596E). Secondly, an allowance would have to be made for the saving to TTF of not carrying out its agreed functions in relation to the DSCC contract and the transfer of that expense to Hesco (at 595F/G and 596D). No doubt, the same allowance ought not to be discounted twice: it is rather that the allowance can be assessed both by reference to the agent’s savings of expense and by reference to the principal’s additional expense. Since the question does not arise, and since in any event the assessment would have had to have taken place elsewhere, it is not easy to know what further to say, and it is not necessary. I do not think that the principles underlying Roberts have been properly worked out.

Hesco never advanced a set-off or counterclaim arising out of TTF’s repudiation. Mr Purle therefore submitted that it was not open to Hesco to seek to raise at this late stage for the first time what was effectively a set-off or counterclaim premised on TTF’s failure to carry out its functions for the purpose of the DSCC contract. Mr Purle made the same submission in relation to the assessment of Explora’s claim under issue 9, namely that Hesco should not be permitted to advance the need for a discount by reference to the consequences of TTF’s non-performance. If the matter had been live, I would have thought that, for the purposes of the assessment under issue 9, it would not be possible to ignore the factors which went to discount the sum due to TTF and thus to Explora: they would all feed into what a court would say was an appropriate sum due. In the context of issue 10, however, the matter has to be looked at more strictly: if Hesco had wished to claim a set-off or counterclaim by reason of TTF’s breach, then it was obliged to plead it.

In sum, TTF had established claims to make, as of 14 June 2002, under both the 1995 agency agreement and the parties’ separate agreement as to the DSCC contract; but those claims were retained as book debts under the CSA agreement rather than transferred to Explora, save for any post 30 April 2002 enquiries earning commission under the 1995 agency agreement which matured in time to have given TTF a right to payment within clause 9 of that agreement. Although the assignment of such commission to Explora was prohibited by clause 5(g) of the 1995 agreement, its assignment under the CSA agreement takes effect as a trust, and TTF holds the benefit of any such commission on trust for Explora. In all other respects Explora’s claim fails.

I agree with the reasoning and conclusions of Rix LJ.

I would like particularly to associate myself with paragraph 74 of Rix LJ’s judgment. In the instant case it was, in the end, common ground that the relationship between Hesco and TTF vis-à-vis the DSCC contract was a contractual one: the issue was whether the relevant contract was the 1995 agency agreement (as suitably modified) or whether it was a separate contract. In my judgment, a debate as to the terms of an (admitted) contractual relationship leaves no room for the imposition of a Pallant v. Morgan equity. As Chadwick LJ said in Banner Homes (at 400E-F):

That, in my view, is precisely the position in the instant case. Since it is common ground that the parties in the instant case were bound in contract, there is in my judgment no need to have recourse to equitable principles applicable in cases where parties are bound only in conscience.

It follows, in my judgment, that there is equally no scope in the instant case for the application of the Keech v. Sandford principle to a renewal of the DSCC contract.

As to Issue 6 (on which my Lords take differing views), I respectfully agree with Rix LJ. I do not for myself see it as being a question of implying a term as to TTF’s entitlement to commission following termination of its contractual relationship with Hesco vis-à-vis the DSCC contract. The true analysis, as it seems to me, is that immediately prior to termination TTF was contractually entitled to future commission since it had done all that it was required to do by introducing DSCC to Hesco; and that that right survived termination. I therefore agree with paragraph 85 of Rix LJ’s judgment.

I agree with the judgment of Rix LJ save in one minor respect, viz. his treatment of commission under the DSCC agreement once there had been a repudiation of the TTF/Hesco relationship. Clause 9 of the 1995 agreement made specific provision in relation to what was to happen on termination and I agree with Rix LJ’s analysis of that agreement under issue 6. But I venture to think that once one is satisfied that the DSCC agreement was not made under the umbrella of the 1995 agreement, clause 9 of that agreement would not apply and one is left to the general law to resolve the question of commission after termination in relation to the DSCC agreement.

It was common ground that TTF had done a considerable amount of work particularly before February 1998 in bringing about the DSCC contract but also in providing services to end-users and encouraging them to make further orders through DSCC between February 1998 and the termination of the relationship in June 2002; but it was almost common ground (and I would in any event hold) that the entitlement to commission did not depend on such work being done. The difference between the parties was essentially that Mr Purle QC for Explora submitted that TTF were entitled to commission in respect of all orders placed pursuant to the arrangements made with DSCC in February 1998 until the contract ended 5 years later (and until the end of any extension of the contract which was agreed between the parties). Mr Strauss QC for Hesco submitted that no right to claim commission came into existence until an order had actually been placed and that, once termination had occurred in June 2002, TTF/Explora had no right to commission on any orders placed after that date.

Mr Purle’s best argument was that it would be unfair to TTF that termination, even if due to TTF’s conduct, should cause them to forgo commission on orders placed during the existence of the DSCC agreement which TTF had done so much to bring to fruition. The essence of the agreement between the parties was that TTF should be rewarded by 15% commission for having secured the DSCC contract. In this sense TTF had introduced DSCC to Hesco and TTF should be entitled to all commission in fact brought about by that introduction. To the extent that orders were still being placed with and processed by Hesco after termination, such orders had come to Hesco as a result of the DSCC contract which TTF had negotiated (together with Hesco, no doubt, but for Hesco’s benefit). The case was thus similar to Roberts v Elwell Engineers [1972] 2 QB 586 where it was held that the agent was entitled to commission on orders and repeat orders placed after termination of the agency relationship because they were attributable to the agent’s introduction.

Mr Strauss’s most persuasive argument was that even though TTF and Hesco had bound themselves together for the duration of the contract with DSCC (which would be as long as 5 years if DSCC opted to avail itself of its four successive rights to extend the contract for another year after the first year – as in fact happened), they could not have intended that in the event of a termination (possibly at an early period in that 5 years) the right to commission would exist in respect of all orders placed during the period of contract, especially since TTF would not be doing any work for the benefit of the contract with DSCC after the termination.

In 1995 the parties had addressed themselves to the question of the commission payable after termination in the context of supplies of gabions to the United Nations Peace Keeping Force in Bosnia. They then decided (in clause 9) that in the context of a contract terminable on 3 months notice, under which commission was payable on cash received by Hesco in respect of goods supplied by them for which enquiries had been made by or through TTF, commission would be payable in respect of enquiries received by Hesco yielding a cash payment in Hesco’s hands within the period of 6 weeks before determination.

I agree with Rix LJ that the UNPROFOR agreement in general cannot apply to the new relationship between TTF and Hesco arising from the making of the DSCC contract. Among other reasons, the fact that it was agreed that it was irrelevant under the DSCC contract to ask whether the original inquiry was obtained “by or through” TTF makes any such application impossible. But does it follow from this that the parties must be taken to have agreed that commission will be payable on all orders placed during the existence of the DSCC agreement regardless of the fact that the relationship between TTF and Hesco has come to an end?

Mr Strauss submitted that if we reach the position that clause 9 of the 1995 agreement does not apply to the DSCC arrangement, there is then no express agreement; the question would then be whether it is possible to imply a term into the new arrangements, whereby if the relationship comes to an end, commission will continue to be payable after termination. He further pointed out that, in a situation where the parties are locked-in together for 5 years if DSCC exercise their 4 annual options to extend the contract so that the relationship cannot be determined by mere notice, by far the most likely reason for the relationship to come to an end will be that one of the parties repudiates the contract constituting that relationship and the other party accepts that repudiation as bringing the contract to an end. For my part I would accept these submissions and ask myself whether it is a necessary implication that commission should be payable on orders received after termination of the TTF/Hesco relationship viz orders received (pursuant to the DSCC contract) between 14 June 2002 and termination in February 2003. It is axiomatic that either party can enforce rights accrued as at termination. But I do not consider that TTF can, on termination, have an accrued right to commission on an order not then placed, unless a term can be implied to that effect.

In a contract with a relatively short notice period entitling either party to bring the contract to an end, it may well be possible to construe the agreement to pay commission as consideration mainly for the introduction of a client and, for that reason, to imply a term that repeat orders from a client so introduced should continue to attract commission after termination. That is, I consider, the rationale of Roberts v Elwell in which either side was entitled to terminate the contract by giving 3 months notice to the other and this court held that commission was payable on repeat orders for the same goods after such a notice had been given. There was, of course, no express term to that effect but, in the circumstances, such an implication was necessary to be fair to the agent. It is significant that, when TTF and Hesco did make a contract with a similar 3 month notice period in respect of goods supplied to UNPROFOR, they did (by clause 9) make an express (albeit, very limited) provision for commission to be payable after termination.

As far as the DSCC arrangement was concerned, there was no express agreement as to what was to happen in the event of termination which (as I have said) is most likely to have occurred as a result of repudiatory conduct by one party to the other. It is, therefore, not unfair to ask whether it is necessary to imply any term in relation to commission in the event of the contract being repudiated.

In my view the answer to this question is in the negative. If Hesco brought the contract to a premature end, TTF would be an innocent party but their remedy would not be to say that commission continued to be payable after termination but rather that Hesco by their breach of contract in prematurely determining the contract had deprived TTF from earning the commission which they would otherwise have earned. In such event it is not self-evidently necessary to imply a term as to commission after termination. So also, where it is TTF who by their repudiation bring the contract to an end; it is they who are in breach of contract and it is by no means necessary to imply a term that, in the event of their breach which has resulted in the termination of the contract, their entitlement to commission should continue merely because TTF initially procured (or assisted to procure) the DSCC contract. In this context it is relevant to observe that, although the entitlement to commission did not depend (while the contract lasted) on TTF doing any specific work, they were nevertheless obliged, in my view, to use reasonable endeavours to market Hesco’s goods and service the requirements of the end-users. TTF’s witnesses always accepted that they did in fact do this. If for any reason TTF decide that they will discontinue their marketing of and assistance to the end-users of Hesco’s products, it is hardly necessary to imply any terms that their entitlement to commission should continue after termination. An order placed before termination is different. Such order gives rise to a right to receive commission which exists at the date of termination.

Since I agree that any TTF claim was a book debt and thus retained rather than transferred to Explora, my minor disagreement with Rix LJ makes no difference to the ultimate disposition of this appeal.