Right of Access to Information and Documents

This article focuses on an agent's right to information and documents, with a particular focus on entitlements to information and documents following the termination of the agency.

Accessing sales information and equality of arms is of paramount importance, particularly when calculating an agent's entitlements following termination, especially for calculating pipeline commission under Regulation 8 of the Commercial Agents (Council Directive) Regulations 1993.

However, an agent also has rights to information during the agency, which is a right which may need to be exercised by an agent if a principal is suspected of "hiding" sales. 

What right does an agent have to information during the agency? 

It is fair to say the most important consideration for an agent is to make sales and earn a commission. It is assumed most agents will know what sales they have made, particularly if the orders are placed via the agent. However, it can be challenging for an agent to keep track of every sale made in agencies with multiple order management systems, cross-jurisdictional offices/customers, and arrangements where customers place orders directly with the principal.

The agent must trust that the principal is giving them full disclosure of sales upon which they are entitled to commission and that they are being paid commission on all qualifying sales. But what happens if an agent suspects his principal is hiding sales to avoid commission being paid? How can the agent check on sales made or verify commissions?

As you might have guessed, the answer lies in the Regulations. Regulation 12 provides an agent with a right of access to information from the principal: 

Periodic supply of information as to commission due and right of inspection of principal's books

12.—(1) The principal shall supply his commercial agent with a statement of the commission due, not later than the last day of the month following the quarter in which the commission has become due, and such statement shall set out the main components used in calculating the amount of the commission.

(2) A commercial agent shall be entitled to demand that he be provided with all the information (in particular, an extract from the books) available to his principal and which he needs to check the amount of the commission due to him.

(3) Any agreement to derogate from paragraphs (1) and (2) above shall be void.

(4) Nothing in this regulation shall remove or restrict the effect of, or prevent reliance upon, any enactment or the rule of law which recognises the right of an agent to inspect the books of a principal.

So, under Regulation 12: 

1. A principal must provide the agent with a commission statement together with an explanation of how it has calculated the commission due; and 
2. A principal must give the agent the information required to check the commission due. 

Regulation 12 is handy for an agent to deploy during the agency, especially where (as alluded earlier) he is sceptical about being paid all commission due or where a principal does not send out regular commission statements. But what if a principal refuses to provide the information?

Although a principal refusing to give this information freely would only confirm suspicions that something isn't quite right, if a principal refuses to supply the requested information, it would breach Regulation 12 and the duty to act in good faith. In those circumstances, the only recourse for an agent is to apply to court. However, this weapon is rarely used since the costs of applying to court are generally disproportionate. 

A principal's refusal to provide information in breach of the Regulations is likely to lead to a breakdown of the relationship of trust, which is fundamental to the successful operation of a sales agency relationship, and a termination of the agency relationship may be inevitable.  

Another right an agent or principal can invoke is the right to a written statement of terms. Regulation 13 states: 

13.—(1) The commercial agent and principal shall each be entitled to receive from the other, on request, a signed written document setting out the terms of the agency contract, including any terms subsequently agreed.

A written statement of terms merely records the agency contract's terms and is not the same as a written agency agreement.

Rights to access information post-termination 

As readers are probably already aware, termination of an agency, through no fault of the agent, triggers the agent's right to claim compensation or an indemnity according to Regulation 17, and post-termination commission, commonly referred to as "pipeline" commission, under Regulation 8. 

One of the main challenges for an agent in calculating pipeline commission is establishing precisely what sales the principal has made following termination. An agent's access to sales information is often terminated when the agency is terminated. The first step in calculating pipeline commission is usually for the agent to ask the principal for a schedule of sales made in his territory since the termination date. 

The principal should cooperate and agree to provide this information promptly, especially if there is no dispute about an agent's entitlement to claim pipeline commission. The court expects parties to a potential dispute to cooperate in providing an early exchange of information, and a party who refuses to do so puts themselves at risk of costs if court proceedings are issued further down the line. 

However, in the event of a dispute, in the context of litigation, the principal must provide all relevant sales documentation as part of the disclosure. Therefore, the information required to calculate pipeline commission will be disclosed at some stage, and in most cases, that will be before any court proceedings are issued. 

A principal is, of course, only able to provide post-sales information to the extent it exists, and in the case of pipeline commission, the amount of such a claim may have to be estimated in part until the post-termination sales information becomes available.