It’s some years since I read Dale Carnegie’s book, ‘How to Win Friends and Influence People,’ so forgive me, but I am a little sketchy now as to its contents. However, I would bet good money on the fact that its sage advice does not include a recommendation that you slag off your clients/customers/partners if you want your business to be a resounding success.
I was therefore astonished to see the Court of Appeal judgement in the case of Crocs Europe BV -v- Craig Lee Anderson & Anor trading as Spectrum Agencies (a partnership)  EWCA Civ1400, this week.
Spectrum had had a contract with Crocs (the rubbery shoe people) to be its agent in the UK for the sale of Crocs footwear. Given the ubiquity of Crocs shoes a few years ago, you would think that this was a pretty important relationship for Spectrum. So what did they do to show Crocs the extent of their undying love and devotion? This from the Court of Appeal judgement:
“On 19 June 2008, an employee of [of Spectrum], helped by others, composed and posted … on a website… written film credits rolling up on the screen. The sequence written by him and colleagues was headed “That’s a Croc!! Of Shite!! SPECTRUMS WAR OF LIGHT VS DARK.”
Pretty bad, eh. But wait, there’s more. The judgement goes on:
‘A link to the [derogatory website] was emailed to other employees of [Spectrum] and to third parties, including some customers of [Crocs] in the UK and distributors in other markets [including four] … long-standing retailers of [Crocs].”
Crocs took exception to being insulted and purported to terminate the agency contract it had with Spectrum on the grounds that Spectrum’s behaviour amounted to breach of its duties as agent to act in good faith towards its principal. Crocs maintained that it was therefore entitled to treat the contract as having been repudiated. If Crocs was right about this, it could save itself the need to pay Spectrum about £12-£16m in compensation which it would otherwise have had to pay had it wanted to end the contract by serving notice.
The case in the Court of Appeal was advanced on three grounds, two of which concerned the status of Regulation 3 of the Commercial Agents (Council Directive) Regulations 1993, in the agency contract (and on which, Crocs properly lost in my view).
For the third ground of appeal, Crocs, asserted that an agent’s breach of its fiduciary duty of good faith and loyalty to its principal should always amount to a repudiatory breach of contract.
Not so, said the Court of Appeal. It depends on the facts how serious the breach was in the circumstances. As Mummery LJ said:
“On an appeal this court can only overturn [a finding of fact on how serious the breach was], if it is clearly shown to be wrong. That is obviously difficult to do, unless the judge misdirected himself in law, or there was no evidence to support his conclusion.”
And what did the court below decide? This is what Sir Raymond Jack had to say in the High Court:
“My conclusion here is that it was a breach of Spectrum’s duty to [Crocs] to put the [derogatory words] onto the website, but that the seriousness of that breach fell a long way short of the seriousness required to entitle [Crocs] to terminate the agency. A reasonable person would not conclude that it showed an intention on the part of Spectrum not to fulfil the contract. The main factors in my reaching that conclusion are that the [derogatory words were] obviously intended to be humorous (and its scatology sounds worse in a court than in the world of the web); that its circulation was very limited, and to persons who would see the joke; that it was very unlikely that a retailer (or any other person seriously interested in Crocs) would see it unless they had the link; and that the situation at [Crocs] which was the subject of the [derogatory word’s] Star Wars humour was well known to Crocs retailers.”
To coin a phrase: That’s a Croc!! Of Shite!!, but that’s not me being forthrightly insulting, oh no. No doubt all ‘reasonable people’ will think that’s just me having a joke and a laugh.