Written by Steve Sidkin
19 July 05
A significant difference between being self-employed as opposed to an employee is that the self-employed can chose when to stop work because of retirement. In contrast stopping work because of infirmity or illness chooses you (whether you be self- employed or an employee) – not the other way round. It is clear, however, from the recent Central London Mercantile Court judgment in Abbott v Condici and Rinku, that Judge Mackie disagrees.
The issue at the centre of Abbott was the Commercial Agents (Council Directive) Regulations 1993 (as amended), or, more particularly, Regulation 18(b)(ii). The Regulations provide an entitlement to no fault compensation when an agency agreement comes to an end unless the agent is in breach, has terminated the agreement without cause, or has transferred the agreement. There is, however, an exception to the situation where the agent has terminated the agreement without cause, namely where such termination is justified on grounds of “age, infirmity or illness of the commercial agent in consequence of which he cannot reasonably be required to continue his activities…….”
In Abbott the agent decided in September 2000 to retire. He wrote to both of the fashion principals that he represented. He expressed the wish to retire as their agent. He gave three months’ notice. However, he did not state that he was retiring on grounds of age. Nor did he say that as a result of his age he could not reasonably be required to continue his activities. Indeed he was found by Judge Mackie to be a fit and active man for his age. Further, in cross-examination, the agent conceded that he could have continued to carry on the agency. However, he did not accept that it was reasonable for him to continue as an agent. Instead he took the view that having worked as an agent for over forty years and being sixty five years old, it was reasonable for him to discontinue his activities. He claimed also that he no longer wanted or felt able to carry on, particularly as his levels of tiredness were mounting. However, neither this nor his need for a hip replacement were such as to cause him to rely on one of the other exceptions set out in Regulation 18 (b) (ii).
The difference between the parties turned on the question of compensation being payable under the Regulations only if termination is justified on grounds of the age of the agent “in consequence of which he cannot reasonably be required to continue his activities.”
It was claimed for Mr Abbott that the primary purpose of the Regulations is to protect agents in all normal circumstances which might lead to the termination of the agency agreement such as death, illness and retirement. As such it was impossible to see why an agent should be compensated for the goodwill generated for his principal where he has been given lawful notice of termination or when he becomes too ill to work or dies, but not when he reaches a recognised retirement age.
In contrast the defendants’ position was that it was necessary to closely examine the circumstances as opposed to mere achievement of a particular age. A series of circumstances was pointed out to show that it would be reasonable to require Mr Abbott to continue his activities. In addition the choice of 65 years as a yardstick was questioned. Attention was drawn to the different state pension ages for men and women and the opportunity for the pension to be deferred for up to five years. Further there are different retirement ages for employees throughout the European Union.
Whilst Judge Mackie recognised the plausibility of the defendants’ arguments, he rejected them. Instead he was concerned with age completing the sequence of events – death, disability, termination not through the agent’s fault – which might be expected to be covered by legislation intended to protect an agent’s right to a goodwill payment. As he himself put it, “it would be absurd and unworkable if every case needed its own carefully calibrated grounds of age, ability and circumstance to decide whether compensation was due. It would also be unfair…… It would be unjust if an agent lost everything by calling it a day at 64, 65 or 66”.
On this basis, age alone was to be the deciding factor. As a result the issue of retirement on the grounds of age being subject to a qualification (that the agent’s age meant that he cannot reasonably be required to continue his activities as agent) was abandoned. Further whilst Judge Mackie recognised that there may be more than one appropriate age, for Mr Abbott the choice of the age of 65 was “embedded as a retirement milestone”.
In reaching this decision, Judge Mackie overlooked the fact that age on the one hand and infirmity and illness on the other hand are distinct. Ageing cannot be avoided – each day we all become one day older. Ill health and infirmity may or may not be avoided. Further when it comes to the critical issue of whether a commercial agent is of a particular state (for example, infirm) in consequence of which he cannot reasonably be required to continue his activities, the distinction between the two is almost palpable. An agent who is infirm or ill is unlikely to be able to chose whether or not he cannot reasonably be required to continue his activities. An agent who retires in consequence of age has that very choice. Mr Abbott retired of his own volition.
Further Judge Mackie having chosen to rely on the current state pension retirement age of 65, overlooked the fact that this is a retirement age for employees. The self-employed may or may not retire at this or any other age. Further whilst he recognised that there may be more than one retirement age, he refused to consider what that might be in the case of Mr Abbott.
It is possible to feel some sympathy for Judge Mackie. He was presented with conflicting propositions, no guidance from the Directive, and references to the laws of other EU Member States that conflicted. But his solution of linkeage to the state retirement age is at best too simplistic.
More importantly, an agent retiring on the grounds of age without having to show anything other than he has reached the state retirement age makes a mockery of the qualification that he cannot reasonably be required to continue his activities when that qualification is applied to infirmity or illness.
In addition it is possible to claim that in reaching his decision Judge Mackie tuned his back on the earlier High Court case of Ingmar v Eaton Leonard where the court refused to award a particular assessment of compensation on the basis that it would be “excessive and result in a considerable degree of windfall” for the agent.
Pending a High Court decision as to how the qualification of “in consequence of which he cannot reasonably be required to continue his activities” is to be applied to age, it is likely that principals:
- will consider carefully about appointing agents in their mid to late 50’s;
- should consider whether an agent may claim that he has become too old for the principal’s products; and
- will monitor more closely agreements with such agents and be more vigilant in dealing with non-performance.
However, the situation may change again from 2006 when age discrimination law comes into operation.
This briefing note is for general information. For advice in applying this general information to your specific circumstances, please contact Stephen Sidkin or any member of the Fox Williams’ agentlaw team (www.agentlaw.co.uk)