Non-compliance with a principal’s reasonable instructions can put an agent in all sorts of difficulties. This is especially so where an agent is unwilling to change working practices. This is the result of the recent case of Gledhill v Bentley Designs, although for the wrong reason!
Is there a difference between calling someone a “stupid, sanctimonious dwarf” and “a horrible, despicable, little man”? Given recent comments in Parliament and the High Court, it would appear that a difference does exist although perhaps it is more to do with the circumstances in which the statements are made. Whilst there may be little difference in effect by the apology given by Simon Burns MP and an agent, it is likely that one will have more impact on the furniture industry. The comments made by the agent were reported in the claim brought by Stephen Gledhill against his former principal, Bentley Designs (UK) Limited. Although the judgment does not expressly say so, Mr Gledhill was seeking to establish that his agency agreement had been repudiated by Bentley Designs in order that he might claim under the Commercial Agents (Council Directive) Regulations 1993.
Mr Gledhill had been Bentley Designs’ agent for 17 years before his termination. More particularly, he was Bentley Designs’ best agent and earned on average about £85,000 a year in commission. Unfortunately, he was also an agent who found it difficult to adapt to changing times. In 2006 Bentley Designs informed its agents that Word and email were to be used in place of paper and faxes or post. This was particularly important in Mr Gledhill’s case as it was claimed by Bentley Designs that Mr Gledhill’s handwriting was difficult to read and, as a result, mistakes were made. It was also claimed that the circulation and filing of papers was slow and cumbersome.
Within a period of three months, nine out of Bentley Designs’ ten agents had complied with their principal’s instructions. Mr Gledhill had not. He was asked repeatedly to comply. He failed to do so, even to the extent of replying by faxes to emails sent to him!
More than six months after the original instruction, Bentley Designs informed Mr Gledhill that unless he complied with the instruction, an administration fee of £100 per month would be charged. At the same time, Bentley Designs offered the agent personal training in Word and email. However, nothing changed. As a result, Bentley Designs proceeded to make the charge with effect from 1 August. This action prompted a hostile reaction from Mr Gledhill and various exchanges between him and Bentley Designs. Ultimately, in a voicemail message and in a telephone call, Mr Gledhill verbally abused Bentley Designs’ managing director. Although he was encouraged to send an apology, his letter sought only to explain the content of the telephone calls. In the absence of an apology, Bentley Designs decided that the only appropriate course was to terminate the agency agreement.
The reason for termination of an agency agreement is important if a principal is to have any chance of avoiding a claim by the agent for loss of the agency under the Regulations. In particular, the Regulations make it clear that an agent will not be entitled to compensation (or indemnity (which is the alternative to compensation)) under the Regulations if the agency agreement has been terminated by the principal because of the agent’s default which would justify immediate termination of the agency agreement because of the agent’s failure to carry out all or part of his obligations under the agreement. However, if the principal is unable to show such default by the agent, then it will have wrongly terminated the agency and can expect a significant claim under the Regulations.
In respect of Mr Gledhill, it would appear from the judgment that Bentley Designs took a calculated risk in terminating the agency agreement because of what he had been said to its managing director. However, whether this risk had been calculated at the time of termination is unclear.
What is clear is that a failure by an agent to comply with the reasonable instructions given to him by his principal will justify the termination of an agency agreement under the Regulations. In the case of Vick a few years ago, an agent refused to use an Ipaq (a forerunner of sorts of the Blackberry) with which to communicate orders to head office. Indeed, the agent informed his principal’s managing director where he might place the Ipaq. Termination of the agency agreement and an unsuccessful claim for compensation by the agent swiftly followed. As such, Bentley Designs would have been taking a lesser risk if it had terminated Mr Gledhill’s agency for his repeated refusal to comply with instructions to use Word and email rather than levy an administrative charge for his continued use of faxes and post.
In contrast, terminating the agency agreement for the personal abuse aimed at Bentley Designs’ managing director very much relied on the court agreeing that parallels could be drawn with the way in which an employee is required to conduct himself towards his employer under employment law. In this respect, the judgment is flawed. Whilst there are parallels between agents and employees, there are also significant differences. At the end of the day, agents are businessmen in their own right. Employees are not. The Regulations recognise that agents are businessmen and it is this recognition that underlies the calculation of compensation under the Regulations. As such, it would have been better so far as the law is concerned had the judge in Gledhill not tried to cling precariously to employment law concepts, but instead had focussed on principles of agency law (including the obligation under the Regulations for an agent to act dutifully and in good faith towards his principal).
Arguably, because of the earlier court decision in Vick, the fact that the judge hearing Mr Gledhill’s claim got his decision right, but for the wrong reasons, will not matter.
Overall, judgments such as those given in Vick and against Mr Gledhill show a determination by the courts to recognise the changing needs of businesses in respect of the adoption of new means of communication.
This article was written by Stephen Sidkin, a partner and head of the commerce and technology team at Fox Williams LLP. For further information Stephen can be contacted on 020 7614 2505 or email: firstname.lastname@example.org
Written by Agentlaw Team