Mercantile Court

IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
BIRMINGHAM DISTRICT REGISTRY
MERCANTILE COURT

		CLAIM NO 0BM40003
		2nd June 2010

1. This is claim by a manufacturer's agent against his principal for unlawful termination on 25^th September 2008 of his agency agreement dated 2^nd December 2005.
2. There is little relevant factual or legal dispute between the parties and the issue to be determined is whether the termination of the Agreement by the Principal was lawful or not.
3. The Claimant alleges that it was unlawfully terminated when the Defendant terminated the Agreement with immediate effect on 25^th September 2008 on the basis of the Claimant's admittedly abusive behaviour over the telephone at 10.30am (voicemail) and repeated at 2.30pm (direct speech) on 12^th September 2008 towards the Claimant's Managing Director, Mr Lalani, that the Claimant contends he openly repented in a faxed letter 6 days later.
4. The Defendant contends that it was entitled to terminate the Agreement because:

a. The conduct of the Claimant amounted to a fundamental breach of contract. It was a breach of trust and confidence, such that Mr Lalani could not be expected to tolerate such conduct and was entitled to terminate the Agreement with immediate effect.

b. The breach was incapable of remedy. Even if it was, the Claimant did not remedy the breach by a letter dated 18^th September 2008 that he sent which purported to be an apology but which was in reality a letter of mere regret, excuse and endorsement for the Claimant's conduct.

5. The message on Mr Lalani's personal mobile telephone on 12^th September 2008 that was subsequently repeated was recorded was:

"I see you have taken the money out of my account which I have asked you and told you not to do.

I just can't believe you. You are at your happiest when you are always causing grief for people and just try to sort of upset people, people that support you, and I just think you are a horrible, despicable little man. I really do. I just think you are absolutely gutless. You have just taken £195 from me which covers the hotel, fair enough, and £100 twice plus the VAT. You just seem more intent on sort of…as opposed to getting the business, the nitty gritty part, you seem more intent on causing trouble to people. I think you are an absolute shit, I really do. You are a despicable, horrible little excuse for a human being.

It was a pity that you were not available to speak to."

6. The relevant extracts of the letter of 18^th September 2008 state:

"I write further to our discussion on Monday regarding the continuing frustrations I am feeling as a result of various isolated charges for not restricting communications with your company to EMAIL only.

Whilst I feel that in the cold light of day my allowing the pent up frustration to boil over when speaking to Rif on the telephone was not to well demonstrated business professionalism shown through our dealings and is regretted.

I do feel however that there was a fair degree of justification in my actions when looking at the circumstances from my perspective.

for the above reasons when I did speak to him almost immediately after, I felt so incensed that I felt it necessary to explain my frustrations and annoyance.

After having received your assurances last Friday that you were not seeking to terminate my contract, I believe we still need to look at how we operate in the future…".

Law

7. As a matter of law, abusive language by an employee towards his or her employer may amount to a repudiatory breach of contract depending on the circumstances. Words spoken in the heat of the moment may be not always lead to a conclusion that they are such that the relationship cannot continue: Wilson v Racher [1974] ICR 428); but in the content and the context of what is said and done may amount to a repudiatory breach: Pepper v Webb [1969] 1 WLR 514).
8. An apology may lead to the conclusion that the conduct is not repudiatory but this is likely to be only the position where the words were spoken in heat and haste and the apology is heartfelt and sincere: Charles Letts & Co v Howard [1976] IRLR 248.
9. In this case, as in any like employment contract, the Agent was under an express duty under Clause 3.1 "to act towards the Principal conscientiously and in good faith" and "any serious breach" of such a term would entitled the Principal to terminate "with immediate effect" under Clause 9.2.1.
10. The relationship of Principal and Agent here is that there is necessarily an implied reciprocal terms that neither would "without reasonable and proper cause, conduct itself in a manner calculated or likely to destroy or seriously damage the relationship of confidence and trust between employer and employee": Mahmud v. B.C.C.I [1997] ICR 621 per Lord Steyn.

Context

11. The Defendant is a company which trades with over 800 retail stores in the supply of dining and bedroom furniture. Like many companies, in recent years this has expanded into servicing clients via the internet and such accounts have been dealt with from Head Office.
12. The Claimant was one of 10 national agents of the Defendant from 1991 uniquely servicing two areas: Yorkshire and the North East. He was an effective agent with a large turnover earning on average about £85,000 pa in commission.
13. By 2006, there was a move to a 'paperless environment' as part of administrative rationalisation and modernisation. All of the Agents were told that they were to move to electronic communication using Word and e-mails rather than paper and faxes or post.
14. These requirements by January 2007 were made expressed at the sales conference in October 2006 by Mrs Donovan, the General Manager of the Defendant who worked under the direction and control of Mr Lalani. This was repeated by Mr Lalani in one to one meetings with Agents and employees. The Defendants contended that this was not just a bureaucratic requirement as the Claimants' handwriting was difficult to read with mistakes being made and the circulation and filing of papers was slow and cumbersome.
15. By January 2007 all Agents had complied other than the Claimant.
16. Mr Lalani, Mrs Donovan and Mrs Neill of the Claimant repeatedly pressed the Claimant to comply with the requirement but despite this he chose not to do so: he continued to send paper faxes in all his dealings with the Defendant even when replying to an e-mail sent to him.
17. In May 2008, the Defendant resolved to charge the Claimant an administration charge for dealing with his paperwork in this way. Mrs Neill raised this with the Claimant and told him that as from 1^st July an administration fee of £100 per month would be levied unless he complied offering personal training in Word and e-mail if desired.
18. Nothing changed. The Defendant then proceeded to levy a charge as from 1^st August.
19. This brought a hostile reaction from the Claimant. On 5^th August he faxed a letter stating that he would not pay, stating he would go on a course to become computer literate in the autumn which he had already promised on a number of occasions but never fulfilled.
20. Mrs Neill responded on 14^th August stating that the charge would continue until he complied with his principal requirements of all their agents.
21. A further debit note was sent on 28^th August. The Claimant wrote again to Mr Lalani in defiance.
22. On 12^th September, the two telephone incidents than occurred followed by an e-mail to the Claimant on the Friday afternoon from Mrs Neill offering training.
23. Mr Lalani immediately telephoned Mrs Donovan and related what had happened.
24. Mrs Donovan, realising how serious this was, spoke to the Claimant on the following day from her home as it was a Saturday. I accept that she advised him to "apologise" to Mr Lalani if "matters were to move forward" and to think on it over the weekend.
25. Mrs Donovan spoke to the Claimant on Monday 15^th September and on 16^th September when the Claimant said he would be sending a letter.
26. This letter, as above, dated 18^th September duly arrived by fax under cover of another one giving an "apology" for not e-mailing it due to computer problems.
27. Mr Lalani did not consider the letter to constitute any sort of "apology" and decided that the only appropriate course open to him was to terminate the Claimant's agency. Mrs Donovan duly wrote a letter of termination on 25^th September 2008.

Evidence & findings

28. The Claimant and Mr Lalani both gave evidence as did Mrs Donovan and Mrs Neill. There were other witnesses whose evidence is not relevant to the very narrow issue to be determined.
29. It is apparent that there was a two year pressure build up to an explosive end to what had been a fruitful 17 year professional relationship for both parties.
30. The methods of modern communications have radically changed over the last two decades with the rapid advances of, and reliance on information technology. Older established businessmen tend to be slower to adapt to these changes and understandable find it difficult to embrace them or are fearful of them. In my judgment Mr Gledhill falls in that category and one must respect him for that. Mr Lalani and those working for him were equally understandably keen on making their business as efficient as possible in a very competitive environment and in my judgment they sought to make those changes at a pace that was sympathetic to their agents.
31. It was the ratcheting up of the pressure some 18 months after he should have changed over to sending e-mails, not just receiving them as he was happy to do, by trying to make him making him pay for the privilege that caused the terminatory outburst.
32. In my judgment, Mr Gledhill is not only conservative; he is also demonstrably very stubborn and that was plain in the manner he gave evidence under cross examination. Mr Lalani on the other hand came across as very reasonable and understanding only reluctantly dismissing his top agent when he received no apology.
33. In my judgment, the contents and tone of two telephone calls (I heard the recorded message) were personal abuse of the worst kind and gross insubordination of the Managing Director of his Principal by the Agent and would lead to an irrevocable breakdown of the necessary personal relationship of trust required between Principal and Agent, unless repaired. Such repair could only be at the indulgence of the abused, i.e. Mr Lalani. He and the Defendant gave the Claimant ample time and opportunity to give the necessary abject "apology".
34. This was not spur of the moment behaviour by the Claimant. He was not only was abusive to Mr Lalani on the mobile phone but had already left a message for him. This was thought out, calculated and inappropriate conduct.
35. 6 days on, in my judgment, the Claimant spurned that gracious opportunity and put the breach of trust beyond repair by sending under cover of another fax that actually referred to an "apology" on a trivial matter, a letter of mere "regret" of his own lack of professional behaviour whilst seeking to justify it. There was not one word of "apology" relating to the "personal abuse" and hurt that his awful words undoubtedly caused Mr Lalani. There was no need whatsoever in the context of the business issue between the Claimant and the Company for the Claimant to descend into "personal abuse" that also became broadcast to employees of the Defendant under Mr Lalani's direction. "Regrets" do not without more amount to "apologies".
36. In my judgment, the conduct of the Claimant in personally abusing the Managing Director of the Defendant over the telephone and his avoidance of proffering any apology to Mr Lalani when given ample and generous opportunity of giving one, was a course of conduct calculated, or at the very least likely, to destroy or seriously damage the relationship of confidence and trust between principal (Mr Lalani) and agent (the Claimant).
37. Accordingly, in my judgment the termination of the agency agreement on 25^th September 2008 was lawful and the claim must be dismissed.

HH Judge Simon Brown QC 2^nd June 2010