NEW YORK LIFE INSURANCE WORLDWIDE LTD v. LIN MAN CHI ANDY

HCA 895/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 895 OF 2009

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J U D G M E N T

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Introduction

1.  These are Order 14 proceedings.  This appeal is concerned with the true construction of Clause 5.1 of Addendum 1 — Financing Scheme to an Appointment Letter dated 1 June 2006 under which the Defendant was appointed as an Agent of the Plaintiff selling life insurance policies for commission on its behalf. 

2.  Apart from the Appointment Letter, the parties also signed an Agent’s Agreement and a Manager’s Agreement both of which are dated 10 July 2006.

3.  I will return to the material parts of these documents presently.  The factual background which I will recount first can be stated shortly.  For the purposes of this judgment, it is sufficient to relate that the Defendant was engaged by the Plaintiff as the head of a team of agents.  He says that he was appointed as such to mask the fact that he was in reality a subordinate of his brother who was then appointed to another insurance company to whom he was exclusively attached so that he could not also represent the Plaintiff during the currency of his contract with that other insurance company.  According to the Defendant therefore the majority of the fees and commissions earned by his team went to his brother and he only retained what was directly attributable to himself as an individual agent rather than as the overall team leader.

4.  The Plaintiff does not accept this version but for the purposes of these proceedings and this appeal it accepts that this must be left to the trial of the action.  Accordingly, on this summons it is only claiming the amounts paid to and referable to the Defendant as an individual agent.

The Material Provisions

5.  By describing the material parts of the Agreements signed by the parties it becomes possible to see how the issue in this case has come about.  The basis of the Defendant’s earnings as Agent were by commission based on the value of the life policies sold.  Suffice it to say that there are different types of commission and bonus that can be earned by an Agent.  The scheme of the Agreements appointing an Agent are that the Agent is required to remain in his appointment with the Plaintiff for at least two years in order to maintain his right to retain certain types of commission and bonus payable and paid to him.

6.  The statement of claim in this case fairly pleads the facts relating to the Defendant’s appointment with the Plaintiff from 10 July 2006 until the termination of his appointment on 13 July 2008.  It is common ground that the Defendant had received various classes of commission totalling $6,487,684.94 which the Plaintiff is now seeking to have returned to it by virtue of the fact that the Defendant has had his appointment terminated on 13 July 2008 which is a date within the two years period after the Last Finance Payment Date.  None of this is in dispute.

7.  Given that by his defence the Defendant has pleaded that these payments were in fact, to the Plaintiff’s knowledge, secretly paid to his brother, the Plaintiff has restricted its Order 14 summons to the amount of $987,684.94 which is what the Defendant kept for himself as his commission.  This figure is also not in dispute.

8.  The Plaintiff decided to terminate the Defendant’s appointment after it had previously served him with a warning letter on 4 March 2008 [67] to the effect that his and his team’s sales performance was unacceptably low.  When that did not improve, it sent him a letter of termination on 13 July 2008 [66].  The Defendant disputes the validity and bona fides of the warning letter and says that its demands were impossible to meet, but this does not bear on what it is that I have to decide.

The Issue

9.  The question that I need to decide is whether on a true construction of Clause 5.1 of Addendum 1 [supra.] [64], the Plaintiff is entitled to terminate the Defendant’s engagement in the way that it did and to require him to repay to it all the commission and bonus that he had received from it.  Before I set out Clause 5.1, I should draw attention to Clause 16.1 [51] of the Agent’s Agreement which is the termination provision.  It says this:

“16.1  Subject as provided in Clauses 16.2 and 16.3, this Agreement may be terminated by either Party giving to the other not less than seven (7) days prior written notice such notice to be given in accordance with Clause 23 and, in the case f the Agent, a copy of such notice must also be given to the Manager.”

Mr Cheung, who appears for the Defendant and who has argued his case most attractively and persuasively, accepts that this is what the clause says and that this is what the Plaintiff was entitled to do and, this is what it actually did.  This being an arms length commercial agreement, the parties had agreed that either of them could terminate the Agreement in this way.

10.  The dispute that arises is as to the consequence of the termination and for this one needs to go to Clause 5.1 of the Appointment Letter [64] which I will now set out:

“In the event of the Agent’s Agreement is terminated for any reasons other than by reason of ill-health and disability that will, in the Company’s view, prevent you from discharging your duties as an agent, subject to clauses 1, 2 and 3 of the Addendum you will be required to repay such proportion as provided below of the Personal Confirmation Bonus.  Additional Personal Confirmation Bonus, Team Confirmation Bonus and Additional Team Confirmation Bonus (‘Bonuses’) and Special Allowance already received by you under the terms of this Letter and Addendum together with costs of recovery.”

11.  Mr Brown, for the Plaintiff, says that nothing could be plainer.  He submits that save for cases where an agent’s appointment is terminated by reason of ill-health and disability which in the company’s view prevent him from discharging his duties, the agent will on termination be required to repay the various commissions and bonuses referred to in this Clause.

12.  Mr Cheung has submitted that this is not the correct reading and/or interpretation of the Clause which can result in the Plaintiff, for no good reason at all, terminating an Agent’s Agreement on the day before he could keep his commissions and bonuses with the result that a successful and blameless Agent would be required to repay his hard-earned commissions following a capricious or even malign termination by the Plaintiff’s management.

13.  Mr Brown fairly accepts that this may well be a consequence of what the parties have agreed but, that this is what they have agreed and in a clearly drawn document such as this it is not for the court to re-write the contract nor to imply terms which have no place in what the parties had signed up to.

14.  Mr Cheung has submitted that what the Clause actually means is that the Agent can only be required to repay bonuses and commissions if termination is due to “reasons [which] … prevent you from discharging your duties as an agent …”.  He says that the medical grounds referred to in the Clause are otiose given the terms of the Disability Discrimination Ordinance which amply and specifically covers the dismissal of persons under a medical disability.

15.  Despite Mr Cheung’s best efforts, I simply cannot see how such a construction could operate in the face of such a clearly drawn provision which means what it says.  It plainly means that save in cases of ill-health and disability which prevent an Agent from discharging his duties, in all other cases of termination, the commissions and bonuses must be repaid.

16.  This is the construction that Master de Souza arrived at in entering judgment and in my view he was absolutely right in coming to this conclusion.  Whilst I appreciate what Mr Cheung says about situations of manifest injustice being permitted by a deliberate and malign early termination in order to require repayment from a thoroughly competent and hard working agent, it needs to be remembered that this is what the agent would have freely signed up to and he must be left to the consequences of such a decision.  There is no answer to this claim and accordingly, the appeal must stand dismissed with costs.