MASSMUTUAL ASIA LTD v. CHAN MAN LAI

DCCJ2700/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2700 OF 2002

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J U D G M E N T

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1.  The Plaintiff (“P”) is an insurance company. The Defendant (“D”) was formerly appointed as P’s Manager under an agency leader agreement dated 29^th February 2000 (“Agreement”) to sell insurance policies on commission. P terminated Agreement and claimed for refund of the special income/special bonus (net of commission payable to D) previously paid to D. D denied such claim and counterclaimed for loss of commission up to 30^th June 2003 as a result of P’s wrongful termination of Agreement.

Contractual background

2.  By Agreement P appointed D as Unit Manager (ie Grade 1 Manager) as from 16^th March 2000 on inter alia the following terms :

(a)	P shall have a first charge on all sums payable under Agreement and the right to withhold from or offset against any commission due to D the amount of any debt, obligation or liability due/owing or likely to become due/owing by D to P (clause 6.8).
(b)	Agreement shall forthwith determine without the need for any notice given by P if inter alia D was in breach of any of the terms of Agreement or D did not meet training, production, recruitment, persistency or other requirements which P might set from time to time (clause 9.2(e) and (g)).

3.  On 29^th February 2000 P and D entered into a Memorandum on Special Income for Unit Manager/Marketing Executive (“Memorandum”) which provided inter alia that P would pay D additional income for 12 months (“Special Income”) and a special bonus (“Special Bonus”). Memorandum further provided inter alia that the Unit Manager/Marketing Executive shall be liable to immediately repay Special Income/Special Bonus he received if Agreement was terminated by P within 30 months from 16^th February 2000 for the reason that the Unit Manager/Marketing Executive failed to meet the “Contract Maintenance Requirements” specified in P’s Agency Manual (“Manual”) from time to time for his grade (clause 5.2).

4.  Pursuant to Memorandum, P paid D HK$163,308.00 and HK$49,110.60 respectively as Special Income and Special Bonus.

5.  Manual specifies five Grades of Managers defined as “Agency Leaders” or “Managers” as well as three levels of career Agents (including Marketing Executive) defined as “Agents” (section A1.1). Agents/Managers work in teams called “Agencies”. Manual sets out P’s requirements for calculation of commission, promotion/demotion and production quota based on inter alia “persistency” and “AFYC”. Each Manager’s persistency rating and personal/group production for the preceding month are recorded in their monthly production reports (“MP Reports”). MP Reports are couriered by P’s Agency Administration Department (“AAD”) to the head of the Agency (“Head”) for distribution to Managers on/about the 10^th day of each month.

6.  “Persistency” is the Agent’s/Manager’s percentage of renewed/continued policies. “AFYC” means annualised first year commission, which is a percentage of the annual premium that varies with different types of policies. This is for consistency in calculating commission because customers can choose from various periodic premium payment methods after paying the first three months’ premium on new policies. AFYC is net of lapses so commission will be charged back from the Agent’s/Manager’s account should a policy lapse before receipt of the fourth monthly premium or the second quarterly premium or should a policy be cancelled from inception (section A1.2.2 of Manual and clause 6.6(b) of Agreement).

7.  Sections F2.1 and A2 of Manual provide inter alia that Grade 1, 2 and 3 Managers are required to achieve a Marketing Executive’s minimum personal production requirement (“MPPR”) of AFYC HK$118,000.00 for any calendar year, AFYC HK$12,000.00 for any calendar quarter and AFYC HK$11,800.00 for first calendar quarter. All Managers must achieve personal persistency of 85% (section A2.2.2). Upline Managers also earn overrides on group production, ie policies sold by their downline Agents/Managers.

Factual backgroundand the parties’ respective claims

8.  Chu Chi Keung Alex (“Chu”) was D’s direct supervisor and witness. He was D’s mentor since D joined the insurance trade in June 1998. Chu’s team was under Leung Chung Shing Kenny’s (“Leung’s”) Agency (“Leung’s Agency”). Leung was a Grade 5 Manager and Head of Leung’s Agency. He was involved in administration matters of Leung’s Agency but Chu as Grade 4 Manager could independently handle his own team’s business. Their office (“Agency Office”) was at Harcourt House whilst P’s head office (including AAD and the Agency Development Department (“ADD”)) was at MassMutual Tower.

9.  D had no difficulty in satisfying MPPR all along and was promoted to Grade 2 Manager on 1^st September 2000. He was invited to join P’s Emerald Club and Million Dollar Round Table. He also earned agency building allowance and went on overseas trips, eg the Tokyo Annual Dinner from 3^rd to 5^th February 2002 (“1^st Conference”) and the Australian Convention 2002 from 6^th to 11^th February 2002 (“2^nd Conference”). D spent 7 days on vacation leave in Japan (“Vacation”) prior to 1^st Conference.

10.  D accepted that his AFYC was zero from 1^st January 2002 to 25^th or 26^th March 2002 (“D’s Date”). D’s MP Reports recorded his AFYC was zero for January, February and March 2002 (“Quarter”). P claimed that as D failed to satisfy AFYC HK$12,000.00 for Quarter, Agreement was determined with effect from 1^st April 2002 (“P’s Date”) and P issued to D a letter dated 26^th March 2002 to such effect (“Letter”).

11.  Letter was signed by Jeannie Hui (“Hui” - AAD’s assistant manager). She was the subordinate of Wong Siu Ngar Christina (“Wong”), AAD’s senior manager and P’s sole witness. Letter stated inter alia that Agreement “will be terminated with effect from 1^st April 2002 …… in accordance with clause 9.2(e) & (g) of [Agreement]” and D should refund various sums calculated up to the end of February 2002. Letter was sent by ordinary post on 28^th March 2002 to D’s address last notified to P (“D’s Address”) and copied to inter alia Manly Cheng (“Cheng” - P’s assistant vice president and ADD’s responsible person in charge of Leung’s Agency) and Leung.

12.  By a further letter from AAD to D dated 15^th April 2002 (“Further Letter”) copied to inter alia Cheng and Leung, P demanded refund of the sums set out in the Statement of Claim which had taken into account D’s earnings of March 2002. 

13.  On the other hand, D claimed P wrongfully/prematurely determined Agreement on/before D’s Date by (a) Chu’s verbal notice to D that Agreement “was then immediately terminated by [P]”, (b) P’s administration staff immediately sealing up his office room at Agency Office (“D’s Room”) or (c) Letter.

14.  Mr Lui, counsel for P, and Mr Leung, counsel for D, agreed that (a) if Agreement were terminated on P’s Date, D would have failed to meet MPPR and (b) if Agreement were terminated on/before D’s Date, the termination of Agreement (“Termination”) would have been premature and P’s claim would fail. In respect of (a), D further pleaded that Termination was wrongful as P failed to give any (i) prior warning or (ii) six months’ extension of time to fulfill the “contract maintenance criteria” under section F3.1 of Manual. There was no dispute that the quantum of P’s claim was HK$206,437.33.

15.  On 27^th May 2002, D became registered with the Hong Kong Federation of Insurers (“HKFI”) as an insurance agent of New York Life Insurance Worldwide Ltd (“NYL”). D counterclaimed for loss of commission up to 30^th June 2003 but waived any claim for loss of commission after that date. P disputed such counterclaim and on the issue of damages under the counterclaim, P asserted that D suffered no loss of commission by joining NYL shortly after Termination or alternatively the period of D’s loss was limited to one month after Termination. Subject to the aforesaid claim/defence under D’s counterclaim, both counsel agreed that the calculations of commission on D’s personal production (that had not lapsed) were HK$8,215.98 (for one month after Termination), HK$7,247.75 (from 1^st to 26^th May 2002) and HK$59,273.33 (from Termination to 30^th June 2003).

P’s case

(1) Pre-26^th March 2002

16.  Shortly before 26^th March 2002, Cheng briefly mentioned to Wong that one or two Agents/Managers from Chu’s team might leave to join another insurance company. Wong saw no need to check out such rumour. Cheng later asked AAD to report on (which Wong did) the production/persistency status of Chu’s team. Wong did not pay attention to the contents of the reports as Cheng made similar requests fairly regularly.

17.  Cheng had several discussions with Wong about Chu’s team, including the potential consequences of terminating Chu’s/D’s services. Cheng sought Wong’s advice on the effective date for termination of Agreement (“EDT”) under Manual/Agreement. Wong suggested P’s Date. Cheng later told Wong to issue a letter to D on Termination. The decision to terminate Agreement was probably made by Cheng/ADD, P’s Chief Executive Officer Kenneth Yu (“CEO”) and P’s Chief Operations Officer Elroy Chan (“COO”) on/before 26^th March 2002.

(2) Letter

18.  AAD’s clerk prepared Letter and Hui checked and signed it. Cheng did not object to Wong’s proposal of using P’s Date as EDT and it was so stated in Letter. Due to manpower limitation, Letter was only posted on 28^th March 2002. Wong did not know whether D received Letter but it was not returned through the dead letter post. It was P’s practice to issue such written notice in advance of EDT, but with EDT clearly stated in Letter, it did not matter even if Letter were received prior to P’s Date.

(3) Satisfying MPPR

19.  Mr Leung suggested that D could easily have satisfied AFYC HK$12,000.00 at 54% for Quarter by purchasing a single policy from P between 26^th and 31^st March 2002 (“Period”) that required a monthly premium of HK$1,852.00 (ie HK$12,000.00 ¸ AFYC 54% ¸ 12). The initial 3-months’ premium outlay for such policy was HK$5,555.00 (HK$1,852.00 x 3 months), but in return D as the insurance agent would earn commission income of HK$3,000.00 (HK$5,555.00 x AFYC 54%) on such policy. Thus the net capital outlay would be only HK$852.00/month (ie (HK$5,555.00 – HK$3,000.00) ¸ 3 months).

20.  Wong disagreed with the above suggestion, saying that the primary purpose of selling a policy was not to satisfy MPPR but to meet an insurance need. The concept of net capital outlay was suggestive of using commission as rebates, which was prohibited under Agreement or HKFI guidelines. Further, AFYC percentages for some types of policies were less than 54% and P was entitled to clawback commission on lapsed policies from the Agent’s/Manager’s account, so MPPR might not necessarily be achieved by the sale of a single policy.

(4) Sealing of D’sRoom

21.  AAD did not seal up D’s Room, but Wong did not know whether (a) D’s Room was sealed up, (b) Chu/D returned to Agency Office in June 2002 to collect their belongings, or (c) (if they did) Leung arranged such collection. If an office room had been formally sealed by AAD, ADD and P’s Office Administration Department (“OAD”) and the ex-staff wished to collect his belongings from such office room, the usual practice was to make formal appointment with OAD on notice to AAD/ADD for such purpose. However, OAD’s Terry Chan told Wong a week before the trial that OAD had no record of Chu/D making such arrangements.

D’s case

(1) D’s Date

22.  On/about D’s Date, Chu received a telephone call from Leung who said (a) Agreement and Chu’s agency leader agreement had been terminated by P with immediate effect and (b) Chu/D should remove their belongings as P would lock/seal their office rooms soon. At about noon on the same day, Chu telephoned to inform D what Leung said. As Chu/D did not commit major errors, Chu did not understand why his/D’s appointments were terminated. Chu telephoned Hui who confirmed Agreement and Chu’s agency leader agreement had been terminated. She did not explain why but told Chu to ask Leung.

23.  D returned to Agency Office shortly afterwards and asked Chu whether Termination had been verified as he found it strange. Chu told him of his telephone conversations with Leung and Hui. D had nothing further to say. Chu/D proceeded to pack up some of their belongings and left.

24.  D said it would have been easy to achieve AFYC HK$12,000.00 before the end of March 2002 by just selling a single policy with three months’ premium payable at HK$5,555.00.

(2) Sealing of D’s Room

25.  D/Chu did not actually see D’s Room being sealed up on/after D’s Date. But about 1-2 days later, D’s former downline Agent (“Colleague”) telephoned to ask D why D’s Room was sealed. D told Colleague Agreement had been terminated. Colleague did not question him the reason and they went on to discuss other things. Chu also said his former downline Agent and former secretary informed him his/D’s office rooms had been sealed. Chu/D returned to Agency Office in/about May or June 2002 to remove their remaining belongings. D saw the door knob of D’s Room was sealed with paper with stamp/chop thereon.

(3) Letter

26.  D did not live at D’s Address but collected Letter in mid- to end of April 2002. By that time, Agreement had been terminated so D did not feel strange about Letter. He did not read Letter in detail but knew it stated P’s Date as EDT.

(4) NYL

27.  About half a month after Termination, D had a discussion with NYL’s agency leader and agreed to join NYL in early May 2002. He only started to work for NYL in June/July 2002. Chu also joined NYL.

Issues

28.  The issues in this case are as follows :

(a)	whether on D’s Date Leung/Hui (through Chu) verbally notified D Agreement had been or would immediately be terminated and if so, whether it amounted to P’s repudiation of Agreement;
(b)	whether D’s Room was sealed after D’s Date but prior to P’s Date and if so, whether it amounted to P’s repudiation of Agreement;
(c)	whether P only gave formal notice or intimation of intention to regard Agreement as terminated on EDT (“Formal Notice”) by Letter;
(d)	whether EDT was P’s Date;
(e)	whether Agreement would forthwith determine without notice when MPPR was not satisfied or whether P was required to give six months’ extension of time for D to satisfy MPPR;
(f)	if P’s Termination were wrongful, whether D suffered any loss of commission and if so, what was the quantum of D’s loss.

Overall impression of the witnesses

29.  Wong gave evidence in a straightforward and candid manner and I find her evidence honest and reliable. I am not persuaded by D’s/Chu’s versions of the events, which I find contradictory and/or unreliable in certain material respects. I am unimpressed with D’s excuses for his zero production for Quarter and his claimed lack of inquiry over the reasons for Termination on/after D’s Date. Where the evidence of D/Chu conflicts with Wong’s, I prefer Wong’s evidence.

Warning to D

30.  It is common ground that D had not been warned about his personal production status. Wong said AAD would not give such warnings to Managers. I find D must have known (and he admitted as much) that he had not sold a single policy throughout Quarter, so P’s lack of warning is immaterial. In any event, D received MP Reports for Quarter on the 10^th day of each month and he could check his production status any time from P’s computerised agency enquiry system which was updated daily.

31.  I do not accept that D was so busy that he last checked his MP Report and the agency enquiry system in early to mid-January 2002. Even taking into account Vacation, 1^st and 2^nd Conferences, public holidays and the need for D to carry out review and planning with his downline Agents, it is still improbable that D had no time at all since January 2002 to review the single-page personal production section of his monthly MP Report or the electronic record (particularly when he had to attend Agency Office each working morning to sign up for duty).

32.  Mr Leung submitted that Wong’s evidence was unreliable. It was suggested that on one hand Wong claimed no warning would be given to D/Managers and on the other hand, she said after Grade 4 and 5 Managers had made the recommendation and ADD/COO/CEO had decided to terminate a downline Agent/Manager, ADD might interview such Agent/Manager to see if the relationship could be salvageable and such process could take several weeks. Such negotiations could hardly be described as “warning” on production status and I see no conflict. I note Wong also said there was no room for such negotiations if the Manager failed to satisfy the most basic MPPR. There can of course be many other reasons for termination of an appointment that may lead to such negotiations.

D’s personal production for Quarter

33.  I have reservations about Chu’s assertion that half or over half of his team had low/nil personal production for Quarter. I am prepared to accept that the period around Chinese New Year is unlikely to be conducive to selling insurance policies and Agents/Managers may take leave during that time. I am even prepared to accept that D might have relaxed a bit after achieving strong production in December 2001. However, Chu’s team (including D) must have known MPPR was applicable to Quarter irrespective of the above factors, and there is no sensible reason (other than it was D’s deliberate choice) why D would risk termination in having zero production for Quarter, particularly as he claimed he performed consistently well since 2000 and he could easily have resolved the problem by selling a single policy.

34.  I do not accept D’s claim that 1^st and 2^nd Conferences prevented him from satisfying MPPR. But I accept Wong’s evidence that D’s attendance at 1^st and 2^nd Conferences was not compulsory and it was for D to determine whether he could satisfy MPPR if he went to those conferences.

35.  D claimed that during Quarter he was busy planning for his own promotion to Grade 3 by July/August 2002 as he already had ten downline Agents and his group production for the preceding six months was AFYC HK$800,000.00. This was not mentioned in D’s witness statement nor supported by documents. I find it implausible that D wished for a promotion at that time. A Manager eager for promotion is unlikely to risk termination by not satisfying the most basic MPPR.

36.  There is no evidence that Chu discussed with or warned D even though he was D’s mentor and upline Manager and he knew of D’s zero production during Quarter. I find Chu must have condoned D’s non-performance for otherwise his complaisance would have been unreasonable given the risk of termination of Agreement for failure to satisfy MPPR, Chu’s/D’s close working relationship and the adverse effect of D’s zero production on Chu’s own group production.

37.  It is unnecessary for me to decide whether D ceased his production in order to conserve business for joining a new insurance company. It suffices for me to conclude, which I do, that D deliberately chose not to have any production for Quarter and Chu knew/condoned D’s zero production.

Reason for Termination

38.  I find that P terminated Agreement because D had zero production for Quarter and thereby failed to satisfy MPPR and not because P wanted to forestall D’s departure to join NYL. I bear in mind that Wong did not bother to check out the rumour that some members of Chu’s team might leave P. Further, the decision to regard Agreement as terminated on P’s Date was made after Cheng had requested and reviewed the production/persistency reports of Chu’s team. Letter also expressly stated Termination was for D’s breach of inter alia clause 9.2(g) of Agreement.

39.  I am not persuaded by Chu’s/D’s claim that if insurance company(ies) were to terminate Agents/Managers at the beginning of the year, it would be for poor performance in the preceding year and not for failure to satisfy MPPR during the first few months of the current year. I am also not convinced that the appointments of Agents/Managers would only be terminated if they still failed to satisfy MPPR after being given 2-3 months to catch up.

40.  The importance of MPPR in relation to termination of appointments can be seen from P’s computerised automatic termination system. The system generates a mid-month internal report which identifies the Agents and Grade 1 to 3 Managers who are unlikely to satisfy MPPR by the end of the month. Agents (not Managers) will be given warnings and if they still fail to satisfy MPPR by the end of the month, they will be automatically terminated unless they give acceptable production commitments and have the support of their upline Managers.

41.  Mr Leung submitted that the situation was different with Managers as they had a supervisory role. However, Grade 1 to 3 Managers were also required to satisfy MPPR and D’s name would appear in the mid-March 2002 internal report from P’s automatic termination system since his personal production was zero during Quarter. Further, D’s/Chu’s assertions do not sit well with clause 9.2(g) of Agreement which allowed termination without notice for non-compliance with production requirements or with Chu’s knowledge that a Manager’s appointment could be terminated for not satisfying MPPR.

42.  When D made his affirmation in these proceedings in November 2002, he believed P terminated Agreement before the expiry of 30 months from 16^th February 2002 in order to claim reimbursement of Special Income/Special Bonus. I do not agree with D’s claimed belief. I find that the timing of Termination was dictated by D’s zero production for Quarter and that P’s claim for such refund was permitted under Memorandum.

43.  D next suggested Termination was a political decision engineered by Leung to oust him/Chu. Leung/Chu had maintained a good working relationship. D claimed the relationship deteriorated when Chu was promoted to Grade 4 and had his own independent team. In the circumstances, D as Chu’s right hand man expected he would also be terminated when P terminated Chu’s appointment. I do not agree that Termination was a political decision. Such assertion has not been canvassed in D’s/Chu’s witness statements or confirmed by Chu in his viva voce evidence. Indeed, Chu said he never knew why his appointment was terminated. Further, there is no evidence that Leung recommended let alone engineered Termination. After all, Leung had no final say in terminating Agreement (see below).

Authority to terminate

44.  In my view, (a) Leung as Head of Leung’s Agency had the right to recommend Termination only, (b) the decision for Termination rested with P (ie ADD/CEO/COO), (c) AAD handled Termination’s paperwork upon receipt of instructions from ADD, and (d) D/Chu knew of the above matters. I note that under clause 9.2(g) of Agreement termination of the appointment thereunder can happen forthwith without notice and the decision to terminate in this respect refers essentially to identification of the relevant breach and EDT.

45.  Mr Leung submitted that Leung/Hui had P’s authority to give verbal Formal Notice of Termination to D via Chu (which amounted to P’s repudiation of Agreement) but D would not contend that Leung had authority to terminate Agreement. However, I still set out briefly my analysis on this issue as it is relevant to Leung’s/Hui’s/Chu’s roles :

(a)	Agreement is a standard form agreement the terms of which are applicable to unit managers, branch managers, senior branch managers, deputy general managers, and general managers/chief general managers (ie Grade 5 Manager such as Leung) (clause 12.8 of Agreement and section A1.1.2 of Manual).
(b)	Clause 3.9(a) of Agreement provides that P may at its discretion inter alia terminate Agency Leaders or Agents from amongst those persons previously trained or recruited by the Manager or his subordinates.
(c)	Clause 1.2 of Agreement provides that an upline Manager has the right to seek/nominate candidates for appointment as P’s Agents/Managers but only P has the final say on such appointments. Clause 1.4 of Agreement provides that such upline Manager can only recommend the termination of appointment of an Agent/Manager but the effective right, title and power to do so rest with P in accordance with terms of the agency or agency leader agreement.
(d)	I accept Wong’s evidence that ADD was generally responsible for inter alia recruitment/termination of P’s Agents/Managers and the decision to terminate appointments of Agents/Managers rested with ADD’s/D’s senior management (ADD/CEO/COO). As discussed above, ADD sometimes entered into negotiations with the subject Agent/Manager over termination issues. This shows that the right to terminate did not rest with Head or the upline Manager.
(e)	Leung’s involvement in administration matters or even in the recruitment/ termination process (eg making recommendations) does not mean he had decision-making power over recruitment/termination. D admitted that after Leung/Chu interviewed a candidate for suitability as D’s downline Agent, they would have to submit a nomination form for P’s approval. I agree that Leung as Head of Leung’s Agency was well positioned to make such recommendations, but it cannot be said to be commercially inappropriate for P’s management to retain the right to recruit/terminate. This will also obviate any fear that Head of Agency may make political decisions to get rid of the “enemy”.
(f)	D claimed that his downline Agents had never been terminated, so he did not know whether P’s approval was necessary for termination of appointments of Agents/Managers. I find that he should have known of P’s reservation of the right to terminate appointments unto itself from the terms of Agreement at the very least.
(g)	Chu accepted it could be said that the right to terminate agency leader agreements rested with P and not Leung. He said that apart from recruitment matters handled by ADD, he would approach AAD on inter alia termination of Agents/Managers. Although I am not persuaded that this is entirely correct (see below), it is quite clear that Chu did not regard Leung as having the ultimate right to terminate appointments.

Termination : EDT

46.  I find that EDT was P’s date. Both P and D knew Manual prescribed MPPR for inter alia any calendar quarter and ADD/AAD were well familiar with termination matter and/or paperwork. There is no sensible reason for P/AAD/ADD to terminate Agreement before P’s Date, ie before the expiry of Quarter. I also note that Cheng had consulted Wong on EDT and had no objection to her recommendation of P’s Date. AAD also specified in Letter that EDT was P’s Date and that P relied on inter alia clause 9.2(g) of Agreement, ie breach of MPPR.

47.  Wong fairly accepted that had D been able to satisfy MPPR during Period, P would not have been able to terminate Agreement and would have to issue a letter to D to revive Agreement, which process was known as “contract reinstatement”. She said “contract reinstatement” was a common occurrence. P had seven days after EDT to deregister the Agent/Manager from HKFI as its insurance agent. “Contract reinstatement” during that period when the Agent/Manager was still held out as P’s insurance agent would not affect third parties. Sometimes “contract reinstatement” happened even after de-registration.

48.  I disagree that the concept of “contract reinstatement” indicated that P must have treated Agreement as terminated before P’s Date. First, there is no “contract reinstatement” in respect of Agreement. D/Chu did not refer to discussions on possible “contract reinstatement” in their evidence and I find such discussions unlikely since D’s production was zero up to the end of March 2002. The concept of “contract reinstatement” is therefore irrelevant here. Secondly, the concept of “contract reinstatement” does not necessarily mean Termination was effected prior to P’s Date. Letter provides for EDT on P’s Date. Had D been able to satisfy MPPR by P’s Date, Termination to take effect on P’s Date would have been inappropriate (the ground for Termination having fallen away) and “contract reinstatement” would still be required.

49.  Next, Mr Leung submitted that as D was required to pay a daily administrative penalty for failing to report for duty at the Agency Office during Period, and as there was no evidence of deduction of such penalty from D’s earnings, Termination must have been on/before D’s Date.

50.  I am not with Mr Leung on his argument. First, D/Chu made no mention of any administrative penalty in their witness statements. It was first raised in D’s viva voce evidence but was not confirmed by Chu or put to Wong in cross-examination. Wong was also not cross-examined on why the alleged deduction was not made or whether any of the entries in Commission Statement/Payment Report (see below) had taken into account the administrative penalty. Secondly, there is no provision in Manual/Agreement for payment of such administrative penalty. There is also no evidence of the nature, amount or payee of such administrative penalty or that it was due and owing to P under Agreement (and not, say, as collection for staff welfare) and therefore liable for set off under clause 6.8 thereof. Thirdly, D did return to Agency Office on D’s Date (possibly 26^th March 2002). Since such administrative penalty was levied for failure to sign up for working days, there is no evidence that Period (apart from 26^th March 2002) were working days and not D’s leave days or public holidays. I find there is insufficient basis to infer non-deduction of any administrative penalty and even if it can be so inferred, I do not find it necessarily means Agreement had been terminated on/before D’s Date.

51.  Wong referred to the monthly statements in P’s “Agent Payment Transaction Report” (“Payment Report”). She said that although each monthly statement was dated the 28^th day of each month, it was actually updated to the 4^th day of the following month. The monthly statement dated 28^th March 2002 revealed entries for (a) “CASH BONUS – 2001/2002” and “PAID – 2001/2002 03/27/2002” for HK$3,200.00 (“Cash Bonus”) and (b) “PAID – COMM FOR 02/02 ALEX-B3625 03/11/2002” for HK$3,126.15. (a) and (b) became a combined entry of “Check Paid (Last Month)” for HK$6,328.19 in P’s “Summary of Commission Statement – Manager” dated 28^th March 2002 (“Commission Statement”).

110.   Mr Lui submitted that since Payment Report/Commission Statement showed that P paid Cash Bonus on 27^th March 2002 by cheque (“Cheque”) which was sent to Leung’s Agency for distribution to D, it was clear P still regarded Agreement as alive on 27^th March 2002 after D’s Date. Mr Leung submitted no weight should be attached to the entries in Payment Report/Commission Statement as there was no evidence how the system worked. He suggested the entries could have been (a) the unilateral act of P’s accounts staff in ignorance of Termination, (b) the result of miscommunication between P’s various departments or (c) a product of inadvertent error. There was also no direct evidence of delivery of Cheque or actual payment to D (eg clearance of Cheque). Mr Leung questioned how Cheque could be passed to D after he had on D’s Date packed up some of his belongings and left.

111.   D said he generally received his monthly earned commission by autopay on the 10^th or 11^th day of the following month but had expected P to withhold his March 2002 earnings for alleged set-off. But D did not unequivocally deny he received Cheque, something which he himself could have easily verified as well from his own banker. Rather he only said he had no impression of Cheque and could not remember. The suggestion that the entries in Payment Report/Commission Statement and payment of Cash Bonus by Cheque were the result of ignorance, inadvertence or miscommunication is speculative and unsupported by evidence. 

112.   Payment Report/Commission Report are not disputed as to authenticity and admissibility and D confirmed he generally accepted D’s records as accurate. Payment Report expressly stated that payment of accrued Cash Bonus (not earned commission) was made on 27^th March 2002 (ie not normal autopay date) and Commission Statement referred to payment of such sum by Cheque. More importantly, D did not dispute the quantum of P’s claim. Since he was clearly entitled to Cash Bonus, if he had not received Cash Bonus or Cheque, there is no reason why he did not ask for the quantum of P’s claim to be adjusted accordingly. I find on balance P did pay Cash Bonus by Cheque on 27^th March 2002 and that D had received the same. P clearly regarded Agreement and Memorandum as alive during Period, which is supportive of EDT being P’s Date.

Termination : Leung’s telephone call to Chu

52.  Mr Leung submitted that wrongful termination of performance of or express refusal to perform a contract constituted repudiation (Carter and Harland, Contract Law in Australia 3^rd ed (1996) para.1940 at p.670 and para.1937 at p.667) and that Leung’s telephone call to D via Chu telling him about Termination was itself a wrongful termination and repudiation of Agreement.

53.  Mr Lui submitted that repudiation was a serious thing not to be lightly found or inferred. Mr Lui referred to Lord Wright’s judgment in Ross T Symth & Co, Ltd v T D Bailey, Son & Co [1940] 3 All ER 60, 71-72 as follows :

“	I cannot do better than quote the words of Lord Selbourne in Mersey Steel & Iron Co. v. Naylor, Benzon & Co., at p.438, where he says that you must look at the :
	… actual circumstances of the case in order to see whether one party to the contract is relieved from its future performance by the conduct of the other; you must examine what that conduct is, so as to see whether it amounts to renunciation, to an absolute refusal to perform the contract, such as would amount to a rescission if he had the power to rescind, and whether the other party may accept it as a reason for not performing his part …”

54.  Mr Lui also cited Woodar Investment Development Ltd v Wimpey Construction U K Ltd [1980] 1 WLR 277 where the House of Lords held that a party who took action relying simply on the terms of the contract in question and not manifesting by his conduct an ulterior intention to abandon it was not to be treated as repudiating it. It was further held that the whole of the circumstances must be considered.

55.  I find Wong’s assertion that Head may be told informally once P decides to terminate the appointment of an Agent/Manager is not unreasonable as Head may be the one who recommended the termination and/or his Agency’s operations may be affected by the Agent’s/Manager’s departure. I am therefore prepared to accept that (a) P’s ADD/CEO/COO decided on Termination before 26^th March 2002, (b) Leung might have been informally told of such decision and (c) on D’s Date Leung telephoned Chu to alert him that his/D’s agency leader agreements would be (but not had) terminated. There is no evidence that Leung was told Agreement had been or would immediately be terminated and I reject any such contention.

56.  Likewise, I reject D’s/Chu’s contention that Leung told Chu on D’s Date that Agreement had already been or would immediately be terminated. I reiterate the aforesaid analysis on EDT and note also that Leung was not involved in deciding EDT. I therefore find there has been no unlawful termination or immediate refusal to perform Agreement by P. There is no intention or act that departed from what Agreement permitted, namely, to terminate Agreement on P’s Date for breach of clause 9.2(g) of Agreement.

57.  This is sufficient to dispose of D’s claim of P’s repudiation on the basis of Leung’s telephone call to Chu on D’s Date. However, I will deal with Leung’s authority briefly for completeness. I find that Chu/D knew P’s and Leung’s verbal forewarnings to Leung and Chu respectively on D’s Date were only informal administrative steps and Formal Notice would be by letter to D with copy inter alia to Leung.

58.  There is no evidence that Leung had P’s express authority to convey to D via Chu information that Agreement had already been or would immediately be terminated. Mr Leung submitted that Leung/Chu had implied or apparent authority to do so as Leung handled administration matters and Hui verified Leung’s authority on D’s Date (see analysis below). But Chu’s evidence is illuminating. He regarded Leung’s information given on D’s Date as unverified and expected Formal Notice by letter. It is therefore plain Chu did not regard Leung’s telephone call as Formal Notice. I find that Leung on being informally told of P’s decision as aforesaid merely gave Chu/D informal early alert and that Chu well knew the nature of such telephone call.

59.  I agree that Leung as Head acted as a bridge between P and Leung’s Agency on general administration matters and he was consulted on and/or made recommendations for (but did not have the final say in) the recruitment, promotion, demotion or termination of Agents/Managers. I further accept D (a) generally regarded P’s records of his earned commission as accurate and (b) would liaise with and authorise Leung, Chu and Leung’s wife (who also worked at and was responsible for administration matters in Agency Office) to intercede with P on D’s behalf on commission disputes instead of dealing with AAD/ADD directly.

60.  However, I find Leung’s aforesaid general involvement in administration matters and Leung’s/his wife’s/Chu’s role in fighting for the interests of the downline Agents/Managers insufficient to show that P clothed Leung with implied or apparent authority to notify D that P had terminated or would immediately terminate Chu’s/D’s appointments. It was commonly known that Leung’s right was restricted to making recommendations for recruitment and termination of appointments, that P reserved unto itself the right/power to make such decisions and that AAD (and not Head) was the party who would give Formal Notice by letter.

Termination : Chu’s telephone call to Hui

61.  I accept the possibility that Chu telephoned Hui on D’s Date and Hui confirmed P’s decision for Termination. However, I do not accept Chu’s/D’s assertion that Hui told Chu Agreement had already been or would immediately be terminated. I find no repudiation on P’s part arising from Hui’s conduct.

62.  There is no evidence that Hui was mistaken about EDT. Hui did not participate in the earlier discussions between Cheng and Wong. Her only role was to check the contents of and calculations in Letter and to sign the same. There is no suggestion that she knew of any EDT other than P’s Date as stated in Letter. She also must have known that Termination would be for breach of clauses 9.2(e) and (g) of Agreement. It is implausible that Hui would have on D’s Date told Chu that Agreement had already been or would immediately be terminated.

63.  I will also deal with the issue of Hui’s authority briefly for completeness. Mr Leung submitted that Hui had P’s actual authority for giving verbal Formal Notice to D via Chu as AAD/Hui were responsible for preparing paperwork for termination of appointment and there was no material difference between verbal and written notification. Mr Leung further submitted that Chu’s evidence (namely, Hui telling Chu to direct enquiries to Leung) was sufficient to cloth Leung with authority to give Formal Notice verbally.

64.  In my view, Hui had no actual authority as alleged. Cheng only instructed AAD to prepare Formal Notice by letter to D and I accept Wong’s evidence that P/ADD did not have a practice of giving verbal Formal Notice. P’s practice of giving Formal Notice by letter is supported by Wong’s evidence (which I accept) that the wording of Letter followed AAD’s standard form. It is common knowledge that AAD only handled routine paperwork and was not involved in decision-making. Hui herself only handled Letter and not discussions with ADD. Her limited involvement was also reflected by her suggestion to Chu to direct enquiries to Leung who would be copied with Letter.

65.  Although Chu claimed he telephoned Hui on D’s Date as information from Leung’s telephone call was unverified, I cannot regard Hui’s telephone call as an endorsement of Leung’s authority to give verbal Formal Notice. Chu knew Leung’s role as described above and he also knew that Formal Notice should be in written form. Even on Chu’s evidence, he said normally ADD would give Formal Notice by an initial letter (setting out the reason for termination and EDT) sent by post to the Manager’s correspondence address and by hand through his upline Agency Leader, and by a further letter after the end of the month demanding refund of sums after taking into account earnings calculated up to the end of the month. Although in the present case Chu/D said they only received written Formal Notice (eg Letter) by post, there is no doubt Chu knew Formal Notice would be by letter. I therefore find that Chu was merely making informal telephone enquiries with Hui on D’s Date. More importantly, I find Chu would not have told D Leung’s/Hui’s communications were Formal Notices or they amounted to verification that Agreement had already been or would immediately be terminated.

Termination : Letter

66.  I prefer Wong’s evidence that the usual practice was to send written Formal Notice to the Agent/Manager by post to his address last notified to P (and not by hand to the agency office for distribution to the Agent/Manager via his upline Manager). I do not accept Chu’s claim that Formal Notice comprised two letters but even if it did, quite clearly the initial letter setting out EDT and the ground for termination would be sufficient to constitute Formal Notice. In the present case, Letter set out EDT and the reason for Termination and the sums due from D calculated as at the end of February 2002. Then Further Letter set out P’s claim for a reduced amount which took into account D’s earnings in March 2002. These two letters are not far different from the practice Chu described.

67.  Mr Leung submitted Letter was mere confirmation of an earlier Termination on/before D’s Date (which argument I have rejected). He argued it was inherently improbable that Formal Notice in form of Letter would be sent by post without any assurance of actual receipt by D. It would be alarming if Letter had gone astray and D kept on selling policies without authority.

68.  Although Letter could have been delivered personally or P could have arranged for it to be couriered to Agency Office for distribution to D, I accept Wong’s evidence that it was not AAD’s standard practice to do so and that AAD only had limited manpower in handling substantial paperwork on administration matters given inter alia the frequent turnover of Agents/Managers. I also accept that other than MP Reports and documents relating to earnings issued at the beginning and middle of each month, there was no regular courier service to P’s various agency offices.

69.  Clause 11.2 of Agreement permits Formal Notice by letter to be sent by post to D’s last notified address and such notice shall be deemed to have been served on the day following the date of posting. Since Letter was mailed to D’s Address on 28^th March 2002 and D actually received the same, P has complied with the contractual mode of service.

70.  P also need not be overly concerned with the risk of D selling policies after EDT. Even during the term of D’s appointment, “[subject only to any authorization which may be given to [D] in [Agreement] or otherwise in writing by [P], nothing [in Agreement] shall require [P] to accept any application for insurance of any person introduced by [D]” (clause 2.2 of Agreement). Wong also said P’s Underwriting Department might not necessarily approve applications for issuance of policies. In any event, clause 9.4 of Agreement provides that “[if] after [EDT] of [Agreement], [P] accepts any application from [D], all such transactions shall be governed by the same terms and conditions as provided in [Agreement] in so far as those terms and conditions are applicable but no such acceptance of applications shall be construed as a renewal or holding over of [Agreement].”

D’s/Chu’s enquiries

71.  Mr Leung reminded that Wong had no direct knowledge of what happened at Agency Office on/after D’s Date and Hui/Cheng had not been called to give evidence. I have borne this in mind but still find certain aspects of D’s/Chu’s evidence unreliable.

72.  D claimed that on D’s Date he felt it strange that P wished to terminate Agreement and he did not understand P’s reason. Yet he never asked Chu or anyone else why Agreement was terminated. Mr Leung submitted that D did not bother to do so as Chu (who was his upline Manager and whom he trusted) confirmed the fact of Termination to him. I find D’s apathetic attitude and lack of enquiry or protest even to Chu (if not to P) unconvincing when on D’s case Termination was unexpected and unjustified (since D/Chu claimed they made no major mistakes). The absence of any follow up on the reason for Termination is particularly surprising as D claimed he had no other available job and the commission he earned from P was his only income. The likely inference is that D knew that he did not satisfy MPPR and further knew that Agreement was terminated for such reason.

73.  The unreliability of D’s evidence is also highlighted by its conflict with Chu’s evidence that about 1-2 days after D’s Date D should have asked him why Agreement was terminated. Chu’s case was that he was aggrieved and he took active steps to ascertain the reason for the termination of his/D’s appointments by liaising with Leung about 1-2 days after D’s Date (although Leung did not give any explanation) and by making an appointment to meet Cheng a week after D’s Date (although the meeting eventually did not materialise). Chu felt obliged to do so as he was D’s upline Manager. For D, Termination by P was still unexplained and unjustified at that time. Against such background, it is improbable that Chu would not have reported to D on his follow up efforts or that they would not have discussed the same. I bear in mind that D claimed he was Chu’s right hand man and they suffered similar fate at P’s hands. Further, they were in constant contact after D’s Date.

74.  I further find D’s claim that he did not read Letter in detail when he collected it in mid- to end of April 2002 and that he no longer felt strange by that time (since the reason for Termination was no longer important) unconvincing. D admitted he knew from Letter that P asserted EDT was P’s Date, which on D’s case was different from his understanding that EDT was on/before D’s Date. Yet not only D did not make any enquiry, his reaction was that P probably chose the beginning of the month as EDT. Further, D claimed he never bothered to ascertain from Letter the ground for Termination or find out how it was said he breached clauses 9.2(e) and (g) of Agreement. The likely explanation is that D already knew and accepted (and was therefore unsurprised) Agreement had been terminated on P’s Date for his failure to satisfy MPPR.

113.   The unreliability of D’s evidence on his lack of inquiry or liaison with P is also evidenced by the conflict with the assertion in his homemade Defence (which contents he confirmed to be correct despite subsequent amendment of the pleading) that he had written to COO to complain and was then awaiting a reply. D later admitted in evidence he never sent such letter to COO. Although D was unrepresented when he prepared his homemade Defence, there is no convincing reason for him to give an untrue or made up statement and I find his evidence suspect.

Termination : sealing of D’s Room

75.  Mr Lui submitted there was no evidence that D was prevented from carrying on as P’s insurance agent during Period, but D did nothing to satisfy MPPR. Mr Leung argued on the other hand the sealing up of D’s Room prior to P’s Date prevented performance and such conduct by itself constituted repudiation on P’s part.

76.  The question is whether there is sufficient evidence that D’s Room was actually sealed up prior to P’s Date and if so, whether it amounted to repudiation of Agreement. D’s Room was not sealed on D’s Date for D had access to his office room for collecting his belongings. Mr Leung relied on (a) Chu’s evidence that Leung told Chu he/D should collect their belongings as their office rooms would be sealed soon, (b) the telephone conversation between D and Colleague 1-2 days after D’s Date whereby Colleague said D’s Room had been sealed and (c) D’s evidence that he saw D’s Room was sealed when he returned to collect his belongings in June 2002. Mr Lui suggested that minimal if any weight should be attached to the hearsay evidence in (a) and (b) as Leung/Colleague were not called to give evidence and to D’s evidence in (c) as it was only newly raised at the trial.

77.  Wong explained (and I accept) that Formal Notice by letter was usually issued in advance of EDT to allow time for posting and for the Agent/Manager to collect his belongings before EDT if time permitted, but P had no policy requiring the Agent/Manager to do so before EDT or any other deadline. Further, she said the Agent/Manager would normally arrange for collection of his belongings through Head at the agency office without involving AAD/P’s head office.

78.  Mr Leung criticised Wong for giving evidence on matters which she had no knowledge, namely, P had no deadline for a departed Agent/Manager to collect his belongings. However, since AAD was involved in the process of formally sealing up office rooms (see below), there is no reason why Wong could not speak to such matters. In any event, Wong’s evidence is supported by D’s evidence that he was allowed to return in June 2002, ie more than 2 months after D’s Date, to collect his belongings.

79.  I also accept Wong’s evidence that it is a rare step for Head or the upline Manager to make an appointment with the staff of AAD, ADD and OAD to formally seal up the office room of a departing Manager by covering the door knob with paper and signing thereon. It had only been done on 2-3 previous occasions when the Manager left very abruptly without any time at all for removal of his belongings or where the Manager had a bad row with colleagues at the Agency, so P’s head office had to intervene to secure his belongings. Wong also said once the office room was formally sealed, the ex-staff would have to make an appointment with OAD upon notice to ADD/AAD for return to the agency office to collect his belongings.

80.  The purpose of sealing an office room is administrative, ie to minimise the risk of loss and to avoid any claim of loss being laid at P’s door. I am prepared to accept that D’s Room has been sealed at some stage and that Leung intimated to Chu on D’s Date that Chu’s/D’s office rooms would be sealed soon. Wong has not been to Agency Office and is not in a position to deny this. Indeed her evidence hinted of sealing up of D’s Room as she said OAD later told her it would check with Agency Office to see if Chu/D had removed their belongings as their office rooms had been sealed and there was always an urgent need for office rooms.

81.  However, I do not accept that D’s Room was formally sealed in the manner described above. I accept Wong’s evidence that AAD had not been notified for sealing up D’s Room and OAD also confirmed to Wong that it had no record of having made arrangements with Chu/D to return to Agency Office to collect their belongings. There is no evidence forthcoming from Chu/D that they liaised with OAD for collection of their belongings in May/June 2002. Further, had D’s Room been formally sealed by involving P’s head office (ie AAD/ADD/OAD) such that D had to go through OAD to make an appointment for collecting his belongings, there would have been no need for OAD’s suggestion that it would send staff to Agency Office to investigate whether D had collected his belongings. The evidence indicated that D’s Room was informally sealed by Agency Office as an administrative measure without involving P’s head office and Chu/D returned to collect their belongings through arrangements with Agency Office. I see no conflict in Wong’s evidence.

82.  Anyway, there is no sufficient or cogent evidence that D’s Room was sealed prior to P’s Date. I have found that Leung did not tell Chu Agreement had been or would immediately be terminated by/on D’s Date. Even on D’s case, all Leung said was that the office rooms would be sealed “soon” with no deadline mentioned. I am unable to draw any inference that D’s Room would be sealed before P’s Date.

83.  Although D/Chu claimed their former colleagues told them their office rooms had been sealed, this was not canvassed in their witness statements. Further, even though D was on good terms with Colleague who eventually joined him at NYL, Colleague was not called as D’s witness. Indeed, D did not even give Colleague’s name when he gave evidence. I find D’s evidence in this respect unconvincing. D’s pleadings show the sealing up of D’s Room is an important part of his defence and counterclaim. Yet D said he never told his solicitors about his telephone conversation with Colleague. I find such omission improbable if such telephone conversation did take place.

84.  Further, on D’s case, Chu/D left suddenly and Colleague was eager to know why D’s Room had been sealed. Yet when D briefly replied to Colleague’s enquiry that his appointment had been terminated, Colleague did not even ask why but went on to discuss other matters. I find this an unlikely tale. In respect of Chu, other than a bare assertion that his former downline Agent and former secretary informed him that his office room had been sealed, he did not give any particulars at all. I find D’s/Chu’s evidence in this respect unreliable.

85.  Mr Leung submitted that P did not adduce positive evidence to prove that D’s Room was sealed on or after P’s Date. Even so, on the aforesaid analysis and bearing in mind the burden is on D to prove P’s repudiation on the balance of probabilities, I find it likely that Chu/D returned to Agency Office in May/June 2002 (probably after they had joined NYL) to remove their furniture and belongings and discovered then their office rooms have been sealed with paper over the door knob and stamp/chop thereon.

86.  In the circumstances, there is no repudiation on P’s part in respect of the sealing up of D’s Room and no obstruction that prevented D from performing his obligations under Manual or Agreement during Period. However, D’s personal production remained zero until 31^st March 2002 and Agreement was liable to be and was terminated on P’s Date.

Six months’ extension of timefor D to satisfy MPPR

87.  This is a matter of construction of Agreement and Manual. The law in this respect is not disputed. It is agreed that since P drafted/supplied Manual, the contra proferentum rule operates against P in case of ambiguity and the words of Agreement/Manual must be construed objectively and sensibly having regard to their practical effect and by reference to the whole document (per Lord Wright in IRC v Raphael [1935] AC 96, 142-143 and per Lord Goff of Chieveley in President of India v Jebsens (UK) Ltd [1991] 1 Lloyd’s Rep 1, 9). The court can also be assisted by a consideration of the commercial purpose of the contract (Bank of Nova Scotia v Hellenic Mutual War Risks Association (Bermuda) Ltd [1990] QB 818, 870).

88.  Section A2.2.3 of Manual provides that “In addition, there will be a minimum level of productivity of AFYC HK$12,000 in any calendar quarter. Marketing Executives under probation are also required to meet this minimum productivity on each of the contract quarter. Failing that may be terminated immediately.” Mr Leung submitted that whilst MPPR of AFYC HK$12,000.00 per calendar quarter was applicable to D, the provision for termination in section A2.2.3 was only applicable to Marketing Executives under probation. However, I need not consider Mr Leung’s submissions under this head in detail as P does not rely on this provision but on clause 9.2(g) of Agreement which provides that Agreement shall “forthwith determine without the need for any notice” if D did not meet “production” requirements in respect of D’s operations set by P from time to time (ie MPPR in section A2.2.3 of Manual which Mr Leung agreed was applicable to D).

89.  Here, Termination for breach of MPPR as a result of D’s zero production for Quarter did not require notice and Letter was an administrative or good practice step to let D know of Termination. I find that clause 9.2(g) of Agreement provides sufficient basis for Termination to take effect on P’s Date.

90.  Section F3.1 of Manual provides that “[if] a Manager fails to meet the contract maintenance criteria, the Manager will be given 6 months extension to fulfill the requirements. During the extension period, the Manager can retain his/her title and continue to receive the normal overrides”. “If the Manager fails to meet the contract maintenance criteria at the end of any calendar month (based on the previous 12 months performance) during the 6-month extension period, the Manager will be permanently demoted to the next lower grade or at the discretion of [P] to the Grade appropriate to the Manager’s performance in the previous year” (section F/3.2).

91.  Mr Leung therefore submitted that D should have a grace period of six months to catch up with MPPR. He suggested there was no reason why the “contract maintenance criteria” in section F3.1 of Manual only referred to group production and not include MPPR. Section F3.1 did not make any express reference to group production but section F2.1 expressly referred to MPPR by providing that Grade 3 or below Managers were required to achieve the personal production for a Marketing Executive set out in section A2.

92.  Section F3 must be considered in the context of Manual. Section F of Manual is titled “Promotion and Maintenance Criteria for Grades of Agency Management” and section F3 is titled “Demotion”. The preamble of section F of Manual sets out the promotion and contract maintenance criteria as follows  :

F.    PROMOTION AND MAINTENANCE CRITERIA FOR GRADES OF AGENCY MANAGEMENT

MANAGER	PROMOTION/MAINTENANCE CRITERIA	MANPOWER REQUIREMENT
Grade 1	Promotion : Personal or Unit AFYC of HK$220,000 in the past 12 months Maintenance : Unit AFYC of HK$220,000 or Group AFYC of HK$330,000 in the past 12 months	NIL   2 Agents (direct)
Grade 2	Group AFYC HK$660,000.00 in the past 12 months	5 Agents (direct)

(“Section F Preamble”). Whilst there is a distinction between promotion criteria and contract maintenance criteria for Grade 1 Manager, there is no such distinction for Grade 2 Manager and both promotion and contract maintenance criteria refer to group production. Section F6 of Manual expands such promotion and contract maintenance criteria by providing that such criteria “[includes] a group and direct unit persistency of at least 80%”.

93.  In contrast to the express inclusion in section F6 of a persistency requirement as part of the contract maintenance criteria, section F2.1 merely refers to the need for achieving MPPR without expressly including such requirement as part of the contract maintenance criteria. Indeed, section F2 titled “Maintenance” provides for both (a) Grades 1-3 Managers to achieve MPPR set out in section A2 (section F2.1) and (b) all newly joined/promoted Managers and other Managers to measure up to the relevant contract maintenance criteria (section F2.2).

94.  Thus on the aforesaid analysis, “contract maintenance criteria” used in section F is distinct from MPPR under section A2 although Grades 1-3 Managers had to satisfy both requirements for contract maintenance. A plain reading of sections F3.1 and F3.2 of Manual shows that demotion and extension of time for catching up relate only to “contract maintenance criteria” and not MPPR. In my view, it makes logical and practice sense as sections F3.1 and 3.2 are relevant to considerations for potential demotion of a Manager to a lower grade or to a grade appropriate to the Manager’s performance and not for termination of appointment. It is also consistent with Wong’s understanding of Manual as part of the daily operation of AAD. As Wong said, there is little point in extending time or considering a demotion if a Manager fails to satisfy the most basic MPPR that any Marketing Executive has to achieve. It is only when a Manager fails to achieve his group production AFYC or group/unit persistency that there may be room for extension of time or demotion.

95.  Further, in light of the clear words of “shall forthwith determine” without notice on failure to satisfy production requirements in clause 9.2(g) of Agreement, I do not agree that sections F3.1 and 3.2 of Manual restrict and override its operation and scope. At most, sections F3.1 and 3.2 of Manual (as Wong said) only give P a discretion to grant extension of time to catch up with the “contract maintenance criteria” referred therein. As explained above, such discretion is irrelevant to the present case and even if it were relevant, P did not exercise such direction in favour of granting a grace period.

Conclusion

96.  In the circumstances I grant judgment to P against D for HK$206,437.33 with interest thereon from the date of the writ of summons to the date of judgment at the current judgment rate of 8.069% pa and thereafter at judgment rate until payment. As I have found there was no repudiation or wrongful termination on P’s part, I dismiss D’s counterclaim. There is no reason why costs should not follow event. I therefore grant a costs order nisi that D shall pay P costs of the action and of the counterclaim (including all costs reserved if any) to be taxed if not agreed with certificate for counsel.