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High Court of Fiji |
IN THE HIGH COURT OF FIJI
AT SUVA
CIVIL JURISDICTION
CIVIL ACTION NO. HBC0286 OF 1999
Between:
KAIAFA BIU LEDUA
Plaintiff
and
THE COLONIAL MUTUAL LIFE INSURANCE SOCIETY LIMITED
VIKASH REDDY
FABIAN CORRIE
Defendants
Mr. S. Valenitabua for the Plaintiff
Mr. F. Haniff for the Defendants
JUDGMENT
This action was instituted by way of writ of summons dated 9 June 1999 wherein the Plaintiff Kaiafa Biu Ledua (the “plaintiff”) sued Colonial Fiji Life Limited, then called Colonial Mutual Life Insurance Society Limited (“Colonial”) for wrongful termination of his employment in breach of a Sales Representatives Agreement (“the Agreement”) dated 12 January 1999.
THE PLAINTIFF’S CLAIM
The plaintiff claims:
(a) “$1,167,005 it being commission that the plaintiff would have earned during the next 14 years prior to his retiring at age 65.”
(b) “defendants pay damages, whether jointly or severally to the plaintiff for the defamation of his good name and character the quantum of which is to be assessed by this Court.”
(c) “an order that the second and third defendants pay damages to the plaintiff for having wrongfully and unlawfully interfered with the plaintiff’s contractual dealing and relationship with the defendant ...”
(d) “that defendants pay damages to the plaintiff for mental pain and suffering ...”
(e) “that defendants pay exemplary and/or punitive damages ...”
BACKGROUND
Relationship between Plaintiff and Colonial
The plaintiff is an insurance agent with 18 years’ experience in this field. Until the termination of his agency with Colonial he was its sales representative.
Part of the Colonial’s business is to sell to its customers various insurance products. These products include life insurance and a special form of insurance called the ‘keyman insurance’.
The relationship between the Plaintiff and Colonial as its sale representative is described, inter alia, in Colonial’s submissions as follows:
Colonial sells its insurance products through its “sales representatives”. Sales Representatives act as agents of Colonial pursuant to written contracts. It is emphasised that it is not disputed that they are not employees of Colonial. Under their contracts, they have the status of independent contractors. The Plaintiff and the Defendant entered into such a contract on 12 January 1999.
As agents, sales representatives solicit customers on behalf of Colonial. Their contracts contain various provisions governing their work as agents of Colonial.
...sales representatives prospect widely, mainly through personal relationships, networking and through making telephone calls on (prospective) clients... sales representatives do a lot groundwork to secure customers and this is why ethical rules and customs of this trade, protect sales representatives from poaching of their business by other sales representatives.
The Agreement (the relevant provisions)
The terms of the Agreement included, inter alia, the following relevant provisions:
Clause 4 reads:
The Sales Representative agrees to devote his best endeavours to the performance of his or her duty as Sales Representative and agrees to follow and be governed by the terms and conditions of this contract, rate book of the Company, and such rules and regulations for the conduct of its business as the Company has established or may in the future establish whether captured in its rate book or otherwise.
The clause further states that:
The Sales Representative nevertheless as an independent contractor reserves the right to exercise independent judgment as to his or her time, place and manner of soliciting applications for business, use of his own resources in the performance of the undertaking under this contract, and no provision hereof nor any rule or regulation of the Company shall be construed to abridge this right or create between the parties a relationship other than that of principal and independent contractor.
Clause 15:
In all cases where the sales representative’s claim for compensation is disputed or otherwise questionable, the company shall have the right to decide and settle the dispute, and the decision of the company shall be binding and conclusive.
Clause 26 (c) which reads (in so far as it is relevant):
The Company may at its absolute discretion terminate this Agreement immediately without notice for any reason whatsoever including (but not limited to):
(i ) to (v) ....
Clause 28:
Relationship between the Parties - The Sales Representative shall act as an independent contractor and nothing herein contained shall be construed to create between the Company and the Sales Representative the relationship of employer and employee, partnership, joint venture or otherwise. (emphasis added)
Clause 31:
Entire Agreement and Variation – This Agreement constitutes the entire agreement between the parties and supersedes all communications, negotiations, arrangements, either written or oral, between the parties with respect to the subject matter of this Agreement. Except as provided for under this Agreement, no agreement or understanding varying or extending this Agreement shall be legally binding upon either party unless in writing and signed by both parties.
COMPLAINT AGAINST PLAINTIFF
The process culminating in the termination of the Agreement began with a complaint against the Plaintiff for “twisting”. The complaint was lodged by Vikash Reddy (VR) (the ‘second defendant’) to his District Manager, Fabian Corrie, as he was the link between sales representatives and Colonial. The nature of the complaint of twisting is as follows:
“Vikash Reddy alleged that he was sales representative of one Unique Motor Spares Limited (UMS) on the life of one Victor Dutta, the keyman for UMS. VR wrote a Keyman Proposal for UMS. The Plaintiff then intervened and wrote another Keyman Proposal for a second company called Unique Motor Repairs Limited (UMR) also on the life of Victor Dutta. VR allegedly lost out of business and commission because of the Plaintiff’s intervention.”
Colonial’s hearing into the complaint
On receiving the complaint, Mr. Corrie then forwarded Mr. Reddy’s (VR’s) complaint to Colonial’s National Sales Manager, Mr. Culden Kamea, together with his recommendation that Mr. Reddy be credited with the Plaintiff’s business.
After obtaining some initial advice from colleagues, Mr. Kamea then invited Colonial’s Chief Underwriter, Mr. Joape Kuinikoro, and the Sales Administration Manager, Mr. Tevita Waqairawai, to form an ad hoc arbitration committee to look into the allegations. These arbitrators met on 14 January 1999.
The Plaintiff was represented at the meeting by his District Manager, Mr Esava Cakau. VR was represented by his District Manager, Mr. Corrie. Mr. Victor Dutta was not invited to the meeting. Colonial’s underwriter who assessed the proposal, namely, Doris Domonatani, was the only witness called at the hearing.
Arbitration findings
At the conclusion of the meeting, Mr. Kamea recorded the arbitrators’ findings in his Memorandum dated 26 January 1999, as follows:
PLAINTIFF’S RESPONSE
Following this the Plaintiff was given 14 days to respond in writing to these findings. The Plaintiff did this by letter dated 10 February 1999 (exhibit 14). It states, inter alia, that:
“(a) Your heading facts of the case no. 2, I do not agree with you that Unique Motor Spares Limited stamp was used on the proposal form. The reason being that Unique Motor Repairs Limited was ready then, and our intention was to cross off the word “Spares” and be replaced by the word “Repairs” but somehow we missed that and there was no intention at all to deceive the underwriter.
(b) Your facts of the case no. 3, is misleading because at no time (had) I brought any cancellation letter from Victor Dutta.
(c) As for your findings no. 1, I wish to draw your attention to the letter from Victor Dutta, which is self-explanatory and attached herewith.
(d) Your findings no. 2, is very very misleading, I refer to my previous letter in which I clearly stated that we cannot (use) a company financial report for another company’s use. I was expecting a query from NB in connection with the financial report for Unique Motor Repairs Limited. I never at any time instruct Doris to use Unique Motor Spares Limited financial report when assessing my proposals. I only advised her to use the same medical report as it can cover all three proposals. Just suppose if I had instructed her as she had claimed, one wonders how dishonest and reliable she can be in a management post.
(e) As for your findings no. 3 please refer to my second paragraph of this letter...
(f) In conclusion I wish to state here that this is a frame up accusation. The fact of the case is that Vikash Reddy could not close the sale for Unique Motor Spares Ltd.
After considering, and not being satisfied with the Plaintiff’s response, Colonial then proceeded to terminate its Agreement with the Plaintiff.
THE ISSUES
It was after the ‘fact finding’ hearing that the plaintiff’s contract was terminated. The plaintiff says that he was wrongfully terminated as there was a breach of contract on the part of Colonial.
The termination letter dated 26 February 1999 is in the following terms:
Further to my memo dated 26 January 1999 regarding the Twisting Claim against you and specifically the findings of the Arbitrators, Colonial hereby terminates its Agency Agreement with you pursuant to clause 26(c) of the Sales Representatives Agreement dated 12 January 1999.
You are no longer authorised to procure business on Colonial’s behalf. Please deliver all Colonial property to Mr Esava Cakau by 5 pm on Tuesday, 02 March 1999.
The plaintiff has therefore sued the defendants claiming, inter alia, breach of contract and damages.
The issues to be considered in this case are as follows (as agreed in the Minutes of the Pre-trial Conference); except for item 4 it was agreed that the trial would be limited to the determination of liability only:
PLAINTIFF’S SUBMISSION
For the plaintiff five witnesses testified. They were the Plaintiff (PW1), Inoke Qarau Koroinivalu (PW2), Panapasa Belena (PW3), Margaret Sadal (PW4) and Victor Dutta (PW5).
The plaintiff wrote two Proposals for Keyman Policies for a company called Unique Motor Repairs (UMR). The ‘Keyman’ was Victor Dutta (VD). The Proposals were dated 28 October 1998.
These Proposals were numbered 8012705 and 8012706 respectively. The Policy owner in both cases was UMR and the life insured was VD. The learned counsel for the plaintiff very clearly and in considerable detail sets out the circumstances leading to the plaintiff’s termination as agent in items 2.2.8 to 2.2.19 of his written submission and I refer to them.
The arbitration hearing took place at the defendant’s office. It was presided over by Messrs. Culden Kamea, with Joape Kuinikoro and Tevita Waqairawai. Mr. Kuinikoro was a Chief Underwriter. Evidence was given by Doras Domonatani – an underwriter. Neither VR nor VD nor the Plaintiff was present at the hearing. At the conclusion of the hearing the Plaintiff’s contract was terminated.
Although Victor Dutta (PW5) was not called to the arbitration hearing, PW5’s (VD’s) evidence, inter alia, is as follows (as stated in counsel’s submission):
“that the Plaintiff was his insurance sales representative. The Plaintiff was the insurance agent for the family. PW5 stated that he wanted to have a Keyman Insurance Policy for his new company UMR. That the Plaintiff was to write the policy for UMR which at the material time was in the process of being incorporated. PW5 stated that he had no real intention of writing-up a Proposal with Vikash. As a result he gave the Cheque for the first premium to the Plaintiff. PW5 also said that Vikash lied when he stated that the Plaintiff had brought the revocation letter from PW5. The letter was in fact written by Vikash, signed by PW5 and then brought to Colonial by Vikash. Vikash later told Fabian that the revocation letter was written by PW5 and was brought to Colonial by the Plaintiff. This was the lie.
PW5 confirmed the Plaintiff’s evidence that a new company UMR was being incorporated and that the Key-man policy was for that new company. The rubber stamp for UMS was used on the UMR Proposals because there was no stamp for UMR at the material time and that the word SPARES was going to be crossed from the Proposals and the word REPAIRS written in its place. Both the Plaintiff and PW5 over-looked this.”
It is the plaintiff’s contention that the termination was wrongful in that correct facts relating to the issue at hand at the material time was not presented to the ‘arbitration’. Therefore the decision was wrong resulting in the termination being wrong and without any reason being given. The plaintiff alleges breach of contract.
The tenor of the Plaintiff counsel’s submissions in respect of the first issue is that the meeting of 14 February 1999 was in fact an arbitration hearing.
As to the second issue, Plaintiff’s counsel relies on the meaning and effect of clause 26(c) of the Agreement which states, inter alia, that: “The company may at its absolute discretion terminate this agreement immediately without notice for any reason (including but not limited to)...”
Counsel argued that no discretion is absolute. He cited the case of Ward v James [1965] 1 All ER 563 where the Court said at 568, that the word “absolute” either added nothing to “discretion” or if it did, was ultra vires.
Counsel argued that in order to exercise discretion, Colonial must hear the Plaintiff fairly as required by the principles of natural justice. Discretion, he said, could not have been fairly exercised in the present case because the Plaintiff was not fairly heard.
Mr. Valenitabua also argued that the words “for any reason” imposed on Colonial an obligation to give correct and valid reasons for its decision to terminate the Agreement. He further submitted that a “termination without notice” can be only effected after a proper and fair hearing to determine the correct and valid reasons for terminating the Agreement.
Counsel concludes, on the second issue, that Colonial has no absolute discretion to terminate and that Colonial ought to have conducted a proper hearing before doing so.
As to the third issue, the thrust of Mr. Valenitabua’s argument is that the findings of the arbitrators and hence the reasons for terminating the Agreement were in fact wrong.
He argued that the basis for terminating the Agreement was for “twisting” business from a fellow sales representative, namely, Vikash Reddy.
Mr. Valenitabua submitted that Colonial’s insurance policies are numbered in ascending order in accordance with the order in which they are submitted to Colonial’s underwriter. He argued that since the Plaintiff’s proposals were numbered 8012705 and 8012706, it followed that they were in fact received as “new business” before Mr. Reddy’s proposal numbered 8012735.
Dealing with this aspect of Policy numbers I notice that the evidence reveals that the two proposals on VD were signed on 28.10.98 for $240,000 and $210,000 respectively. The proposer’s name on these two proposals was UMR Ltd and they carried the stamp of UMS Ltd. These proposals were brought by the plaintiff and have been issued. Accompanying these proposals by plaintiff was a letter from VD that he wanted the proposal by VR cancelled. It is to be noted that VR wrote VD’s proposal on 19.10.98, that is, before the plaintiff wrote his proposals on 28.10.98.
Counsel submitted that in deciding to terminate the Agreement, the arbitrators had relied in part on a letter dated 2 November 1998 from Victor Dutta to Colonial, cancelling Reddy’s proposal number 8012735 as Dutta stated “for reasons unexplained” as evidence of the Plaintiff’s twisting. Mr. Valenitabua argued however that, although the letter was signed by Mr. Dutta, it was in fact written and delivered to Colonial by Reddy.
Counsel also submitted that ‘twisting’ is by definition inducement to cancel a policy and that the Plaintiff could not be guilty of twisting Reddy’s business because he did not induce Mr. Dutta to cancel the proposal written by Reddy.
Mr. Valenitabua submitted that the Plaintiff had written two proposals for Unique Motor Repairs Limited (“UMR”) and that this was a different entity from that which Reddy had written his proposal for, namely, Unique Motor Spares Limited (“UMS”). He argued that technically, therefore, there was no twisting.
Counsel also submitted that at no time did the Plaintiff act deceptively as alleged by Colonial. The Plaintiff did not instruct Colonial’s underwriter, Doris Domonatani, to attach UMS’s Financial Reports to UMR’s proposal. The Plaintiff did however instruct Ms. Domonatani to attach Mr. Dutta’s medical records from the UMS proposal to the UMR proposals but that was only because that medical report was still valid.
He submitted that the use of UMS’s company stamp in UMR’s proposals was not meant to deceive Colonial but rather to facilitate processing of the proposals. He submitted that since UMR had only just been incorporated and did not yet have a company stamp, the Plaintiff used the UMS stamp with the intention of later substituting the word “Spares” with “Repairs”. The Plaintiff however ‘overlooked’ this.
Mr. Valenitabua also submitted that the Plaintiff had been the Dutta family’s insurance representative for some time and that Mr. Dutta had informed Mr. Reddy that he already had a mutual agreement with the Plaintiff for insurance purposes.
He submitted that Mr. Dutta’s intentions were to take out a Keyman Policy for UMR and not UMS. Mr. Valenitabua argued that this was why Mr. Dutta had paid the relevant deposits for UMR and not UMS, and this was also why Mr. Dutta cancelled both policies when he learnt they were in UMS’s name.
Counsel submits in sum that in the circumstances, Colonial failed to convene and conduct a proper and fair hearing and as a result the arbitrators incorrectly concluded that the Plaintiff was guilty of ‘twisting’.
DEFENDANTS’ SUBMISSION
On the first issue, counsel for the Defendant submitted that it is irrelevant whether the meeting is called an arbitration or a fact-finding hearing. He said that the point of the meeting was to find the truth behind the allegations levelled against the Plaintiff.
It was submitted that clause 15 of the Agreement gave Colonial the right to decide a sales representative’s claim for commission. In his quest to find the truth, Mr. Kamea sought the assistance of his colleagues.
Mr. Haniff, counsel for Colonial, submitted that the Plaintiff was given the opportunity to be present at the meeting but he chose to be represented by his District Manager, Mr. Cakau. Counsel also submitted that the Plaintiff was given a further 14 days to respond to the findings of the meeting. He said that in the circumstances, the Plaintiff had been given ample opportunity to be heard before the decision was made to terminate the Agreement.
As to the second issue, he submitted that even though it had ample reason to do so, under clause 26, Colonial did not need to have a good reason to terminate the Agreement. Counsel said that, construed literally as it ought to be, clause 26 (c) gave Colonial an absolute and unqualified right to terminate the Agreement for whatever reason it thinks fit.
Counsel cited British Movietonews v London and District Cinemas [1952] AC 166; Lloyd v Lloyd [1837] EngR 484; (1837) 2 My & Cr 192 and TNT Worldwide Express (NZ) Ltd v Cunningham [1993] NZCA 84; [1993] 3 NZLR 681 as authorities supporting the Defendant’s submission that clause 26 (c) ought to be construed literally.
Counsel also argued that the case of Ward v James cited by Counsel for the Plaintiff was distinguished from the present circumstances in that it dealt with the exercise of discretion of the Court or a Judge. In the present case “absolute” simply meant unfettered or unrestrained.
He submitted that Colonial did not need to give a specific reason to terminate the Agreement, and that the only requirement was that a reason existed. He submitted that Colonial’s reason for terminating the Agreement was that it had concluded that the Plaintiff had acted improperly in respect of the two keyman policies, and it had lost its trust in him.
He also submitted that if, in its wisdom, this Court should find that the Plaintiff is entitled to specific reasons for the termination, then this was done in Mr. Kamea’s Memorandum of 26 January, 1999.
Counsel further submitted that the Agreement does not afford either party any right to procedural fairness in terminating the Agreement. He cited the case of Paul v Mobil Oil NZ Limited [1992] 2 ERNZ 1 as authority to support its claim that Colonial was not required to follow procedural fairness when terminating the Agreement. Counsel argued that, in any event, Colonial did follow procedural fairness when dealing with the Plaintiff.
As to the third issue, counsel for the Defendant submitted that the Agreement contained an express term of trust and this was breached when the Plaintiff improperly interfered with Reddy’s proposal and deceptively provided incorrect information in his proposals; the Plaintiff violated Colonial’s trust in him.
Counsel argued that contrary to the Plaintiff’s submissions, UMR was not incorporated until after the proposals were lodged with Colonial and the Plaintiff either knew about this or was reckless about this essential factor. He maintains that the Plaintiff had intended to deceive Colonial all along. Counsel then questioned why the Plaintiff could not simply have waited for UMR’s company stamp to be made before lodging the proposals. In the circumstances, counsel challenged the credibility of the Plaintiff’s evidence.
He submitted that evidence at the trial indicated that Mr. Dutta had intended the policies for UMS and not UMR as was submitted by the Plaintiff. Counsel argued that Mr. Dutta had signed receipt of the clearly marked UMS policies and had paid out the premiums from the UMS’s Bank Account.
In the circumstances, counsel argued that Colonial had correctly found the Plainitff guilty of ‘twistng’ Reddy’s business and the decision to terminate the Agreement was not wrongful.
DETERMINATION OF THE ISSUES
Both counsel provided helpful written submissions.
I have given careful consideration to the whole of the evidence before the Court on all material issues and also to the submissions of both counsel at some length so as to give a complete picture of the dealings between the parties.
In dealing with the three issues stated hereabove one has to keep in mind the provisions of the Agreement between the plaintiff and Colonial.
There is no doubt that there was a contractual relationship between the plaintiff and Colonial as per the said clauses 26(a), 28 and 31 of the Agreement.
First issue
On the first issue of whether the investigations by Colonial constituted an arbitration hearing or a fact-finding investigation it is immaterial.
The members of the meeting were constituted for the purposes of determining the truth behind the allegations levelled against the Plaintiff. In this sense it was a fact-finding investigation. However, in all the circumstances, the meeting was conducted in a manner more conducive to a hearing than a mere investigation. The Colonial’s own Memorandum dated 26 January 1999 stated that it was an arbitration hearing.
As Mr Haniff submitted, Mr. Kamea sought the advice from experienced personnel within Colonial on the best way to deal with VR’s complaint. Those who advised him were Colonial’s Chief Underwriter, Mr. Joape Kuinikoro as well as Colonial’s Sales Administration Manager, Mr. Tevita Waqairawai. The views of Mr. Cakau and Mr. Corrie, the District Managers of V.R and plaintiff Ledua respectively were also sought. Also present at the meeting as a witness was Ms. Doris Domonatani who was the underwriter who assessed the three proposals lodged by the plaintiff and V.R. Also present were Mr. Corrie who represented VR and Mr. Cakau who represented the plaintiff.
I agree with the Defendant’s submission on the point that if the Agreement does not specifically require procedural fairness, then no such obligation should be implied into it. In Paul v Mobil Oil NZ Limted [1992] 2 ERNZ 1 Fisher J stated at page 12:
“My conclusion is that at least in the circumstances of this case... and in probably all other cases, the hirer of an independent contractor... may terminate the contract without observing any requirements of procedural fairness beyond those stipulated in the contract itself. The hirer takes the risk that if it terminates unilaterally under a mistake of facts the contract or the law, it will be liable for breach of contract. But if the facts objectively considered do confer a substantive right to terminate, there will generally be no justification for impeaching the termination upon the ground that procedures not referred in the contract itself has not been satisfied.”
However, all in all I find that Colonial had given the plaintiff a fair opportunity to be heard on the complaint. The Plaintiff was invited to be heard at the arbitration hearing and was then given a further 14 days to respond to the findings of the arbitrators, which he did. In all the circumstances, Colonial had conducted itself fairly when dealing with the Plaintiff.
Whether Colonial came to a right decision on facts and law is something which I shall deal with in the next ‘two issues’.
Second issue
I now deal with the second issue of whether Colonial could determine its contract with the Plaintiff at its own discretion without any reason being given.
It is clause 26(c) which deals with the aspect of termination of contract and it is clear and unambiguous. The clause states, inter alia, that: ‘the company may in its absolute discretion terminate this agreement immediately without notice and for any reason....’
In the case of Lloyd v Lloyd cited by Defendant’s counsel, Lord Cottenham LC stated at 102 that:
If the provisions are clearly expressed and there is nothing to enable the court to put upon them a construction different from that which the words import, no doubt the words must prevail...
In the circumstances, I find that clause 26(c) does in fact confer on Colonial an absolute discretion the right to terminate the Agreement for whatever reason it thinks fit. It stands to reason that the only requirement is that a good reason must exist to terminate.
The true interpretation of the contract has to be found in the agreement itself and as Cooke P at 687 said in TNT v Worldwide Express (NZ) Ltd v Cunningham [1993] NZCA 84; [1993] 3 NZLR 681:
“In the end, when the contract is wholly in writing, it is the true interpretation and effect of the written terms on which the case must turn.”
Mr. Haniff referred the Court to the following passage from the judgment of Casey J in TNT (supra at 695):
“The parties signed a written contract and it can be assumed they were working in accordance with its terms. On ordinary principles of construction their intention about the nature of their relationship is to be arrived at from a consideration of the contents of that document read in light of all the surrounding facts at the time of its execution.”
As submitted hereabove, I also find that the case of Ward v James cited by the Plaintiff’s counsel is distinguished from the present case as it does not provide any weight to the argument that such a restriction exists in the exercise of discretion of parties under written contract.
I disagree with the defendant’s counsel’s submission that the court does not need to go beyond the words of clause 26(c) to ascertain what was intended.
The Court has to interpret that clause looking at the facts and circumstances of this case. It cannot be said here that there was no reason to terminate. It was in the light of the said findings by Colonial after the said hearing that decision was reached to terminate. Although it does not state in the agreement that there has to be procedural fairness and natural justice, the Colonial I find did observe these aspects.
The question now before the Court is whether the termination was proper or not which is the third issue in this case.
Third issue
The third issue is whether Colonial wrongfully terminated the Agreement with the Plaintiff.
It is clear from the evidence that the contract was terminated when Mr. Culden Kamea, the National Distribution Manager came to the following conclusion after the ‘Arbitration’ hearing:
K.B. Ledua’s actions throughout this saga demonstrate a blatant disregard of the minimum professional and ethical standards expected of a Colonial Sales Representative. Particularly one as experienced as he is.
The fact that the financial report of one company, Unique Motors Spares LTD, was used (unwittingly by the underwriter) as supporting documentation in considering the proposal of another company, Unique Motor Repairs LTD, effectively invalidates the proposal of the second company and therefore renders the corresponding issued Policies on the life of Victor Dutta, invalid also.
Based on the Findings and Conclusion of the arbitrators and the existing Business Rules and Regulations of Colonial regarding “Twisting” the following decisions will apply:
KB Ledua’s service with the company is suspended, effective immediately, during which he has 14 days to show why his service should not be terminated at the end of his suspension.
Vikash Reddy is given 14 days to make good the Policy on the life of Victor Dutta and so benefit from the subsequent Debit/Credit Claim to his favour, failing which the said Policy shall be cancelled.
The Sales Representatives Agreement (the ‘Agreement’)
The law recognizes a number of different categories of workers, including servants, employees, independent contractors, agents and partners.
In this case under the agreement in clause 6 it is clear that the plaintiff was an ‘independent contractor’ and referred to as the ‘agent’.
The Sales Representatives Agreement (the ‘Agreement’) sets out, inter alia, the appointment, duties, responsibilities, scope of authority and termination of the Agreement.
I have already set out hereabove some of the relevant clauses in the Agreement pertaining to the issues before me for my consideration.
There is no doubt that the defendant has the right to terminate in accordance with the termination clause albeit the plaintiff is an ‘independent contractor’. The parties have specifically agreed to the terms of clause 26 (caption ‘Termination’).
The Agreement sets out the terms of the contract and that determines the rights of the parties. The following passage from the judgment of Greer L.J in Newsholme Brothers v Road Transport and General Insurance Company Limited [1929] 2 KB 356 at 379 describes the position clearly:
“Once a contract is reduced into writing, the writing alone can be looked at as containing the terms of the contract. Anything said during the negotiations ceases to have any legal validity. The contract, and the contract alone, can be looked at in order to determine the rights of the parties. This rule is conveniently stated in the late Sir John Salmond’s Principles of the Law of Contracts, edited by Professor Winfield, at pp. 103, 104: “Such being the nature of a written contract, I proceed to the consideration of a fundamental legal principle which applies to all such contracts, and distinguishes them from all others. This principle may be thus formulated: In the case of a contract in writing the written instrument is exclusive and conclusive evidence of the terms of the contract. It is exclusive evidence, and therefore no other and substituted evidence is admissible as to what these terms are . . . . . A written contract is what the written instrument says it is: nothing more, nothing less, and nothing different.” The paragraph concludes by this citation from Denman C.J. in Goss v. Nugent (1): “If there be a contract which has been reduced into writing, verbal evidence is not allowed to be given of what passed between the parties, either before the written instrument was made, or during the time that it was in a state of preparation, so as to add to or subtract from, or in any manner to vary or qualify, the written contract.”
The above statements apply not only to the said agreement in writing between the plaintiff and Colonial but also to the contract entered into which is contained in the policy of insurance emanating from the information supplied in the proposal form by the proposer with the assistance of the sales representative (the plaintiff) in this case.
Was there a breach of Agreement?
Whether the plaintiff’s contract was lawfully terminated is dependent on whether certain provisions of the agreement were breached or not.
I have already stated hereabove the circumstances leading to the complaint, the arbitration hearing and its findings culminating in the termination of contract.
It is abundantly clear from the evidence, and I do so find as fact that the plaintiff did improperly interfere with the complainant VR’s proposal in that, inter alia, when he wrote VD’s proposals on his company UMR, he caused incorrect information to be given about the incorporation and financial statements of the company UMR and stamped them with the company stamp of another company the Unique Motor Spares (UMS) in respect of which VR lodged his ‘proposal’. Thereby resulting ultimately in the complaint of ‘twisting’ being lodged with Colonial by Mr. Reddy (VR).
The plaintiff tried to explain the circumstances which led to the attachment of the medical and financial reports of UMS to the proposals of UMR lodged by the plaintiff. The UMR was not even incorporated at that time. There was no Certificate of Incorporation under the Companies Act. He did not come out clean regarding the ‘financial report’ of the UMR proposal at all.
It is interesting to note at this stage that Mr. Valenitabua argued that although it was not pointed out to the underwriter that UMS and UMR were entirely different companies with strikingly similar names, it was the underwriter’s duty to check the proposals carefully and properly. There is no merit in this argument. Also, it should be noted that in his letter of 10.2.99 VD wrote to Mr. Kamea that he has ‘interests in these two companies’ with 50% share in UMS & and that UMR is fully owned by him and registered recently. He said ‘the two companies have separate accounts, separate records and separate office, yet I am managing both companies’.
In cross-examination he was asked how the medical report came to be with the Proposals he wrote. At first he denied that he asked the underwriter/Colonial to use it with V R’s proposal but then he said “I only advised her to use the same medical report as it can cover all three proposals.” The evidence of Domonitani is that the plaintiff asked her to ‘use the same medical and financial reports that Vikash had submitted with his proposals’ because he said ‘they were for the same life insured and for the same company’.
On the evidence before me the credibility of the plaintiff is in question. It leaves much to be desired.
The plaintiff’s conduct in the manner in which he went about writing the Proposals created a violation of trust between him and Colonial and is in breach of clause 21 of the agreement which in so far as it is relevant states:
“Unauthorised Acts: The Sales Representative is without authority to do or perform and expressly agrees not to do, perform or purport to do or perform any of the following acts on behalf of the Company:
(a) to (f) ......
In addition, the Sales Representatives agrees not to:
(b) breach any law or rule or regulation in respect of the Company’s businesses;
(h) to (l) .......
(m) commit any criminal acts, fraud, violation of trust; or
(n) bring discredit to the Company;
(o) .....
In the event of the occurrence of any of the abovementioned unauthorised acts, whether before or after the termination (refer clause 26 below) of the Sales Representative’s appointment, the obligation of the company to pay compensation under any and all contracts of agency between the Sales Representative and the Company shall, if the Company in its sole discretion considers fit cease and terminate immediately.” (emphasis mine)
It is quite obvious on the evidence that the plaintiff knew that V. Dutta had already signed a proposal with VR for UMS. He was asked in cross-examination: ‘so when you returned in September or October (1998) Vikash had signed up Victor (Dutta) for Unique Motor Spares’ he answered ‘yes’ and said VD had told him this.
By interfering with VR’s proposal the plaintiff had breached section 12(c) of the Code of Ethics the observance of which is a condition of every sales agent’s licence under the Insurance Act 1976. The said section 12 (c) provides:
“In procuring new life business, an agent shall:
(c) not interfere with any proposal introduced by any other agent.”
There are other unethical practices on the part of the plaintiff. The UMR as I stated above was not even incorporated when the proposals were written up by the plaintiff.
The plaintiff put the UMS stamp on UMR proposals. He tried to explain why he did that by saying that he had intended to cross off the word ‘Spares’ on the affixed stamp and write the words “Repairs”. But he said ‘unfortunately, we forgot to do that.”
This explanation when looked at in the light of all the facts and surrounding circumstances, for a person with 18 years experience as sales representative, can best be taken with a grain of salt. The plaintiff’s intentions were definitely bad for if the crossing was done he would have run the risk of the Colonial’s underwriting section not accepting his proposals.
I prefer to accept the evidence of Ms Domonitani to that of the plaintiff when she said that plaintiff had told her to use the UMS financial statements and medical reports in the UMR proposals as they were for “the same life insured and for the same company’. The plaintiff denied that he told her to do that.
The plaintiff’s financial ‘projection report’ on UMR in the face of the events is full of untruths; he admitted some errors in it. He tried to cast blame on Ms. Domonitani for not raising queries on these matters. By not giving a true picture in the proposals and the financial reports the proposer and the agent (plaintiff) have put themselves in a tight situation by now having to answer to the allegations of ‘twisting’ on the part of the plaintff.
I agree entirely with Mr. Haniff that the manner in which the rubber stamp of UMS were placed in a number of places in the proposals gave all the appearance of the UMS proposal.
I find that the plaintiff’s action in writing the proposals were not a straightforward and honest way of behaving towards the Colonial whose sales representative he was albeit an ‘independent contractor’.
All these factors lead to no other conclusion but than that they constituted ‘twisting’ on the part of the plaintiff.
Twisting aside, I agree with Mr. Haniff that Mr. Kamea’s other ground for terminating the plaintiff’s contract was that in view of the plaintiff’s overall conduct in his dealings with Ms. Domonatani and the Company itself, which bordered on deceit he had violated the trust Colonial had placed in him in breach of the said clause 21 of the Agreement. That trust no longer remained to enable Colonial to continue the relationship that they enjoyed hitherto and hence the contract had to be terminated.
Was the plaintiff’s termination wrongful?
As agreed, one of the issues for determination is whether the plaintiff’s contract was unlawfully terminated.
The answer is in the negative on the facts and circumstances and on the evidence before the Court.
The defendant acted within the provisions of the termination clause. It had made inquiries on the complaint of twisting, it had an arbitration hearing and arrived at certain findings which did not turn out in favour of the plaintiff. The plaintiff was given every opportunity to be heard and/or represented. He was represented at the arbitration hearing and was given an opportunity to respond to arbitrators’ findings which he did. There was procedural fairness and natural justice accorded to him all along.
The question of ‘procedural fairness’ was raised in plaintiff’s Counsel’s submission. Although in Mallock v Aberdeen Corporation [1971] 1 WLR 1578 at 1581 Lord Reid has said that “an employee who may be dismissed without cause is not entitled to demand reasons from his employer, nor, in the ordinary course, is he entitled to a hearing or any of the normal incidents of natural justice”, the Supreme Court in case of Central Manufacturing Company Limited (Petitioner) v Yashni Kant (Respondent) Civil Appeal No. CBV0010 of 2002 – Supreme Court – judgment 24.10.03 said that “it does not follow that there is no implied term requiring an employer to deal fairly with an employee when dismissing that employee”.
Upholding the Court of Appeal on this aspect, the Supreme Court said “that there is an implied term in the modern contract of employment that requires an employer to deal fairly with an employee, even in the context of dismissal. Each case must depend upon its own particular facts” (emphasis added).
In all the circumstances of this case in view of the facts as I have found them and for the reasons stated such termination was not in breach of the provisions of the Agreement nor was it unfair or unreasonable as alleged by the plaintiff.
CONCLUSION
To sum up, on the whole of the evidence I find that Colonial has successfully established as its defence that the plaintiff was guilty of “twisting” in the sense used in insurance business pertaining to the work which the insurance sales representatives are required to do under the Agreement particularly in this case.
As Megaw L.J. said in O’Connor v BDB Kirby & Co (a firm) and another [1971] 2 All E.R. 1415 at 1422
A broker who takes it on himself to fill in a proposal form for a client owes the client a duty to use such care as is reasonable in all the circumstances towards ensuring that the answers recorded to the questions in the proposal form accurately represent the answers given to the broker by the client. He does not owe a duty to ensure that every answer is correct (see p 1422 e, post).
There is no doubt whatsoever that the plaintiff, as Mr. Haniff put it and I agree, was bent on procuring insurance policy for Unique Motor Spares Ltd (UMS) but he could not do so directly as he was fully aware that the complainant Vikash Reddy (VR) had already completed a Proposal for UMS. Also the plaintiff could not do so as he was prohibited under the Code of Ethics for it would have been regarded as ‘twisting’ business his way.
In the light of what I have found in regard to the use of the financial and medical reports hereabove it is quite obvious that the plaintiff went to great lengths and adopted devious methods in attempting to procure business resulting in being hauled up for ‘twisting’.
In insurance business the ‘form of proposal’ called the ‘proposal’ is an important document which gives the status of the proposer (in this case V. Dutta). A lot of detail is covered and the essentials required, inter alia, are the name, address and occupation of the proposer. ‘The name may well give an indication as to the sort of persons the insurers are being asked to deal with, for example, a deliberate mis-statement of the name is a very strong indication of fraud’ (McCormick v National Motor and Accident Insurance Union Ltd (1934) 50 TLR 528, CA – Hals.4th Ed. Vol 25 para 385) . These statements have a strong bearing on the plaintiff’s actions in writing up the proposals herein.
In this case the plaintiff had the proposals completed and it was his duty to see that proper and full information is given in them. This it is quite clear was not done. It is to be emphasized that:
“the information sought by the questions is not exhaustive, this serves to remind the proposer that, notwithstanding his answers to the specific questions, there still remains the common law duty to disclose all material facts. Even then, of course, immaterial matters need not be disclosed, but anything which a reasonable man would regard as material must be stated unless the form of the question indicates that the proposer is at liberty to exercise his own judgment as to this.” (Hals. 4th Ed. Vol 26 para 386)
In this regard it is pertinent here to note the scope of agent’s authority in the writing up of proposals in the interest of the insurers who rely so much on the agents on the accuracy of the answers to questions in the proposal. On this aspect it is stated as follows in Hals. 4th Ed. para 393:
“Further, the agent being the only person with whom the proposer can negotiate, he is inevitably the person to whom the proposer turns for advice either as to the meaning of questions in a proposal form which is about to be completed, or as to the sufficiency of answers already given or proposed to be given to such questions, and he acts as agent on behalf of the insurers in giving advice on these topics if it is sought. Accordingly, when such advice has been given the insurers cannot subsequently repudiate the policy on the ground that the answers given are inadequate.”
Here the plaintiff and the proposer/V Dutta both knew that Reddy had already written out a Proposal. Even Ms. Domonatani was not supplied with the correct and full information. The plaintiff did not have to wait for a query from her on the contents of the proposals by the plaintiff. It was for the plaintiff to do his work properly as required of him as the sales representative.
In this context the following passage from Hals 4th Ed. Vol. 26 at para 389 on the duties of the proposer when completing the proposal is apt:
“In completing, signing and submitting the proposal form the proposer is providing the information on which the insurers act in deciding whether to accept the proposal at all and, if so, at what premium. He is therefore to be regarded as acting pursuant to his common law duty to make full and frank disclosure of material facts and also, or it may be alternatively, pursuant to stipulations set out in the proposal form which will, if the proposal is accepted, become contractual warranties or conditions. He must therefore be assiduous to comply with the basic rules which are applicable at this crucial stage, which may be the first step, but is often the last as far as the proposer is concerned, in the negotiations.”
Both the plaintiff as agent (knowing Reddy had already written out a proposal) and the proposer have failed dismally in regard to this requirement.
There are a number of basic rules applicable to proposal and one of these is:
“No excuse will be accepted for being careless or slipshod or for perpetrating slips of the pen, unless of course the error is so obvious that no one could be regarded as misled. If the proposer puts “No” when he means “Yes” it will not avail him to say it was a slip of the pen; the answer is plainly the reverse of the truth.” (Hals. Ibid para 390)
Therefore for the plaintiff to say that it was intended to substitute the word “Repairs” for “Spares” on the rubber stamp placed in 4 places on the proposal and then it was not done in this case is not a convincing reason at all for this type of error to be excused. I find this explanation difficult to accept.
One other rule which is pertinent and which was not followed here is:
“Any answer given, however accurate and honest at the time it was written down, must be corrected if, up to the time of acceptance of the proposal, anything supervenes to make it inaccurate or misleading.” (Hals ibid para 390)
To conclude therefore, the actions of the plaintiff as agent in the completion of the proposals and forwarding them on to Colonial his principal were such that by supplying the incorrect answers in the proposals through the proposer the plaintiff has brought about mistrust on himself as far as the principal/Colonial is concerned. Insurance law requires that full and correct disclosure are important and crucial matters to be paid heed to lest one risks the policy being declared void and of no effect.
Some observations on the duties of agents as stated in Biggar v Rock Life Assurance Company [1901] UKLawRpKQB 217; [1902] 1 KB 516 are worth considering for these have a bearing in deciding the issues in this case.
In Biggar (supra) at 524 – 525 Wright J said:
“I cannot put the doctrine better than in the language of the Supreme Court in New York Life Insurance Co. v. Fletcher (1), at pp. 532-533 of the case referred to, where they are citing from and adopting previous decisions of the Supreme Court. They say (speaking of another case): “The application was signed without being read. It was held that the company was not bound by the policy; that the power of the agent would not be extended to an act done by him in fraud of the company and for the benefit of the insured, especially where it was in the power of the assured by reasonable diligence to defeat the fraudulent intent; that the signing of the application without reading it or hearing it read was inexcusable negligence; and that a party is bound to know what he signs.”
Then speaking of the agent’s conduct they say at 525:
“His conduct in this case was a gross violation of duty, in fraud of his principal, and in the interest of the other party. To hold the principal responsible for his acts, and assist in the consummation of the fraud, would be monstrous injustice. When an agent is apparently acting for his principal, but is really acting for himself or third persons and against his principal, there is no agency in respect to that transaction, at least as between the agent himself, or the person for whom he is really acting, and the principal . . . .”
In the outcome, for these reasons on the facts as found by me the plaintiff has failed to establish his case and what has happened, namely termination, was not in breach of the Sales Representatives Agreement as alleged by the plaintiff.
The plaintiff’s action against the defendants is therefore dismissed with costs which is to be taxed unless agreed.
D. Pathik
Judge
At Suva
27 September 2004
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