GYC Financial Planning Pte Ltd and Another v Prudential Assurance Company Singapore (Pte) Ltd

• Judge: Judith Prakash J
• Judgment Date: 28 April 2006
• Neutral Citation: [2006] SGHC 71
• Citation: [2006] SGHC 71
• Defendant Counsel: K Shanmugam SC, Christopher Tan and Edwin Tong (Allen & Gledhill)
• Published date: 05 May 2006
• Plaintiff Counsel: Alvin Yeo SC and Ameera Ashraf (Wong Partnership)
• Date: 28 April 2006
• Docket Number: Suit No 960 of 2004
• Court: High Court (Singapore)
• Subject Matter: Whether necessary for "representative" of exempt financial adviser to be natural person,Contract,Contract allowing termination by either party with 14 days' notice,Defendant denying existence of such agreement,Whether oral agreement in fact existing,Financial advisors,Contract of service,Company purporting to be "representative" of exempt financial adviser,Sections 6(1), 7(1) Financial Advisers Act (Cap 110, 2002 Rev Ed),Termination with notice,Formation,Financial and Securities Markets,Whether giving more than 14 days' notice constituting giving proper notice,Plaintiff alleging breach of oral agreement,Certainty of terms,Whether employer needing to have good reason for termination where termination with notice given,Employment Law

8 April 2006 Judgment reserved

Judith Prakash J:

Introduction

1 The defendant, Prudential Assurance Company Singapore (Pte) Ltd (“Prudential”), is a well-known company carrying on the business of providing, inter alia, life and general insurance. For many years, the second plaintiff, Goh Yang Chye (“Mr Goh”), was one of Prudential’s top agents. In 1998, Mr Goh and his wife incorporated the first plaintiff, GYC Financial Planning Pte Ltd (“GYCFP”), to accept an appointment as a corporate manager from Prudential.

2 This action arises out of the termination of the Corporate Manager Agreement (“CMA”) in March 2003 between Prudential and GYCFP and certain discussions that took place a year later between Prudential and Mr Goh concerning the future relationship between the parties. The plaintiffs allege that the termination was wrongful and that GYCFP is entitled to damages for that termination. They further allege that, in February 2004, there was an oral agreement between Prudential and Mr Goh whereby Prudential appointed Mr Goh to market its products and that Prudential wrongfully resiled from this agreement thus causing loss to Mr Goh.

3 Shortly before the trial was scheduled to begin, Prudential filed an application asking for two issues to be tried as preliminary issues. These issues arose from the claim made by GYCFP. This application was heard on the first day of the trial and I granted it. Thereafter, there were arguments on the preliminary issues. When these were completed, I reserved my decision since the preliminary issues were discrete issues and my decision on them would not affect the remaining issue that had to be tried, that being the sole issue arising out of the claim made by Mr Goh personally. Oral evidence was then adduced by the plaintiffs in relation to this issue. At the end of the plaintiffs’ case, Prudential submitted that there was no case for it to answer. I then heard submissions on the third issue.

4 This judgment deals with the two preliminary issues and the one issue that went to a full trial. These are the issues that I have to determine:

(a) Whether Prudential wrongfully terminated the CMA.

(b) Whether as a matter of construction of the terms of the CMA, GYCFP is entitled to further payment of commission and other sums from Prudential after termination of the CMA.

(c) Whether an oral agreement was made on 11 February 2004 (“the oral agreement”) between Mr Goh and Prudential.

Background

5 The following account of the facts is taken from the affidavit of evidence-in-chief filed by Mr Goh (to the extent that these were not disputed) and from the documents found in the agreed bundles.

6 The story began in 1987 when Mr Goh became an agent of Prudential’s predecessor. His duty was to sell policies of life assurance in Singapore. Mr Goh was a successful agent and, over the years, he rose through the ranks to become a trainer, a unit organiser, a unit manager and then a field manager. As field manager, Mr Goh recruited suitable persons as insurance agents for Prudential and thereafter managed them.

7 In 1991, Prudential took over its predecessor’s business and all Mr Goh’s subsequent contracts were made with Prudential. On 29 December 1992, Mr Goh and Prudential entered into a Field Manager Agreement (“the FMA”).

8 When Mr Goh first became a field manager in January 1990, the remuneration structure was such that once an insurance contract was secured by an agent reporting to Mr Goh, an overriding commission payable to the field manager would be computed on the sum assured and paid in the same year as the insurance contract was secured. In May 1990, the Monetary Authority of Singapore (“MAS”) directed a change in such payments. Thereafter, payment of overriding commission, based on first-year premium, was spread over a period of three years. Some years later, Prudential changed its computation of overriding commission again from that based on first-year premium to that based on the earned commission of the agents. Further, payment was spread over six years.

9 In 1998, Mr Goh decided to set up GYCFP to act as a corporate manager. From December 1993, Prudential had permitted corporate entities to act as field managers. The duty of the corporate manager was the same as that of a field manager, ie, to recruit and manage agents for Prudential. Each corporate manager functioned as a business unit, with tiers of agents reporting to it. The agents, however, remained agents of Prudential rather than agents of the corporate manager.

10 Prudential was willing to make GYCFP a corporate manager and, in late 1998, it sent Mr Goh a draft CMA. The material terms of this agreement were:

Authorisation

1.(a) The Corporate Manager is hereby appointed as a corporate manager of the Company to provide the services set forth herein in the Territory but the Corporate Manager shall have no exclusive rights to do so. Except with the express consent of the Company, the provision of the services hereunder by the Corporate Manager shall be confined to the Territory.

(b) …

Payment

2.(a) As consideration for the services to be provided by the Corporate Manager hereunder, the Company shall pay to the Corporate Manager during the continuance of this Agreement such sums as shall be determined in accordance with and subject to the terms of the attached Schedule or such other terms as may from time to time be agreed between the parties hereto or determined upon and notified in writing to the Corporate Manager by the Company. Save as provided in Clause 2(b) no revision shall operate to reduce the sums accrued and payable to the Corporate Manager prior to the notification of such revision.

…

Termination

14.(a) This Agreement shall automatically terminate forthwith upon:-

…

(ii) a sale, assignment or transfer of all and not part only of the Corporate Manager’s rights, benefits and interests under this Agreement in accordance with Clause 13; or

…

(c) Any party may terminate this Agreement by giving to the other parties fourteen (14) days notice of termination in writing.

…

(e) Save as provided in this Agreement, termination of this Agreement shall be without prejudice to the rights of any party hereto accrued prior to termination.

Payments After Termination

15.(a) Subject to Clause 15(b), (c) and (d) no production overrider, Group Term Assurance or Death Benefits or other sums of any kind whatsoever shall accrue to the Corporate Manager in connection with this Agreement after the termination hereof save as otherwise agreed in writing by the Company.

(b) There shall be paid to the Corporate Manager all production overriders and other sums of any kind already accrued and becoming due and payable to the Corporate Manager under this Agreement after the termination hereof.

(c) The Company may, by notice in writing to the Corporate Manager, pay to the Corporate Manager from time to time any Group Term Assurance and Death Benefits notwithstanding the termination of this Agreement.

11 Apart from these terms, attached to the draft was a schedule setting out the commission payable to GYCFP in respect of:

(a) Production Overriding Commission – these were to be paid on business secured by the agents appointed to work through GYCFP at rates set out in the schedule.

(b) Buyout Overriding Commission – these were to be paid on the business secured by agents who had been promoted from senior unit organisers to senior unit managers and thus ceased to work under the field manager/corporate manager.

I should note at this stage that the rather complicated remuneration structure adopted by Prudential in respect of its field managers and corporate managers was always set out in a schedule to the relevant field or corporate manager agreement and that from time to time during the life of such contracts Prudential would change the remuneration terms and would do so by issuing a replacement schedule that contained the new terms.

12 Whilst Mr Goh had certain concerns about the draft CMA, Prudential managed to deal with these in a manner satisfactory to him and he then accepted the draft. Subsequently, however, Prudential sent him an addendum (“the Addendum”) to the draft which provided that cl 6 of the CMA was to be deleted in full and replaced by the following provision:

The Corporate Manager shall observe and comply with all Company’s rules, regulations and agency instructions which are currently in force and applicable to the field managers and corporate managers of the Company on the subject matter of this Agreement, whether included in the Agent’s Rates Book or otherwise and the Corporate Manager shall further observe and comply with all Company’s rules, regulations and agency instructions which may be declared by the Company and notified to the Corporate Manager from time to time subsequently to be in force and applicable to the Corporate Manager as a field manager/ corporate manager of the Company on the subject matter of this Agreement.

13 According to Mr Goh, he was not happy about the inclusion of the Addendum because he found it unacceptable that new rules or agency instructions could come into force and alter his agreement with Prudential. He therefore refused to sign the draft CMA. According to Mr Goh, notwithstanding this refusal, the parties subsequently conducted themselves on the basis of the draft CMA without the Addendum. Prudential opened a new account in the name of GYCFP and recognised GYCFP as a corporate manager. Mr Goh himself continued to be an agent for Prudential. In its defence, Prudential agreed that a CMA was entered into with GYCFP. Its stand was that the terms of this agreement were those set out in the draft CMA forwarded to Mr Goh as amended by the Addendum. It pleaded that although neither GYCFP nor itself had signed the draft CMA, the parties had at all material times conducted themselves according to the terms of the draft CMA including the Addendum.

14 The next development took place because of...