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IN THE HIGH COURT OF MALAYA AT KUALA LUMPUR
(COMMERCIAL DIVISION)
SUIT NO. 22NCC-354-04/2013
CHE MELAN BIN AWALUDIN
v.
SYARIKAT TAKAFUL MALAYSIA BERHAD
GROUNDS OF JUDGMENT
The Plaintiff’s Claim
The Plaintiff’s claim against the Defendant is for overriding
commission, special damages, exemplary damages, general
damages and aggravated damages as a result of his termination
as Group Agency Manager. It is the Plaintiff’s case that the
termination as Group Agency Manager by the Defendant is
unlawful as stated in the Penyata Tuntutan as follows,
Paragraph 8:
“ Defendan
telah
menamatkan
Perjanjian
Pengurus
Kumpulan tersebut di atas alasan bahawa Plaintif telah
melanggar terma Perjanjian Pengurus Kumpulan tersebut,
di mana Plaintif tidak mencapai sasaran sepertimana yang
ditetapkan di dalam garis panduan “Minimum Qualitative
Criteria” (MQC).
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Paragraph 24:
“ Akibat daripada tindakan Defendan di dalam menamatkan
Plaintif sebagai Pengurus Kumpulan, imej; reputasi;
integriti dan nama baik Plaintif telah cedera dan/atau
rosak.
Paragraph 25:
“ Tindakan penamatan Defendan ke atas Plaintif telah
memberi gambaran tersurat dan tersirat bahawa:a.
Plaintif adalah seorang yang tidak berupaya untuk
menjalankan tugas sebagai Pengurus Kumpulan;
b.
Plaintif adalah seorang agen yang bermasalah dan
tidak boleh dipercayai; dan
c.
Plaintif telah melakukan perkara-perkara yang tidak
baik/salah yang telah mengakibatkan Plaintif ditamatkan sebagai Pengurus Kumpulan.
Paragraph 26:
“ Plaintif akan bergantung kepada fakta-fakta berikut bagi
menyokong tuntutannya terhadap gantirugi am, gantirugi
teladan dan gantirugi teruk.
Paragraph 27:
“ Plaintif, melalui peguamcaranya Tetuan Amir Khusyairi
& Associates pada 2.4.2013 telah menuntut daripada
Defendan tetapi Defendan masih enggan dan gagal untuk
mengambil apa-apa tindakan.”.
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The Salient Facts
Principal Agency Agreement
The Plaintiff and the Defendant entered into a Principal Agency
Agreement (‘the said Principal Agreement’) on 26.1.2012. Under
the said Principal Agreement, the Plaintiff is appointed by the
Defendant as the Agent to market and distribute Takaful products
subject to the terms and conditions of the said Agreement. Under
the said Agreement the Agent shall, at all times,
i.
act in the interest of the company;
ii.
not to allow his interest to conflict with the duties that
he owes to the Company;
iii.
act in good faith and use his best endeavor to preserve
and promote the interest and enhance the reputation of
the Company; and
vi.
act strictly within the express authority conferred by the
Company.
(Re: Clause 4.1 of the said Principal Agreement).
The Agent must comply with all the Agency Rules and Regulations
pursuant to Clause 11 of the said Principal Agreement. The
Agency Rules issued by the Defendant shall be binding and
enforceable on the Plaintiff as an Agent.
Supplementary Agreement
A Supplementary Agreement dated 16.1.2012 was executed
between the Plaintiff and the Defendant. This Agreement is
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supplemental to the Principal Agreement but the said Agreement
was executed ten (10) days before the Principal Agreement.
Supplementary Agreement (Group Manager)
Another Supplementary Agreement (Group Manager) was also
executed between the Plaintiff and the Defendant dated 16.1.2012.
This Agreement is also supplemental to the Principal Agreement
but was executed ten (10) days before the Principal Agreement.
Letter of Termination dated 15.1.2013
According to the letter of termination the Plaintiff was terminated
pursuant to Clause 15.2. The aforesaid letter of termination,
however, did not specify the reasons as stipulated under the said
clause.
Decision and Reasons
Events leading to the termination
The Plaintiff is a registered agent with the Defendant. He has
been an agent since 19.3.2010 and was promoted as Unit
Manager. Subsequently he was appointed as a Group Agency
Manager. It is the general practice that agents are required to
execute the Agency Agreement on a yearly basis. With regards to
the Plaintiff, the latest relevant agency agreements were both
executed on 16.1.2012.
It is the Defendant’s case that the Plaintiff was terminated as the
Group Manager as he failed to meet the targets as set out in the
Minimum Qualitative Criteria (MQC) Requirement for the year
2012. Under the MQC, the Group Manager is required to achieve
the following:-
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1)
[Whole Group] First Year Contributions Collected:
RM250,000.00.
2)
[Direct
Unit]
First
Year
Contributions
Collected:
RM100,000.00.
3)
Recruit 10 agents [including 5 qualifying agent and one
Unit Manager].
4)
40% maximum individual production.
5)
80% 1 year persistency of whole group.
(Re: pg 43 Ikatan Dokumen Bersama).
If the Group Manager achieves all the 5 criteria then he will be
retained as Group Manager. If he managed to achieve 4 criteria,
he will be retained but with conditions. However, if he achieves
only 3 criteria, he will then be demoted to Unit Manager and if he
achieves less than 3 criteria he will be demoted to an Agent.
According to the Defendant, the Plaintiff had only achieved a target
of RM166,527.00 as compared to the target set by the Defendant,
which is RM250,000.00. It is further submitted by the Learned
Counsel for the Defendant that the Plaintiff failed to adduce any
evidence that the figure quoted by the Defendant in evidence is
incorrect.
With regards to the 40% maximum individual protection, the
Plaintiff’s Counsel argued that he was unable to meet the
aforesaid criteria as the Defendant had rejected the Plaintiff’s
request to appoint one Zakiah Zainal Abidin as his down line. The
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Defendant however, submitted that even if Zakiah was appointed
as Unit Manager under the Plaintiff’s group agency, her
contributions will not fall under that
of the Plaintiff’s direct
business.
The said Zakiah was appointed directly as a Unit Manager by the
Defendant. She had in fact requested to be under the Plaintiff’s
down line as she was not under any Group Agency Manager. PW1
gave evidence that there had been incidences where Unit
Managers were appointed directly by the Defendant but became a
Group Agency Manager’s down line whenever there is a request.
Minimum Qualitative Criteria (MQC)
The basis for the termination of the Plaintiff by the Defendant is
the failure of the Plaintiff to achieve the targets as set by the
Defendant. It is the submission of the Learned Counsel for the
Defendant that the MQC was issued pursuant to Clause 11 of
the Principal Agreement. Pursuant to Clause 11, the Defendant
shall be entitled to issue rules and regulations relating to the
conduct
and operation of the Takaful Agency business,
“11. AGENCY RULES AND REGULATIONS, DIRECTIVES AND
CIRCULARS
11.1
The Company shall be entitled to issue rules and
regulations relating to and governing the conduct and
operation of the Takaful agency business (“Agency Rules
and Regulations”) and the Agent shall observe and comply
with such Agency Rules and Regulations.
11.2
The Agency Rules and Regulations may be issued, varied
and updated from time to time by the Company via
directives and/or circular letters and such directives
and/or circular letters shall be deemed as forming an
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integral part of the Agency Rules and Regulations
(“Circular”).
11.3
The Agency Rules and Regulations shall be binding and
enforceable on the Agent.
11.4
The variation and updates to the Agency Rules and
Regulations via Circular shall be notified to the Agent by
posting on the notice board at the headquarters, branches
or TMCC of the Company, the agency officers, the agency
website portal, electronic mail and/or such other means as
deem fit by the Company. Such mode of notification shall
be deemed to be sufficient notice to the Agent for the
purposes of this Agreement and shall take effect from the
date specified in the Circular.
11.5
For avoidance of doubt, all variations and/or updates for
the purpose of Clause 5, 12, 13 herein and such other
clauses
having
the
effect
to
varying
any
benefit,
remuneration, privilege or perquisite shall be deemed to be
sufficient notice to the Agent if issued by the Company via
Circular and posted in accordance with Clause 11.4
above.”.
Clause 12 of the same Agreement provides that the Defendant
shall be entitled to prescribed performance targets and shall have
the right to terminate the Agreement if the agent fails to meet any
performance target prescribed. Clause 13.3 further stipulates that
the Defendant shall have right to terminate in the event the Agent
fails.
According to the MQC Guidelines (pg 42 of the Ikatan Dokumen)
all decision of terminating and/or demoting are based on both the
MQC results and justifications from Head of Departments and
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Agency Sales and Development Officers. It is argued by the
Plaintiff that the Defendant failed to adduce any evidence of any
justification from Head of Departments and Agency Sales and
Development Officers.
Letter of Termination
The letter of termination dated 15.1.2013 issued by the Defendant
reads as follows,
“….Based on your performance result as more particularly delineated
below, you have failed to meet the Minimum Qualitative Requirement
(MQC) of your position as Group Manager for Financial Year 2012:MQC Requirements
Target
Actual
Whole Group FYCC
250,000
166,527
Direct Unit FYCC (RM)
100,000
166,527
Max 40% Personal
Max 40%
87%
New Recruitment
10 agents with 5
qualifying agents &
1 UM
8 agent(s) with 1
qualifying agent(s) &
0 UM
CPD Hours (per year)
30
30
Persistency Rate For
Direct Unit
80%
95%
(RM)
Cases
You may wish to note that your failure as abovementioned has
breached
Clause
15
(Maintenance
Requirements)
of
the
Supplementary Agreement (Group Manager) dated 16/01/2012 existing
between your goodself and Syarikat Takaful Malaysia Berhad (STMB)
(“the GM Supplementary Agreement”). In view thereof, we have no
alternative but to exercise our right to terminate your appointment as
the Group Manager under the GM Supplementary Agreement as
entitled by us under Clause 15.2 of the Principal Agency Agreement
dated 16/01/2012 existing between your goodself and STMB (“the
Principal Agency Agreement”).
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With the above being said and without affecting your position to
continue as STMB’s agent under the Principal Agency Agreement,
effective from 1st February 2013, the GM Supplementary Agreement
and all other the Supplementary Agreement(s), if any, shall be deemed
terminated and of no further effect wherein neither party shall have any
claim whatsoever against the other save for antecedent breaches and
obligations stipulated thereunder.”.
Clause 15.1 of the said Principal Agreement provides for
termination without cause,
“ Termination without Cause
Notwithstanding the clauses herein contained, either party shall be
entitled to terminate this Agreement by giving to the other party
fifteen (15) working days notice in writing, without having to assign
any reason whatsoever. Any remuneration payable up to the
effective date of termination will be paid by the Company to the
Agent in accordance with the terms and conditions of this Agreement.
Upon payment of such remuneration as aforesaid, the Agent shall
have no further claims against the Company under this Agreement.
Provided Always that payment of such remuneration as aforesaid
by the Company shall be without prejudice to the right to the
Company under Clause 20 below and any other right and remedy
entitled by the Company under the law against the Agent for the
antecedent breaches of the Agent which include but not limited
to all debt which may be due and owing by the Agent to the
company.”.
Clause 15.2 provides specifically the grounds for termination with
cause,
“ Termination With Cause
This Agreement shall terminate immediately upon:
15.2.1
the death of the Agent;
15.2.2
a bankruptcy petition is filed against the Agent in any court
of law of competent jurisdiction;
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15.2.3
the conviction of the Agent by a court of law of competent
jurisdiction for any offence which in the opinion of the
Company may adversely affect the reputation and/or
business of the Company;
15.2.4
the service on the Agent by the Company of a notice of
termination after the Agent has been informed in writing of a
breach of this Agreement and the Agent has been given
fourteen (14) days to rectify the breach or to show cause
why this Agreement should not be terminated;
15.2.5
the Agent fails to submit any new business for a period
of ninety (90) consecutive days, or such other minimum
production requirement as specified by the Company from
time to time by way of written notice, agency circular and
directive;
15.2.6
the Agent’s persistency rates or maintenance quota falls
below any rate or rates or targets as specified by the
Company from time to time by way of written notice, agency
circular and directive;
15.2.7
the Agent commits fraud and/or breach of any trust in the
exercise of his/her duties;
15.2.8
the Agent is placed under the MTA referred listing by the
previous insurance company or Takaful operator after
contracting with the Company or blacklisted by other
Takaful operators or insurance companies as guideline
provided by other statutory bodies;
15.2.9
the Agent is involved in the use of proxy representative or
proxy agency;
15.2.10 the Agent is in breach and/or fails to comply with the terms
and conditions of this Agreement, the prevailing Agency
Rules and Regulations or the Circular and/or any directives
or guidelines of MTA, BNM or such other competent
authority;
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15.2.11 the Agent suffering a Total and Permanent Disability as
defined in any of Company’s standard certificate documents
containing a definition of Total and Permanent Disability.
Any remuneration payable, if any, up to the effective date of
termination will be paid by the Company to the Agent in accordance
with the terms and conditions of this Agreement. No remaining
commissions, if any, shall be payable to the Agent. Provided Always
that payment of such remuneration as aforesaid by the Company
shall be without prejudice to the right of the Company under Clause
20 below and any other right and remedy entitled by the Company
under the law against the Agent for the antecedent breaches of the
Agent which include but not limited to all debt which may be due and
owing by the Agent to the Company.”.
The said letter merely states that the Plaintiff had breached Clause
15 of the Supplementary Agreement and that the Defendant is
entitled to terminate the appointment pursuant to Clause 15.2 of
the said Principal Agreement,
“ …your failure has breached Clause 15 (Maintenance Requirements)
of the Supplementary Agreement (Group Manager) dated 16/01/2012
…..In view thereof, we have no alternative to terminate your
appointment as the Group Manager…..as entitled by us under Clause
15.2 of the Principal Agreement….”.
Clause 15 of the Supplementary Agreement provides as follows,
“ MAINTENANCE REQUIREMENTS
To remain as a Group Manager of the Company, the Group
Manager shall fulfill the maintenance requirements of a group
manager which requirements shall be provided to the Group
Manager from time to time at the Company’s sole and absolute
discretion.”.
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Clause 15.2 lists the 11 circumstances for termination with
cause, ranging from death to bankruptcy as well as the Agent’s
persistency rates or maintenance quotas falling below any rate
or target set by the Defendant. However, in the instant case the
letter of termination issued by the Defendant dated 15.1.2013
clearly did not specify under which limb of Clause 15.2 of the
Principal Agreement the Defendant is invoking.
In Bank of Credit and Commence International SA v. Ali [2002]
1 AC 251, Lord Bingham of Cornhill said at p. 259:
“ In construing a contractual provision, the object of the court is to give
effect to what the contracting parties intended. To ascertain the
intention of the parties, the court reads the terms of the contract as a
whole, giving the words used in their natural and ordinary meaning in
the context of the agreement, the parties' relationship and all the
relevant facts surrounding transaction so far as known to the parties.
To ascertain the parties' intentions the court does not of course
inquire into the parties' subjective states of mind but makes an
objective judgment based on the materials already identified. (see
also Investors Compensation Scheme Ltd v. West Bromwich Building
Society [1998]
1 WLR 896 at p. 912 - 913).”.
The relationship between the Plaintiff and the Defendant is based
on all the said Agreements. The Parties are therefore bound by the
express terms of the said Agreements. A letter of termination must
be clear, unequivocal and precise notifying the person being
terminated the reason for his termination as provided under the
Agreement. The Defendant had submitted that the Defendant
has the right to terminate the Plaintiff’s appointment pursuant to
Clause 12. In the Letter of Termination, however, the Defendant
did not state specifically Clause 12, the termination is made
pursuant to Clause 15 instead. It is also observed that the 15 days
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notice in writing applies only if the termination is without cause. For
a termination pursuant to Clause 15.2, it is immediate termination.
The contractual relationship of the Parties are governed by the
terms of the Agreement and as such the Defendant cannot invoke
and interpret the provisions of all the Agreements according to
their whims and fancies. If there is any doubt as to whether
the Notice of Termination is one under Clause 15.1 or Clause
15.2, then that doubt must be resolved in favour of the weaker
party. As was observed by his Lordship Suffian LP in SEA
Housing Corporation Sdn. Bhd. v. Lee Poh Choo [1982] CLJ
305 (Rep); [1982] CLJ 355; [1982] 2 MLJ 31 at page 34:
“ With respect, the provisions in question here are similar to those in
Johnson v. Moreton [1978] 3 All ER 37, a House of Lords decision,
where at page 49 Lord Hailsham said:
“The policy of the law has been repeatedly used to protect the
weaker of two parties who do not contract from bargaining
positions of equal strength. (line a).
The truth is that it can no longer be treated as axiomatic that, in the
absence of explicit language, the courts will permit contracting out
of the provisions of an Act of Parliament - as was attempted herewhere that Act, though silent as to the possibility of contracting out,
nevertheless is manifestly passed for the protection of a class of
persons who do not negotiate from a position of equal strength, but
in whose well-being there is a public as well as a private interest.”
(lined onwards).
It would appear that only “contracting out” in favour of the weaker
party - i.e. the purchaser might be countenanced by the Courts.”.
Even though the Plaintiff may have not fulfilled the MQC, I am
of the view that the Notice of Termination issued under Clause
15 is not a valid notice as the Defendant had failed to state
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specifically the reason of the termination as provided by the
terms of the Agreement, that the termination is pursuant to Clause
15.1 or 15.2. The termination and/or demotion was not done
in accordance to the terms of the Agreement. Therefore, the
termination of the Plaintiff as Group Manager (Agency) pursuant
to the Agreement is unlawful and invalid.
Overriding Commission
Since the termination of the Plaintiff as Group Manager (Agency)
pursuant to the Agreement is unlawful and invalid the Plaintiff
is entitled to any overriding commission that there is due to him.
Damages
The basis for assessment of damages in a breach of contract
is to put the Plaintiff, the non-defaulting party, in the position
as if the contract had not been wrongfully terminated. It is
compensatory in nature. As such aggravated damages is generally
not awarded for a breach of contract simpliciter. The House of
Lords in Farley v. Skinner [2002] 2 A.C. 732 summarised
succinctly the general principle in a breach of contract against an
award for anxiety, distress, disappointment and loss of credibility,
reputation and the like as follows in the speech of Lord Hitton
at page 757-758:
“ 47. It is clearly established as a general rule that where there has
been a breach of contract damages cannot be awarded for the
vexation or anxiety or aggravation or similar states of mind resulting
from the breach. The principle was stated by Bingham LJ in Watts v.
Morrow [1991] 1 WLR 1421, 1445:
“A contract-breaker is not in general liable for any distress,
frustration, anxiety, displeasure, vexation, tension or aggravation
which his breach of contract may cause to the innocent party. This
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rule is not, I think, founded on the assumption that such reactions
are not foreseeable, which they surely are or may be, but on
considerations of policy.”.
Generally no exemplary damages shall be awarded in a
contractual claim, and the weight of authorities is against granting
such an award. The learned author of Guest on Contract (28th
ed) is categorical on this (“vindictive” or “exemplary” damages
have no place in the law of contract”; pg. 592), while Mcgregor
on Damages (18th ed) stated at page 428:
“ For contract, on the other hand, the position is less certain.
Historically, the law has always set its face against awarding
exemplary damages for breach of contract; outrageous conduct is
the domain of tort rather than contract.”.
In the Federal Court case of Lembaga Kemajuan Tanah
Persekutuan (FELDA) & Anor v. Awang Soh Mamat & Ors And
Another Application [2010] 3 CLJ 895 the Court held,
“ Learned counsel for the applicants sought to argue that his clients
were seriously prejudiced because the judge had acted upon an
allegation of fraud that must be proved beyond a reasonable doubt.
Also, the judge had made an award of damages which had never
been proved. He referred us to the well known dictum of Lord
Goddard LCJ in Bonham-Carter v. Hyde Park Hotel [1948] 64 TLR
177 at p. 178 where he said:
In an action for damages it is for the plaintiff to prove his
damages, it is not enough to write down the particulars and
throw them at I the head of the court, saying: ‘This is what I
have lost; I ask you to give me these damages’. He has to
prove it.”.
In Johnson v. Gore Wood & Co [2002] 2 AC 1, Lord Cooke of
Thorndon observed, at p 49,
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“ Contract-breaking is treated as an incident of commercial life which
players in the game are expected to meet with mental fortitude.” But
the principle is not applicable in every case and in Watts v. Morrow
[1991] 1 WLR 1421 Bingham LJ went on to state that there was an
exceptional category of cases which he described as follows:
“ Where the very object of a contract is to provide pleasure,
relaxation, peace of mind or freedom from molestation,
damages will be awarded if the fruit of the contract is not
provided or if the contrary result is procured instead. If the law
did not cater for this exceptional category of case it would
be defective. A contract to survey the condition of a house for
a prospective purchaser does not, however, fall within this
exceptional category.”.
Therefore, in the instant case the Plaintiff is not entitled to general
damages as the Plaintiff’s claim is essentially based on a breach of
contract.
Conclusion
Based on the facts and evidence, both oral and documentary, the
termination of the Plaintiff as Group Manager is invalid as the
Notice of Termination is deficient and not in accordance to the
terms of the aforesaid Agreement. I have considered the evidence
adduced in its entirety together with the submissions of both
Counsels as well as authorities tendered in support of their
respective cases, I am satisfied that the Plaintiff has proven his
claim against the Defendant on a balance of probabilities.
Accordingly, based on reasons mentioned above I allowed the
Plaintiff’s claim against the Defendant in particular prayer (a) and
(b) with cost. With regards to the other prayers (c)–(j) including
aggravated and exemplary damages are dismissed.
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Interest shall be at 5% per annum from the date of claim to the
date of realization. After hearing submission on costs, I awarded
costs of RM15,000.00 to the Plaintiff.
sgd.
( HASNAH BINTI DATO’ MOHAMMED HASHIM )
Judge
High Court of Malaya
Kuala Lumpur.
17th June 2014
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Counsels:
For the Plaintiff/ Respondent:
Messrs. Amir Khusyairi & Associates
- Nik Erman Nik bin Roseli
- Amir Khusyairi bin Mohamad Tanusi
For the Defendant/ Appellant:
Messrs. Jayadeep Hari & Jamil
- Eunice Ong
- Shobana Padmanathan
- Harikanan Ragavan