American Life Insurance Company v Franklyn
| Jurisdiction | Barbados |
| Judge | Waterman, J.A. |
| Judgment Date | 31 March 2009 |
| Neutral Citation | BB 2009 CA 4 |
| Docket Number | Civil Appeal No. 15 of 2006 |
| Court | Court of Appeal (Barbados) |
| Date | 31 March 2009 |
Court of Appeal
Waterman, J.A.; Williams, J.A.; Moore, J.A.
Civil Appeal No. 15 of 2006
Mr. Bryan Weekes and Ms. Dyon Scarlett for the appellant.
Ms. Liesel Weekes for the respondent.
Industrial law - Employment contract — Termination — Whether worker was employed under a contract of service or a contract for services — Whether respondent was wrongfully dismissed — Damages — Quantum.
The respondent in this matter Henderson Franklyn (Franklyn) was awarded damages, interest and costs arising out of the breach of a contract dated 4 March 1974 and made between Franklyn and the appellant, American Life Insurance Company Ltd. (ALICO). His writ of summons claimed damages for wrongful dismissal from his employment as an insurance agent with ALICO. The principle issue for determination by this Court raised the age old question, recently considered by the Chief Justice, Sir David Simmons, sitting in the High Court in the case of Sagicor Insurance Co. v. Carter and others (2007) 71 W.I.R. 74, as to whether a worker, in this case Franklyn, is employed under a contract of service or under a contract for services.
ALICO appointed Franklyn as one of its agents in Barbados under a contract headed “Career Agent Agreement” dated 4 March 1974. He was to solicit, procure and transmit to ALICO applications for insurance and annuities offered by ALICO in Barbados.
It is agreed between the parties that up to 1987, Franklyn performed well and consequently had the benefit of receiving a bonus and the right to attend overseas insurance conventions at ALICO's expense.
However by 1999, Franklyn's performance had deteriorated to a point that ALICO considered unsatisfactory and they subsequently wrote him about his poor performance. When his performance did not improve, ALICO indicated to Franklyn in writing that at a minimum he would have to secure one personal accident and two life applications weekly. They subsequently indicated to him that should he not be able to meet the minimum requirements then set by the company they would provide him with a “special contract to operate outside the company.”
By this correspondence ALICO essentially informed Franklyn that he would become an external agent. On 15 April 2002, ALICO gave Franklyn written notice that he would become an external agent with the company with effect from 15 May 2002. However, before that change could take effect, ALICO terminated Franklyn's contract by correspondence dated 17 May 2002 but with retroactive effect from 19 April 2002.
In the High Court, Counsel for Franklyn submitted that Franklyn was an employee of ALICO and not an independent contractor. In support, she cited two cases, Market Investigations Ltd v. Minister of Social Security [1968] 2 Q.B. 173 and Marren v. Swinton and Pendlebury Borough Council [1965] 2 All E.R. 349.
Counsel for ALICO argued that the terms of the contract between Franklyn and ALICO were consistent with a contract for services and that except for the deduction of P.A.Y.E and N.I.S., ALICO did not exercise control over its agents.
The trial judge stated (at para. [12] of her judgment) that no one test may be sufficient to determine whether Franklyn was indeed an employee or independent contractor and that a number of factors may have to be considered.
The first factor the trial judge considered was the test of control (at pans. [15]–[21]) (see Market Investigations). The judge took into consideration (i) the issue of holiday and the lack of reference to it in the contract, (ii) the responsibility for payment of P.A.Y.E and N.I.S. and the lack of reference to them in the contract and (iii) the fact that the contract specifically (a) allowed Franklyn to perform the job at such time and place as he chose and (b) did not limit him to any hours of work.
The judge noted that the absence of any provision relating to holiday and freedom in terms of the performance of his duties pointed to a contract for services, whereas the deduction of P.A.Y.E and N.I.S. contributions, the provision of a productivity bonus, attendance at overseas conferences at ALICO's expense and the provision of a pension scheme were all consistent with a contract of service.
Additionally, the judge stated that clause 4 of the general conditions of the contract provided that Franklyn was “at all times to use his best efforts to promote the business of ALICO and to do nothing contrary to its best interest.” Further, the judge remarked that had Franklyn acted for any other insurance company, this would have been contrary to clause 4 and thus she found this provision in the contract as a factor pointing towards a contract of service. The judge also stated in her findings that since Franklyn was ‘free to exercise his own judgment the test of control was of no assistance in determining the issue”.
The second factor the trial judge considered, which she found to be the more important factor, was whether Franklyn was performing the services under the contract as a person in business on his own account. The judge stated that there was no evidence before the court that Franklyn hired his own helpers, took any financial risks, had responsibility for investment or management of that business or had any opportunity to profit from the performance of his job. She referred to testimony during the trial indicating that a non-performing agent was an expense to the company.
The judge subsequently found that the provisions of the contract and the way it was “operationalised” were consistent with a contract of service and that Franklyn was an employee of ALICO.
Mother issue before the trial judge was whether there was a unilateral variation of the contract. The judge found that Franklyn had accepted the variation, despite provisions in the contract requiring any modification thereof to be by amendment executed in writing by both parties. At no point, the judge said, did Franklyn object to the variation in the contract nor was his conduct demonstrably different from what it had been before the variation. Franklyn, she found, continued to work despite several written warnings from ALICO to which he never responded. The judge, therefore, held that Franklyn's conduct was fatal to his claim for damages for breach of Clause 18 of the contract.
The final issue before the trial judge was whether the contract was wrongly terminated by ALICO and if it was, whether Franklyn was entitled to damages, and in what amount. The judge found that there was an express term in the contract relating to termination and noted that on the authority of Clarke v. American Life Insurance Co. (2002) 62 W.I.R. 1 at para. 29, that where there is such an express term, the law will hold the parties to that term. The judge held that the termination of the contract was wrongful and that Franklyn was entitled to damages for wrongful termination. Clause 9(b) of the contract, she stated, indicated that the contract could be terminated by either party giving to the other at least 30 days' prior written notice. The judge found that use of the phrase “at least” showed a clear intention that 30 days was to be the minimum period of notice and that the period of notice could be longer than 30 days. Given that Franklyn was employed for some 28 years the judge held that damages calculated by reference to a 30 day notice period were inadequate and computed the damages in a manner determined by taking the average commissions earned by Franklyn in the last six months of his contract immediately preceding the date of the termination letter of 17 May 2002.
The Appeal
There are three main grounds of appeal:
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(1) that the learned trial judge erred in holding that the contract between the parties was one of services and that Franklyn was an employee of ALICO;
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(2) that the learned trial judge erred in holding that Franklyn's employment was wrongfully terminated in light of the provisions in the contract relating to termination; and
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(3) that the learned trial judge erred in calculating the quantum of damages payable to Franklyn.
The pleadings raised the issue as to whether the respondent was an employee or an independent contractor. Mr. Weekes, counsel for the appellant submitted that if the judge had correctly applied the law to the facts of this case she would have found that the respondent was at all material times an independent contractor or an agent of ALICO, as expressly stated in the career agent agreement, and not an employee of ALICO. He contended that in order for this Court to interfere with the finding of the judge on this point the Court must find that the judge's decision involved an error of law or was perverse. In support of his submission he cited Lee Ting Sang v. Chung Chi-Keung [1990] 2 A.C. 374. In that case Lord Griffiths stated that generally a finding by the trial judge that a person was, or was not, employed under a contract of employment was a question of fact with which an appellate court would not generally interfere. As the basic facts in the instant case were not in dispute, it was therefore not surprising that the main plank of counsel's submission was that the judge made an error of law.
The foundation of counsel's submission was paragraph [21] of the judgment where the judge stated:
“Having regard to the fact that the contract expressly provided that Franklyn was ‘free to exercise his own judgment’ in performing the task, the test of control is of no assistance in determining this issue.” (Our emphasis.)
It was on the above foundation that counsel predicated the following paragraphs in his skeleton argument:
“18. It is submitted that the trial judge made no express finding of fact as to whether the Appellant exhibited even de minimis control over the Respondent...
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