The Judicial Committee of the Privy Council Decisions

Hanna v. Imperial Life Assurance Company of Canada (The Bahamas) [2007] UKPC 29 (2 May 2007)

Privy Council Appeal No 61 of 2005

John Hanna Appellant

v.

Imperial Life Assurance Respondent

Company of Canada

FROM

THE COURT OF APPEAL OF

THE BAHAMAS

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JUDGMENT OF THE LORDS OF THE JUDICIAL

COMMITTEE OF THE PRIVY COUNCIL

Delivered the 2^nd May 2007

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Present at the hearing:-

Lord Hope of Craighead

Lord Rodger of Earlsferry

Lord Mance

Lord Neuberger of Abbotsbury

Sir Peter Gibson

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[Delivered by Lord Hope of Craighead]

1. In this action the appellant, John Hanna, seeks a declaration that the respondent, the Imperial Life Assurance Company of Canada, was in breach of its contract of employment with him when they dismissed him on 1 October 2001 without giving him reasonable notice, or pay in lieu of notice, and providing him with the appropriate pecuniary benefits. He maintains that the agreement which he entered into with the respondent on 7 November 1988, under which he agreed to serve the company as its agent to solicit applications for policies of insurance which it was licensed to issue, was a contract of employment. His case is that it was terminable on reasonable notice and not summarily.
2. The matter came before the trial judge, Thompson J, for trial in January 2004. The respondent sought a preliminary ruling on the question whether the appellant was an agent of the respondent or an employee. The judge agreed to his request. A preliminary hearing was held on this issue, at which evidence was led. On 17 February 2004 she delivered a brief written judgment in which she ruled that the appellant was an employee of the respondent and not an agent. She said that in her opinion he was employed in the capacity of an insurance agent for the purpose of selling the company's policies. Following that hearing the parties were agreed that the only issue that remained to be decided was what constituted reasonable notice in all the circumstances. On 26 August 2004, after a further hearing at which evidence was led on this issue, Thompson J delivered a judgment in which she held that six months' notice would have been reasonable. She awarded the appellant six months' salary in lieu of notice, four weeks' vacation pay for the year 2001 and various commission and pension payments for a period of six months.
3. The respondent then appealed against what in the notice of appeal was described as "the whole of the ruling and judgment of Thompson J made on 17 February 2004 and 26 August 2004". The appeal was on three grounds: (1) that the judge erred in law and misdirected herself in concluding that the agency agreement was in fact a contract of employment such that the appellant was deemed an employee rather than an agent; (2) that the judge erred in law in awarding the appellant six months' salary in lieu of notice, having regard to his length of service with the company, his responsibilities, experience, training, qualifications as well as his chances of alternative employment in The Bahamas; and (3) that the judge erred in law and misdirected herself in awarding the appellant four weeks' vacation pay for the year 2001 and various commission and pension payments for a period of six months.
4. On 24 February 2005 the Court of Appeal of The Bahamas (Ganpatsingh, Ibrahim and Churaman JJA) allowed the respondent's appeal against the preliminary ruling by Thompson J dated 17 February 2004 and dismissed the appellant's claim. The reasons for this decision were set out in an oral judgment which was delivered by Ganpatsingh JA. At the outset of his judgment he said that the appeal was from the ruling of 17 February 2004. He then went on to narrate the order which the judge made on 26 August 2004 and to record the fact that the appeal was on various grounds. But the only issue which he dealt with in the judgment was whether the judge was wrong to hold on 17 February 2004 that the appellant was an employee. Having said that the appeal would be allowed on that ground and the claims dismissed, he said nothing about the orders which the judge made on 26 August 2004 to which the respondent's second and third grounds of appeal were directed. On 14 September 2005 the appellant was given leave to appeal against the judgment of the Court of Appeal to your Lordships' Board.
5. In the appellant's written case it was stated that the appeal was presented on three main grounds: (1) that the Court of Appeal erred in setting aside the judge's ruling that he was an employee; (2) that the Court of Appeal erred in setting aside the judge's ruling that he was entitled to a notice period of six months; and (3) that the Court of Appeal erred in setting aside the judge's ruling that he was entitled to four weeks' vacation pay and various commission and pension payments for a period of six months. As has already been noted, the Court of Appeal did not deal with the second and third issues. It decided to dispose of the entire case by its ruling on the first issue. So any appeal on the second and third issues is premature. It is its ruling on the first issue, and on that issue only, that is before their Lordships in this appeal.
6. The appeal on the first issue is divided into two parts. First, there is a procedural objection. The appellant maintains that his status as an employee was determined by the judge's ruling on 17 February 2004, and that no appeal was taken against this ruling within either of the two periods mentioned in rule 13 of the Court of Appeal Rules. He says that the parties then came to an agreement as to the remaining issue before the court, which was what constituted reasonable notice. He claims that the appeal on the issue of status was out of time, and that the respondent made no application for the time limit for an appeal on that issue to be extended. He says that, although this point was taken in the Court of Appeal, the Court of Appeal failed to address it. Secondly, there is the substantive issue. This is whether the judge was right to rule that the appellant was an employee of the company, not an agent providing services to it.

The procedural issue

7. There is no doubt that the respondent's appeal against the judge's ruling of 17 February 2004 was well out of time. Rule 13 of the Court of Appeal Rules provides that every notice of appeal shall be filed within one or other of two periods, calculated from the date on which the judgment or order of the court below was signed, entered or otherwise perfected. These periods are:

"(a) in the case of an appeal from an interlocutory order, fourteen days;

(b) in any other case, six weeks."

8. The judge's ruling on the preliminary issue was not an interlocutory order within the meaning of this rule. This was because it was a final determination of one of the substantive issues in the case. So the time within which the notice of appeal ought to have been lodged was six weeks from 17 February 2004, which is the date when the order was signed. It should have been lodged by 6 April 2004. But rule 8 of the Court of Appeal Rules provides that the court may:

"… enlarge the time prescribed by these Rules for the doing of anything to which these Rules apply, or may direct a departure from these Rules in any other way where this is required in the interests of justice."

9. Mr Ferguson, who appeared for the appellant before the Board and below, said that the objection that the respondent's appeal on this preliminary issue was out of time was taken by him in the Court of Appeal. Mr McDonald for the respondent did not contradict him. The oral judgment which Ganpatsingh JA delivered on 24 February 2005 is silent on this point. But the facts are that the Court of Appeal heard argument on the merits of the preliminary issue and that it delivered a judgment upon it on which rested its decision that the appellant's claim should be dismissed. There are occasions when acts speak louder than words, and this is one of them. It must be assumed from the way the Appeal Court conducted the hearing that it decided to exercise the dispensing power. It allowed the respondent to present his argument. The exercise of the dispensing power is a matter which lies in the discretion of the Court of Appeal. Bearing in mind that the appeal against the judgment of 26 August 2004 was brought well within the time limit, their Lordships are unable to say that the discretion to allow the respondent to appeal on the preliminary issue too was not properly exercised.

The substantive issue

10. It is now time to say a little a bit more about the facts. None of them are in dispute. On 7 November 1988 the parties entered into a written agreement, described as an "agency agreement", by which with effect from 1 November 1988 the respondent appointed the appellant as its agent to solicit policies of insurance which the respondent was licensed to issue. According to his statement of claim, the appellant worked initially as an insurance agent. He then held the position of manager-marketing, supervising a staff of six employees. Latterly and at the time of termination he was working again as an insurance agent. The relationship between the parties was regulated throughout this period by the agreement which he had entered into on 7 November 1988. On 29 August 2001 he was warned by the manager of the respondent's Nassau West Branch that he was not meeting the required production standard. On 1 October 2001 the manager wrote to him again in these terms:

"As a follow-up to our letter of August 29 and as a result of your not meeting the required production standard, Imperial Life Financial is obliged to bring your contract of employment to a close, effective 1 October 2001.

We wish to thank you for your years of service with the company and to offer you best wishes for success in your future endeavours."

By the date of that letter the contract between appellant and the respondent had subsisted for a period of twelve years and eleven months. "Imperial Life Financial" was the name under which the respondent was trading from its West Nassau Branch on that date.

11. For the purposes of the agreement which the parties entered into in November 1988 the appellant was called "the Agent" and the respondent was called "the Company". Among the clauses which it contained were the following:

"1. Appointment The Company hereby appoints the Agent as its agent

(a) to solicit applications for policies of insurance which the Company is licensed to issue,

(b) to collect and immediately remit to the company the first premium on such applications, and

(c) to deliver promptly such policies as the Company may issue pursuant to such applications.

2. Duties The Agent will tender to the Company every such application obtained by him. If the Company is not prepared to grant insurance pursuant to any such application, it will so advise the Agent and only in that event may the Agent submit such application to another company. The Agent is free to select the persons from whom he will solicit applications, and the place of solicitation.

…

8. General Conditions

…

(ii) As an agent of the Company, the Agent will be governed by the rules and regulations of the Company.

…

(vii) Standards of performance for continuation of the Agreement will be issued by the Company annually.

…

14. Benefits The Agent shall participate in such arrangements for Group and retirement benefits as may be set up by the Company from time to time for its whole-time Agents, and he shall be entitled to the benefits provided under such arrangements subject to the rules, regulations, and provisions thereof.

15. Termination of Appointment The Agent's appointment hereunder will automatically terminate in the event of the death of the Agent or may at any time be terminated by either party, with or without cause, by notice in writing. Such notice may be delivered personally to the receiving party or may be mailed to his last known address. No commission will be payable under this Agreement following such termination except as specifically provided in Clause 6 hereof [Commissions in the event of death]."

12. The arrangements for group and retirement benefits for the respondent's whole-time agents referred to in clause 14 were provided for by means of the company's Pension Plan for Bahamian Agents. Among the definitions which the Pension Plan contained was the following:

" 'Employee' means a person who is a full-time agent of the Employer and who is employed in The Bahamas."

The appellant was a "full-time agent" of the respondent within the meaning of this definition. As such he was entitled to participate in the benefits that the Plan provided to the persons referred to in it as employees of the company.

13. Summarising the arguments that were presented to her, Thompson J said that the respondent's counsel referred to the fact that the agreement was called an "agency agreement" and that he relied on the provisions about termination set out in clause 15. He had conceded that the agreement was not "a bare agency" agreement, and that in the particular circumstances the agent "became almost like an employee". But he had maintained nevertheless that it was an agent agreement because the document which the parties signed said so. Counsel for the appellant submitted that, although the agreement was labelled an agency agreement, it was truly an agreement for the employment of the appellant to do certain work on the respondent's behalf. Although he was referred to in that capacity as an agent of the company, the agreement stipulated that he was to be governed by the rules and regulations of the company (clause 8(ii)), provided for an annual evaluation of his performance (clause 8(vii)) and made provision for termination benefits (clause 14). The appellant had given evidence that all the equipment and premises that he required to perform his duties was provided by the respondent, and that the respondent paid a portion of his national insurance payments.
14. Thompson J set out her conclusions in the following paragraphs:

"8. The agreement before the court, although labelled an agency agreement, as pointed out by counsel for Mr Hanna, has all the characteristics of a contract of employment. Even the mode of payment, that is, on commission, does not exclude it from this category, as this kind of payment is accepted as a mode of payment by an employer to an employee in the Fair Labour Standards Act as pointed out by counsel for Mr Hanna.

9. I agree with the submission made by counsel for the plaintiff and I am satisfied that Mr Hanna was an employee of the company and not an agent. He was employed in the capacity as 'an insurance agent' for the purpose of selling the company's policies."

15. The Court of Appeal reached the contrary conclusion. Ganpatsingh JA said that in the court's view the preponderance of evidence was that the relationship was an agency relationship simpliciter. He said that it was not disputed that the appellant had at some time held the position of manager and had supervised a staff of six persons. But that position had come to an end by the time of termination. The fact that he had remained a member of the respondent's pension plan was insufficient in itself to characterise the relationship as one of master and servant. Whatever the Fair Labour Standards Act might say, the proposition that all agents were by virtue of its provisions employees was untenable. In this case the parties had adjusted their relationship to one based on paid premiums in respect of policies issued. The agency agreement had set out the terms that were to govern their relationship. The parties had agreed that the appellant's appointment could be terminated at any time in the manner provide for in clause 15. Based on that clause, it was terminated by the notice of 1 October 2005 and there was no basis for a claim of wrongful dismissal.
16. Two things are plain from the Court of Appeal's judgment. The first is that there was no challenge to any of the evidence that was before Thompson J, which of course the Court of Appeal did not hear. No mention is made of her findings, based on that evidence, that all the equipment and premises that the appellant required to perform his duties was provided by the respondent and that the respondent paid a portion of his national insurance payments. But this is not because the court was of the opinion that she was not entitled to make those findings. On the contrary, they appear to have been left entirely out of account in the analysis. The second is that the Court of Appeal approached the whole issue de novo. It appears to have taken the view that it was open to it to substitute its own opinion for that arrived at by the trial judge on her review of the evidence.
17. In Lee Ting Sang v Chung Chi-Keung [1990] 2 AC 374 Lord Griffiths, delivering the judgment of the Board, said at p 384E-385A that the question whether or not a person is employed under a contract of service was often said to be a mixed question of fact and law. There might be exceptional cases where, because the relationship was entirely dependent upon the true construction of a written document, it is regarded as a question of law. But must be taken as firmly established that, where it had to be determined by an investigation an evaluation of the factual circumstances in which the work was performed, it was to be regarded by an appellate court as a question of fact to be determined by the trial court. He referred to a series of decisions in the Court of Appeal and the House of Lords in which it had been held that a finding by the trial judge that a person was, or was not, employed under a contract of service was a question of fact with which an appellate court could only interfere if there was no evidence to support his finding.
18. The question which the Appeal Court should have asked itself, therefore, is whether there was no evidence to support the conclusion reached by Thompson J. Was her decision, in other words, one which no reasonable person acting judicially and properly instructed as to the relevant law could have reached? The answer to that question must be found by examining the whole of the material that was before the trial judge. No single factor is likely to be conclusive. The fact that the appellant was described as an agent in the written agreement will not prevent his being held to be an employee if this is what the facts, regarded as a whole, indicate. Conversely the fact that the contract was described in the termination letter of 1 October 2005 as a contract of employment – "an egregious error", said Mr McDonald – does not on its own conclude the matter in the appellant's favour.
19. Approaching the question in this way, their Lordships consider that there was ample material before Thompson J to entitle her to hold that the appellant was an employee of the company, not an agent carrying on business his own account. He was required by his agreement with the respondent to devote the whole of his time, apart from his vacation time, to the service of the company. All the resources which he needed to do this, including the accommodation and equipment, were provided to him by the respondent. A portion of his national insurance payments was paid by the respondent, and he was given access to retirement benefits that were available under the company's pension plan. It is plain that while he held the position of manager-marketing supervising a staff of six employees he was himself an employee of the company. He was not required to enter into a fresh agreement with the company during this period. This is a strong pointer to the conclusion, when taken with the other evidence, that he was an employee throughout and that he remained an employee when the contract was terminated.
20. It is true, as the judge recognised, that the word "agent" was used throughout the written agreement. But the provisions in clause 8(ii) and (vii) show that the appellant was not free to set his own standards of performance. He was required to observe the rules and regulations laid down by the company. The description of his duties in clause 2 shows that all his efforts were to be directed full-time to serving the interests of the respondent. It was only in the event of its not being prepared to grant the insurance which had been applied for that he was free to submit the application to another company. The description of his contract in the letter of 1 October 2005, while not determinative, is at least consistent with the impression created by the facts as a whole that the appellant was working throughout the period of his service not on his own account but as the respondent's employee.
21. Their Lordships will therefore humbly advise Her Majesty that the appeal should be allowed and that the order which Thompson J made on 17 February 2004 should be restored. The case will be remitted to the Court of Appeal for determination of the second and third issues referred to in the respondent's grounds of appeal to that court. The respondent must pay the costs of the appeal to their Lordships' Board.