This case concerns a dispute between an insurance agent and an insurance company on the entitlement of a benefit under a Long Service Bonus plan provided by the insurance company, which accrued at the time of retirement but not on termination of the insurance agent agreement by way of resignation. 

Facts

In FWD Life Insurance Company v Cheng Wing Yiu Dumas HCMP 2365 of 2014, the defendant, Mr Cheng, worked for the plaintiff, FWD Life Insurance Company, on 1 July 1984 as an insurance agent.  The defendant was promoted, and became the Chief Regional Director of the plaintiff on 9 January 2004, till the end of his employment.

On 17 November 2013, the defendant attained the age of 60 years, which is the retirement age under the IAA (see below) between the defendant and the plaintiff. Despite reaching the retirement age, the defendant continued to work with the plaintiff beyond December 2013. On 20 January 2014, the defendant sent an e-mail to the plaintiff as his “resignation”. On 27 January 2014, the plaintiff replied the defendant that the defendant’s proposed termination of the IAA would not be effective unless and until the sum owed by the defendant to the plaintiff were fully repaid and the plaintiff had given consent to the defendant’s termination.  The defendant did not reply to the plaintiff’s letter dated 27 January 2014, and other letters from the plaintiff to the defendant on divers dates after 27 January 2014.  In essence, the plaintiff claimed that the working relationship between the plaintiff and the defendant were terminated on 12 February 2014, when on that date the plaintiff consented to the defendant’s termination of the IAA.

The operative document governing the defendant’s employment was an Individual Agent’s Agreement dated 1 January 1989 (the “IAA”), which contained, inter alia, a term that the IAA would be terminated in the event of retirement and that the retirement shall be deemed to occur on the 31st of December coincident with or next following the defendant’s attainment of the age of 60 (or such other age as may be agreed by the parties in writing) (the “Retirement Clause”). The defendant therefore argued that under the IAA, it was terminated by 31 December 2013 as he was deemed to retire by that date.

The defendant also participated in a Long Service Bonus (“LSB”) plan provided by the plaintiff, which stated that if the IAA was terminated for any reasons other than death or retirement, any accrued but unpaid LSB shall be forfeited.

In this action, the plaintiff claimed against the defendant for sums advanced by the plaintiff to the defendant and his wife and guaranteed by the defendant. The defendant counterclaimed that he was entitled to payment from the plaintiff under the accrued LSB, and such that he was entitled to set off any liability he might have that was due to the plaintiff.

The plaintiff’s entitlement to recover against the defendant turns upon the existence of the guarantees provided by the defendant to the plaintiff, and the interpretation of the terms of the mortgage of the defendant’s property in Hong Kong that secures the guarantees. The mortgage contained, inter alia, terms that the defendant shall, on demand by the plaintiff, pay to the plaintiff (i) the amount of all advances and all monies which become due to the plaintiff on all contracts and engagements guaranteed by the defendant to the plaintiff; and (ii) all sums of money which become payable to the plaintiff by any other person guaranteed by the defendant to the plaintiff.

The defendant’s entitlement to the LSB turns upon the interpretation of the Retirement Clause in the IAA, and there was a dispute as to when and how the defendant’s employment terminated. The defendant’s case was that he had “retired” from the plaintiff, and accordingly entitled to all the accrued LSB, and in that event, he would be entitled to offset the accrued LSB against the liability he may have to the plaintiff. The plaintiff’s case was that the defendant was not retired, but had “resigned”, and as resignation constituted neither death nor retirement, pursuant to the terms of the LSB plan, any accrued but unpaid LSB was forfeited and there could not be any set off.

Decision

In respect of the time when the employment was terminated, the judge held that as the defendant attained the age of 60 years on 17 November 2013, the defendant was deemed to have retired on such date and the IAA had been terminated on the date of 31 December 2013 pursuant to the Retirement Clause. There was no evidence to suggest that any other age of retirement had been agreed between the parties in writing. Even though the defendant only sent an e-mail to the plaintiff on 20 January 2014 for “resignation”, there was nothing from which the defendant could resign, and the email was “simply meaningless” and an “empty gesture”.  The judge also pointed out that there was no evidence as to how or why 12 February 2014 was selected by the plaintiff as the date of the purported resignation. There was nothing in the subsequent letters from the plaintiff which could be said to have revived the IAA.  Accordingly, the judge concluded that the defendant had retired on 31 December 2013, and he was entitled to the accrued balance of LSB.

Take-away points for HR professionals

• While there is no statutory retirement age in Hong Kong, there could be stipulated restriction as to the retirement age, depending on the drafting of the agency or employment contract.
• The “deeming” provision in this case (i.e. that a person is deemed to retire and the agreement terminated once that person has reached a certain age) in the agency/employment contract will operate automatically and the Court will apply a plain interpretation of the clause. Employers are advised that the use of the word “deemed” does not indicate that a rebuttable presumption is raised and if the employer intends that the provision is a rebuttable presumption, it should say so expressly and the term “deemed” should be properly defined in the agency/employment contact.
• If the employment contract contains a Retirement Clause, employers are advised to check if any necessary triggering arrangements (e.g. notice in writing) should be included regarding the termination of employment or agency agreement as a result of the agent/employee reaching the stipulated retirement age as set out in the agency/employment contract.
• Employers are advised to plan and act ahead if one intends to extend the employee’s retirement date. It would be prudent to seek legal advice to ascertain if the purported extension would have any effect on the employer’s liability to the employee’s entitlement to any benefits under the original employment contract.

(This article, written by our Partner Mr Dominic Wai and our Trainee Solicitor Ms Jenny Ng, is also published in the December 2016 issue of Human Resources, the Official Journal of the Hong Kong Institute of Human Resource Management.)