Skip to content


Empire of India Life Assurance Company Ltd. Vs. S. Nanu Ayyar - Court Judgment

LegalCrystal Citation
SubjectInsurance
CourtChennai
Decided On
Judge
Reported inAIR1921Mad309; (1921)ILR44Mad170
AppellantEmpire of India Life Assurance Company Ltd.
RespondentS. Nanu Ayyar
Cases ReferredAdinarayana Rao v. The General Manager
Excerpt:
.....his opinion the claim must fail. in my opinion it may very well be that where the claimant has to do no work beyond making the first introduction of the customer to a trading firm he can claim commission on repeat orders but where, as in the language of cairns, l......has to do no work beyond making the first introduction of the customer to a trading firm he can claim commission on repeat orders but where, as in the language of cairns, l.c., and the court of appeal in boyd v. mathers (1893) 9 t.l.r., 443 he is paid commission in respect of his services, and services are expected to be rendered in respect of the renewals, when he has ceased to be in a position to render the services he cannot claim to receive the commission. i prefer, therefore, to follow the reported case of the court of appeal and the earlier decisions of this court and hold that in the absence of a definite agreement to that effect the right to receive the commission lapses on dismissal.14. in the result the appeal must be allowed and the suit dismissed with costs of the.....
Judgment:

Napier, J.

1. This Second Appeal arises out of a suit by one S. Nanu Ayyar against the Empire of India Life Assurance Company of Bombay. The plaintiff alleges that he was once an agent of the Company and claims a declaration and an account in respect of all premia paid by policy-holders in respect of all policies procured by the plaintiff after the termination of the plaintiff's services as agent. The plaintiff does not allege that he was wrongfully dismissed or claim damages for wrongful dismissal. The lower Appellate Court has found that he was an agent employed by the Company and was properly dismissed for misconduct, but on the terms of his engagement, as found by itself, has held that the plaintiff is entitled to premia on the original policies obtained through his efforts for three years prior to the suit. I accept the finding as to the agency, but the important question remains whether the lower Appellate Court has based its finding as to the terms of engagement on proper materials. The' plaintiff alleged that he was engaged on certain terms but in his plaint did not state whether his engagement was in writing or oral. In his evidence he endeavoured to establish that he was engaged on the terms of a letter which is Exhibit F in the case, his evidence being 'the terms written to me by Venkatachala Iyer (that is the chief agent) are mentioned in Exhibit F.' The lower Appellate Court has found that Exhibit F was not addressed to him nor any letter in those terms; and as Exhibit F is not a letter but a circular and as he has proved no other letter there can be no doubt that this finding is correct. But the lower Appellate Court has held that he was engaged on the terms set out in a letter, Exhibit S. Now, Exhibit S is not a letter addressed to the plaintiff, but a letter addressed by the Chief Agent for Madras to the Company at Bombay in 1913 and is his report about the plaintiff after the date of his dismissal. In that letter the Agent states that the plaintiff had been working under him until 30th March 1912 under the terms of 10 per cent commission on the first year's premia, 5 per cent on renewals, plus a bonus of one per cent on new collections up to Rs. 1,000,. 2 per cent up to Rs. 3,000 and 3 per cent above Rs. 3,000, and he states that he gave one copy of the book of 'Instructions to Agents' to the plaintiff. The admissions by this servant of the Company must of course be taken all together, and the statement that the Sub-agent was supplied with a copy of the 'Instructions to Agents' is part of the admission as to the terms of percentage. This 'Instructions to Agents' is Exhibit T in the case. This has been ignored by the Subordinate Judge, whereas it should have been treated as part of the contract.

2. The 'Instructions to Agents' sets out the terms of commission and bonus commission and to the extent that the evidence shows those rates have been altered the contract is varied to that extent, but the other terms undoubtedly apply. Article 29, which is in that part of the book dealing with commission, is as follows:

The commission is allowed so long as the premiums are paid and the agent continues to represent the Company.

3. This clause was, in my opinion, part of the contract and this being so the claim must fail in. toto.

4. Even if Article 29 was not incorporated in the contract I should be of the same opinion.. 'this claim by an agent or subagent to be entitled to renewal premia after his connexion with the Company was severed was the subject of a suit, Civil Suit No. 100 of 1899 on the original side of the High Court. In that suit the plaintiff alleged that he was wrongfully dismissed and that he was entitled to receive the future premia. Boddam, J., held that he was properly dismissed for improper and fraudulent conduct and dismissed the suit. The case went on appeal (Original Side Appeal No. 42 of 1899) before Shephard and Davies, JJ., and their Lordships hold that in the absence of any special agreement for such payment the agreement must be treated as binding only as long as the agency lasted.

5. Another suit was filed on the original side of the High Court in 1903, Original Suit No. 178 of 1903. In that suit the plaintiffs who were the head Madras Agents had had their agreement terminated by notice and not for misconduct. They claimed that they were entitled to commission on renewal premia as long as any policy remained in force which had been obtained by them or their sub-agents. The case was tried by Moore, J., who found that the agreement in that case was founded on Exhibits C and P, two Instruction Books, and he states that nothing is said in either of them as to whether the commission is to continue to be paid after the termination of the agency or not. The learned Judge held that as there was no claim for damages as compensation for wrongful termination of the agency the claim could not be sustained. An appeal was filed from that decision but withdrawn.

6. The claim has lately been renewed in a suit on the small cause side of the District Munsifs Court of Cuddapah, in Adinarayana, Rao v. The General Manager, Empire of India Life Assurance Company, Bombay Small Cause Suit No. 991 of 1915 which was brought before a Bench of this Court in Adinarayana Rao v. The General Manager, Empire of India Life Assurance Company, Bombay Civil Revision Petition No. 933 of 1916 (unreported).: That suit was against the defendants in this suit by another dismissed agent. There too the plaintiff did not claim. that he was wrongfully dismissed. The difference between that suit and this is that the Court found that the term of the contract were in a letter which was Exhibit A in that case and which contains . the terms set out in Exhibit F in this case, and it does not appear that the book of 'Instructions to Agents' was sent to the plaintiff. Anyhow it is not found to have been part of the terms of the contract. The District Munsif dismissed the suit relying upon a statement of law in Halsbury's Laws of England, Volume I, page 185, the judgment of the Bench of this Court in Original Side Appeal No. 42 of 1899 and the judgment of Mr. Justice Moore in Original Suit No. 178 of 1903. The Bench has distinguished those cases on grounds which, with all respect, I am unable to appreciate. The decision presents one difficulty in that there is a seeming contradiction on a finding of fact. The learned Judges say that the:

respondent did not contend that any part of petitioner's claim related to renewals or to anything except the payments of ordinary premia on the original policies obtained through his efforts.

7. The defendant being the same as in this suit, it is easy to ascertain what is meant by the word 'renewals'' in respect of which the petitioner is stated not to be claiming. As a matter of fact subsequent premia on original policies are renewals and are called renewals in the books of this company, and are known as renewals in ordinary insurance parlance. When, therefore, the Bench distinguishes the other Madras cases on the ground that they deal with the agent's right to commission on payments made in consequence of: renewals they are, with all respect, making a distinction that does not exist, for the claim in the Madras cases was exactly the same as the claim in the case with which they were dealing, namely, subsequent premia on original policies which are in fact renewals.

8. The only insurance case to which our attention has been called is a decision of Lord Cairns, L.C., Re The Albert Life Assurance Company, Lewine's Case (1871) 15 S.J., 828. In that case the Directors of the Albert Company entered into an agreement with one Mr. Lewine that he should act as an agent for the Insurance Company on a salary of 250 with a commission of 10 per cent on the renewal premiums on all policies effected through him, and in case of his retirement from his agency a commission of 5 per cent for the remainder of his life on the renewal premiums on all policies which had been effected through him. The Company went into liquidation and Mr. Lewine claimed to rank as a, creditor in respect of the premia which he would have earned after the close of his services basing his claim on the last clause above referred to. The Lord Chancellor held that it was entirely ultra vires of the Directors to provide for the payment of commission on renewal in case of the retirement of Mr. Lewine from the agency. In that case, there was salary as well as commission, but his Lordship thought that it was unreasonable and improper to agree to pay commission after the retirement of the agent from his service just as it would have been to agree to pay salary. Both salary and commission must be for services rendered and not for services which are not rendered. It is to be noted that it was not suggested in this case that the general language that the plaintiff was to have a commission of 10 per cent on the renewal premia on all policies effected through him would entitle him to recover commission on premia after retirement but that there was a specific contract to that effect. This case is of value for the proposition that a specific clause being so unreasonable the absence of a specific clause either allowing or refusing in terms cannot lead to the inference that such a right was contemplated or implied in the agreement. With reference to his Lordship's observation that commission is for services rendered it is to be noted that Exhibit T shows the class of services required of agents in respect of renewals. Article 31 of 'Instructions to Agents' gives directions to the agent for action to be taken when a policy-holder desires to have his policy altered in any particular. Article 41 deals with the duty of an agent on the death of any person assured in his agency and those duties are of a distinctly exacting nature. One very important duty of an agent will always be to impress upon policy-holders the value of keeping up their premia and this is especially a work necessary for the earning of the premia which in the view taken by the Bench in the case under consideration would have to be. done by some: other agent while the original agent or his executors or his trustee in bankruptcy drew the proceeds for doing nothing at all. So far for insurance cases. .

9. Mr. T.R. Venkatarama Sastri in the course of his able argument invited our attention to a series of cases on commission in respect of other businesses. The first case is Bilbee v. Hasse (1889) 5 T.L.R., 677 a decision of Lopes, L.J., sitting at nisi prius. In that case both the parties were butter merchants, the plaintiff having a large and extended business and the defendants only a small business. The defendants agreed with the plaintiff to do business with persons introduced by him and 'as regards your commission we have agreed to allow 1 per cent upon all orders executed by us and paid for by the customers arising from your introduction.' After a certain time the defendants gave notice to the plaintiff to close his transactions on defendants' behalf, and a suit was brought to recover commission on business done, after his severance with the defendants with persons who had been introduced by the plaintiff. No cases were quoted and the learned Lord Justice thought that the remedy in the hands of the defendants was to give up business transactions with persons introduced by the plaintiff. He held that the plaintiff was entitled to recover the commission.

10. The next case is Boyd v. Mathers (1893) 9 T.L.R., 443, a decision of the Court of Appeal. The plaintiff was an advertising contractor and the defendant, the proprietor of a newspaper. The terms of the contract were that the plaintiff should act as advertising contractor and canvasser in connexion with the paper and should receive from the defendant a commission of 25 per cent on renewal orders of advertisement obtained from the plaintiff. The plaintiff's employment was terminated and he brought a suit for a declaration that he was entitled to commission on renewals which were received after the determination of his employment. Kekewich, J., dismissed the suit and his decision was upheld by the Court of Appeal. Lindley, L.J., said, that be could not read the letters as amounting to a contract that the plaintiff was to receive a commission on all advertisements appearing in the paper after he ceased to have anything to do with it. He was to be paid commission in respect of his services and after he had ceased to be in a position to render any services he was not to receive anything.. Bowen, L.J., and Kay, L.J., concurred.

11. Salumon v. Brownfield and the Brownfield Guild Pottery Society (1896) 12 T.L.R., 239 is a case tried at nisi prius by Mathew, J. The defendants were pottery manufacturers who employed the plaintiff to go to Australia and travel for them upon terms of their paying 7 per cent on the not amount of cash in payment of goods, orders for which were obtained through him. The plaintiff's services were terminated in 1895 on three months' notice and he sought for a declaration that he was entitled to the commission on all orders obtained from persons originally introduced by him though after termination of his agency. Mathew, J., took the same view as Lopes, J., and gave judgment, for the plaintiff, but the decision of the Court of Appeal in Boyd v. Mathers (1903) 19 T.L.R, 554 was not brought to his notice.

12. The next case is the case of Gerahty v. Baines (1893) 9 T.L.R., 443, a case tried by Lord Alverstone, C.J. The plaintiff in that case was an advertising agent and claimed a declaration that he was entitled, to a commission of 10 per cent on all advertisements received by the newspapers belonging to the defendants from advertisers introduced by the plaintiff, even subsequent to the determination of his employment as the defendants' canvasser. The terms of the contract gave no such specific right, the only reference to renewal orders being that he should have 10 per cent on .all renewal orders of such advertisements so long as they were sent in within two years of the next previous order. A mass of evidence was called to prove custom and the cases of Bilbee v. Hasse (1883) 5 T.L.R., 677, Boyd v. Mathers (1903) 19 T.L.R, 554 and Saloumon v. Brownfield and the Brownfield Guild Pottery Society (1896) 12 T.L.R., 239 were brought to the notice of the Court. The Lord Chief Justice told the Jury that no custom had been established and left them the question whether there was any agreement between the plaintiff and the defendants that the plaintiff should be entitled to a commission on renewals of advertisements after the expiration of his employment as canvasser: if so, whether it was for any definite time and if so, for what time and on what terms. The Jury found that there was no such agreement between the parties and that the point had never been raised between them. The Lord Chief Justice agreeing with the Jury said that in his opinion the claim must fail. The plaintiff was the defendants' canvasser and it made no difference that his services wore paid for by commission and not by salary. These words have, I think, reference to the language of Lord Cairns in Re The Albert Life Assurance Company, Lewinc's Case (1871) 15 S.J., 828. He then continued:

The position of a canvasser wan that of an agent who, so long as ho was acting for his employers, was daily or weekly soliciting advertisements, or renewals

and stated that, in his opinion, there must be a special bargain proved to on entitle an advertising' agent to recover commission for renewals after the termination of his employment.

13. The last two cases are the judgments of the learned Judges on the Chancery side, Wilson v. Harper [1908] 2 Ch., 370 and Levy v. Goldhill [1917] 2 Ch. 297. These were cases of independent traders who were able, without interfering with their own business, to introduce customers to the defendants in the two cases. In the one case the language used was 'half profits on receipt of orders. Same applies to repeats on any accounts introduced by you,' in the other case '5 per cent on all goods supplied to customers introduced by you. We shall be pleased to pay you these aid 5 per cent as long as we do business with those you place on the books.' in Wilson v. Harper [1908] 2 Ch., 370 the conflicting rulings were brought to the notice of Mr. Justice Neville and he held that the plaintiff, not being an agent, was entitled to recover on the terms of the contract. In the latter case all the former case with the exception of the decision of the Court of Appeal in Boyd v. Mathers I.L.R.(18 93) , 443 were brought to the notice of the learned judge, and he appears to have followed the decision of the Court of Appeal on appeal from the decision of Lopes, D.J, in Bilbee v. Hasse (1889) 5 T.L.K., 677. Unfortunately we have no report of that decision of the Court of Appeal which was only reported in the Times Newspaper. Peterson, J'., relies on the reported language of Bowen, L.J., and we do not know whether the learned Lord Justice distinguished or discented from his former judgment in Boyd v. Mathers I.L.R(18 93) ., 443 . Those are all the cases. In my opinion it may very well be that where the claimant has to do no work beyond making the first introduction of the customer to a trading firm he can claim commission on repeat orders but where, as in the language of Cairns, L.C., and the Court of Appeal in Boyd v. Mathers (1893) 9 T.L.R., 443 he is paid commission in respect of his services, and services are expected to be rendered in respect of the renewals, when he has ceased to be in a position to render the services he cannot claim to receive the commission. I prefer, therefore, to follow the reported case of the Court of Appeal and the earlier decisions of this Court and hold that in the absence of a definite agreement to that effect the right to receive the commission lapses on dismissal.

14. In the result the appeal must be allowed and the suit dismissed with costs of the defendant throughout.

Sadasiva Ayyar, J.

15. In arriving at the terms of the contract between the parties, I am. inclined to hold that we ought to be guided by Exhibit F rather than Exhibit S, There is, however, no inconsistency between the two. But whether we look to Exhibit F or Exhibit S or to both, I agree entirely with my learned brother that the 'Instructions to Agents', Exhibit T, which the plaintiff dishonestly denied having received or looked into, ought also to be considered for the ascertainment of all the terms of the contract between the parties. Considering then Exhibits F, S and T together, I am clear that Article 29 of Exhibit T governs the right to claim commission. It follows that when the plaintiff ceased to represent the Company, he lost his right to claim commission on renewals of premiums made after he ceased to be the agent. I, therefore, agree that the appeal should be allowed and the suit dismissed with costa in all Courts.

16. Whether if Article 29 of Exhibit T was not to be incorporated into the contract, the plaintiff's suit should even then fail is a very interesting question. Apart from the English authorities I am inclined to agree with my learned brother that where the duty of the agent does not cease with the first introduction of the customer to the principal, commissions could not be claimed on payments mode by the customer after the agency ceases and I concur in his observations on the judgment in Adinarayana Rao v. The General Manager, Empire of India Life Assurance Co., Bombay Civil Revision Petition No. 933 of 1916 (unreported.).


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //