Integrated Financial PLNG Service v the Mawson GP No. Scgrg-99-846 Judgment No. S398

[1999] SASC 398

INTEGRATED FINANCIAL PLANNING SERVICES PTY LTD (Respondent) v THE MAWSON GROUP (SA/NT) PTY LTD (Appellant)

[1999] SASC 398
Magistrate’s Appeal
1 MARTIN J.  (Ex tempore)           The appellant was the defendant in an action in the civil jurisdiction of the Magistrates Court in which the respondent as plaintiff sued for the amount of $7 705.60 that the plaintiff said was owed by the defendant pursuant to an agreement reached in September 1997.  The agreement related to the payment of commission for sales of life insurance and other life products. 
2 The Magistrate found in favour of the plaintiff.  The defendant appeals against the judgment on a number of grounds related to findings of fact and matters arising out of agreements between the parties.  
3 The plaintiff, through its director Mr Peter Moyle, carried on business in the marketing and selling of life insurance, superannuation and investment products for life assurance offices and fund managers.  An arrangement existed between the plaintiff and FAI Life Assurance Society Ltd ("FAI") that if the plaintiff wrote a volume of business that resulted in payment by FAI of a base commission over a particular figure, FAI would pay a bonus commission described as an override commission.   However, the bonus commission was not paid directly to the plaintiff.  A business arrangement existed between the plaintiff and the defendant whereby the bonus commission would be paid by FAI to the defendant.  The defendant carried on business as a general agent, sometimes referred to as a master agent, and was able to negotiate favourable terms for individual agents, like the plaintiff, with a number of insurers.  The business relationship between the plaintiff and the defendant is reflected in its original form in an agreement comprised of a document dated 1 September 1995, together with correspondence which supplements that document dated 30 August 1995 and 12 September 1995.   That agreement should be understood in the context of the bonus commission. 
4 In the case of FAI, once the individual selling agent, in this case Mr Moyle, earned in excess of $120,000 in base commission for individual sales, until 1 October 1997 FAI paid the bonus commission calculated as 60 per cent of the base commission.  In that context, in September 1995 the parties agreed that the bonus commission due to the plaintiff would be assigned to the defendant and the defendant would pay 80 per cent of that bonus commission to the plaintiff, retaining 20 per cent for itself.  This arrangement was varied in January 1997.  The parties agreed that the entire bonus commission would be paid by the defendant to the plaintiff and the plaintiff would pay the defendant a minimum of $500 a month.  In addition, if the plaintiff used the defendant's services the defendant was entitled to be paid at an hourly rate for the delivery of those services.  The details are set out in a letter dated 20 January 1997 from the defendant to the plaintiff. 
5 In September 1997, FAI apparently decided to dispense with the services of some of its management personnel and to use the services of agents such as the defendant to carry out the work previously done by its own personnel.  FAI met with Mr Peter Johnson of the defendant on 17 September 1997.  FAI was represented by the witness Mr Peter Taylor.  According to Mr Johnson, he understood that FAI were to pay a 20 per cent management allowance from 1 October 1997.   In essence, that management allowance was based upon the bonus commission earned by the individual agents such as the plaintiff.  Instead of paying 60 per cent of the base commission to the defendant, from October 1997 FAI was to pay 80 per cent of that base commission to the defendant.  As between FAI and the defendant, the additional 20 per cent was treated as a management services fee. 
6 The defendant said he undertook certain management work for FAI which is set out in a document that could be said to form the agreement between the defendant and FAI.  That document was headed "Managing Agent Remuneration Schedules".  From Mr Johnson's perspective, if he was required to carry out additional work for FAI, then this additional 20 per cent was his remuneration.   He said he was requested by Mr Taylor not to pass on in excess of half of that management services fee to the individual agents. 
7 Mr Taylor gave evidence that they advised the master agents and those receiving the management services fee that it was in their interests to keep the fee for themselves.  He added that what they did with it was their business, but that was the wish of FAI.
8 Mr Taylor also met with Mr Moyle in September 1997.  In evidence accepted by the Magistrate, Mr Moyle said he was advised that FAI would increase its bonus commission by 20 per cent from 1 October 1997.  This was denied by Mr Taylor. 
9 According to Mr Moyle, after he had met with Mr Taylor he spoke with Mr Johnson and said he wanted to be paid the extra 20 per cent.  He said Mr Johnson agreed saying "That's between you and me, FAI don't have to know".  While Mr Johnson agreed Mr Moyle demanded the full 20 per cent, he said he explained it was not available because FAI had asked him not to pass on the full 20 per cent.  He said he told Mr Moyle a maximum of 10 per cent would be available (meaning half of the twenty per cent).
10 Mr Johnson's evidence in this regard is significant because of submissions made on behalf of the appellant that the parties reached a separate agreement that only half of this additional amount would be paid by the defendant to the plaintiff.  He said that when he explained that only a maximum of, as he put it, 10 per cent would be available, Mr Moyle responded as follows:
"Peter, as I recall, was about to go on leave and he didn't want to carry the discussion on any further at that stage, but I wasn't in a position to make a final decision that day anyway because I was waiting on a call from FAI from Peter Taylor".
Mr Johnson said he told Mr Moyle he would pay him the 10 per cent, but at no time in his evidence did he say that Mr Moyle agreed to accept that figure.  In my opinion, there is insufficient evidence from Mr Johnson to justify a finding that the parties entered into a new agreement, either in variation of the existing agreement or as an independent agreement, whereby the plaintiffs agreed to accept half of the additional amount that was to be received from FAI.  The subsequent conduct of Mr Moyle supports this view. 
11 Initially, the defendant did not pay any amount of the additional 20 per cent to the plaintiff.  The discussions having occurred in September 1997, it was approximately 9 months later in June 1998 when Mr Moyle's secretary alerted him to the fact that they had not been receiving the additional bonus commission.  He spoke with Mr Johnson who responded in a vague manner, saying he did not know and would get back to Mr Moyle.  When Mr Moyle spoke with Mr Johnson he asked where the additional 20 per cent was;  he did not ask where his half of that additional twenty per cent was. 
12 The next Mr Moyle knew was receipt of a letter from Mr Johnson dated 23 July 1998.  The letter indicated that Mr Johnson had arranged for a deposit of $2 734.07 to be made to Mr Moyle's bank account.  The letter listed the amounts owing for the period October 1997 to June 1998 and the amounts were set out under a heading "10 Per Cent Extra Management Allowance".  The letter stated that the decision to pay the extra 10 per cent of what had been allocated by FAI as a specific management allowance was outside the terms of their previous agreement, but that Mr Johnson had decided in the spirit of compromise to pay the amount until further notice. 
13 Mr Moyle said this was the first he had heard of a suggestion that there be a split between them of the additional 20 per cent.  He said he never agreed to accept half of the increased payment from FAI or to the defendant retaining half.  Mr Moyle said he received the maximum available bonus commission from all other companies with which he placed business and by which bonus commissions were paid.
14 The Magistrate accepted the evidence of Mr Moyle.  His finding in that regard is challenged.  It is said that Mr Johnson was unlikely to have agreed to pass on all of the additional amount because he was now being required to provide extra services to FAI.  In addition, it was said that Mr Johnson had been looking to change the existing arrangement and it would have lacked commercial feasibility to enter into the arrangement to pay the full amount. 
15 Although a number of grounds have been argued in support of the defendant's appeal, at the heart of those grounds are the propositions that the Magistrate misconceived the nature of the arrangement between FAI and the defendant and that this misconception contaminated his reasoning.  It was said that the misconception is such a fundamental flaw that his Honour’s findings of credit cannot stand. 
16 The Magistrate may have confused the matter a little when he spoke in terms of a moral issue and expressed the opinion that it was unfair or improper for FAI or the defendant, or both, to seek the benefit from the plaintiff's earnings.  However, his Honour addressed the critical question as to the nature of the additional payments and found that it was, in reality, a bonus commission.  In my view, there is no reason to interfere with his Honour's finding in that regard.  The bonus commission had been 60 per cent of the base commissions earned by the plaintiff and other individual agents once those commissions exceeded $120 000.  It was now being increased to 80 per cent.  FAI said the twenty per cent increase would pay for additional management services, but it was a matter for the agents what use they made of it.  Presumably the increase was a convenient way for FAI to reflect the additional management work which was being carried out by the master agent, possibly on the basis that if the individual agent had earned so much base commission through sales, the increase reflected the additional work that the master agent was required to perform.  However, whatever arrangement was reached between FAI and the defendant, the real question is what agreement was reached between the defendant and the plaintiff. 
17 While it might be said by the defendant that was unlikely that it would agree to pay the full amount of the increase to the plaintiff, it could be argued by the plaintiff that, in reality, there was no additional management work to be carried out and Mr Johnson was quite likely to have agreed to pass on the full amount in accordance with the existing agreement.  In my opinion, the Magistrate did not misconceive the nature of the new arrangement and a sufficient basis for interfering with his findings as to credit has not been demonstrated.
18 In those circumstances, accepting the evidence of Mr Moyle, the appropriate finding is that Mr Moyle and Mr Johnson agreed that the existing agreement would continue in the sense that the defendant would continue to pay the full amount of the bonus commission to the plaintiff.  The alternative way of approaching it is that they reached a fresh agreement to vary the original agreement and to do so orally and the terms of the new agreement were that the additional amount of 20 per cent would be paid in full by the defendant to the plaintiff.  Whichever way it was approached, on the basis that Mr Moyle's evidence is accepted, the plaintiff made out its case. 
19 In addition, as I have indicated, in my opinion the evidence of Mr Johnson falls short of establishing either that there was an independent agreement that only half of the additional 20 per cent would be paid or that there was a variation to the existing agreement to that effect.  In those circumstances, and accepting the finding of the Magistrate that this was a bonus commission, the terms of the original agreement continued to be in force and the defendant was liable to pay the full amount to the plaintiff. 
20 The appeal is dismissed.