BARBADOS

IN THE SUPREME COURT OF JUDICATURE

COURT OF APPEAL

Civil Appeal No. 15 of 2006

BETWEEN:

AMERICAN LIFE INSURANCE COMPANY Appellant

AND

HENDERSON FRANKLYN Respondent

BEFORE: The Hon. Frederick L.A. Waterman, CHB, The Hon. Peter D.H. Williams and The Hon. Sherman R.
Moore, Justices of Appeal.

2007: 19 July 2009: 31 March

Mr. Bryan Weekes and Ms. Dyon Scarlett for the Appellant

Ms. Liesel Weekes for the Respondent

DECISION

WATERMAN JA

INTRODUCTION
[1] 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 WIR 74, as to whether a worker, in this case

Franklyn, is employed under a contract of service or under a contract for services.

[2] 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.

[3] 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.

[4] 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.”

[5] By this correspondence ALICO essentially informed Franklyn that he would become an external agent. O n 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.

[6] 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 Morren v Swinton and Pendlebury Borough Council [1965] 2 All ER 349.

[7] 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.

[8] 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.

[9] The first factor the trial judge considered was the test of control (at paras. [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.

[10] 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.

[11] 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”.

[12] 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.

[13] 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.

[14] Another 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.

[15] 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 WIR 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

[16] There are three main grounds of appeal:

(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;

(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

(3) that the Learned Trial Judge erred in calculating the quantum of damages payable to
Franklyn.

Ground 1

[17] 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.

[18] 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.)

[19] 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 but dismissed the control test out of hand as
 being of no assistance.

19. The Appellant submits that the common law dictates that for there to be a finding in law that a
contract of employment exists there must be a minimum amount of control exhibited by the employer
over the employee. Without such control there can in law be no contract of service in existence.”

In support of this submission, counsel referred to the dicta of Mackenna J. in Ready Mixed Concrete (South
East) Ltd. v. Minister of Pensions and National Insurance [1968] 2 Q.B. 497 at 515 and Market
Investigations Ltd. v. Minister of Social Security (1969) 2 Q.B. 173, among others. Counsel may have
obtained his inspiration for the submission from a passage in 16(1A) Halsbury’s Laws on Employment, Fourth

Edition Reissue (2005) at para. 4 which states:

“The final classification of an individual now depends upon a balance of all relevant factors, fine
though the balance sometimes might be, with ‘mutuality of obligation’ and ‘control’ being seen as
‘irreducible minimum’ legal requirements for the existence of a contract of employment.”

[20] However, counsel’s submission is flawed because of a misreading of the judge’s statement and a failure to
appreciate the modern approach to the control test. The judge did not state that the appellant exercised no
control over the respondent; she stated that she did not find “the test” of control helpful to her determination. This
position accords with the limitations of the control test in the context of many modern working relationships; a high

degree of control is not necessarily indicative of a contract of employment and a low degree of control is not
necessarily indicative of self-employment. Much will depend on the nature of the work and the arrangement
between the parties.

[21] The modern approach to the definition of a contract of employment is stated in Chitty on Contracts, Thirtieth

Edition (2008) at 39-005, as follows:

“The traditional statements of what constitutes a contract of service placed most emphasis on the
power of the employer to control the work of the employee, when contrasting that contract with an
independent contractor. The traditional distinction was that whereas the employer could merely direct
what work was to be done by the independent contractor, he might also direct how the work was to be
done by an employee. The current approach to this distinction, and hence to the definition of the
contract of employment, has four main elements:

(1) the denial of the supremacy of the control test, whilst still acknowledging its importance;

(2) the use of some form of ‘organisation’ test;

(3) a growing preference for asking whether the worker is ‘in business on his own account’ –
though it has been denied that this is the fundamental test;

(4) the assertion that exhaustive definition is futile and that the method of classification is by the
 accumulation of relevant factors in each case;

(5) an increasing tendency to treat the distinction as one to be applied at first instance rather than
by an appellate court.”

[22] Counsel for the respondent, Ms. Weekes, submitted, inter alia, that there is no one conclusive test or set of tests
to be applied to the circumstances of the case and it was open to the judge to apply the principles set down in the
Market Investigations case. She submitted that the issue of control is encapsulated in the test laid down by
Market Investigations and invited the Court to agree “that implicit in a finding that a man is not in business on his

own account is the premise that there must be some control by the person for whom he is working”. The
submission accords with Halsbury’s Laws at para. 4 which states:

“There is no single test for determining whether a person is an employee. The test that used to be
considered sufficient, that is to say the ‘control’ test, can no longer be considered sufficient, especially
in the case of the employment of highly skilled individuals, and is now only one of the particular factors
which may assist a court or tribunal in deciding the point.”

[23] Ms. Weekes submitted further that the authorities on the distinction between a contract of service and a contract
for services have been extensively reviewed in a number of recent cases. In support of her submission Counsel

referred the Court to Whittaker v Minister of Pensions and National Insurance [1967] 1 Q.B. 156, Ready Mix
Concrete v. Minister of Pensions and National Insurance (supra) and the recent Privy Council case of John
Hanna v. Imperial Life Assurance Company of Canada (Privy Council Appeal No. 61 of 2005, unreported

decision of 2 May 2007) among others. Hanna entered into an agency agreement with the Life Assurance
Company but the trial judge on a preliminary ruling held that Hanna was an employee of the Company and not an

agent. The Court of Appeal reversed the judge’s ruling but the Privy Council restored the finding of the judge.

[24] The Chief Justice dealt with the very issue now before this Court in the Sagicor case (supra). The headnote of

that case reads in part as follows:

“The plaintiff insurance company brought proceedings seeking a declaration as to the nature of the
employment relationship between itself and four categories of workers, designated variously as
‘canvassers’, ‘senior financial services representatives’, ‘sales representatives’ and ‘representatives’.
The principal issue for the court was whether the workers were engaged under a contract of service or
under a contract for services.

Held – Upon an analysis of established authority and tests formulated therein, including the control
test, the organisation or integration test, the economic reality test, the multifactor test and mutuality of
obligations, the proper approach to the issue required a thorough examination of all aspects of the
relationship between the parties including an examination and construction of the terms expressly set
out in the written contracts as well as the manner in which the contracts were performed.”

The judgment of Kentish J was referred to in the Sagicor case at paragraphs [30] to [32] and at [72]. However,
 that case was decided after the appeal hearing in the instant case and we did not have the benefit of counsel’s

submissions to consider the same.

[25] Chitty at 39-010 provides a useful list of the factors derived from the case law identifying a contract of
employment as follows:

“(1) the degree of control exercised by the employer;

(2) whether the worker’s interest in the relationship involved any prospect of profit or risk of loss;

(3) whether the worker was properly regarded as part of the employer’s organisation;

(4) whether the worker was carrying on business on his own account or carrying on the business of
the employer;

(5) the provision of equipment;

(6) the incidence of tax and national insurance;

(7) the parties’ own view of their relationship;

(8) the structure of the trade or profession concerned and the arrangements within it.”

[26] In some jurisdictions the courts have adopted a “dominant impression” test to determine whether the relationship

is one between an employer and an employee or between an employer and an independent contractor. The
determination is made in accordance with the dominant impression created by all the facts. This test may have

been derived from the words of Lord Griffiths in Lee Ting Sang when he referred at page 384 to “the strong

impression that the evidence created in the minds” of the judges. Similarly in this case, in agreement with the
judge, we formed the dominant impression that the respondent was an employee of the appellant.

Approach to resolving appeal

[27] The determination of the respondent’s status was essentially a question of fact for the trial judge. We therefore

bear in mind without repeating them, the well recognised constraints of a Court of Appeal in this area. Lord Hope

of Craighead in Hanna’s case gave guidance on the approach the Court of Appeal should have adopted in
reviewing the judge’s decision in a very similar case; he stated at para. 18 as follows:

“The question which the Appeal Court should have asked itself, therefore, is whether there was no
evidence to support the conclusion reached by the trial judge. 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 as a contract of employment does not on its own conclude the
matter in the appellant’s favour.”

[28] The Privy Council in Hanna’s expressed the view that the question whether or not a person is employed under a

contract of service is largely a question of fact to be determined by the trial judge on an investigation and

evaluation of the factual circumstances in which the work was performed (para. 17). Support for the view is also
to be found in Chitty at 39-011 as follows:

“The recent tendency has been for appellate courts to confine their intervention to cases where they
find a positive error of law at first instance; to cases, that is, where they find that there was no
evidence to support the conclusion reached at first instance or where they find that no reasonable
person acting judicially and properly instructed as to the relevant law could reach such a decision”.

[29] We adopt the language of Lord Hope in para. 19 of that case and hold in the instant case that there was ample
material before Kentish J to entitle her to hold that the appellant was an employee of ALICO and not an agent

carrying on business on his own account. He was required by his agreement with the respondent at all times to

promote the business of the respondent. The appellant was performing business on account of the respondent
and was provided with the resources to do so. There were deductions for P.A.Y.E. and N.I.S. and provision for a

bonus and attendance at conferences. The appellant 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 agent he was himself an
employee of the company and that he remained an employee when the contract was terminated.

[30] We are satisfied that the judge carried out a proper determination of the respondent’s status. Accordingly, we
hold that Franklyn was employed under a contract of service and was an employee of ALICO. We therefore find

that the first ground is without merit.

Ground 2-Termination of the Contract

[31] Counsel for ALICO contended that the course of dealings between the parties clearly indicated that ALICO
intended to terminate the contract under clause 9(d). Clause 9(d), counsel submitted was a performance based

clause and basically provided that if Franklyn was not performing at the required level, that this was a proper
cause for termination. Mr. Weekes acknowledged that the letter of termination from ALICO to Franklyn referred to

a non-existent clause 18(c), but submitted that the only reasonable inference that could be drawn was that he

was terminated under Clause 9 (d). In support of this submission, Mr. Weekes cited the correspondence to
Franklyn concerning his poor performance that preceded the final termination letter from ALICO. He submitted

that the letter of termination dated 17 May 2002 should be read in the context of the overall factual matrix of the
 case.

[32] On the issue of notice, Counsel for ALICO argued that clause 9 of the Agreement did not require notice to be

given to Franklyn upon termination of the contract.

[33] Counsel for Franklyn submitted that the termination of the Agreement between ALICO and Franklyn ought to

have been for breach of clause 9. She noted the fact that clause 18(c) was non-existent, and therefore could not

be the clause pursuant to which the contract was terminated.

[34] Counsel for Franklyn further submitted that retroactive termination of the Agreement was never contemplated

and argued that such termination would have essentially disadvantaged Franklyn in that whatever he earned
during the period before termination, he would not have been entitled to. She contended that ALICO’s

termination of Franklyn’s employment ought to have been executed under clause 9(d), but because it was not

done properly, it was a breach of contract.

Discussion

[35] Clause 9 of the Agreement, which provides for the termination of the contract between Franklyn and ALICO is as
follows:

“This Agreement shall be terminated by:

(a) Mutual written agreement;

(b) Either party giving the other at least thirty (30) days prior written notice by registered mail;

(c) The Agent violating any of the terms of this Agreement;

(d) By the Agent’s failure to meet any one of the following criteria:

(1) During any ninety day period to procure and transmit to the Company three life
applications upon which a policy is issued and the full first premium thereon is paid in cash;

(2) To produce a minimum of 25 paid for life applications per Company accounting year; or

(3) To maintain a persistency of at least 80% according to the Company’s persistency Study
then in effect;

(e) By the agent transferring his permanent residence from the Territory; or
 (f) By the death or total and permanent disability of the Agent.

Upon termination of this Agreement pursuant to subparagraph (c) above, all Agent’s rights hereunder
and under any and all previous contracts including the right to any compensation payable thereafter
shall immediately cease. In the event of termination for any other reason, the Agent shall be entitled to
the termination benefits pursuant to the Schedules.”

[36] By letter dated 17 May, 2002, ALICO purported to terminate their relationship with Franklyn retroactively from 19

April 2002. In that letter, ALICO also informed Franklyn of the benefits to which he was entitled on termination.
That letter of termination is crucial to the determination of this appeal, and is reproduced below:

C/O ALGICO

PO Box 943

91-93 St. Vincent Street;

Port of Spain,

Republic of Trinidad & Tobago

Fax No.: 1-868-623-4923

Tel.: 6-ALGICO

May 17, 2002

Mr. Henderson Franklyn

Salters

St. George

BARBADOS

Dear Mr. Franklyn:

This letter is to advise you that your Career Agent Agreement dated February 20 (sic), 1974, with American Life Insurance
Company, has been terminated effective April 19, 2002 under Section 18C.

We would appreciate your returning to our local office, if you have not already done so, our Rate Book and all other
documents belonging to the company.

Kindly be advised of the following:

Vested Commissions: You are entitled to vested commissions, that is first year plus fifty (50%) renewal commissions
 for 24 years.

Deductions: Effective immediately all standard deductions will cease and you should make alternative arrangements to
ensure that those payments are made.

Group Coverage: You are entitled to convert your Group Coverage within thirty-one (31) days of receipt of this letter.

Pension: We have attached a form that should be completed and returned to us for the necessary calculations to be made.

Henderson, we at Alico thank you for your contribution over the last twenty-eight (28) years and wish you all the best in your
future endeavours.

Yours sincerely,

SANDRA DE BOULET

MANAGER—LIFE MARKETING DEPT

c.c. Mr. Neval Greenidge”

[37] Clause 9(b) provides for termination of the Agreement by either party giving the other party at least 30 days prior

written notice by registered mail. ALICO disregarded that sub-clause and purported to terminate Franklyn

retroactively by Clause 18c which is not a clause in the Agreement. Retroactive termination is not provided for in
the Agreement. This does not accord with notions of fairness or reasonableness and in our view is wrongful.

[38] Further, the Agreement was predicated on Franklyn not being an employee of ALICO (Clause 1) but an
independent contractor and therefore no provision was made in Clause 9 for termination of Franklyn as an

employee. It follows that this Court, in agreement with the trial judge, having found that Franklyn was in fact an

employee, he is entitled to damages for wrongful dismissal.

Ground 3—Damages for Wrongful Dismissal

[39] The trial judge found that Franklyn’s contract of employment was wrongfully terminated by ALICO and awarded
him “damages equivalent to the value of six months commissions determined by taking the average

commissions earned in the last six months of his contract immediately preceding the date of the termination letter

o f 17 May 2002”. No figure was stated for this amount, but it would have been considerably less than a
severance payment.

[40] However, having found that Franklyn was wrongfully dismissed, the judge failed to address her mind to section
45 of the Severance Payments Act, Cap. 355A (the Act) which provides as follows:

“(1) Notwithstanding any rule of law to the contrary, where, in an action brought by an employee
against an employer for breach of their contract of employment, the employee claims damages
for wrongful dismissal, the court shall, if
 (a) it finds that the employee was wrongfully dismissed; and

(b) it is satisfied that, had the employee been dismissed by reason of redundancy or natural
disaster, the employer would be liable to pay him a severance payment,

assess those damages at an amount not less than such severance payment.”

[41] The measure of damages for wrongful dismissal is therefore not less than the severance payment which the

employee would have received if his employment had been terminated by reason of redundancy. The Court

does not agree with Mr. Weekes’ written submission on damages that Franklyn was entitled only to notice, which

under the terms of the contract was limited to 30 days. However, Mr. Weekes did agree that section 45 was

applicable if Frankyn was an employee. Although there is no cross-appeal on damages, Ms. Weekes also

accepted that the damages should be calculated in accordance with section 45. We are therefore of the view
that the award of damages was not properly arrived at and that we should correct the same.

[42] Franklyn had been continuously employed with ALICO for 28 years. He gave evidence that his commission in
the year preceding his termination was eighteen thousand dollars ($18,000). His damages for wrongful dismissal

would therefore be equivalent to a severance payment, calculated by reference to his basic pay for the periods

as set out below. Basic pay is defined as the insurable earnings of the employee: First Schedule of the Act.

Franklyn’s average weekly commission was less than the weekly maximum insurable earnings for the purposes

of the Act (which in 1991 was $715 and is currently $858). We can therefore safely use his weekly pay as his
basic pay and calculate his severance as follows:

$18,000/52=$346.15 weekly pay

2.5 weeks’ per year for the first 10 years=$346.15 x 2.5x10= $8,653.75

3 weeks’ per year for the next 10 years=$346.15 x 3 x 10=$10,384.50

3.5 weeks’ per year for the next 8 years= $346.15 x 3.5 x 8 =$9,692.20

Franklyn is therefore entitled based on the information available to us to twenty eight thousand seven hundred

and thirty dollars and forty five cents ($28,730.45). The parties are free to adjust this figure in the Order if it is not
accurate.

[43] In the letter of 17 May 2002, ALICO attached a form to be completed and returned by Franklyn for the necessary
calculation to be made for his pension. The Court therefore also finds that Franklyn is entitled to have his
 pension entitlement. The amount is to be determined by agreement between Counsel for the parties and paid

within 90 days of the date of this decision, failing which the parties have liberty to apply to this Court.

[44] In the result, the appeal is dismissed, the award of damages made by the judge is varied and it is ordered as

follows:

(1) ALICO pay Franklyn damages for wrongful dismissal pursuant to the Severance Payments Act
in the amount of $28,730.45 with interest thereon at the rate of 4% per annum from the date of
the writ, 2 April 2003, until the date of the High Court decision, 29 May 2006, and thereafter at
the rate of 8% per annum until paid;

(2) ALICO pay Franklyn his pension entitlement under the contract within 90 days of the date of this
decision with interest thereon at the rate of 4% per annum from the said date of the writ until the
said date of the High Court decision and thereafter at the rate of 8% per annum until paid; and

(3) ALICO pay Franklyn his costs here and below to be agreed or taxed.

Justice of Appeal

Justice of Appeal Justice of Appeal