In June 2016, there was an exodus of over 200 agents of Prudential, who gave notice of termination of their agency agreements en masse. Prudential alleged that its former top agency leader, Peter Tan Shou Yi, had surreptitiously orchestrated the mass defection of these agents to Aviva, a competitor in the industry. In Prudential Assurance Company Singapore (Pte) Ltd v Peter Tan Shou Yi and anor  SGHC 109, the Singapore High Court found that in soliciting agents to defect to Aviva, Peter had breached his contractual obligation to conduct his insurance business “with integrity and honesty”.
Findings of the Singapore High Court
The Singapore High Court held that Peter had breached his agency agreement, which provided that Peter shall “conduct his insurance business with integrity and honesty”. In this regard, the Court found that this obligation required Peter to serve PACS with good faith and undivided interest, and that duty meant that he should not do anything, during the currency of the agency, which may harm PACS. In the Court’s view, this duty included a duty not to solicit PACS’ agents (during the currency of Peter’s agency agreement) to join a competitor.
However, the Court found that Peter was not bound by any non-solicitation clause as, although there was a non-solicitation clause set out in the “agency instruction”, that clause was not incorporated into Peter’s agency agreement(s) with PACS. The “agency instruction” in question also did not fall within the scope of Peter’s agency agreement(s) with PACS. Obiter however, the Court considered that the non-solicitation clause, had it been incorporated, would have been reasonable and therefore enforceable.
In addition, the Court concluded that there was no basis for implying duties of mutual trust and confidence in Peter’s agency agreement with PACS.
In relation to PACS’ allegations that Peter had breached fiduciary duties owed to it, the Court found that Peter’s relationship with PACS was a purely commercial relationship, and Peter did not owe any fiduciary duties as pleaded by PACS. In this regard, the Court found that the relationship between Peter (as tied agent and agency leader) and PACS was not a legal relationship of agent-principal. Further, the circumstances surrounding Peter’s role at PACS also did not give rise to a relationship of mutual trust and confidence such as to give rise to fiduciary obligations.
Given the Court’s findings that Peter did not owe PACS any fiduciary duties, PACS’ claim against PTOMC for dishonest assistance (which required a breach of fiduciary duties) also failed.
Having found that Peter had breached his agency agreement with PACS, the Court awarded PACS damages to be calculated based on the profits that PACS would have earned from 227 of its former agents (being the agents that the Court found on the facts, left PACS as a result of Peter’s acts of solicitation) for the period of 9 May 2016 to 23 July 2016.
The relevant period of loss was determined to run from the time Peter started talking to the agency leaders about moving to Aviva, until the day after Peter’s notice period expired, whereupon he could have legally solicited the agents. The assumption made was that the same events would have played out, except that they would have started on 23 July 2016 (after Peter’s notice period expired) instead of in May 2016.
With respect to Peter’s counterclaims, they were wholly dismissed by the Court.
This case is significant not only because of the scale of the solicitation, but also because of the number of factual and legal issues that the High Court had to grapple with. Amongst other things, the High Court was prepared to interpret the obligation to act with “integrity and honesty” in Peter’s agency agreement as including a duty of non-solicitation during the currency of the agency agreement. Another significant finding was that Peter did not owe fiduciary duties to PACS, despite his extremely senior position within the organisation.
The case underscores the importance of insurance companies and companies with a similar business model reviewing their contracts with their agents to ensure that any non-solicitation clauses are (a) properly incorporated; and (b) properly scoped so as to be enforceable. Some of these issues would also be relevant to employees, and it will therefore be important for companies to review their contracts with their employees (in particular senior staff members) as well to ensure the enforceability of the relevant restrictive covenants.
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