AMERICAN INTERNATIONAL ASSURANCE COMPANY (BERMUDA) LIMITED V WILSON HC AK CIV-2010-404-7161

AMERICAN INTERNATIONAL ASSURANCE COMPANY (BERMUDA) LIMITED V WILSON HC AK CIV-2010-404-7161 20 April 2011IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2010-404-7161BETWEEN AMERICAN INTERNATIONALASSURANCE COMPANY (BERMUDA)LIMITEDPlaintiffAND PHILIP MUNRO WILSONDefendantHearing: 30 March 2011Counsel: Mr J Land and Mr J Broad for PlaintiffMr P Sills for DefendantJudgment: 20 April 2011JUDGMENT OF ASSOCIATE JUDGE DOOGUEThis judgment was delivered by me on20.04.11 at 12 pm, pursuant toRule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateCounselKensington Swan, Private Bag 92101, Auckland –john.land@kensingtonswan.com/mark.broad@kensingtonswan.comMr P Sills, P O Box 1990, Auckland – paul.sills@paulsills.co.nzIntroduction[1] The defendant was the proprietor of a company called PMW Finance Ltd (―PMW Finance). It was the corporate vehicle pursuant to which he carried on an insurance brokerage and financial advisory business. The company and the defendant provided services to the plaintiff, American International Assurance Co(Bermuda) Ltd (―AIA), in the form of operating as an agent for the sale of lifeinsurance and other products. The agreement between the plaintiff and PMW Finance appointing PMW Finance as the agent contained a provision providing for the refund of commissions which were paid on policies which lapsed (that is, the policy owner failed to pay the required insurance premiums) within the commission chargeback period of 24 months. The defendant gave a guarantee of any liability that would be incurred in this way by PMW Finance. The plaintiff sought to recover commissions paid of $385,096.73 which were attributable to policies which had defaulted or had not proceeded. PMW Finance did not pay the amount claimed and the plaintiff issued proceedings. The plaintiff then looked to the defendant to make good the liability. An attempt was made to settle the matter. In the course of correspondence, the defendant completed a statement of personal financial positionwhich included amongst liabilities ―AIA - $362,000.[2] When the plaintiff issued its proceedings, it verified in the usual way that the contents of the statement of claim were correct and that it believed that the defendantdid not have a defence. An affidavit was filed in support of the plaintiff'sapplication for summary judgment. That affidavit was from a Mr Quinn. The affidavit made reference to the fact that a number of the policies which had been taken out with the plaintiff as a result of the agency of PMW Finance had lapsed.[3] The key document regulating the relationship between the plaintiff and the defendant was the adviser agreement signed 16 July 2008 by the defendant. It dealt in detail with the commission entitlements. There was a separate section of theagreement dealing with that subject which was headed ―3.0 Commission on Policies Completed. This part of the agreement commenced with a definition section whichcontained definitions of ―Upfront Commission, ―Renewal Commission,―Commission Credits and ―Commission Debits. The definitions so far as relevantneed to be set out and they were as follows:a) ―Upfront Commission is paid as remuneration for selling a policy and is calculated as a percentage of the annual premium due in the first year in accordance with the Schedule of Commission. ...[4] ―Renewal Commission was stated to be:b) ―Renewal Commission is the commission paid as remuneration for servicing a policy. Renewal Commission is payable from month 13 onward ... .[5] ―Commission Credits was defined as follows:c) ―Commission Credits is the aggregate of Upfront Commission andRenewal Commission to which you are entitled in accordance with the Schedule of Commissions.[6] ―Commission Debits were described as:d) ―Commission Debits is the amount of monies which have becomepayable by you in accordance with Clause 3.6 – Debts owed by you to AIG Life.[7] Clause 3.6 provided:3.6 Debts owed by you to AIG LifeAny debt which may arise in accordance with ... the Charge Back Schedule shall be payable by you ... .[8] The chargeback schedule is an extensive section and is reproduced in its entirety as schedule A to this judgment. The provisions of the schedule identify types of premiums, part of which the defendant is required to repay in varying proportions when a lapse of the policy occurs. The schedule makes a reference tothe various classes of premiums affected as being ―the Upfront Commission.[9] In the usual way, the plaintiff filed an affidavit in support of the statement of claim which verified its content and deposed to the belief of the plaintiff that the defendant had no defence.[10] Annexed to the affidavit was a document entitled ―Debt Origination for Phil Wilson. This is the statement of accounts showing how the plaintiff calculated the main component of the commission which it claimed to recover from the defendant.The statement includes items which are described as ―Basic Commission, ―Quality Bonus and ―Performance Commission.[11] In the brief affidavit in opposition which the defendant filed he deposed as follows:7. The amount claimed by AIA, as set out in the commission statement dated 9 September 2010 (annexed to the affidavit of Mr Quinn,marked ―DQ-16) states that Basic Commission, PerformanceCommission and Quality Bonus payments are being claimed back from PMW Finance.8. I do not believe that Bonuses are Commission. I don't believe thatBonus payments can be claimed back from PMW Finance under the Agreement as being Commission.9. In addition, AIA has received $215,172.00 in premiums for the policies that they are now claiming Commission Debits. Copies of statements showing the amount paid to AIA in premiums for thesepolicies is annexed and marked ‗PMW-1'.10. I believe that the amount received by AIA in premiums for the relevant policies should be offset against the amount that they claim from PMW Finance for the discontinuance of those policies.[12] The terms ―Basic Commission, ―Performance Commission and ―Quality Bonus payments are not separately defined in the agreement but it is obvious from the terms of Mr Wilson's affidavit and an affidavit filed in reply by the plaintiff,which I will make reference to below, that they are categories of payments that the parties recognise were components of the commission that the agent received.[13] The first ground of defence in essence is that the outstanding amount that theplaintiff seeks to recover must be restricted to ―Upfront Commission whereas theitems that the plaintiff is claiming back from the defendant include writebacks, reverse commissions and normal commissions in respect of basic commissions, performance commissions and quality bonuses.[14] The second ground of defence, summarised, is that the plaintiff has received premiums of $215,172 in respect of the policies for which it claims commissiondebits are due and that that amount should be offset against any claim that it makes from the defendant to recover commissions.[15] A third possible ground that was raised for the first time by Mr Sills at thehearing before me centred on quantum. To understand the argument advancedrequires consideration of the reducing levels of abatement of the commissions thatthe contract provided for. In summary, the shorter the time a policy was on footuntil it was cancelled, the greater the rebate of commission, so that there weredifferent rates of commission recovery provided for in months 1 to 24 from the dateof inception of the policy. The defendant's position is that this adds a degree ofcomplexity to calculation of the quantum which has not been dealt with by theplaintiff in its claim and therefore the quantum of any claim cannot be decided on thepresent material available to the Court.First ground of opposition — Amount claimed includes items plaintiff not entitled to charge back[16] The issue that arises for decision in this part of my judgment is whether quality bonuses and performance commissions were reversible under the chargeback schedule to the contract. This involves a question of contractual interpretation. The surrounding circumstance leading up to the conclusion of the contract may, if relevant, be taken into account when interpreting the contract. Evidence of the subjective intentions of parties is not admissible: Vector Gas Ltd v Bay of Plenty Energy Ltd.1[17] The plaintiff's statement of claim asserts that a large proportion of policies which were written by PMW Finance ―were lapsed within the commissionchargeback period, provided for in the Independent Financial Adviser Agreement.There was attached to the statement of claim a schedule which showed that the debt owed by the agent was $385,096.73. The schedule is in several parts.[18] The chargeback schedule entitled the plaintiff to recover from the defendantthe appropriate proportion of ―Upfront Commission earned by PMW Finance. In broad terms, ―Upfront Commission as defined in section 3 of the agreement1 Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444 at [14].embraces all remuneration which the defendant was to receive for selling the policybut not ―Renewal Commission. I come to that conclusion because the definitions ofremuneration are broken down into two subgroups, one of which is ―Upfront Commission and the other ―Renewal Commission.[19] The initial affidavit supporting the application for summary judgment was filed by Mr Quinn. Apart from generally verifying the correctness of the claim and setting out an account which showed the components of the amounts that the plaintiff sought to recover, Mr Quinn gave evidence of dealings that the plaintiff had had with the defendant after the agency had been discontinued. As part of this evidence, Mr Quinn deposed that:25. On 22 June 2010, I advised Mr Wilson that his total exposure based on first year commissions paid from inception was $361,927.75.[20] This evidence was not subsequently controverted by Mr Wilson in the affidavit that he filed.Quality Bonuses[21] Mr Wilson said in his affidavit that the amount claimed by the plaintiff as set out in the commission statement was stated to include basic commission, performance commission and quality bonus payments. He said:8. I do not believe that Bonuses are Commission. I don't believe that Bonus payments can be claimed back from PMW Finance under the Agreement as being Commission.[22] It is necessary to also mention that the terms on which the defendant has stated his grounds of opposition are not restricted to a claim that it is only quality bonuses that fall outside the chargeback schedule. He generally asserts that theamount which the plaintiff seeks to recover under the chargeback schedule ―includes amounts that are not Upfront Commission.[23] I disagree. The question of whether an item is ―Upfront Commission and istherefore liable to partial recovery under the chargeback schedule, depends uponwhether it falls within the definition of ―Upfront Commission at clause 3.1 of theagreement. That is, the enquiry is whether the various items claimed back fall withinthe category of ―remuneration for selling a policy. As the definition in clause 3.1(a)makes clear, the ―remuneration for selling a policy is contrasted with ―Renewal Commission in clause 3.1(b). The latter is defined as ―remuneration for servicing a policy. The distinction is further clarified by the additional words of clause 3.1(b)which state that renewal commission ―is payable from month 13 onward. There aretherefore two distinct phases into which the two types of commission fall. One is remuneration generated when the policy is written and the other arises in later yearsand relates to the maintenance or ―servicing of a pre-existing policy.[24] In the course of his clear and informative submissions, Mr Sills referred meto the evidence of Mr Van Graan in which he explained that ―quality bonuses werea percentage commission paid on the policy based on the individual persistency rate of the adviser. Mr Sills submitted that this demonstrated that quality bonuses werenot ―remuneration for selling a policy.[25] I do not accept that submission made for the defendant. I note that what Mr Van Graan said about quality bonuses was:This is a percentage commission paid on the policy based on the individual persistency rate of the adviser. The persistency rate or percentage of an adviser is the number of the total insurance policies that the adviser has written, which remain in force and that have not lapsed. The higher the percentage of policies that have not lapsed, the higher the persistency and therefore the higher quality bonus entitlement the adviser obtains for writing a policy at that time.[Emphasis added.][26] Any quality bonus, therefore, is payable as a component of the overall commission payable for writing individual policies. The rate or percentage which is applied is calculated by the persistency of the adviser's sales generally. It wouldappear that persistency ratios would have to have been calculated retrospectively in the sense that they would be based upon past experience of what part of the overall business written by the agent resulted in policies that lasted other than briefly. But the ratios or percentages so calculated, were then applied to the value of the policy in order to calculate one of the components of the commission to be paid on the signing of the new policy.[27] The fact that it is called a ―bonus is not decisive, in my view. The use ofthat term in some contexts may be suggestive of a gratuitous or discretionary element in the payment made. In the context of the contractual arrangements which the parties entered into in this case, the position is otherwise. It is a contractual entitlement to remuneration derived from the sale of the particular policy andtherefore falls within the definition of ―Upfront Commission and outside thecategory of commission payable in relation to the subsequent renewal of the policyin year two of the policy's life and subsequently.[28] To the extent that resolving that point involves an issue of fact, Mr VanGraan in his affidavit in reply confirms that such payment is ―paid to theindependent financial adviser at the same time the policy is written together with theother commission components .[29] In that connection I note that Mr Sills was critical of the extent of the materialcanvassed in Mr Van Graan's reply affidavit. I am unable to agree with those criticisms. When the plaintiff commenced the summary judgment application, it could not, and was not expected to, anticipate the grounds of opposition which the defendant might advance. These would only be known once the notice of opposition and affidavit in support had been filed. Mr Van Graan in his affidavit in reply was replying to a contention put forward by Mr Wilson in his affidavit which I have set out at [21]. By stating the view (without, incidentally, giving grounds for it) that Mr Wilson did in his affidavit of opposition, he introduced the subject matter as a suitable topic for inclusion in a reply affidavit.[30] It is also necessary to note the submission of Mr Lands about the purpose of commission chargeback provisions of this kind:8.5 Mr Van Graan, in his affidavit in reply also explains that commission clawbacks are standard insurance industry practice. Commission clawbacks are put in place by the insurer to recoup some of the upfront costs the insurance company incurs when issuing a policy (i.e. the advisers'commission, actuarial time and administration costs) if the policysubsequently lapses. Most insurance companies have a unique sliding scaleto manage and recover commission clawbacks.[31] The submission accurately summarises the evidence. Mr Van Graan also said, in expansion on the evidence just noted:AIA does not make any profit during the infancy of an insurance policy. Usually it takes between 5–7 years for AIA to breakeven on an insurance policy depending on the type of policy.[32] Consistent with that evidence, the chargeback mechanism would seem to have two functions. First, it would recover expenditure where the policy cancelled early and no profit was to be made. The result is that where the policy written is not going to result in profit, the commission agent does not get paid. The second consequence of the charge back mechanism is that it would provide an incentive to direct the agents to concentrate on writing business that was likely to endure.Principles[33] In Pemberton v Chappell2 Somers J said:Where the only arguable defence is a question of law which is clear-cut and does not require findings on disputed facts or the ascertainment of further facts the Court should normally decide it on the application for summary judgment, just as it will do so on an application to strike out a claim or defence before trial on the ground that it raises no cause of action or no defence: cf R Lucas & Son (Nelson Mail) Ltd vO'Brien [1978] 2 NZLR 289; and see European Asian Bank AG v Punjab and Sind Bank [1983] 2 All ER 508, 516. Where the defence raises questions of fact upon which the outcome of the case may turn it will not often be right to enter summary judgment.[34] In the case European Asian Bank AG v Punjab and Sind Bank,3 the issue before the Court was an appeal by an unsuccessful plaintiff from the dismissal of an application for summary judgment. The Judge at first instance had held that the defendant had raised triable issues and dismissed the applicant. Robert Goff LJ said:42 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 4.3 European Asian Bank AG v Punjab and Sind Bank [1983] 2 All ER 508 (CA)4 Ibid, at 515.We turn now to the substance of the appeal, and we shall consider first issue (1), which is concerned with the construction of the letter of credit. As to that, having heard full argument on the point, which is a pure point of construction, we do not shrink from stating our conclusion which is that we accept the respondents'submissions on the point as correct in law.Conclusion on quality bonuses[35] It is my conclusion that quality bonuses are payments that were made as part of the upfront commission and their inclusion in that category is consistent with the commercial objectives of the contract that the parties entered into. There are no seriously contestable issues of fact which need to be disposed of preliminary to coming to this conclusion. There is no reason apparent to me why summary judgment ought not to be entered in respect of this part of the claim.Performance Commissions[36] Mr Van Graan explains that performance commission is: additional commission paid to the adviser based on the production levels — or volume of business an adviser generates through AIA, which is also a percentage of the value of the policy written.[37] In short, this is clearly a category, like quality bonuses, of upfront commission that falls within the definition in the policy. It is not a renewal commission. Further, as Mr Van Graan establishes, it is paid at the time of thecreation of the policy and would seem on that ground, too, to qualify as ―upfront commission as contrasted with commission which might be payable downstream at a point later in the life of the policy, should it continue in existence.[38] Again, I am satisfied that the plaintiff has negatived the existence of any defence which considerations of justice and fairness require ought to be left for determination at trial. There will be judgment for the plaintiff on this part of the claim, too.Second ground of opposition — Set-off[39] The second ground of opposition can be dealt with quickly. I am unable to accept that there is a right of set-off as claimed by the defendant. It is necessary to consider briefly the background context of the contract which the parties entered into.[40] The objectives of the contract seemed to have been, first, that the agent whose liabilities the defendant guaranteed (that is, PMW Finance) would be retained to sell life insurance on behalf of the plaintiff. A commission arrangement was devised in order to provide an incentive to the agent to maximise the number of policies that it would write. The chargeback arrangement, though, implicitly recognised that the owners of a proportion of the policies taken out would not proceed with them other than for a short time. In the case of early termination, the position that the plaintiff would find itself in, in the absence of the chargeback arrangement, would be that it would have met a major expense in regard to thepolicy, namely paying its agent's commission, with little compensation by way ofprofit because of the early termination. The commission structure was shaped to recognise this feature by providing that there would be a full or partial refund of commissions paid out on policies with which the owners did not persist. In that way, while commission was paid on an upfront basis, the contract recognised that there would need to be a subsequent abatement if the contingency occurred that the insured did not proceed with the policy for its full term. Mr Van Graan sets out the circumstances which I have attempted to summarise.[41] There would therefore not be any question of the agent being somehow entitled to compensation if he had to give back some of the commission earned. It was exactly this that the parties agreed would happen in the event of early termination of the policy. The recovery of commission in these circumstances aligned exactly with the contractual intention of the parties. There was no question of the insurance company recovering something it was not entitled to and of the agent receiving less than he was entitled to should abatement occur. Further, it was implicit in the contractual arrangements that the fact that the company might retain some of the premiums which it had received was not an obstacle to it invoking thechargeback arrangement. The chargeback arrangement was not intended to compensate the company for receiving no premiums at all: it was designed to compensate the company for receiving less of the premiums than the parties could have expected that it would had the policy run its course rather than being prematurely terminated.[42] For the reasons I have tried to explain, there is no foundation for an implied right of set-off which is the substance of the second ground of opposition which the defendant has pleaded.Third ground of opposition — Quantum[43] Counsel for the defendant raised an additional ground of opposition in his oral submissions. Specifically, he asserted that there was some doubt as to whether the figures that had been included in the chargeback calculation which the plaintiff put in evidence were confined only to the commission on life insurance policies as opposed to different types of policies such as income protection insurance.[44] This point was not taken in the notice of opposition, Mr Sills raising it orally at the hearing.[45] Secondly, I note that the plaintiff gave evidence that in the course of discussions concerning a proposed settlement of this matter, the defendant had not demurred at that figure which the plaintiff advanced as the amount owing. This makes it less likely that the defendant has a bona fide defence to raise in this area.[46] Thirdly, this case here has some similarities to Australian Guarantee Corp (NZ) Ltd v McBeth.5[47] In that case, the appellant had provided finance to enable a car dealer to carry on business. When it issued its summary judgment proceedings the appellant did not attempt to deal in detail one by one with the vehicles and other assets which it had sold in exercise of its security but asserted and verified its claim overall accompanied by documentation which provided the essential support for that5 Australian Guarantee Corp (NZ) Ltd v McBeth [1992] 3 NZLR 54 (CA).verification. Nonetheless, the defendant claimed that they were not satisfied that the appellant had provided all the information necessary to enable them to confirm the accounting of the individual items that went into making up the account. In his judgment for the Court, Greig J said:6As to [that issue], the accounts show by date and amount all payments received and credited to the account in these have been confirmed on oath by officers of the appellant. Without some further particularisation, and there is none, there can be no basis for any defence on that score.[48] In McBeth, as in this, the plaintiff provided the general verification of its claim including the quantum. The Court said:The summary judgment procedure is a simple expeditious way to enable a plaintiff to obtain judgment where there is no real defence to the claim made: see Pemberton v Chappell [1987] 1 NZLR 1 at p 2. The essence of the procedure is the plaintiff's own verification by affidavit of his own statement of claim and the allegations made in it: Harry Smith Car Sales Pty Ltd v Claycom Vegetable Supply Co Pty Ltd (1978) 29 ACTR 21. There has to be a balancing between the right of the defendant to have his day in Court and to have his proper defences explored and the appropriate robust and realistic approach called for by the particular facts of the case: see Bilby Dimock Corporation Ltd v Patel (1987) 1 PRNZ 84 and Cegami Investments Ltd v AMP Financial Corporation (NZ) Ltd [1990] 2 NZLR 308 at p 313. Although the onus is upon the plaintiff there is upon the defendant a need to provide some evidentialfoundation for the defences which are raised. If not, the plaintiff's verification stands unchallenged and ought to be accepted unless it is patently wrong.In this case the appellant quite rightly did not attempt to deal in detail one by one with the vehicles and other assets but asserted and verified its claim overall, accompanied by the documentation which provided the essential support for that. To enter into an analysis of that, as the Master did, pre-empted any answer that might have been raised or explanation that might have been made by the appellantand, by implication, questioned the appellant's verification when the respondents had not done so themselves. Moreover, in undertaking his own analysis the Master fell into error in his calculations by overlooking the fact that all the indebtedness had been refinanced so that loans previously secured over individual vehicles were6 Ibid, at 58.repaid and then re-advanced. While the plaintiff must verify its claim it is not required to prove the details with the same precision as might be required in a viva voce hearing where everything might be in issue. That standard would undermine the simplicity and the benefit of the summary judgment procedure.[49] Of course, if it is obvious to the Court that the figures which are the basis ofthe plaintiff's calculation are demonstrably wrong or the methodology behind thecalculation is plainly flawed, the Court will dismiss the application for summary judgment or the affected part of it. It will not be deterred from doing so just because the plaintiff has mistakenly adduced evidence of what the correct quantum figure is. But that is not the case here.[50] I agree that the statement annexed to the statement of claim purporting to show the makeup of the amount of the claim is not clear in its meaning. But the points which the defendant took may well be capable of explanation and may have been explained had the defendant explicitly raised the claimed errors in his notice of opposition and affidavit.[51] It is my judgment that the evidence which the plaintiff has advanced when considered in all the circumstances of the case including: the apparent acceptance of the amount outstanding by the defendant in the negotiations, the plaintiff'sverification of the amount owing on oath, the absence of any manifest error in the calculations and the failure on the part of the defendant to raise explicitly the substance of the defence, is, in combination, sufficient to dispose of any arguable defence as to quantum.Inadequate pleadings[52] Mr Sills also raised an issue in relation to the pleadings which the plaintiff had filed. He said they did not provide sufficient information to provide clarification on whether a given policy was or was not one in respect of which the plaintiff was entitled to invoke the chargeback schedule. Further, there was insufficient information to judge whether the abatement calculation, in the cases of reducing commission with the lapse of time, had been properly carried out. He referred me toa decision of Duffy J in Westpac New Zealand Ltd v Cooper.7 In that case a bank sought to recover from the defendant, pursuant to a guarantee that he had given of amortgagor's liability to the bank. The defendant raised an issue about whether those notices had been properly served on him and submitted that it was for Westpac, the mortgagee, to prove service of the notices from the outset. The Judge in the circumstances of that case considered that the plaintiff by not pleading valid service of the Property Law Act notices omitted an essential element of its claim.[53] I would prefer to be guided in the particular circumstances of the case before me by the Court of Appeal judgment in Australian Guarantee Corp (NZ) Limited v McBeth8 to which I have already made reference at paragraph [48].[54] I regard the statements in that judgment as being applicable in the present case. The plaintiff set out as an annexure to its statement of claim a schedule which showed how the claim against the defendant was made up. It has verified that the claim is correct. The defendant has not filed any evidence in opposition to suggestotherwise. Mr Sills has made submissions on the defendant's behalf but that is a different matter. I consider that the plaintiff had discharged the onus on it to enable it to seek summary judgment and that it was incumbent on the defendant, if it did not accept the verification of the statement of claim, to provide some evidence which indicated that there was a dispute of substance in that respect.[55] I do not accept that the complaint about the lack of particularisation is a reason in the circumstances of this case for dismissing the summary judgment application.Conclusion[56] The plaintiff produced a memorandum of quantum at the hearing before me. I understand that, subject to the various suggested defences advanced by thedefendant, he did not take issue with the quantum of the plaintiff's claim. However,it is my recollection that Mr Sills did not assent to the amount claimed by way of7 Westpac New Zealand Ltd v Cooper HC Auckland, CIV-2009-404-990, 29 January 2010.8 Australian Guarantee Corp (NZ) Ltd v McBeth, above n 5.costs and disbursements. He may have no issue with him but I do not have a note of the parties being in agreement on that issue. Therefore the matter of costs may be dealt with by the parties in memoranda to be filed. The defendant is to file and serve any memorandum on the matter of costs within 14 days and the plaintiff will have 7 days to reply. Thereafter judgment is to be entered for the following amounts and any order for costs which is hereafter determined by the Court:Judgment 385,096.73Interest 17,812.62Total 402,909.35_____________J.P. DoogueAssociate JudgeAppendix ACHARGE BACK SCHEDULEA discontinuance of a Life Policy in the circumstances outlined below will give rise to a Commission Debit in accordance with Clause 3.1 d, the amount of Commission Debit being calculated as follows:i) Where discontinuance occurs through non-payment of a premium from 1 monthly but before 24 monthly preiums have been paid to the Life Policy, the Commission Debit shall be equal to a proportion of the Upfront Commission previously paid by AIG Life to you in accordance with the Following scale:Policy Chargeback periodMonthlyPremiums PaidPercentage of Total Paid Compensation to be ReversedMonthly Premiums PaidPercentage of Total Paid Compensation to be Reversedr 100% 13 55%2 100% 14 50%3 100% 15 45%4 100% 16 40%5 100% 17 35%6 90% 18 30%7 85% 19 25%8 80% 20 20%9 75% 21 15%10 70% 22 10%11 65% 23 5%12 60% 24+ 0%ii) Where a premium payment is made but subsequently reversed / dishonoured / cancelled / refunded and you have chosen, with the agreement of AIG Life, to earn your commission upon receipt by AIG Life of premium and the commission thereon is payable on the same basis as premium payments, the Commission Debit shall be equal to the Upfront Commission paid in respect of that premium.