In the recent case of Leung Chee Kuen Carol Macrady v American International Assurance Co (Bermuda) Ltd [2009] HKEC 1826, the court was asked to consider whether the insurance company AIA had wrongfully terminated its relationship with the plaintiff.

The plaintiff joined AIA as an insurance agent in 2002 after signing a Letter of Understanding and a Career Representative's Contract with AIA (collectively the "Contract"). After considering the terms of the Contract, which expressly provided that they should not be construed to create an employment relationship whether expressly or implied between AIA and the plaintiff, the court held that there was no employment relationship between the plaintiff and AIA under the Contract or in reality. By wrongful termination, the plaintiff could only be referring to breach by wrongful repudiation of the Contract on the part of AIA.

AIA sought to rely on clause 25(c) of the Contract which entitled it to terminate the Contract without notice in the event of dishonesty and breach of good faith on the part of the plaintiff. On the balance of probabilities, the judge did not find the plaintiff to be dishonest and held that the Contract was not terminated in March 2003 as claimed by AIA. Nevertheless, the judge found that the Contract was subsequently validly terminated by AIA's letter of 23 April 2003, which gave the plaintiff 22 days' prior notice before the termination took effect on 15 May 2003.

The plaintiff then told the court that the Contract was expected to last for a term of three years and claimed that this early termination would cause her hardship since not only would she be deprived of the prospect of earning commission and bonus, but also she would be subject to a one-year trade restraint after the termination from approaching policyholders introduced by her to AIA. The court rejected this alleged hardship and held that whilst the enforceability of a restraint of trade clause may be subject to a reasonableness test, the enforcement of a contractual right to terminate does not become unreasonable because of the operation and effect of a restraint of trade clause upon termination.

This case reflects the trend in the UK that as long as the contractual arrangements are genuine, it will only be in very rare situations that an employment relationship would be implied by the court (see James v. Greenwich London Borough Council [2008] EWCA Civ 35). Furthermore, the court will be very reluctant to read employment law concepts (eg wrongful dismissal and restraint of trade) into contracts for services which are freely entered into between the parties.