RE CHUNG FANNY ACDAL

HCB 10559/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDINGS NO. 10559 OF 2004

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J U D G M E N T

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1.  This is a bankruptcy petition presented by The Prudential Assurance Company Limited against Ms Chung Fanny Acdal (“the debtor”), based on a debt in the statutory demand issued on 11 August 2003 in the sum of HK$149,787.37.  The demand was served on the debtor by advertisement in an English newspaper on 18 September 2003.  The petition was presented on 3 November 2004, and was served on the debtor personally on 30 November 2004. 

2.  The petitioner is an insurance company carrying on business in Hong Kong.  The debt in the statutory demand is said to arise in this way and is based on the documents adduced from the petitioner’s records.

3.  Effective from 1 May 2001, The debtor was appointed by the petitioner as an insurance agent in the position of Assistant Unit Manager, for the purpose of soliciting applications from third parties for individual and group life assurances and retirement benefits.  She accepted the terms in the appointment letter issued to her dated 25 April 2001 (“the Service Agreement”) and on 26 July 2001, she signed an agency agreement (“the Agency Agreement”) and a supplementary agreement for managers.

4.  The material terms in the above agreements may be stated as follows.

5.  By clause 11 of the Service Agreement, it was provided that the terms and conditions of the debtor’s appointment were contained in the Service Agreement, the Agency Agreement and annexures, the agency terms and conditions and any other terms, conditions or directions that might be circulated or communicated to her from time to time.

6.  Clause 5 of the Service Agreement provided that the debtor was required to meet production and performance criteria as in force for the time being and as amended by the petitioner from time to time.

7.  By clauses 6 and 9 of the Service Agreement, the debtor was required to maintain a persistency rate of 85%, and a personal production level with reference to the immediate past 12 months of HK$180,000.00 as her personal net annualised first year premium.  Persistency means that an insurance policy is maintained and does not lapse for 19 months.

8.  By clause A2.2 of the agency terms and conditions for 2002, the minimum quarterly production required of the debtor for the end of the third quarter, that is in September 2002, was HK$130,500.00 which was 72.5% of the year-end quota of HK$180,000.00.  Clause A2.5 provided that those who failed to meet the contract maintenance requirements or the quarterly quota would be terminated immediately.

9.  Clause 11.2(g) of the Agency Agreement provided that the Agency Agreement should forthwith terminate without any need for notice in the event that the agent did not meet production, persistency or other requirements set by the petitioner.

10.  When the debtor joined the petitioner as an insurance agent, she was provided by the petitioner with a loan in the form of a monthly finance payment of HK$15,000.00, for a period not exceeding 12 months.  Pursuant to clause 6 of the Service Agreement, 70% of all commission earnings attributable to the debtor each month was withheld by the petitioner and credited to the debtor’s commission account, to reduce her indebtedness for the monthly finance payment.

11.  By clauses 6 and 10 of the Service Agreement, in the event of there being a deficit balance in the debtor’s commission account, such debit balance should be regarded as a loan and become immediately repayable by the debtor in the event of the Service Agreement being terminated for any reason by either party prior to the expiration of 18 calendar months from the commencement of the Service Agreement.

12.  The petitioner had issued to the debtor monthly statements of her commission account without fail from the end of April 2001 to the end of September 2002 setting out the position for each month.  The petitioner had also maintained an intranet for agents (the Agency Enquiry System) and the debtor could view her performance and production level through intranet from time to time.  The debtor had in fact gained access to the intranet, as shown by a document she produced to her affidavit in opposition giving the time of access of that particular record as 10:56 a.m. on 8 August 2002.

13.  On 14 May 2002, the petitioner issued a memorandum to Dominic Ho, the upline manager of the debtor, stating that as the debtor had failed to achieve contract maintenance requirement, she would be demoted from Assistant Unit Manager to Life Underwriter.  On 27 June 2002, the petitioner wrote to the debtor informing her of her demotion with effect from 1 June 2002.

14.  Since May 2002, the debtor had failed to maintain the 85% persistency rate.  By September 2002, her persistency rate was only 27.09%, and her production achieved only HK$26,671.32, far below the maintenance requirement of HK$130,500.00

15.  The petitioner exercised its right under the contractual provisions to terminate the debtor’s appointment without notice.  By a letter to the debtor dated 10 October 2002, the petitioner terminated her appointment with effect from 7 October 2002.

16.  Upon the termination of her appointment, the monthly statement showed that the debtor was indebted to the petitioner in the sums of :

(1)     HK$144,354.60, being a loan advanced to her for monthly finance payment; and

(2)     HK$5,432.77, being the negative balance of her commission account as a result of various payment adjustments.

Thus, the total amount owed was HK$149,787.37.

17.  As the debtor’s appointment was terminated within 18 months of her commencement, she became liable to pay the amount owing.  The petitioner made a demand for the debt by a letter dated 13 November 2002.  This was sent to her by registered post, and no response was received from the debtor.  On 11 August 2003, the petitioner issued a statutory demand for the debt.

18.  The debtor filed one affidavit in opposition.  She made these allegations.

19.  Firstly, she claimed that she was induced to join the petitioner as an agent by Dominic Ho who was then her manager at her former insurance company.  Mr Ho had told her that the petitioner’s products would “guarantee the needs of clients and be easy to sell”.  That did not turn out to be the case.  In her oral submissions today, she elaborated that it was her understanding from what Mr Ho told her that the product she would be selling for the petitioner would be good for Filipino domestic helpers but that was not so, as the investment fund of the policy could not be used to pay the premium after one year.  Because of this, many of the customers she had obtained for the petitioner did not renew their policies and this brought about a big drop in her persistency rate.  She said she would not have left her former insurance company to join the petitioner, if she had known what Mr Ho had represented to her was incorrect.

20.  Secondly, she was unable to meet the minimum production requirement due to the outbreak of SARS in 2003, the economic downturn and her own family problems.

21.  Thirdly, the petitioner did not give any warning or notice to her about her unsatisfactory production performance and its intention to terminate her appointment.  She did not have a computer at the time and could not access the intranet.  She also claimed for the first time today that she did not know she could have access to her own performance records via intranet.

22.  None of these are valid grounds of opposition.

23.  As submitted by Mr Thomas Au for the petitioner, there are a number of difficulties about the misrepresentation allegation. 

24.  Firstly, there is no credible evidence that the alleged misrepresentation made by Mr Ho was made on behalf of or with the knowledge of the petitioner or that he was doing so with the petitioner’s authority or consent.  When Mr Ho made the alleged misrepresentation, he was still the manager of the debtor’s former insurance company.

25.  Secondly, the allegation the debtor made today that the investment fund of the policy could not be used to pay the premium is a new allegation, the petitioner just has no opportunity to meet this.  In the previous allegation, the misrepresentation was that the product would guarantee the needs of the clients and be easy to sell, this was not a representation of fact but of opinion.

26.  Thirdly, even if the misrepresentation was indeed made on the petitioner’s behalf to the debtor to induce her to enter into the Service Agreement, the conduct of the debtor showed that she had affirmed and continued to act on the Service Agreement after she became aware of the alleged misrepresentation.  Even assuming that she did not become aware of the misrepresentation until a year later, as she has told the court today, she had done nothing for five months until her appointment was terminated.

27.  Fourthly, if the Service Agreement were to be rescinded, the debtor would still be liable to repay the monthly finance payment she had received.

28.  I agree with Mr Au’s submissions.

29.  The 2^nd allegation of the debtor equally cannot get off ground.  The debtor’s appointment was terminated in October 2002, and had nothing to do with the outbreak of SARS in 2003.  The petitioner was acting entirely within its contractual rights in terminating the debtor’s appointment, upon her failure to meet contractual maintenance requirement.

30.  There is no substance in her 3^rd allegation that the petitioner had failed to give warning or notice to her.  The petitioner was entitled to terminate without notice.  In any event, she was put on notice of her inability to meet maintenance requirements as she could have access to her performance level through the intranet and she had received the letter of demotion dated 27 June 2002.  I reject her contention she did not know she could have access to the intranet.  That is contradicted by the record she produced that I referred to earlier.

31.  In these circumstances, I make a bankruptcy order against the debtor.  The costs of the petitioner including all costs reserved are to be paid out of her estate.