SHUM NGO SHEUNG WINNIE v. TSOI YAN WAH STELLA

DCCJ 1945/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 1945 OF 2011

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J U D G M E N T

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1.  During the period between April 2005 and March 2006, the plaintiff (“Shum”) had given and the defendant (“Tsoi”) had received a total sum of HK$150,000. Shum now claims for the repayment of the sum as loan. Tsoi says that it was a gift.

BACKGROUND

2.  Shum has been in the insurance agency business since 1990.  Since 2003, she had been a District Director of American International Assurance Company (Bermuda) Limited (“AIA”).

3.  The parties came to know each other on social occasions in about March 2005.  Tsoi was then an insurance agent of another insurance company, MassMutual Asia Limited (“MassMutual”). It was about then when Shum and Tsoi discussed the recruitment of Tsoi by AIA.

4.  Tsoi eventually submitted her application dated 1 May 2005; was eventually recruited by AIA as unit manager under Shum as her agency leader.

5.  Since April 2005, Shum had given and Tsoi had received a cheque almost every month for 11 months.  Except for the first cheque which was for the sum of HK$50,000, the rest were for the sum of HK$10,000 each.  The last cheque was dated 1 March 2006.  Hence the total sum of HK$150,000 mentioned above.

6.  In 2009, Tsoi left AIA and eventually joined Manulife.

7.  Shum also left AIA and joined Manulife in 2010.

8.  By letter dated 20 April 2011, Shum through solicitors issued a letter of demand to Tsoi for the repayment of the above sum of HK$150,000 as loan.

9.  By letter dated 20 April 2011, Tsoi replied to Shum’s solicitors, denying the alleged loan and debt.

10.  On 23 May 2011, Shum commenced the present action.  She was legally represented until just before the trial.  She conducted the trial by herself.

THE DISPUTE

11.  According to the pleading, Shum says that it was contemplated as a term of Tsoi’s recruitment by AIA that she would be entitled to, among others, a personal production challenge bonus (“PPCB”) at the rate of HK$150,000 upon her producing a commission in the first year of her contract of over HK$375,000.

12.  By an alleged oral agreement in April 2005, Shum agreed to lend to Tsoi a sum of HK$150,000, such loan should be immediately repayable upon Tsoi’s receiving from AIA the PPCB.  It was pursuant to the alleged oral agreement that Shum gave to Tsoi the cheques.

13.  On 4 July 2006, and it is not in dispute, Tsoi received from AIA the PPCB in the sum of HK$150,000.  Shum contends that the loan of HK$150,000 became immediately repayable pursuant to the alleged oral agreement.

14.  By pleading, Tsoi denies the alleged oral agreement; and contends that the sum of HK$150,000 was treated as a gift for Shum’s appreciation of her joining Shum’s team in AIA.

THE LEGAL PRINCIPLES

15.  Whilst this is essentially a factual dispute, I found it necessary to, and I did, draw the parties’ attention during the trial to the relevant legal principles.

16.  Shum has pleaded the positive case of an oral agreement for a loan of HK$150,000 payable by monthly instalments and repayable upon Tsoi’s receipt of PPCB in the sum of HK$150,000 in the first year of her contract with AIA.  The basic principle is that she who pleads has the burden of proving it.

17.  Where a defendant admits receiving money, in the absence of circumstances giving rise to a presumption of advancement, it is for the defendant to prove that the money was a gift or a loan which was not repayable at the date of the issue of the writ.  If there is nothing to suggest the money was paid to settle an existing debt or given and returned for cash, the money was prima facie repayable on demand: see Seldon v Davidson [1968] 1 WLR 1083; Mak Ka Hing v Pang Ming Chung [2011] 1 HKLRD 347 (at §23).  The parties in the present case do not fall within the kind of relationship that would give rise to the presumption of advancement.

18.  The above in combination, I believe, operate like this: Shum as the plaintiff has the burden to prove the loan agreement as alleged.  Whether she manages to do so will not change the undisputed fact that the money had been given to and received by Tsoi.  In the absence of the presumption of advancement, it is the burden of Tsoi to prove that it was a gift.  That Shum may not be able to prove the alleged loan agreement is but one of the circumstances to be taken into account in assessing the credibility of the parties.

THE EVIDENCE

19.  It matters not whether it started as the idea of Shum’s or Tsoi’s.  While Shum stated that Tsoi was interested in joining AIA, Shum also admitted her wish for the same with a view to strengthening her own team.

20.  Shum explained that the recruiting insurance company might consider offering to the candidate the so-called 握手費 or monthly allowance as compensation for the agent’s leaving some of the customers as a result of departing from the current insurance company (generally referred to below as “the Payment”).  The amount of the Payment, if any, would depend on the agent’s past performance.  Shum therefore asked for an account of Tsoi’s past performance.

21.  It is common ground that Tsoi was qualified as a “Million Dollar Round Table” (“MDRT”) member, which is recognition of exceptional performance of the agent in the industry, for 3 consecutive years since 1997.  But Shum allegedly noticed that Tsoi’s performance in recent years by 2005 had not been satisfactory.

22.  Shum continued to say that AIA was originally not prepared to make any offer.  She explained that Tsoi’s performance in recent years failed to meet the minimum level of achievement expected by AIA.  It was only pursuant to Shum’s effort that AIA eventually decided to make the offer to Tsoi.

23.  According to Shum, AIA proposed a bonus package for Tsoi which would include a lump sum bonus at HK$150,000 payable to Tsoi on condition that Tsoi achieved the commission in the first year of the contract, or the “First Year Commission” (“FYC”), in the sum of not less than HK$375,000.

24.  Shum stated that Tsoi asked if Shum could loan to her that amount of PPCB in advance because she had financial difficulty.  Tsoi allegedly undertook to repay Shum upon receipt of the PPCB which Tsoi was confident in achieving.  Shum agreed; but out of concern about possible early termination of Tsoi’s contract with AIA, Shum was only prepared to extend the loan by instalments.  Tsoi allegedly agreed to that.

25.  Tsoi’s application and her contract with AIA were dated 1 May 2005.  They were also signed by Shum as the agency leader.  By a memorandum dated 10 June 2005, AIA set out, among others, the PPCB package for Tsoi.  Based on the contract date of 1 June 2005, PPCB would be awarded in the following manner:

26.  The memorandum provided that if the contract was terminated for any reason by either AIA or Tsoi within 12 months after the contract date, Tsoi agreed and undertook to refund, among others, the PPCB to AIA.  The memorandum was also signed by Tsoi as the applicant and Shum as the District Director.

27.  Shum admitted that though Tsoi managed to achieve the maximum PPCB of HK$150,000 and received the sum in July 2006, she did not demand repayment of the loan.  She explained that this was because they were still working in the same team.

28.  Tsoi’s performance subsequently turned unsatisfactory and she was demoted.  Eventually, Tsoi left AIA and, according to Shum, acrimoniously.  Shum allegedly could not contact Tsoi until she discovered that Tsoi had joined Mutualife in 2009 when she also joined there in 2010.

29.  Tsoi denied any financial difficulty and therefore any cause for her to borrow from Shum.  According to her, Shum promised her the sum of HK$150,000 as appreciation of her agreeing to join AIA that was expected to help enhance the performance of Shum’s team.

30.  Tsoi thought Shum would pay her a lump sum upon the signing of her contract with AIA; but it turned out to be a payment by cheque for HK$50,000.  Tsoi asked Shum, who allegedly explained her concern that Tsoi would not work as expected and decision to provide the money by instalments.

31.  Tsoi also pointed out that contrary to the alleged agreement to lend by monthly instalments, there was no payment from Shum in the month of June 2005.  Tsoi confirmed that she managed to achieve not less than HK$375,000 in FYC by the end of 9 months of the first year.

32.  Not surprisingly, Tsoi questioned why Shum had not demanded repayment until years after the supposed accrual of her obligation to repay the alleged loan.  Tsoi queried whether such timing had anything to do with the unwelcome fact that she now led more agents than Shum did in Mutualife.

33.  During the trial, the parties gave further details of what surrounded their discussion of Tsoi’s move to AIA.  I was at first sceptical about the revelation of such details by Tsoi through counsel during the cross-examination of Shum.  It became clear that this could not be prevented after all, when Tsoi gave evidence.  I had to allow such details to be introduced in order to have complete and meaningful understanding of the evidence.

34.  Tsoi agreed with Shum on the existence of the arrangement of the Payment; and the offer of that would depend on the agent’s past performance in the industry.  What Tsoi added was that she had in hands a proposed offer from AIA, though through another agency leader Zhou Da Lian (or Chow Tai Lin), before Shum asked her to join her team.  She had indeed provided her income statements for the recent years to Zhou.  The proposed offer through Zhou consisted of the Payment in the sum of HK$250,000, refundable on a pro rata basis if Tsoi’s contract with AIA was terminated prematurely.

35.  According to Tsoi, Shum persuaded Tsoi to join her team instead.  Shum told Tsoi that she very much needed a unit manager in her team and invited Tsoi to be that.  Tsoi went on to explain that if she agreed to do so, the solicitation of another proposed offer from AIA, including the Payment, could not be repeated.  For this reason, Tsoi never provided to Shum her income statements (like she had previously provided to Zhou).  It was then Shum offered her a sum of HK$150,000.  It should be noted that in these proceedings, those income statements were still disclosed by Tsoi, not Shum.

36.  According to Tsoi, it was in these circumstances that she was moved by how keen Shum was at inviting her to join her team; and to agree to do so.

37.  Tsoi was adamant that the sum of HK$150,000 offered by Shum was not referable as a matter of agreement to the PPCB as Shum alleged.  According to her, the PPCB package was not mentioned until after she had already joined AIA under Shum.

38.  As mentioned, Tsoi’s application to AIA was dated, though submitted before, 1 May 2005.  It was by memorandum dated 10 June 2005 when AIA informed both Shum and Tsoi of the PPCB package.  The contract date was set at 1 June 2005.  Tsoi understood that had she agreed to join AIA through Zhou and on the terms that he had proposed, she should have expected such PPCB package.  According to Shum, Tsoi was indeed the only agent in her team that was given such a package.

39.  I gave Shum leave to further cross examine Tsoi on the above details and to put her own case.

40.  Shum challenged Tsoi’s evidence in respect of her position at MassMutual at the time of her application to join AIA.  Tsoi’s income statements and tax notices indeed show that during the years when Tsoi was with MassMutual, Tsoi’s annual remuneration has dropped from over HK$500,000 in 2002-2003 to less than HK$100,000 in 2004-2005.  Her position also changed from that of agency leader to that of agent in 2004-2005.

41.  In the circumstances, it was apparently inaccurate to state in Tsoi’s application to AIA that she was a unit manager of MassMutual during the entire period of 2002-2005.  Nevertheless, as mentioned, Shum also signed the application as Tsoi’s agency leader.

42.  In any event, the performance of Tsoi in the recent years by 2005 obviously did not compromise Shum’s keen attitude towards recruiting Tsoi.  In her evidence, she expressed her confidence in Tsoi performing well under her leadership. According to Shum, and if true, this was why she agreed to lend to Tsoi and fought for Tsoi her bonus package.

43.  In cross examining Tsoi, Shum suggested that the terms offered by Zhou and those by her were the same; that the position offered by Zhou was not unit manager; and that AIA did not offer advance payment through Zhou to Tsoi and therefore Tsoi chose to join her team instead of Zhou’s team.  I am not impressed that these suggestions helped Shum in disputing what Tsoi said in this respect.

44.  Shum’s case is that the sum of HK$150,000 was partly needed to resolve Tsoi’s financial difficulty at the time and partly referable to the maximum PPCB that Tsoi was confident in achieving in the first year of her contract with AIA.  Numerous aspects of such case of Shum invite scepticism.

45.  First, if Tsoi needed no less than HK$150,000 to resolve her financial difficulty then, one wonders how it would have helped and therefore why she would have agreed to a loan advanced by instalments, of which most would be HK$10,000 a month.  As pointed out, the month of June 2005 was even left out without payment.

46.  Tsoi was believed to be capable of achieving FYC of not less than HK$375,000 (and hence entitlement to the maximum PPCB of HK$150,000).  That would mean a projection of average commission of no less than HK$31,250 per month in the first year.  It transpired that Tsoi indeed managed to achieve that.  Notwithstanding that, according to Shum’s case, the alleged monthly loan of much lesser sum somehow continued.

47.  Bank statements of Tsoi were referred to but not referred to in detail, if at all, during the trial.  The credit balance at a particular point of time may not be substantial; but the incoming and outgoing transactions were frequent. Besides, it is undisputed evidence that Tsoi was married and her husband worked as an engineer at all material times.

48.  The suggestion that Tsoi nevertheless needed the alleged monthly loan of HK$10,000 to resolve her financial difficulty lacks conviction in the circumstances.

49.  Second, according to Shum, the loan was repayable upon the occurrence of a future event. Whilst she was confident in Tsoi’s potential at the time, there was at the time of the alleged agreement the possibility that Tsoi might not perform well enough to entitle her to the maximum PPCB.  Shum’s case is that she did consider the risk.

50.  Shum allegedly contemplated the risk including that Tsoi terminate the contract with AIA prematurely.  According to her, it was exactly because of that that she decided not to extend the alleged loan in a lump sum.  She cared to make photocopies of the cheques for Tsoi as documentary evidence.  Nevertheless she made no documentary record of the alleged loan agreement, let alone obtained Tsoi’s acknowledgement in any manner.

51.  Third, according to Shum, the alleged loan was repayable upon Tsoi’s receipt of payment of the PPCB.  There is no dispute that Tsoi received the PPCB on 4 July 2006. Notwithstanding her alleged concern about the recoverability of the loan at the outset, Shum admittedly did not demand Tsoi for repayment after 4 July 2006.

52.  Shum explained that because Tsoi was still working in her team.  Yet I find that to have been a neutral factor from the outset.  The fact was that she did not demand for repayment when Tsoi should be able to do so, after having achieved the amount of FYC and the maximum PPCB.  Nor did she do so when Tsoi’s performance subsequently went so downhill that she was demoted in March 2007.

53.  Last, and following from the above, there is no evidence that any actual demand for repayment had been made prior to Tsoi’s departure from AIA in 2009.  In court, Shum agreed that there was public record which she could have searched to ascertain which other insurance company Tsoi had joined, assuming that Shum did not in fact know otherwise.  She explained that she would not have known the exact branch office where Tsoi worked.  Such explanation is not impressive, as nothing suggests that she could not have asked.  If need be, she could have instructed lawyers to assist.  This she did, but only after she had joined Mutualife which Tsoi had already joined the year before.  It was also 1 year after Shum had joined Mutualife.

54.  I do not accept the evidence that it was an oral loan agreement for HK$150,000 payable by instalments and repayable upon Tsoi’s receipt of the PPCB in the same sum as alleged.  I find the alleged loan agreement not proved on the balance of probabilities.

55.  The history of acquaintance between the parties by the time when money was first given to Tsoi was short.  On the one hand, it may seem unlikely that Shum would make a substantial gift of money to Tsoi.  Therefore certain reluctance exists against the finding of a gift.  On the other hand, the strong incentive of Shum to recruit Tsoi, who was perceived to be a strong addition to her team, is not to be ignored.  Nor is the significance of the proposed offer that Tsoi had already solicited through Zhou from AIA by then.  I accept Tsoi’s evidence in this respect.

56.  Considering all the evidence, I find on the balance of probabilities that the money paid by Shum to Tsoi was not agreed or intended to be repayable as a loan but was in the nature of a gift.

ORDER

57.  The claim is dismissed with costs to Tsoi, including any costs reserved.  Costs shall be taxed, if not agreed, with certificate for counsel.  In the absence of application in 14 days to vary, the nisi costs order shall become absolute.

Note: interpreter’s assistance would be arranged, if required, to assist the plaintiff in receiving this judgment.