KOON TUNG YING v. NATIONAL MUTUAL INSURANCE CO. (BERMUDA) LTD. AND ANOTHER

HCA 19087/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 19087 OF 1999

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REASONS FOR DECISION

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1. This is an appeal by the Plaintiff ("Madam Koon") from an order of a master striking out her Statement of Claim and dismissing the action.

2. The application for striking out was made on the basis that the Statement of Claim disclosed no reasonable cause of action, was frivolous or vexatious and/or was otherwise an abuse of the process of the court.

3. The writ in the present action with Statement of Claim endorsed was issued on 15 December 1999. A Defence was filed in January 2000. A summons to strike out the Statement of Claim and to dismiss the action was issued in February 2000. However, the matter has a much longer history than that.

History

4. The matter began in July 1992, when Madam Koon's daughter Chow Fung Lin ("the deceased") took out a life insurance policy with the 1st Defendant in the present action ("the Insurance Company"). The 2nd Defendant in the present action, Miss Chan Mei Lan, was the agent who effected the policy. Although she had prior to the deceased's death left the Insurance Company's employment, I shall refer to her as "the agent".

5. In the application form for the policy, the deceased named her mother Madam Koon as the beneficiary. However the policy provided:

"You may change the beneficiary. The change requires satisfactory written notice to us. After we record it, the change is effective from the date you signed the notice. ...Whenever a person is named as beneficiary, in accordance with the provisions of this policy, such person shall be deemed to be entitled to the policy proceeds if and when the insured dies and a trust shall be created in favour of the beneficiary or beneficiaries named ..."

6. In December 1993, after the deceased had been diagnosed as suffering from a terminal illness, a "Request for Services Application" form was signed by the deceased. This form showed that the beneficiary under the policy was changed from Madam Koon to Mr Lau Chup Hei.

7. In the Request for Services Application form, the relationship of Mr Lau to the deceased was stated to be "cousin". It would appear from the evidence in an action to which I will refer that Mr Lau was not the deceased's cousin but a male friend with whom the deceased had had a longstanding and close relationship, even though the deceased had another relationship with a Japanese person for some ten years before her death.

8. In April 1994, the deceased died. Shortly thereafter Madam Koon made a claim under the insurance policy for its proceeds. She was then informed that the beneficiary had been changed to Mr Lau. She did not accept this. Her case was initially that the signature purporting to be that of the deceased was a forgery. Subsequently, her case was that the deceased had signed it thinking that the only change effected by the Request for Services Application form was that of the mode of payment of instalments.

9. For his part, Mr Lau also claimed payment of proceeds under the policy to him.

Interpleader proceedings

10. Faced with two competing claims, one from Madam Koon and one from Mr Lau, in December 1994, the Insurance Company commenced interpleader proceedings which were then heard by the court. In February 1995, the court ordered that Madam Koon be the Plaintiff in the issue and Mr Lau be the Defendant in the issue and that on the Plaintiff's (the Insurance Company's) payment of the proceeds under the policy into court, the Plaintiff be relieved from the claims of the 1st Defendant (Mr Lau) and the 2nd Defendant (Madam Koon) in respect of the proceeds and that no action be brought against the Plaintiff by the 1st Defendant or by the 2nd Defendant to recover the same, provided that nothing therein shall prevent either the 1st Defendant or the 2nd Defendant from making any application to the court for discovery of documents against the Plaintiff.

Judgment after trial

11. The matter came on for trial before Hartmann Dep. J, as he then was, in December 1997. He saw and heard witnesses including the insurance agent, Madam Koon and her son and the Japanese gentleman who had lived with the deceased when he was in Hong Kong.

12. Hartmann Dep. J considered various aspects of the evidence, including the fact that there was another policy of insurance in which the deceased had named Madam Koon as beneficiary and that she had given Madam Koon cash a few months before her death and had left a house in her estate.

13. In a lengthy judgment, the judge rejected any allegation of conspiracy between Mr Lau and the insurance agent to effect the change in the name of beneficiary without the deceased's knowledge or consent. He found that there was in fact a longstanding and close relationship between the deceased and Mr Lau, that the deceased had acted generously towards Mr Lau, and that they were sufficiently close for the deceased to entrust Mr Lau with her safety deposit box key. The judge, on a thorough analysis of the evidence including the evidence of Madam Koon's son, also rejected the evidence that the deceased might have thought that she was signing the form simply and solely to effect a change in the mode of payment of instalments. He accepted the insurance agent's evidence that the description of "cousin" had been approved by the deceased prior to the deceased's execution of the Request for Services Application form. He found the insurance agent to be an honest witness and found that she did not perpetrate a fraud in respect of the policy of insurance. Accordingly, the judge ordered that the proceeds be paid to Mr Lau.

Appeal to Court of Appeal

14. In September 1998, the Court of Appeal heard Madam Koon's appeal from the judgment of Hartmann Dep. J. The Court of Appeal, having considered the judgment, held that there was no possible ground on which it could properly interfere with his judgment. The appeal was dismissed.

Appeal to Court of Final Appeal

15. Leave to appeal to the Court of Final Appeal was granted. In the Case, new grounds of appeal based on four new points of law were submitted. These included a submission on failure to effect a variation of contract, a submission on trust, a submission on whether the policy was a testamentary disposition and a submission on the enforceability of the contract of insurance by Mr Lau. At the hearing of the appeal to the Court of Final Appeal, Madam Koon appeared in person and further submissions were put forward including a submission that the request for the change of beneficiary should be avoided due to a misrepresentation of the relationship, it being alleged that the misrepresentation was made by the insurance agent in order to avoid "a problem of insurable interest".

16. The Court of Final Appeal dismissed the appeal, holding amongst other things that there was no question of Mr Lau's ability to sue the Insurance Company and the Court of Final Appeal found that it saw no merits in the arguments in the Case or in the subsequent submissions based on the alleged fraud of the insurance agent, a lack of "insurable interest" between the deceased and Mr Lau, misrepresentation by the insurance agent of the relationship of "cousin" and lack of verification of the deceased's signature on the form. The Court of Final Appeal's judgment was delivered in June 1999.

New Action

17. In December 1999, the present action was instituted by Madam Koon against the Insurance Company and the insurance agent. In the first paragraph of the Statement of Claim, Madam Koon describes her capacity as "the mother and one of the administrators of the estate of the deceased". In this Statement of Claim, it would appear that she complains of the Insurance Company's failure to produce the original of the Request for Services Application form for verification when she requested it, and of a misrepresentation by the Insurance Company in adducing before the court in the interpleader proceedings the form which describes Mr Lau as cousin when there was allegedly no insurable interest between the deceased and Mr Lau. Madam Koon goes on to say in her Statement of Claim that this made her unable to challenge the basis of the Insurance Company's "acceptance" of Mr Lau as the deceased's new beneficiary.

18. The relief claimed as against the Insurance Company was under breach of contract and declaratory relief that the Insurance Company was not entitled to execute the Request for Services Application form; alternatively, relief from its execution; alternatively damages for the wrong acceptance of such a form. The relief claimed against the insurance agent is in conspiracy and for tendering a false document and damages for deception.

19. On 10 January 2000, the Insurance Company's solicitors wrote to Madam Koon asking her to withdraw the action saying that if she did so, the Insurance Company would not seek costs against her. Obviously, that offer has been rejected. In February 2000, the present summons was issued and in March 2000, the summons was heard and the Statement of Claim was struck out by the master.

Plaintiff's case

20. Madam Koon has since the decision of the master filed a new affirmation in which she seeks to add negligence as a new cause of action. Both in her second affirmation and in her first, she has made an attempt to answer the Insurance Company's allegation that she is seeking to re-litigate matters which had already been dealt with by three courts in the first action.

21. In her oral submissions before me which were made partly by Madam Koon herself and partly by her son, Mr Chow, on her behalf, it has been stressed that these new proceedings have been instituted by Madam Koon in her capacity as an administratrix of the deceased's estate and not in her capacity of the original beneficiary under the policy.

22. In paragraph 6 of her second affirmation, Madam Koon makes it clear that the present claim is not for payment of the policy proceeds. In paragraph 6(c) of her second affirmation, and as Mr Chow submitted, the alleged cause of action is in negligence, and it is said that as a result of the alleged negligence, the deceased's estate had wasted costs and had suffered in "averment of intention and the transfer of beneficiary".

23. I fail to see how there can be such a cause of action by the deceased's estate against the Insurance Company and insurance agent, and I agree with the master that the action is frivolous, vexatious and/or is otherwise an abuse of the process.

24. The only duty that was owed by the Insurance Company and its agent to the deceased was a duty in contract. There is no duty in tort which goes beyond the contractual duty. In Tai Hing Cotton Mill Limited v. Liu Chong Hing Bank Limited [1986] 1 AC 80, the Judicial Committee of the Privy Council held that there was no advantage to the development of the law in searching for liability in tort where the parties are in a contractual relationship. Although it was possible to conduct an analysis of the rights and duties inherent in some contractual relationships either as a matter of contract or as a matter of tort it was correct in principle and necessary for the avoidance of confusion in the law to adhere to the contractual analysis. Parties' mutual obligations in tort cannot be any greater than those to be found expressly or by necessary implication in their contract.

25. Secondly there has been no breach of any duty. The complaint now made by Madam Koon as administratrix of the deceased's estate is that the Insurance Company was negligent in that it had failed to "formulate the [Request for Services Application form] in helping the deceased to transfer the beneficiary". I have to say that this argument is misconceived.

26. It has been found by three tiers of courts that the insurance company should pay Mr Lau as the beneficiary under the policy pursuant to the Request for Services Application form. Although a misdescription of Mr Lau as the deceased's "cousin" had been inserted, neither party to the contract was affected by the misdescription, and in any event that description had been inserted with the knowledge and approval of the deceased, so she (or her estate) could not complain of any adverse consequences. In any event, no adverse consequences have been suffered by the deceased or her estate. If any one might be affected by the way in which the change had been effected (containing a misdescription), it could only have been Madam Koon or Mr Lau. Mr Lau has not been affected because he has received the proceeds. In the Court of Final Appeal, Ching PJ had already held that the court could see no merits in the argument put forward by Madam Koon in her personal capacity arising from the misdescription or misrepresentation.

27. Further, there is no loss to the estate. The estate of the deceased was never a party to the first action. It was and is not liable for costs of the first action. It is Madam Koon herself who is liable in her personal capacity as she had claimed the insurance policy proceeds.

28. Before me Mr Chow, the representative of Madam Koon, said that it was the deceased's estate which had suffered financially because it had funded the litigation. I do not understand why the estate has been used to fund the first action when the Plaintiff in the first action was Madam Koon acting in her personal capacity and the purpose of the action was to acquire the proceeds of the policy for herself as beneficiary. Even if the estate had advanced any money to Madam Koon (who is a beneficiary under the deceased's intestacy) for her costs in the first action, the estate should look to Madam Koon for reimbursement and not elsewhere.

29. Finally, even if the Insurance Company had been in any way in breach of a duty in tort to Madam Koon in her personal capacity, I would have thought that what she ought to have done was to have objected to the order made on the interpleader proceedings. For example, if it is considered that she had any right to damages as a result of any breach of duty owed to her by the Insurance Company or its agent, that should have been put forward for consideration by the court back in 1994 when the originating summons was issued by the Insurance Company under Ord. 17 r.3 for interpleader relief against the claims of Mr Lau and Madam Koon respectively. In any event, that is irrelevant to the present action because the present action is being instituted by the deceased's estate.

30. Accordingly, I dismissed the appeal with costs. In relation to the scale of costs, the Insurance Company has asked for the costs to be taxed on an indemnity basis. I have been referred to cases where judges have awarded costs on an indemnity basis in applications to strike out. The Plaintiff in the present action is not legally qualified. I also take into account the fact that masters' decisions do not have written reasons accompanying them, thus I take the view that it may be too harsh to order that Madam Koon bear costs on an indemnity basis on an appeal from a master. Accordingly, I ordered that the scale should be on the ordinary party and party basis.