L & C INSURANCE CONSULTANTS LTD v. LIU KAM SHING

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. This is an action by the Plaintiff against the Defendant for breach of an alleged agreement and for recovery of commissions from May 1991 paid by the Plaintiff to the Defendant on the ground that the Defendant while she was employed by the Plaintiff, was in breach of her contract. The trial took an usual course in that it started on the 11th of January 1995 with the Plaintiff being represented by Counsel, Mr. Samuel Chan and the Defendant acting in person. However on the third day of the trial, the Plaintiff found itself having to act in person and so from the 18th to the 24th January 1995 both the Plaintiff and the Defendant were acting in person. Then there was a medical problem with the Defendant necessitating an adjournment and by the time the trial resumed on 16th March 1995, new Counsel Mr. Kwan Tong Lee was acting for the Defendant while the Plaintiff continued to act in person right to the end through its very capable director, Mr. Harry Kwan. The somewhat unusual course of the proceedings meant that in order that the parties would not be prejudiced by their lack of knowledge of the court procedures the trial proceeded slowly and accordingly this proceeding took somewhat longer time to reach its final conclusion. By the time of the final submissions, however, many of the disputed matters had disappeared or ceased to be relevant and at the end the parties agreed that I have really at the most only 3 major Issues which I need to decide in this Judgment. These Issues are:-

But before I can proceed to consider the three Issues, it is necessary for me to first recount the story leading up to the break between the Plaintiff and the Defendant.

THE STORY

2. In late 1987, 4 good friends Mr. Harry Kwan Yik Shun ("Harry Kwan"), Mr. Tony Lam Yau Cheung ("Tony Lam") , Mr. Luk Yiu Cheng and Mr. Lee Sheung Wing formed a partnership with the name of L & C Insurance Consultant ("the Partnership") and registered the Partnership under the Business Registration. The business of the Partnership was insurance broking and that business apparently started on 1st September 1987. The nature of the business of the Partnership as insurance broker was to go out and find amongst the common people of Hong Kong potential buyers of insurance policies. When a citizen of Hong Kong buys an insurance policy, that person is committed to paying a premium for that policy and in the case of life insurance, which is what I will be concerned with in this case, the payment of premium is for a great number of years. The insurance broker is of course acting as agent for the insured but his bread is really buttered by the insurance company because it is from the commission paid by the insurance company that the insurance broker makes his living. Normally out of say $1,000 of premium paid by the citizen insured, something like 60% or 70% goes to the broker. It can be seen therefore that unknown to the general public, an insurance broker has this unique position of apparently acting for one person (the citizen insured) but being really paid by the insurance company.

3. To ensure that business keeps coming in, an insurance broker must have a sales team called agents whose work is to go out and canvass and generate the business, namely the taking out of insurance policies. They are in reality what might be primitively called, salesmen whose job is to sell the life policies and in return the broker company gives to these agents, a commission amounting very often to 45% of the money received by the broker from the insurance company. So in a typical case, a premium sum of say $1,000 paid by the citizen insured could be shared $300 by the insurance company, $250 by the broker company and $450 by the agent himself.

4. Madam Amy Fung Lai Ying ("Amy Fung") was one of the early agents employed by the Partnership. Not long after her being first employed. Amy Fung was made a supervisor by the Partnership, which meant that she had Agents working under her and as supervisor she was entitled to a small percentage of the income of the Agents. Subsequently Amy Fung became Unit Manager which was one rank higher than supervisor and in that position she was entitled also to a small percentage of the income of the supervisor. Above the unit manager ("UM"), there was the district manager ("DM") rank with yet higher income deriving from the additional percentages from the income of the UM under the DM. As can be seen, the whole structure is pyramidical and it was structured in this way to enable more people to be recruited as agents and those further down the pyramid ladders add to the better welfare of those higher up the pyramid ladder. The general idea of course is that more policies should be sold by more agents so that more premium income would be generated for the benefit of the insurance company, the insurance broker employer, the DMs, the UMs, the supervisors and the Agents.

5. Some time in late 1988, Amy Fung introduced the Defendant and her husband, Lai Kam Tong ("Lai") to work for the Partnership. Lai was a professional Fung Shui expert and was also involved in a number of other financial and business activities while his wife, the Defendant was a professional nurse working full time in a clinic. The Defendant and her husband were persuaded to sign up with the Partnership by Amy Fung but certainly the understanding at the time was not that the Defendant would be looking to the work for the Partnership as her main source of income or work. Apparently after discussions, Lai joined as a Supervisor and the Defendant joined as an Agent. The Defendant signed a written Agreement with the Partnership dated 28th December 1988 ("the 1988 Agreement") and amongst the relevant provisions of the 1988 Agreement was a term prohibiting any association with an insurance company.

6. Initially, the career of the Defendant with the Partnership did not immediately prosper. The Defendant was still very much working full time as a nurse and only went into the office of the Partnership from time to time. This non- requirement of regular attendance at the office of the Plaintiff was in fact a major drawing point for both the Defendant as well as many of the housewife Agents of the Plaintiff.

7. In May 1989, there was a rethinking by the partners of the Partnership and they decided to incorporate a limited company to carry out the insurance brokerage business done by the Partnership. The Plaintiff company was incorporated on 16th of May 1989 and the name of the Plaintiff company though similar to that of the English name of the Partnership is somewhat different in respect of its Chinese name. It is the case of the Plaintiff that the Partnership and/or the Plaintiff notified employees Agents of the Patnership of the transfer of business from the Partnership to the Plaintiff company. It is also the case of the Plaintiff that the insurance companies for whose policies the Partnership was selling were also notified. It is disputed however whether the Defendant was so notified by the Partnership or the Plaintiff and if so the extent of the notification. It is not in dispute that the Defendant was never asked to and never did sign any agreement with the Plaintiff.

8. It is clear from the evidence and it is generally accepted by the parties at the trial that soon after the changeover of business from the Partnership to the Plaintiff, the Defendant was selling the policies for the Plaintiff company and she told her clients to make the insurance premium payable to the Plaintiff. There was agreement at the trial that the Plaintiff and the Defendant both regarded the Defendant as being employed by the Plaintiff.

9. Then came a few boom years when the Defendant was doing very well and in fact so well that she was given by the Plaintiff the highest production award. It is not disputed that the Defendant was most outstanding in her work and she rose very quickly in the Plaintiff company, reaching ultimately the position of District Manager and there were something like 100 people at one stage working for her and under her. However there were problems, stemming from the fact that Agents working under her were apparently constantly being persuaded by her fellow managers to seek other work. The Defendant was particularly unhappy in that the Plaintiff company was not backing her up in her complaints against her fellow managers.

10. Shortly before 9th November 1992, the Defendant started talking to Raymond Chow of Imperial Life Assurance Company of Canada to develop the idea of her leaving the Plaintiff and starting up on her own, selling the insurance policies of Imperial Life. Raymond Chow was supportive and an agreement was reached for Imperial Life to give to the Lai Company a right to sell the policies of Imperial Life.

11. Fortified by this support from Raymond Chow, on the 9th of November 1992 the Defendant and her husband sought out Tony Lam of the Plaintiff. This is the important meeting on the 9th November 1992 at the office of Tony Lam. The parties are agreed that there was a meeting with those 3 persons attending. But whereas the Defendant and Lai said that the Defendant at that meeting resigned and terminated her employment at the meeting, Tony Lam said that this was not the case.

12. On the 15th November 1992, Lai on behalf of the Lai Company signed a written agreement with Imperial Life. On or around the 19th and the following days, there were the much debated events of Cheung Yau Ming. On the 26th November 1992 the Defendant went back to the Plaintiffs office to attend the Training course for part of which she had paid out of her own money. On the 30th November 1992, there was the alleged sacking of the Defendant by Tony Lam. On the 9th of March 1993, the Writ in this action was issued and in the Amended Statement of Claim, it was alleged that some $177,639.77 was paid by the Plaintiff to the Defendant as commissions since May 1991 (the date of the alleged breach by the Defendant) and that the Plaintiff was entitled to recover the same from the Defendant.

CREDIBILITY OF WITNESSES

13. This is a case where credibility of the witnesses is vital. Therefore, before I proceed to consider in detail the various Issues, I will first give my impression of the witnesses and my general finding of their credibility.

Harry Kwan Yik Shun of the Plaintiff

14. Mr. Harry Kwan Yik Shun appeared for over 20 days before me. He was the first to give evidence at the trial. He then conducted the case for the Plaintiff throughout the trial when Counsel for the Plaintiff bowed out. As an advocate, Harry Kwan showed himself to have all the makings of a good lawyer. He was thorough, courteous, reasonable and shrewd. As a witness, he demonstrated a little bit less of those qualities and a little bit more of the qualities of a businessman which is of course what he really is. As a businessman he was tough, unyielding, relentless and I would even say vindictive as can be seen from the numerous notices he sent out to everyone in the insurance industry who could harm the Defendant.

15. Mr. Kwan gave evidence but mostly on the novation Issue and undoubtedly he was alert to the problems faced by the Plaintiff on this Issue. There is no question that his evidence was forceful but at the end I found myself not being convinced. It seemed to me that he was only telling the truth as he wished me to see it. I would not say that he was consciously telling me wholesale untruth. Mr. Kwan is too sophisticated and shrewd as to tell blatant lies in that manner. It is in the little details of his evidence and the manner of his giving his evidence, which lead me to the view that there was not only too much shading in his evidence but also that there was venom too difficult to detect but none the less deadly. My conclusion on his evidence is that at the end of the day it will not be safe or satisfactory to rely on his evidence and in the circumstances, I do not regard that his evidence warrants acceptance by the Court and except where I specifically find his evidence to be particularly compelling on any point. I do not accept his evidence generally.

Tony Lam Yau Cheung of the Plaintiff

16. Tony Lam Yau Cheung gave rather loud evidence before me. The evidence was given with very strong emotional feeling which filled the court room. Mr. Lam gave his evidence with considerable sound and fury accompanied by large gestures, reinforcing the impression given to everyone that Mr. Lam is man of a violent disposition, given to fits of fury and anger. He did not strike me as either a good witness or someone who gives priority to the telling of truth. I am convinced that when it comes to proving he is right or that his actions are justified, Mr. Lam would not be adverse to overlooking any particular event and giving a version best suited to fortify his ego. I reject his evidence in so far as it may conflict with the evidence of the Defendant and/or Lai. Due to his very special relationship with the Defendant (which can only be characterised as a love/hate relationship suggestive of ties far beyond those normally generated by a formal business relationship), it seemed to me that neither his judgment nor his memory could be relied upon for the retelling of the relevant events.

Raymond Chow Kam Hom of the Plaintiff

17. Whereas Tony Lam was full of bombast, Mr. Chow Kam Hom was neither loud nor obviously egoistic. But compared to Tony Lam, Chow Kam Hom is sinister and darkness. He is the eminence grise and he was in many ways the cause of all this problem and litigation. His evidence in fact was not very material so far as the issues are concerned, but where they matter I reject them. In many ways, Mr. Chow gave the most menacing evidence of all, while all the time appearing to be sweat and reasonable. Although he tried to distance himself from the events of November 1992, I find that I cannot accept anything he said.

Amy Fung Lai Ying of the Plaintiff

18. So far as Amy Fung is concerned, I am not too impressed with her. She did not give her evidence well and it is difficult to know from her manner of giving evidence whether she was telling the truth. She has obviously reason to be unhappy with the Defendant over her dismissal by Twin Lotus. Further as her immediate upline, Amy Fung did receive firstly 50%, then 100% of the benefits which otherwise went to the Defendant. In so far as her evidence may be material, I reject her evidence. But in relation to her evidence that there was an attendance book which recorded attendance at the meetings by the Agents, that seems to me to be not an invention. The failure to produce this attendance book by the Plaintiff served only to cast further doubt on the whole of the case of the Plaintiff.

Cheung Yau Ming of the Plaintiff

19. Cheung Yau Ming was so bumbling and incoherent that it is impossible to conceive of a situation where his evidence could be relied upon. By general consent, he was regarded as having low intelligence. Cheung constantly misunderstood a situation or the context and his naivety and child-like approach is the antithesis of the persuasive power of an insurance broker's agent. His evidence turned out to be practically wholly irrelevant but in so far as his evidence might be material, I do reject his evidence.

Lai Ho Yin of the Defendant

20. This son of Lai Kam Tong is not very impressive as a witness. He did not strike me as being particularly bright or having an independence of mind and it is obvious that he is completely dominated by his father. He did not have much to say on the really material aspect of the case and on the whole as his evidence only goes to support and corroborate the evidence of Lai and the Defendant, I accept his evidence.

Lai Kam Tong of the Defendant

21. Lai is a strange product of old fashioned values and virtues laced with modern bravado and flash. He had a very high regard of himself and his own worth and is most sensitive to any slight. His evidence touches on a number of significant aspects of the case and he gave his evidence well, smoothly, without hesitation and on the whole satisfactorily. He might tend to exaggerate somewhat here or there but having seen him over a number of days both in the witness box as well as sitting in court, I take the view that his evidence can be relied on and I prefer his evidence to that of the witnesses for the Plaintiff, in so far as there might be any conflict.

Ada Liu Kam Shing, the Defendant

22. Although her evidence cannot in any way be classified as perfect, I accept her evidence and in many ways she is the best witness at the trial. The Defendant is an attractive and capable lady and she conducted herself well when she appeared in person. For many days she had to cross examine seasoned businessmen such as Mr. Kwan, Mr. Lam and Mr. Chow but she showed the Court what she was made of. I found both in the manner of her giving evidence and in her evidence all the indications of her ability and her reliability and I find her evidence to be convincing and well believable. Whenever there is a conflict between her evidence and that of the witnesses for the Plaintiff, I prefer without any hesitation her evidence.

1ST ISSUE -NOVATION

23. The crux of the Plaintiff's case in this Action is that whilst being employed by the Plaintiff, in breach of the terms of her employment, the Defendant started her own rival brokerage company and therefore all money paid (since that breach) to her as commission by the Plaintiff should be repaid by the Defendant In order for the Plaintiff to succeed, the Plaintiff had to show that the Defendant was in breach of her employment terms. And to show such breach, the Plaintiff had to show that there was such a term of her employment contract which in turn made it necessary for the Plaintiff to prove that the Defendant's term of employment by the Plaintiff was the same as that of the contract of employment by the Partnership. In other words that there was a novation of the 1988 Agreement with the Partnership by a new contract of employment with the Plaintiff on identical terms. This is agreed by the parties to be the 1st and really important Issue.

24. In Chitty on Contract, 27th edition, Volume 1 at paragraph 19-050, the following is said about novation:-

25. On this Issue the real question is not whether the Agent (Defendant) knew that there was a new company (the Plaintiff) or whether the clients of the Agent were told by the Agent to issue cheques to the new company or that the Agent was employed by the new company but whether the employment by the new company (Plaintiff) was by agreement of all three parties to replace the old employment with the old firm (Partnership). The Plaintiff did not rely on a case of new employment in addition to the old employment. The real issue is whether the new contract was agreed by the parties to replace the old contract; namely, could the Court find there was novation or agreement by all three parties for the replacement of one contract by another contract.

26. Having regard to the above considerations on novation, it seems to me that I should make factual findings on the following:-

27. On question (1), I am satisfied that on the evidence adduced that although there was nothing expressly agreed, the Defendant did agree to be employed by the Plaintiff after the setting up of the Plaintiff in or about May 1989. It seems to be plain that the Defendant did know the setting up of the new company, namely the Plaintiff and that the Plaintiff was going to carry on the business of insurance brokerage which was formerly done exclusively by the Partnership. Having regard to the fact that the Plaintiff did carry on the insurance brokerage business and that the Defendant did at some stage in mid or late 1989 start selling insurance policies for the new company (the Plaintiff) and pursuant thereto was given new name cards, promotion letters by the Plaintiff and was then paid by the Plaintiff on basis of commission statements of the Plaintiff, I am satisfied that the Defendant did by implication although not expressly agree to be employed by the Plaintiff. On question (1) the answer is therefore yes.

28. Question (2) however cannot be so favourably answered in favour of the Plaintiff. There seemed to be a total lack of cogent evidence that both the Partnership and the Plaintiff had indicated to the Defendant that the Plaintiff would discharge the liability of the Partnership in place of the Partnership. This question was never explored properly in evidence. Because of the nature of the 1988 Contract, it is clear that when the Plaintiff was set up in May 1989, outstanding liability had already been incurred and accrued to the Defendant by the Partnership or in other words that there were commissions payable by the Partnership to the Defendant (not only in the immediate future but in respect of some policies for some time to come). With the change, was the Plaintiff going to pay for such outstanding commissions instead of the Partnership and did both the Plaintiff and the Partnership make that clear to the Defendant. The evidence during the trial did not expressly touch on this and if it did by implication then I am clear that it was in such vague terms as not being capable of forming a firm basis for the Court to reach any solid finding of fact. In the evidence of the Plaintiff's witnesses, much were said about the transfer of business from the Partnership to the Plaintiff and that the Plaintiff announced to everyone including the Defendant. I do not accept such evidence. It is one thing to announce that the Partnership was ceasing to sell insurance policies and that the Plaintiff would be selling the policies but it is something quite different to say that the whole business of the Partnership including its assets, goodwill and its liability (liability to the Defendant under the 1988 Agreement and all other Agents) were agreed to be transferred to the Plaintiff and had been done. This sort of public announcement is not something that employers are invariably taken to make or that is something which employees need to know. In fact no substantially reliable and independent evidence was placed before me to prove that the actual transfers from the Partnership to the Plaintiff did take place or what was the consideration given by the Plaintiff to the Partnership for such transfers. At the trial, attempt was made to place reliance on a notice purported to have been posted up on the notice board which it was alleged that the Defendant had seen or ought to have seen. As said before on the assessment of the credibility of Harry Kwan and Amy Fung, I am not satisfied that this Exhibit P1 was ever posted up as alleged by the Plaintiff and in any event I accept the evidence of the Defendant that she had never seen either this notice alleged to have been posted up by the Plaintiff or any other notice alleged to have been given to her. Apart from the fact that her general credibility according to my assessment is very much superior to the Plaintiffs witnesses, her evidence on this question is also made more believable because she was not always present at the Plaintiffs office during those critical months. On this second question I must reach the conclusion against the Plaintiff. Strictly speaking this would dispose of the Novation Issue. But for the sake of completeness and in case I might be held to be in error, I will continue to consider Question (3).

29. Question (3) is even easier to answer as the evidence quite emphatically shows that the Defendant never gave her express clear assent and agreement to accept the Plaintiff as the new debtor instead of the Partnership. Neither in the evidence of Harry Kwan nor in that of Tony Lam was this matter expressly alleged and although there was repeated evidence on the transfer of business from the Partnership to the Plaintiff, this related to the prospective business rather than retrospective as to the accrued liability of the Partnership, all of which I reject. The evidence of the Defendant herself is in fact quite to the contrary, namely that she had at no time agreed to any transfer (let alone a retrospective transfer) as against the question of agreeing to work for the new company, the Plaintiff. On Question (3), I find against the Plaintiff.

30. It must follow from the above that on Question (4) I cannot find in favour of the Plaintiff, namely that there was an agreed replacement of the 1988 Agreement by a new contract with the Plaintiff and all the terms of the new contract the same as in the old contract.

31. In the light of my above findings, the Plaintiff fails on the first Issue of novation. No alternative case had been pleaded or alleged or advanced at the trial that in any event if there was no novation there was alternatively an express agreement between the Plaintiff and the Defendant on terms of employment identical to the 1988 Agreement. In the circumstances, the Plaintiff is unable to point to any contract with the Defendant containing the material clause (no insurance company association clause) and this being the case, the Plaintiff's claim in this Action must fail. However, out of deference to the arguments addressed to me on the second Issue and in the possible event that I might be held to have come to the wrong conclusion on the first Issue. I will proceed to give consideration to the second Issue.

2ND ISSUE - ORAL TERMINATION

32. The simple question under the second Issue is whether the Defendant resigned her employment on the 9th November 1992. On this issue, everything turned on the credibility of Tony Lam on one side and of the Defendant and her husband Lai on the other side.

33. Tony Lam gave extensive evidence on the events of the 9th November 1992. There was much common ground between the parties on what happened. It was agreed that a prior appointment was made for this meeting whereby the Defendant and Lai could go and see Tony Lam at his office. It was agreed that the meeting took some time. It was agreed that at the meeting there was much discussion about the dissatisfaction of the Defendant with the way the Plaintiff company was organised and that the Defendant complained that she was not given the support she required. It was not disputed that the question of the Defendant leaving was touched on in the discussion. The disagreement in the evidence is whether the Defendant and Lai said that she wanted nothing further to do with the Plaintiff company and that she had resigned. Tony Lam said that this did not happen and that the Defendant was doing no more than what she always did, threatening to resign like a thousand times previously but did not actually carry out her threat, whereas the Defendant and more emphatically Lai said she did. I have no doubt in my mind that she did resign on the 9th November 1992 and Tony Lam accepted the resignation as given, which took effect immediately as there was no question of the Plaintiff wanting her to stay or discussing how long a period of notice should be given. The parties acted simply on the basis that she wanted to leave and the Plaintiff let her go and this is perfectly understandable bearing in mind that this is not an ordinary relationship of a full time employee coming in to work everyday and therefore the Plaintiff must be given sufficient notice to find a suitable replacement. The insurance agents work part-time and are paid on work being brought in and therefore no work no pay. In my judgment, the question of notice period is just irrelevant.

34. In coming to this conclusion that the Defendant resigned on the 9th November 1992. I have weighed not only the demeanour of the witnesses but I also took into account the following factors which all seem to firmly support this conclusion:-

35. It was suggested against the Defendant that she did not inform all her colleagues about her resignation and it can be inferred thererfrom that she did not resign. I do not agree. The fact that the Defendant did not broadcast to all her colleagues her termination of relationship with the Plaintiff was due to good reason given by the Defendant and her silence is perfectly consistent with her having resigned.

36. It was also put to the Defendant that if she had resigned why did she then attend the Plaintiff's training course on the 26th November 1992. The explanation given by the Defendant was that the course had been paid by her partially and as she had paid herself for that course there was no reason why she should not attend merely because she had resigned. I accept her evidence.

37. It was even suggested to the Defendant that the anger of Tony Lam on the 30th November accusing her of disloyalty can only be understandable if she had not resigned for otherwise there was no reason for him to be so angry. The Defendant explained that Tony Lam had misunderstood the situation and had come to the wrong conclusion. In fact having seen Tony Lam in the witness box I am not at all surprised that he was angry or that he could misunderstand. No one can accuse Tony Lam of being cool and collected or being slow to anger. I have seen him explode time and again in my Court for very little reason. At the trial we have heard many incidents of Tony Lam exploding. In my judgment no adverse inference whatsoever can be drawn from Tony Lam's explosion.

38. In the circumstances. I am satisfied on the evidence adduced at the trial that the Defendant resigned her employment on the 9th November 1992 and it follows therefore on the second Issue, I also find in favour of the Defendant.

3RD ISSUE -BREACH BY DEFENDANT

39. Whether there was a breach of the agreement by the Defendant would depend on what are the terms of the employment contract between the Plaintiff and the Defendant. On the assumption that I was wrong on the first Issue and that the Defendant's contract of employment by the Plaintiff was in identical terms to that of the 1988 Agreement, it would be necessary to consider some of the relevant terms of the what I would call the disputed new agreement with the Plaintiff ("Disputed Agreement").

40. The relevant terms of the 1988 Agreement (with the Partnership defined as the Company and the Defendant defined as the Agent in the 1988 Agreement) were as follows:-

"12. On termination of this Agreement, the Agent shall hand over to the Company all money manuals rate books, documents and other effects and property belonging to the Company or relating to its business."

Under paragraph 2 of the "Benefits and Rules for Agent" attached to the 1988 Agreement, this provision can be found:-

"The Agent is strictly prohibited to run business for other Insurance Company."

41. On the assumption that there was novation and that the Defendant was bound by this Disputed Agreement from mid or late 1989 onwards, the questions under the third Issue are:-

42. What was debated at the trial was that if:-

43. I will first deal with the position before the 9th November 1992. The breach alleged was the connection of the Defendant with the company, of which Lai and the Defendant were directors and shareholders. The company in question was incorporated in July 1987 under the name of Lai Fung Wah Consultants Ltd., Lai Fung Wah being of course the name of the Defendant, Lai. This company which I shall call "the Lai Company" was a company used by Lai for his Fung Shui consultant business and there is no evidence put before the court that the Articles of that company permit the carrying on of insurance business or insurance brokerage business. The Defendant and Lai were the two shareholders and directors of that company. There is no complaint by the Plaintiff in respect of any association of the Defendant with the Lai Company prior to the change of name in 1991. On the 7th of May 1991 the name of the Lai Company was changed from Lai Fung Wah Consultants Ltd. to L & A Insurance Company Ltd. The Business Registration Form 1(b) showing the change of name very interestingly enough did not show any change of nature of business carried on by the Lai Company, and in the Business Registration Form the Business of the Lai Company after June 1991 was still shown as being Fung Shui consultants and general trading investment.

44. There is absolutely no evidence whatsoever that from the date of the change of name in mid 1991 up to 9th November 1992, the Lai Company was engaged in any kind of business connected in any way with insurance either by way of an insurance company, namely underwriting policies or granting insurance cover or by way of insurance brokerage.

45. The case of the Plaintiff on alleged breach prior to 9th November 1992 therefore rested solely on the adopting of the word "insurance" in the name of the Lai Company and the Plaintiff contends that the Defendant because she was a director and shareholder of a company which bears as part of its name the word "Insurance" was in breach of the Disputed Agreement as from the date of the change of name of the Lai Company in May 1991. Is the Plaintiff correct in that contention. I have not the slightly hesitation (which I made clear at an early stage of the proceedings) that this contention of the Plaintiff is wrong in law. It seems to me that two points are fatal to the contention of the Plaintiff.

46. The first point is that it is not the name of the company which determines what is the sort of company the Clause 2 prohibits association. When Clause 2 speaks of insurance company it can only refer to a company whose business is that of an insurance company. So it does not matter if a company bears a name describing it as trading company or even fung shui company if its real business is insurance company, then this company can be caught by Clause 2, whereas a company whose real business is in fung shui or restaurant business but which bears as part of its name the word insurance, would not be a company caught by Clause 2. This must be the meaning and true interpretation of Clause 2 and I do not how else to give real effect to Clause 2. As there is no evidence that the Lai Company was ever from 1991 to November 1992 a company whose business was insurance or was in any way an insurance company and the evidence is quite to the contrary which I accept, it must follow that on the evidence, there was no possible breach by reason of the Defendant happening to be a director and shareholder of the Lai Company.

47. The second point which is fatal to the Plaintiff's case is even simpler. An insurance company has a well defined meaning and refers to a company which underwrites insurance policies and acts as an insurer. An insurance brokerage company is a very different kind of company and acts basically as a middle man or broker and on behalf of prospective insured places the appropriate risks with the appropriate insurance company and in return receives a commission from the insurance company. The Plaintiff is an insurance brokerage company which it euphemistically called L & C Insurance Consultants Ltd. whereas Raymond Chow's company, the Imperial Life Assurance Co. of Canada is an insurance company. Tony Lam in his evidence recognised this very well when he said "We are not insurance company. We are a insurance broker company". Now Clause 2 prohibits association with any other insurance company and the word used is insurance company. Does Clause 2 refer to an insurance company in the way we all understand it to mean or does it not mean insurance company but instead an insurance brokerage company. There is a world of difference between the two. On the plain meaning of the words used, the Clause clearly refers to an underwriting insurance company which cannot possibly be the Lai Company. If in doubt that clause must be construed restrictively and contra proferentum against the Plaintiff. I should point out that the Clause did not say that any company with any connection to insurance business or with insurance industry or any company involved in the insurance industry. The prohibition is restricted to insurance company. I am clear that the contention of the Plaintiff on this point is incorrect. In the circumstances, again the Plaintiff fails to establish that there was any breach.

48. For the sake of completeness, I should also mention that there is no question of breach of the Rules for Agent since on any basis it could not be said there was any evidence that the Defendant ran business for any insurance company before the 9th of November 1992.

49. Finally, the Plaintiff faces another hurdle and that is the question of the consequence of breach. Assuming that there was a breach in May or June 1991 by reason solely of the use of the word insurance in the name of the Lai Company, the consequence of that breach is that the Disputed Agreement terminated automatically (see Clause 9) and the Agent forfeited all rights and claims under that Disputed Agreement (Clause 11(a)). It was conceded by the Plaintiff that the loss of right clause applies to accrued rights not yet paid to the Agent and not retrospectively to money already paid out, namely that there is no clawback under that Clause. On the basis of that concession which is clearly the right interpretation of that Clause, there is clearly no claim which the Plaintiff can now make against the Defendant. But even without the concession, the case of the Plaintiff is hopeless. The case which the Plaintiff then had to rely on is that although the agreement terminated automatically, any money paid out to the Defendant pursuant to the agreement which had been terminated could be recovered as money paid under a mistake of fact. The problem with running a claim of mistake of fact is that the position of the Defendant had radically changed. I cannot envisage if the claim was made 2 weeks after the termination, the Defendant if liable would still go on working for and with the Plaintiff and generate commissions for the Plaintiff and others in the Plaintiff Company. The Defendant would stop working and go away. The injustice of the mistake of fact plea by the Plaintiff is that whilst the Plaintiff had the benefit of all the work done by the Defendant, the Plaintiff asked the Court to deprive the Defendant of all the commissions which was earned on the implicity agreed basis of a valid and nonterminated agreement. I do not accept the Plaintiff's contention on mistake of fact nor do I accept the Plaintiff's argument on any breach of the Disputed Agreement prior to the 9th of November 1992.

50. I now turn to the alleged breach after 9th November 1992. On that basis, (assuming of course there was no resignation on the 9th of November 1992) the damages in any event at best, would be minimal because put at its highest, it would be confined to the claim for the payment made in January 1993 in the sum of $7,511.32. It should be remembered that the payment was made in January 1993 $7,511.32. It should be remembered that the payment was made in January 1993 long after the breaches were known to the Plaintiff and alleged by the Plaintiff. Payment made in such circumstances, must be considered to be made voluntary and not subject to any mistake of fact and so in limine I find that even the tiny claim fails.

51. On the further basis, however that I might be mistaken. I will take the further trouble of considering briefly the argument advanced by the Plaintiff that there were breaches after the 9th November 1992. These alleged breaches consisted of inter alia the following:-

Even assuming for a minute that there were these breaches, which I do not accept (and on this I do prefer the evidence from the Defendant's side and I reject the evidence of the Plaintiff's witnesses), it seemed to me clear that no damage of any kind had been suffered by the Plaintiff. It is true that the whole Chow and Cheung Yau Ming business generated a lot of heat and some inconvenience but at the end of the day, no effective business arising from these 3 proposals had been done by the Lai Company or any new company of the Defendant and no business as a result had been lost by the Plaintiff due to these alleged breaches by the Defendant. The Plaintiff in evidence had sought to blow up the events after 9th November 1992 to give me a picture of dishonesty, betrayal and low-handed business practice on the part of the Defendant. I must say that this was not my impression having seen and heard the witnesses and the evidence. The clear picture which emerged for me is some misunderstanding, much heat and noise and worse of all behaviour on the part of Raymond Chow which must be considered, even by the non-demanding standards of the commercial world he moved in, regrettably low. Sadly the victims were the Defendant and her faithful and loyal clients.

52. In my judgment, there is no substance in the case advanced by the Plaintiff on the third Issue and I find in favour of the Defendant also on the third Issue.

COUNTERCLAIM

53. It was agreed at the trial that if the Plaintiff could not succeed on the claim then the Defendant would be entitled to judgment on the Counterclaim. The parties very sensibly have agreed that the figure of $8,726.63 was the correct figure for the Counterclaim. Accordingly, I find in favour of the Defendant on the Counterclaim in the sum of $8,726.63.

54. The final result therefore is that the claim of the Plaintiff is dismissed with costs and the Counterclaim of the Defendant succeeds and Judgment is entered in the Counterclaim against the Plaintiff in the agreed sum of $8,726.63 together with costs of the Counterclaim to the Defendant.