MASSMUTUAL ASIA LTD v. LAI SUI YING

DCCJ 1534/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 1534 OF 2011

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JUDGMENT

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1.  The Plaintiff is a company incorporated in Hong Kong carrying on business in providing insurance services. Its claim is for a sum of $366,852.00 being a contractual special income (“Special Income”) which the Defendant had received but was due to be repaid since she had ceased to be so entitled; and a sum of $3,438.82 as balance of commission which the Defendant was liable to repay to the Plaintiff due to early lapses of policies written by her (“the Clawback of Commission”). It is also the Plaintiff’s case that it is entitled to interest for sums due calculated at the rate of 3% per month. Further the Plaintiff does not take issue on the Defendant’s entitlement to a sum of $36,701.05 being her contribution to her account under the Individual Saving Scheme with the Plaintiff. The Plaintiff asks that such amount shall be applied to offset the sums mentioned above.

2.  At the material time, the Defendant had been in the insurance profession for over 13 years.  She had just left an insurance company and was asked to consider joining the Plaintiff by one of its agents May Chan.  It was said to her that she would be offered the title of Branch Manager.  She eventually joined at this rank in June 2008.

The Plaintiff’s Case

3.  The Plaintiff takes the stance that their relationship was governed by the documents duly signed by the Defendant and representatives of the Plaintiff. The documents include (i) the Agent’s Agreement; (ii) the Agency Leader’s Agreement, and (iii) the Agency Manual 2008.  The 3 documents will be collectively referred to as the Set of Agreements when appropriate.

4.  The Plaintiff also relies on a Memorandum on Special Income For Manager (“the Memorandum”) signed by the Defendant.  The Plaintiff says that the payment of Special Income to the Defendant was governed by the terms contained therein.  It is the Plaintiff’s case that clauses 6 and 7 of the Memorandum expressly stipulated that the Defendant was liable to repay to the Plaintiff the Special Income she had received in the event that:

(i)	She failed to maintain within 19 months the rate of payable premiums based upon the total amount of Personal AFYC[1] and /or AFYOR[2] achieved in the first contract year to be below 25% of the said amount (Clause 7 of the Memorandum);
(ii)	Her termination of service with the Plaintiff within 48 months of service from the date of entering into the agreements (Clause 6 of the Memorandum).

5.  The appointment eventually took effect upon the Defendant’s registration with the Insurance Agents Registration Board on 10 June 2013.  Further, pursuant to the Memorandum the Plaintiff had paid to the Defendant the Special Income amounted to $366,852 by 12 monthly installments for $30,571 each from June 2008 to May 2009.  However, the Defendant refused despite repeated request and demand to repay to the Plaintiff such sums when the events prescribed in clauses 6 and 7 occurred.

6.  Further, the Plaintiff relies on the Agent’s Agreement to claim a sum of $3,438.82 being balance of Clawback of Commission which the Defendant was liable to refund to the Plaintiffpursuant to clause 6.4(b) of the Agent’s Agreement:

“In the event that the policy is “Early Lapse” as defined in the Agency Manual issued by the Company from time to time, any first year commission already credited to the account of, or paid to, the Agent in respect of the premium paid shall be immediately refunded to the Company by the Agent.  The Agent’s obligations hereunder shall continue irrespective of whether this Agreement has been terminated for whatever reasons.”

7.  Relying on clause 6.5(a) of the Agent’s Agreement, the Plaintiff asks that the Defendant’s entitlement under the said Individual Saving Scheme for the sum of $36,701.05 be applied to offset the amount she still owes to the Plaintiff.

8.  Pursuant to clause 6.5(b) of the Agent’s Agreement and clause 11 of the Memorandum, the Plaintiff asks for interest at 3% per month until full payment.  

Case of the Defendant

9.  The Defendant’s case is that she did not execute the Set of Agreements nor the Memorandum in the circumstances as alleged or alternatively she was misled into signing the documents in reliance of two representations made by May Chan on one occasion and then May Chan on another together with May Ma; further she did not know the terms contained therein.  For these reasons, she maintains that she is not liable to repay the Special Income and the Clawback of Commission as claimed.  To put her defence in legal terms, she relies on misrepresentations effected by May Chan and May Ma and the doctrine of non est factum.

10.  In her Counterclaim, the Defendant asks that all sums accrued under her Individual Saving Scheme and the said sum of $3,438.82 be paid to her as the Plaintiff is not entitled to withhold such payments.

The 1^st Representations

11.  According to the Defendant, the 1^st Representations were made by May Chan in April 2008.  At that time May Chan was an agent of the Plaintiff and her title was Deputy General Manger.  It is not disputed that in the event that the Defendant joined the Plaintiff, May Chan would be her direct manager.  According to the Defendant, the 1^st Representations were relevant to both her remuneration package and the product of the Plaintiff.

(i)	Remunerations Package
	(a)	It was said by May Chan that if the Defendant could achieve her performance equivalent to what she had achieved in her 12 best-performing months during her last 19 months of her service with the previous insurance company (“Annual Benchmark”), on top of basic remunerations including commissions, bonuses, allowances etc which is not in issue, she will be paid an additional sum called the Special Income.  The Special Income would be equivalent to 150% of the Annual Benchmark.  The Special Income would be paid to her over 2 years, 100% out of the 150% would be paid in the first 12 months (“first year Special Income’), and the remaining 50% would be paid in the 2nd year (“the 2nd year Special Bonus”).  In the case of the Defendant, the Annual Benchmark should be $366,852.  So in the first year, she would be paid $366,852 by 12 monthly installments.  However, the Plaintiff would pay half of the first year Special Income, i.e. $183,426 to her immediately at the time she joined as a gesture of welcome (“the Inducement Payment”).
	(b)	The Defendant would be subject to performance requirement standards for each of the Defendant’s first 12 months of contract with the Plaintiff, with effect from the 3rd month of the contract (‘the Monthly Benchmark”), failing which the Defendant would not be entitled to the Basic Remuneration for the particular month and the entire Special Income, unless the Defendant in the immediate subsequent month could outperform over the Monthly Benchmark to the extent that she was below in the previous month.  Or similarly, even if she failed in the first 11 months but would still be so entitled if she in the 12th month succeeded in making up the shortfall from the Annual Benchmark in the past 11 months.
(ii)	The Product (Transplant Policies)
		According to May Chan, the Defendant was always welcomed and encouraged to refer to the Plaintiff her clients with the former insurance company because the Plaintiff had deviced a new scheme that the old policies with other insurance companies would be taken as new policies with the Plaintiff (the Transplant Policies”) and the Plaintiff would adopt their insurance policies, in short, all terms and conditions would remain unchanged under the Transplant Policy.

The 2^nd Representations

12.  According to the Defendant, the 2^nd Representations were made again by May Chan in late April 2008 in the presence of May Ma in the Plaintiff’s office.  May Ma was and still is the Human Resources Manager of the Plaintiff.  Contrary to clause 2 of the Memorandum, May Chan in front of May Ma said that the first year Special Income was not to be returned even if she failed to achieve the Annual Benchmark during her second 12 months of contract with the Plaintiff.

13.  The Defendant said that relying upon the above two Representations she signed the Set of Agreements and the Memorandum.  Further, the Defendant alleges that the above 2^nd Representations turned out to be false in the sense as now set out below:

(i)	Achieving the Annual Benchmark during her first 12 months of service with the Plaintiff would not entitle her to theentire Special Income, 150% of the Annual Benchmark; she was not made aware of clause 2 of the Memorandum which provides for production requirement in the second contract year and entitlement of agent;
(ii)	The Inducement Payment turned out to be a loan which she was liable to repay to the Plaintiff;
(iii)	Her entitlement to the 2nd year Special Bonus, the remaining 50% of the total Special Income, was subject to conditions above the achievement of the Annual Benchmark during her second 12 months of service with the Plaintiff; and
(iv)	The Basic Remuneration and the Special Income would be subject to the duration of payment of premiums by her clients.

The 3^rd Representations

14.  It is alleged that the 3^rd Representations were made by May Chan a week after the Defendant had joined the Plaintiff.  It was a time when the Defendant discovered that she had not received the immediate payment of 50% of the 1^st Year Special Income as represented to her.  She then made enquiries with May Chan and learned that she would have to make an application for it.  She put in an application under the instruction of May Chan (“the SI Advancement Application”).  About a week later May Chan produced to her a document in English and a cheque for $183,426.  May Chan then represented to her that she was to sign on the document to acknowledge receipt of the cheque if she was to take the cheque, and that this was only for the record of the Plaintiff.  Relying on the 3^rd Representations, she signed the document without knowing the content therein.  She later learned from her legal advisers that the document was in fact a loan agreement (“the Loan Agreement”).

15.  Put in a nut shell, the pleaded case of the Defendant was that she agreed to join the Plaintiff relying on of what had been represented to her by May Chan and May Ma.  It is her allegation that she had never received the documents sent out under the cover letter dated 3April 2008 containing the Set of Agreements.  The Agent’s Agreement and the Agency Leader’s Agreement were only produced to her for execution by May Chan at the meeting with May Ma together with the Memorandum and she was not given the opportunity to understand the nature and content of them.  She was never made aware of the existence of clauses 6 and 7 of the Memorandum.  To the contrary, she was given to understand by May Chan in the presence of May Ma that the 1^st Year Special Income would not have to be repaid by her even if she failed to achieve the Annual Benchmark during her second 12 months of contract with the Plaintiff, it was called “the handshake money” offered to her by the Plaintiff upon her joining.

16.  The Plaintiff denies all allegations of misrepresentations, and avers that the Defendant must have been well aware of the operation of the Special Income because:

(i)	The terms of appointments including the Special Income were set out in the Set of Agreements and the Memorandum which formed the contract between them;
(ii)	The Set of Agreements was sent to her for signature and returned duly signed on 5 May 2009, she had also signed to acknowledge receipt of the Agency Manual 2008; further the Defendant signed the Memorandum after the content had been explained to her by May Ma at the meeting held in early June 2008;
(iii)	the Defendant had made the Loan Advancement Application and signed the Loan Agreement which clearly indicated that there was no “handshake money” or Inducement Payment to be paid to her; as a result, she had received a sum of $183,426 by one payment which was equivalent to 50% of the 1st Year Special Income (“the Loan”)
(iv)	she had made a written request on 16 April 2009 asking for discretionary payment of Special Income for the month of January 2009 notwithstanding her failure to meet the requirement;
(v)	she had written another application (“the Application Letter”) in early July 2010 asking for time to reduce the Lapsed Ratio[3] so that she would not have to repay the entire Special Income and this clearly showed that she was aware of the content of the Memorandum;
(vi)	further the monthly statements on commission contradicted her case of being paid handshake money or Inducement Payment as they showed that she had been repaying to the Plaintiff the Loan by 12 monthly installments of $15,285.50 each.

17.  The Defendant maintains that she only signed the relevant documents relying on the representations; and due to her limited knowledge in English, she did not know the true nature and content of them. She had never received any monthly statements on commission.  Further she alleges that she was not the author of the Application Letter and made no admission to a written request for discretionary payment.

Issues to be tried

18.  From the above, the main issue between the parties was whether the Defendant was bound by the Set of Agreements and the Memorandum.  For this main issue to be resolved, I would have to make findings on whether there were misrepresentations as alleged; and if there were such misrepresentation; and  whether Defendant knew the nature and content of the documents at the time they were executed.  The factual disputes can be summarized as follows:

(i)	Whether the Defendant had sent in an appointment application in March 2008 (“the Appointment Application”) or in April as alleged by the Defendant;
(ii)	Whether the Defendant received the Agent’s Agreement and Agency Leader’s Agreement in early April 2008 or was she only shown these documents at the meeting with May Ma together with May Chan;
(iii)	Whether the meeting with May Ma together with May Chan took place in June 2008 or in late April 2008 as alleged by the Defendant;
(iv)	Whether the Defendant had applied for the Loan or for an Inducement Payment which she was not liable to repay;
(v)	Whether the Defendant was aware of the content and true nature of the Loan Agreement at the time she signed it;
(vi)	Whether the Defendant had no idea about the particulars of her income; and
(vii)	Whether the Defendant had written the request in April 2009 and the Application Letter in July 2010.

The Trial

19.  Parties called 2 witnesses each to prove their respective cases.

Evidence of the Plaintiff

Sylvia Tu

20.  She is Assistant Vice President of the Plaintiff.  She is in the Agency Administration Department.  Her evidence was mainly on the process of the Appointment Application put in by the Plaintiff.  According to Plaintiff’s record the Set of Agreements was sent to May Ma on 3 April 2008 and the Agency Administration Department received it on 5 May 2008 by then it was already signed by the Defendant.  On the same day, the Memorandum was sent out to May Chan for it to be passed to the Defendant.  Again Ms Tu received it on 3 June 2008 and saw that it was signed by the Defendant.  The Defendant completed her registration with the Insurance Agents Registration Board as an Agent of the Plaintiff on 10 June 2008 and the appointment took effect.

21.  She said that it was discovered in May 2010 that Lapsed Ratio[4] had exceeded 25% and pursuant to clause 7 of the Memorandum the Defendant was thus liable to repay the Special Income received by her.  The Plaintiff had therefore on 14 May 2010 issued a demand letter to her.

22.  Further due to Early Lapses pursuant to clause 6.4(b) of the Agent’s Agreement the Defendant was liable to repay Clawback of Commission to the Plaintiff.  A letter had been sent to the Defendant informing her of the same on 10 June 2010.

23.  The Defendant sent the Application Letter to the Plaintiff asking for time to amend the Lapsed Ratio and it was received by the Agency Administration Department on 5 July 2010.  Unfortunately, the Defendant could not meet the requirement although extension of time was granted.  A demand letter was issued again on 10 August 2010 by which the Plaintiff asked for repayment of the entire sum of the Special Income the Defendant had received.  It was offered to the Defendant that the amount could be repaid by 24 monthly installments.

24.  Ms Tu said that the Defendant resigned on 15 October 2010, which was within 48 months since she had joined, in the circumstances she would not be entitled to the contribution made by the Plaintiff under the Individual Saving Scheme.  She is however entitled to her own contribution which is $36,701.05.  Ms Tu said that the Plaintiff asks this sum to offset the amount owed to the Plaintiff by the Defendant pursuant to clause 6.5(a) of the Agent’s Agreement. 

25.  The line of cross examination on Ms Tu was to attack her evidence on the chronology of the application process and to establish the Defendant’s saying that the Set of Agreements was only first produced to her in the meeting with May Ma in late April and not earlier.  In fact what Ms Tu could say was that she received a signed version of the Set of Agreements on 5 May 2008 according to the remarks made on the relevant part of the documents.

May Ma

26.  She is Manager of Agency Development Department of the Plaintiff. Her duties include handling, checking and approving agency applications, monitoring agency production performance and explaining the Agency Manual, the Plaintiff’s rules and benefit for agents.

27.  According to her, on 2 April 2008, having reviewed the Defendant’s application with May Chan’s endorsement, the Plaintiff’s Agency Administration Department started to prepare the Set of Agreements for the Defendant’s perusal.  At that time, the Plaintiff was still assessing the amount of Special Income and the possible loan to be made available to the Defendant and thus the Memorandum and the Loan Agreement were not yet prepared for execution.

28.  She said that according to the Plaintiff’s record:-

(a)	The Set of Agreements was sent out by the Plaintiff’s Agency Administration Department to her on 3 April 2008.  Then she sent it out to May Chan’s office by internal courier so as to reach the Defendant.
(b)	The Set of Agreements was signed by the Defendant and returned to the Agency Administration Department on 5 May 2008.
(c)	The Memorandum was sent out by the Agency Administration Department to May Chan for her to pass to the Defendant on 5 May 2008.

29.  The Plaintiff had eventually worked out the amount of Special Income to be $366,852 and the Loan to be $183,426, mode of payment and repayment should be as follows:-

(a)	The amount of Special Income payable to the Defendant would be in the sum of $30,571 per month for a consecutive period of 12 months; and
(b)	The Loan would be in the sum of $183,426 and the same was to be repaid by the Defendant to the Plaintiff by 12 consecutive monthly installments of $15,285.50 each.

30.  In early June 2008, she met the Defendant for the first time with May Chan at the Plaintiff’s office.  During the said meeting she explained to the Defendant the features of the Special Income as follows:-

(i)	The Special Income was subject to validation criteria.  The Defendant would need to fulfill the following requirements in the first contract year in order to obtain the Special Income:- (a) Personal Persistency; (b) Group Persistency; (c) Personal Production Requirement; and (d) Group Contract Maintenance Requirement.
(ii)	The Defendant would need to repay the Special Income to the Plaintiff if the appointment was terminated for whatever reasons by either the Plaintiff or the Defendant within 48 complete months of the service of the Defendant.
(iii)	The Defendant would need to repay the Special Income to the Plaintiff if any policy/layer of policy written by her and/or her subordinates in the first contract year was lapsed/surrendered/had the sum insured or benefit amount reduced before 19 months of the policy premium had been paid and the total amount of Personal AFYC and/or AFYOR from such policies/layers was more than 25% of the aggregate amount of Personal AFYC and/or AFYOR achieved in the first contract year (“Lapsed Ratio”).

31.  She also advised the Defendant to seek her own legal advice if she had any doubt or question with any documents or arrangements.

32.  At the conclusion of the meeting, the Defendant had signed the Memorandum.  As a result the Plaintiff had paid the Defendant a total sum of $366,852.00 as Special Income for a period of 12 months ($30,571.00 x 12 months) since June 2008.

33.  May Ma denied having made the 2^nd Representations as alleged, she said that the terms of appointment and remunerations of the Defendant could only be determined by the Plaintiff and not by May Chan or herself.  And the terms of appointment have been set out in the Set of Agreements and the Memorandum.

34.  Pursuant to the Loan Agreement dated 11 June 2008 the Loan in the sum of $183,426 was released by the Plaintiff to the Defendant and had been fully repaid by 12 consecutive monthly installments of $15,285.50 each.

35.  May Ma further pointed out that the Plaintiff’s records reveal that:-

(a)	On or about 5 October 2009, the Lapsed Ratio exceeded 25%;
(b)	On or about 5 November 2009, the Lapsed Ratio of the Group AFYC and Personal AFYC + AFYOR increased to 78.52% and 78.92%;
(c)	On or about 4 December 2009, the Lapsed Ratio of the Group AFYC and Personal AFYC + AFYOR increased to 80.24% and 80.64%.

36.  The Defendant was informed of the above.  Situation had improved since and the Lapses Ratio was reduced to below 25%.

37.  In or about May 2010, the Plaintiff’s records showed that the Lapsed Ratio increased to exceed 25% again.  The Plaintiff therefore issued a written demand to the Defendant for repayment of the Special Income on 14 May 2010.  Later on, in early July by the Application Letter the Defendant acknowledged the problem and requested that time be extended to 31 July 2010 for the Lapse Ratio to be reduced to below 25%.  She further undertook to repay the Special Income she had received if she failed to amend the problem before time expired.  However, the Defendant failed to improve the situation and was therefore liable to repay the Special Income.  On 10 August 2010, the Plaintiff wrote another letter to the Defendant to demand for immediate repayment of the whole of the Special Income she had received.

38.  The Defendant wrote to the Plaintiff a letter dated 15 October 2010 to resign with effect from 1 October 2010 for personal reasons.  In view of the Defendant’s resignation, the Defendant was liable to immediately repay to the Plaintiff the Special Income and any other sum of money indebted to the Plaintiff.

Evidence for the Defendant

The Defendant

The 1^st and 2^nd Representations

39.  The Defendant gave evidence at the trial.  She adopted her witness statement as her evidence in-chief.  In her witness statement she said that she had been working with other insurance companies for about 13 years before joining the Plaintiff.  At around early April 2008May Chan approached her to persuade her to join the Plaintiff.  They met at a branch of Hoi Tin Tong (海天堂), during which May Chan made the 1^st Representations as summarized in paragraph 11 above.

40.  Around late April 2008, she met May Chan and May Ma at their invitation in the office of the Plaintiff during which May Chan and May Ma, for and on behalf of the Plaintiff, in order to solicit her service for the Plaintiff, made the 2^nd Representations as summarized in paragraph 12 above.  For further details, she said May Ma produced the Set of Agreements and the Memorandum for her signature but she had scarcely explained the content, she only emphasized and directed her attention to the tables and figures in the documents She said as she had only received education in English up to Form 3 level in Mainland China her knowledge of the English language was limited.  In fact she did not fully understand what the documents were about, but May Chan urged her to sign and she signed the documents accordingly.  She said before she signed, no one had explained the documents in detail to her, nor did she have any opportunity to read them. 

41.  In court, she said that acting on the faith and truth of the 1^st Representations and the 2^nd Representations, she agreed to join the Plaintiff.  For such purpose, she had signed 2 English documents.

42.  She said that the Set of Agreements and the Memorandum appear to be the documents she signed at the meeting with May Ma, but she doubted whether the Memorandum was explained at the meeting as it was dated 5 May 2008.  Under cross-examination she said she did not ask any questions about the Memorandum because she said she did not know what to ask.

The 3^rd Representation and the Loan Agreement

43.  The Defendant said that after she joined the Plaintiff, she asked May Chan about the Inducement Payment.  May Chan in reply asked her to apply for it in writing.  She wrote the SI Advancement Application under the instruction of May Chan.  Around a week afterward, May Chan presented an English document for her signature, together with a cheque drawn payable to her for $183,426 by the Plaintiff (the “Cheque”).  May Chan said to her that for the records of the Plaintiff she would have to sign the English document to acknowledge receipt of the Cheque and to take the Cheque, she would have to sign the English document.

44.  Acting on the faith and truth of the 3^rd Representations, she signed the English document without knowing that it was a Loan Agreement.

45.  The Defendant said that she received on 17 June 2008, a sum of $183,426 by way of the Cheque being the Inducement Payment and the remaining balance of the total Special Income would be paid to her by monthly payment.

46.  In regard to whether she knew she had been repaying the Loan and had been receiving the whole of the monthly Special Income and not half, she said that she was never sent her monthly statement for commission to check her income, she did not quite know how to enter into the intranet to check and she was not given the PIN to enter into her account despite her requests, nor did she receive the Confirmation of Agent code sent out on 11 June 2008 after her registration with the Insurance Agents Registration Board was complete.  It is for these reasons, she had no idea about the nature and breakdown of money paid to her every month.  As a result, she did not know she had been repaying the Loan by monthly installment for 12 months.

47.  In 2008 autumn/winter, she realized that the Plaintiff had defaulted paying her due total of Basic Remuneration and 1^st Year Special Income.  She learned from May Chan that the Annual Benchmark should be $600,000 instead of $366,852.  In any event, she managed to achieve the new Annual benchmark of $600,000 by around May 2009.  On the other hand, at around mid-2009 she received complaints from some of her clients about the Transplant Policies.  At around the same time, she learned from her secretary that all new clients of life insurance policies must continue paying four months of premiums; otherwise she would have to repay the Plaintiff all relevant Basic Remuneration received.

48.  She said she felt cheated, being betrayed and had been utilized to exploit her clients.  She almost stopped working after July 2009 due to health condition, and since then she had received no income from the Plaintiff.  At around March 2010, the Plaintiff ceased paying her the recurrent monthly Basic Remuneration.  As the relationship between the Plaintiff and herself had deteriorated irreparably, she issued a letter dated 15 October 2010 to terminate the contract of agency with effect from 1 October 2010.

49.  She denied she had ever written any written request in April 2010 for discretionary Special Income Payment nor the Application Letter asking the Plaintiff to extend the time for meeting the required target or for any other purpose.  She said that if the Application Letter existed it would have been forged and/or fabricated without her awareness or consent.  She called Ms Chek to give evidence to prove that the Application Letter was not written by her.

Chek Wai Lin

50.  Ms Chek said that in fact the Application Letter was drafted by her under the instruction of May Ma. She was part-time private secretary to May Chan between March to July 2010.  She said as she could see from the exhibit now produced to the court, the words “specially approved” and the signature hereunder did not appear to be the hand-writing and signature of May Chan.  She was however not sure whether the signature against “Applicant” was signed by the Defendant as it looked not quite the same as hers.

Discussion

51.  As confirmed by counsel for both parties, the interpretation of the relevant provisions in the Set of Agreements and the Memorandum is not disputed; further it is not disputed that Lapsed Ratio had exceeded 25% and her resignation took place within 48 months of her appointment.  The Defendant does not dispute the quantum of Clawback of Commission either.  In other words, the dispute is only on liability and not quantum; on whether she could rely on her allegation of misrepresentation and non est factum as defence.

52.  The Plaintiff’s case is straight forward.  It relies on the Set of Agreements and the Memorandum signed by Defendant to prove her liability.  In response to her defence the Plaintiff put forth other documents to say that the Defendant case is improbable and in fact she was well aware of the operation of Special Income.  The burden is on the Defendant to prove her allegations to the satisfaction of this court.  The merit of the Defendant’s case despite of argument put forth by her counsel on applicable legal principles, at the end boils down to the credibility of witnesses including the Defendant herself.

53.  Having heard the evidence of the two witnesses of the Plaintiff, I find them truthful and reliable.  Their evidence was straight forward and was well supported by documents.  The two witnesses were not shaken under cross-examination.  They are employees of the Plaintiff and have no direct interest in the joining of the Defendant or otherwise as opposed to a Direct Manager who might have some benefits to gain from building her own team.  On average May Ma handles 30 applications for appointment from fresh applicants and 4-5 applications from experienced agents of other companies per month.

54.  On the other hand, I find the Defendant not reliable nor truthful.  First, the Defendant’s account on the date of events could not be right.  She said that May Chan only approached her in April 2008, but there were dates chopped or written at various places in the Appointment Application Form, the earliest being 26 March 2008 put down by her up-line agency leaders up to 2 levels.  Her saying that the meeting with May Ma took place in late April 2008 could not be correct either.  It was the evidence of the Defendant that she had asked May Ma about the Memorandum and SI Advancement Application, the Memorandum was dated 5 May 2008.  Even the Defendant herself found her saying that she was shown the Memorandum at the meeting with May Ma in late April  could not sit well with the date on the document and she made a faint attempt to say that she might not have discussed the Memorandum with May Ma.  I do not accept the Defendant’s latest version of account.  I accept the evidence of May Ma that they have discussed about the Memorandum at the meeting.  I am of the view that from the date of the Memorandum, the meeting with May Ma could not have been held earlier than 5 May 2013 and dated back in late April.  Having viewed all the evidence before me, I find that the meeting with May Ma was held in early June 2013 instead of late April as alleged by the Defendant.

55.  Secondly, she categorically denied having made or received virtually any documents which would contradict her defence.  It is her case that she was only shown the two agreements at the meeting with May Ma and not earlier; she maintains she had never received the Agency Manual 2008 sent out under the cover letter dated 3 April 2008 despite her signature for acknowledgement; she did not receive the Confirmation of Agent Code informing her Agent Code and the effective date of her appointment with the Plaintiff; and during her service with the Plaintiff for over 2 years, she had not received any monthly commission statements and lastly, she had never received any of the demand letters on Clawback of Commission and refunded for Special Income.

56.  I find her such saying totally unbelievable.  Even she herself could not render an explanation why the documents were not passed to her.  I find the Plaintiff case credible.  I accept Ms Tu and May Ma’s evidence that the Agent’s Agreement and Agency Leader’s Agent had been sent to her for execution on 3 April 2008 together with other documents including the Agency Manual 2008.  The two agreements were returned with the Defendant’s signature on 5 May 2008; her saying that she only had the opportunity of seeing an Agency Manual when she saw her fellow agent being sent a copy was incredible.  It is my finding that when she received the Set of Agreements it was still well before the meeting with May Ma in early June.  This is consistent with May Ma’s evidence that she had explained the Memorandum to the Defendant at the meeting, but did not mention having had much discussion on the Set of Agreements.

57.  I also accept the Plaintiff’s case that monthly statements were sent to her every month and she could at any time access to the Plaintiff’s intranet to check her monthly statements for commission.  I find her saying that she was never given the information of her monthly income and she had never asked for them a blatant lie.  Her saying that she had no PIN to enter into her own account in the intranet was also not believable, according to Ms Tu, the PIN was their Agent Code before it was reset.  Her saying that she could not remember her Agent Code was not worthy of belief as it was her identity in the profession and the Agent Code was printed on every insurance proposal or policy written by her.

58.  I am of the view that the Defendant had fabricated her case of not being made aware of the particulars of her monthly income.  I find her account in this regard totally incredible because the composition an insurance income was so much more complicated than other employees earning a regular income.  It is beyond all comprehension that the Defendant would have been satisfied with getting to know her income through the entry in her bank account passbook.  In my view, she only said so with intent to support her denial of having any knowledge on her paying back the Loan for 12 months from her income, and that she was not receiving the balance of Special Income every month by half the total amount but the whole of $30,571.  This was only an attempt to resolve the contradiction created by her saying that the Loan was in fact the Inducement Payment which was not repayable.  This might then hopefully serve the purpose of explaining why she would believe May Chan’s saying that the loan repayment schedule attached to the Loan Agreement was in fact a payment schedule for her to be paid the balance of the Special Income.  I do not accept her allegation.

59.  The Loan Agreement and the alleged 3^rd Representations was in fact only a side issue at the most.  She said that she was not aware that the Inducement Payment would be paid to her in the form of a loan which was repayable.  There is produced at p189 a copy of the SI Advancement Application signed by her and her up-line leaders up to 2 levels above.  It was eventually approved by Manley Cheng, supervisor of May Ma on 5 June 2008.  The SI Advancement Application was in hand-written form:

60.  The SI Advancement Application was clearly in contradiction with the Defendant’s case that she was not aware of the Loan made to her.  In the SI Advancement Application she did not ask for “handshake money” or the Inducement Payment, she asked for advance payment of “SI” (Special Income).  She admitted that the SI Advancement Application was written by her and signed by her.  She however said that the content and nature was not what it meant.  She said she was instructed by May Chan to put down those words as they now appear.  She said she had also questioned May Chan for the wording but May Chan said “SI” meant to be “handshake money”.  In my view the word “advancement” carries a connotation that it is not an outright payment.  I do not accept her saying that it was an application for Inducement Payment when the content of the SI Advancement Application is clearly inconsistent with her case.  I do not accept her allegation as according to her, May Ma had already explained the content of the Memorandum to her and she must be aware of the nature of Special Income.  I find that in no circumstances she thought she was asking for Inducement Payment by way of the SI Advancement Application.

61.  Even if I find the content of the SI Advancement Application non-conclusive in telling its true nature, the Loan Agreement subsequently signed by the Defendant proved that her version is not credible.  Although the Loan Agreement was in English, there were figures shown in clauses 1 and 7.  If it were a document to acknowledge receipt of the Inducement Payment which was not repayable as alleged, the Defendant’s attention would have been drawn to the figure appearing in clause 7 therein which said “$15,282 shall be debited in June 2008 and shown in the relevant commission statement”.  Further, there was a Repayment Schedule attached to the Loan Agreement which set out when and how the Loan was to be repaid and she had signed right below the table.  She said that she was told that it was a schedule to show how the balance the Special Income was to be paid to her, but she did not explain why the 3-page document failed to raise her suspicion if it was being said to be an acknowledgment of the Cheque.  Further the monthly statement of commission would have told a different story.  I do not accept her evidence in this regard at all.

62.  Having said the above, I find that the Loan Agreement was only an incident in the background because the Loan had been fully repaid and had nothing to do with the Plaintiff’s claim or the counterclaim. Mr Chan for the Defendant confirmed in his final submission that the Defendant was not induced into signing the Set of Agreements by the 3^rd Representations but they would corroborate the 1^st Representations.  I however agree with Mr Wong that this sheds light on the credibility of the Defendant and proves that she was never promised to be paid any “handshake money” or Inducement Payment as alleged.

63.  No doubt the Special Income is a design to attract high achievers in other insurance companies to join the Plaintiff.  Her saying that even if she left the Plaintiff after joining for a few days she could leave without having to repay the Special Income already paid to her is just beyond common sense and commercial sense.  According to her such saying, it seems that the Plaintiff were so generous that it would pay the former agents of its competitors for their past good performance which the Plaintiff had no gain at all.

64.  The Defendant also denied having written the Application Letter to the Plaintiff.  It was suggested by her that the application was put in under the instruction of May Ma.  She called a witness Ms Chek to testify to the effect that the application was arranged and content was dictated to her by May Ma.  But the Defendant did not and could not give a reason why May Ma would have to do this when she had no benefit to derive from such arrangement.  She also denied having made any written request for discretionary Special Income Payment for January 2009.  She was however indeed the only person to be benefitted from such application and she was in return paid the Special Income when she was not supposed to be so entitled but for the written request and the demand for refund was withheld because of the Application Letter. 

65.  Further, Ms Chek gave evidence on the signatures affixed on the Application Letter. I give no weight to it as not only she was not an expert to give opinion evidence, her evidence in this regard was of poor quality as it was quite some time since she had left her position as a part-time secretary to May Chan when she was asked to identify the signature of Application Letter dated in December 2011.  She did not say on what basis she had come to her opinion except from her memory.  She did not say how she had inspected the signature of May Chan and how many signatures she had made comparison with.  She only worked there for a few months years ago.  As I could see it, and I have already mentioned above, the Defendant was the only one to be benefitted from the application.  I am of opinion that she could not be unaware of such application.  I do not see why May Ma would be the one directing the drafting of such letter as she had no interest in the income of the Defendant unlike May Chan who might have override commission from her performance.  I see no reason the Application Letter had to be forged for the Defendant’s sole benefit.  I reject the evidence of the Defendant and Ms Chek in this regard.

66.  The Defendant denied having heard anything about “clawback” despite of her 13 years of experience in the trade of insurance.  But as shown in her Appointment Application Form, she was required to fill in the rate of persistency.  She filled in “90%” against “Persistency”. This shows that persistency is taken as a crucial factor by insurance companies to access the performance of an agent and she must have been aware of it.  Further at the same page of the Appointment Application Form she was asked whether she had any outstanding debt arising from “finance/ clawback of commission owing to any insurance company or…upon her termination”.  She checked the box “No”. I find that she was not credible when she said she had never heard about “clawback”. Even if she was not the one who filled out the form (which I do not accept), the information required shows that “persistency” and “clawback of commission” are known features in the insurance profession.

67.  She denied having heard anything about “override” until I asked her to clarify the meaning of her such saying, then she admitted that she knew what it was.

The Defendant’s Final Stance on Misrepresentations

68.  In his closing submissions Mr Chan informed this court that the Defendant would no longer rely on the 2^nd Representations allegedly made by May Chan and May Ma in the Plaintiff’s office.

69.  Mr Wong criticizes that the Defendant for changing her stance substantially and said that the Defendant should not be allowed to do so without properly amending the pleadings.

70.  It is admitted by Mr Chan that there were discrepancies between her evidence in court and her pleaded case, as a result of which Mr Chan in his final submission says that the Defendant would no longer rely on the 2^nd Representations.

71.  In any event, Mr Wong submitted that the Defendant could not succeed in her allegation that she was misled by the 1^st Representations into signing the Set of Agreements, because according to her evidence, she only submitted the Appointment Application after seeing May Chan.  At that time crucial factors necessary to work out the Special Income for her were still not yet available.

72.  I am of the view that the Defendant’s final stance no doubt further weakens the Defendant’s case because the two Representations were designed to work together.  Without any allegation on representations or misrepresentations made at the meeting with May Ma where content of the Memorandum had been explained, the only inference to be drawn is that the Defendant ought to have obtained proper information on the nature and content of the Memorandum as asserted by May Ma.

73.  To sum up, the Defendant’s new stance does create some difficulties for her.  She now relies on the 1^st Representations which led only to the Defendant’s submission of her Appointment Application.  As she did not deny that the terms of the Memorandum had been explained to her in the meeting with May Ma and she did not ask any question because she did not know what to ask, I do not think her allegation of misrepresentations can even take off ground.

74.  As I have made my finding that the Defendant has failed to prove her allegation of misrepresentation, it is not necessary to go into the submissions as to whether the Plaintiff was bound by what May Chan might have said in the alleged 1^st Representations.  I now do so only for the sake of completeness.

75.  Relying on Thanakharn Kasikorn Thai Chamkat (Mahachon) v. Akai Holdings Ltd (2010) 13 HKCFAR it is the Defendant’s case that the Defendant had justifiably relied on May Chan’s authority to commit the Plaintiff.  Apply the rules set out therein, in determination on whether May Chan had apparent authority, it depends on (a) the state of mind required on the person alleging apparent authority and the test for it is one of “irrationality”; (b) the extent, if any, to which a third party could rely on unauthorized statements made by the agent as to his authority to commit the principal: and (c) the evidence required to show that one relied on the agent’s apparent authority.

76.  In my view, question (b) is most important in the present case.  It has never been the Defendant’s case that there was express statement made by May Chan that she had the authority to make an offer of appointment to the Defendant on terms agreed between them.  Further, the Defendant’ said nothing to show that May Chan’s apparent authority was implied.  To the contrary, the Defendant knew that she would have to submit an Appointment Application to the Plaintiff before she could start discussing the terms of appointment with the Plaintiff.

77.  Going back to question (a), I do not think that the Defendant had justifiably relied on May Chan’s 1^st Representations even taking the test for it is one of “irrationality”.  Having been in the profession for over 13 years, and having been promoted to the grade of Manager, she ought to know that May Chan was only sourcing suitable candidates for the Plaintiff and perhaps in return for her own team; it was after all the Plaintiff who had the final decision to make on whom was to be appointed and the terms of appointment.  That is why the Plaintiff was asking for proof of credentials in the process of Appointment Application.  It is not disputed that after the 1^st Representations were made, if they had been made at all, there was no agreement reached or executed but only an Appointment Application was submitted by the Defendant.  Further she now admits that the Agent’s Agreement which was not even executed by May Chan on the Plaintiff’s behalf, is part of the contract, I do not think the Defendant has any basis to allege apparent authority.

78.  As the Defendant has not proved apparent authority, I do not think it necessary to make a finding on question (c).

79.  For avoidance of doubt I do not accept that there was evidence to show that May Chan had the actual authority to determine an appointment for the Defendant on behalf of the Plaintiff.  There was no evidence or any suggestions that May Chan had participated in setting out the terms in the Set of Agreements and the Memorandum, what she might have done was to facilitate feeding of necessary information so that terms could be drawn up.

80.  Mr Chan criticizes the Plaintiff for not calling May Chan who was allegedly the one who made the 1^st Representation.  Telings International Hong Kong Limited And John Ho and others (CACV 10/2010) was relied on.  In reply Mr Wong said that the rules set out in Teling would not assist the Defendant because it is the primary duty of the Defendant to prove that there is a case of actionable misrepresentation.  I agree with Mr Wong on this.  Truly May Chan was mentioned in the Reply and Defence to Counterclaim to reject the allegations in regard to the 1^st Representations, I however accept that whatever May Chan might have said, the Defendant’s package of remuneration would only be finalized when the Set of Agreements and the Memorandum were to be executed.  The Defendant, with her over 10 years’ experience in the insurance profession, ought to have checked the content of the Set of Agreements to find out her entitlement and duties.  It is more so when at the time of the 1^st Representations, there was still crucial information left to be ascertained. Finally as mentioned above, the consequence of the 1^st Representations was submission of the Appointment Application and not the signing of the Set of Agreement.  I accept the submission of Mr Wong that the principles set out in Teling do not apply.

81.  The Defendant also relies on the defence of non est factum.  In L’Estrange v. F. Graucob Limited [1934]2KB 394, Scrutton L.J. quoted Mellish L.J. in Parker v. South Eastern Ry. Co. 2 C.P.D. 416 at 402-403 and said that the law applicable is that “In an ordinary case, where an action is brought on a written agreement which is signed by the defendant, the agreement is proved by proving his signature, and, in the absence of fraud, it is wholly immaterial that he has not read the agreement and does not know its contents.”  In the case of Parker, having been found that there was no misrepresentation, the Defendant was not allowed to rely on the defence of non est factum when she said that she was told the form she was asked to fill in was an order form, and when she signed it she knew nothing of the conditions which it contained.  Although Maugham L.J. critised the format of the order form, he found that the defendant in that case should be held liable by having signed the order form, the appeal brought by the supplier plaintiff was allowed.

82.  On the same legal principle, it is said in Chitty on Contracts[5] that the defence of non est factum is most obviously important in two situations.  The first is where a party has signed the supposed contract as the result of the fraud of a third party and the other situation is where the fraud has been committed by the other party to the alleged contract or deed and a third party has then relied on the document.  The present case does not fall into any of the two situations.  More relevant to present case, perhaps, it is further said that “If the case is one of fraud or misrepresentation by the other party to the contract, with no third party involved,…the case should be dealt with as one of misrepresentation.”[6]

83.  In the present case, I find the allegation of misrepresentation has not been proved and I find that the Defendant knew that the Agent’s Agreement, the Leader’s Agency Agreement and the Memorandum are legal documents.  There was no mistake on the nature and character of the documents carrying legal effect and consequences on the part of the Defendant.  Since she has failed to prove misrepresentations leading her to sign the documents, she was bound by the same.  It is also Mr Wong’s submission that after the Appointment Application was processed, she was sent the Set of Agreements for execution and at that time she would have the opportunity to check and confirm the terms of appointment stated therein.

84.  I am of the view that it was immaterial whether the meeting with May Ma was initiated by May Chan or by the Defendant.  The purpose of such meeting was for her to seek confirmation of her entitlement according to the Memorandum or even the Set of Agreements by the administration of the Plaintiff other than just for her to accept what might have been said by a Direct Manager.  If it was initiated by May Chan, it would make the Defendant’s case of the 1^st Representation even less probable.  If May Chan had the scheme to mislead the Defendant to join for her own interest and benefit, the last thing she would do is to suggest a briefing to be given to the Defendant by the administration.  If it was initiated by the Defendant it only goes against herself as it showed that she knew May Chan did not have the final say on her terms of appointment.  But I find this peripheral to the core issue.  In any event the Defendant admitted that there was a meeting held where May Ma had explained to her, although only scarcely done, the Memorandum.

85.  In his closing submission, Mr Chan confirmed that the Defendant would no longer maintain her defence of estoppels and mistake.  I would therefore make no ruling on these abandoned issues.

Conclusion

86.  The Plaintiff’s claim is for repayment of $366,852 being Special Income paid to the Defendant during her appointment with the Plaintiff pursuant to clauses 6 and 7 of the Memorandum.  Further the Plaintiff asks for repayment of Clawback of Commission in the sum of $3,438.20 for Early Lapses pursuant to clause 6.4 (b) of the Agent’s Agreement.

87.  It is my finding that the Appointment Application was sent in by the Defendant before end of March 2008.  On 2 April 2008 May Ma reviewed the Appointment Application and directed that the Set of Agreements was to be prepared for execution.  She then received the Set of Agreements on 3 April 2008 from Ms Tu, and upon receipt of the same she sent them out to May Chan.  The Set of Agreements was signed by the Defendant and returned to the Agency Administration Department on 5 May 2008.  The Memorandum was sent out by Ms Tu’s Department to May Chan on 5 May 2008.  The meeting with May Ma took place in early June and there was discussion on the Memorandum which was eventually signed by the Defendant at the conclusion of the meeting.  It was received by Ms Tu’s Department on 3 June 2008.

88.  To prove its case and to dispel the allegation of the Defendant on misrepresentation and non est factum, the Plaintiff relies on the evidence of May Ma and Sylvia Tu and the documents as follows:

1.	The Set of Agreements;
2.	The Memorandum;
3.	The Application Letter; and
4.	The monthly statements of commission.

89.  I accept the case of the Plaintiff that the Defendant had the duty and also the opportunity to read and understand the content of the Set of Agreements. I accept that May Ma had also explained the content of the Memorandum to her. I find that the Defendant had an opportunity to ask May Ma to clarify the terms of her appointment and her entitlement to the Special Income; in fact that was the whole purpose of her seeing May Ma.  Now the Defendant withdrew her allegations of misrepresentations being made at the meeting with May Ma, and it is therefore clear that she knew the Memorandum was a contractual documents to bind the Plaintiff on one side and she herself on the other.  I agree with Mr Wong that the rule under L’Estrange v F Graucob Limited applies to her. I accept on balance that she knew that the Special Income was paid to her subject to the terms set out in the Memorandum.  I am satisfied that she knew about the operation and had on two occasions asked for indulgence from the Plaintiff about her being disqualified from the entitlement.

90.  Further, I am satisfied that the Plaintiff is entitled to claim from her Clawback of Commission according to the Agent’s Agreement and the Agency Manual 2008 and that the Defendant had signed to agree to it.

91.  I accept the Plaintiff’s evidence that a Summary Of Commission Statement would be sent to the Defendant each and every month during her appointment with the Plaintiff for over 2 years and she had access to the computer system where she could retrieve information with further detail.  I reject her saying that she only relied on her bank account passbook to know her income every month. 

92.  On the whole I accept the case of the Plaintiff, judgment is entered for the 2 sums as claimed.  On the other hand, I do not accept that the Defendant is entitled to any contribution made by the Plaintiff into the Defendant’s Individual Saving Scheme account.  I allow the counterclaim to the extent of her own contribution.  This sum shall stand to offset the sums granted in the Plaintiff’s favour.  I enter judgment for a sum of $343,454.50 as claimed by the Plaintiff accordingly.

93.  The claim for interest is not admitted but nothing much was put forth as a defence.  I am satisfied that pursuant to clause 6.5(b) of the Agent’s Agreement and clause 11 of the Memorandum, the Plaintiff is entitled to interest at the rate of 3% per month calculated from 1 October 2010 to the date of payment.  I award interest as claimed.

Order

94.  This is my order:

(i)	The Defendant do pay the Plaintiff a sum of $343,454.50; and
(ii)	Interest at the rate of 3% per month calculated from 1 October 2010 until full payment.

Costs

95.  I see no reason why costs should not follow the event.  I order the Defendant to pay the costs of the Plaintiff for both the claim and the counterclaim.  I find it appropriate to award certificate for Counsel.  I order that such costs are to be taxed if not agreed.  This is an order nisi to become absolute within 14 days if no application is taken out to vary the same.