PACIFIC CENTURY INSURANCE CO. LTD. v. LAI TAT CHI

HCA14522/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.14522 OF 1998

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J U D G M E N T

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1. The plaintiff appeals against the decision of Master de Souza dismissing the plaintiff's application under Order 14 for final judgment and giving the defendant unconditional leave to defence. It also now applies for final judgment in the sum of $471,174.59 plus interest.

2. The plaintiff's pleaded claim is for $471,174.59 being money lent to the defendant since 1 November 1994. The defendant's defence is a bare denial.

3. The defendant worked as an insurance agency manager for the plaintiff. He had to sell insurance for them and he could also recruit, train and supervise other agents. The parties' relations were governed by an Agency Manager's Contract dated 1 February 1995 which is exhibited to the affirmation of the plaintiff's witness, Mr Tang Wai. This was followed by two similar contracts dated 1 March and 1 October 1996, though these are not exhibited.

4. By a Manager's Financing Agreement dated 1 February 1995, which was expressed as being intended to form part of the Agency Manager's Contract of the same date the plaintiff agreed to pay the defendant $70,000 per month for 11 months, as "Advance Remuneration" against all allowances and bonuses payable in accordance with the Agency Manager's Contract. It was agreed that in the same period the plaintiff would withhold all allowances and bonuses payable to the defendant pursuant to Schedule A of the Agency Manager's Contract. This was referred to as "the Freezing Remuneration". It did not include commission; that was paid monthly. At the end of the period there was to be an accounting. If the total of Advance Remuneration exceeded the total of Freezing Remuneration the defendant had to account for the balance, and if no repayment schedule could be agreed, the balance would become repayable on demand.

5. Manager's Financing Agreements were also attached to and intended to form part of the two later Agency Manager's Contracts. These provided for payment of advances to the defendant of $20,000 per month for six months. At the end of the period the defendant was to account for the total advance payments. Again, if no repayment schedule could be agreed, the balance would become repayable on demand. However, there was no provision in these later Agreements for any withholding of "Freezing Remuneration".

6. According to the plaintiff's witness Mr Tang Wai the plaintiff under the first Manager's Financing Agreement advanced to the defendant a total of $665,000.00 and withheld $258,654.51, leaving a balance due by the defendant of $406,345.49. It advanced to the defendant a further $120,000 under each of the two further Manager's Financing Agreements. This produced a total due by the defendant of $646,345.49 as at February 1997. The parties' relationship ended on 16 December 1997. On 18 February 1998, the defendant agreed in writing that his provident fund which then amounted to $194,657.45 should be put towards settling his debts to the plaintiff. The plaintiff credited the greater part of that against what was owed to produce a net figure of $471,174.59.

7. The defendant does not dispute that a total of $950,000 was advanced to him or that $258,654.51 was withheld under the provisions of the first Manager's Financing Agreement up to 31 December 1995. However, he says that further withholdings were made subsequently. He had a meeting on 18 February 1998 with a senior officer of the plaintiff, Ms Kelly Chan in order to find out what his position was as regards the plaintiff. She told him that the accounts were not yet finalised but that the plaintiff would settle his account if he would forfeit the whole of his provident fund. To this he agreed because according to what he had been told by his immediate superior Mr Davy Tang, he was owing about $200,000. He wrote and signed a note to this effect which reads (in translation) :

"I, Lai Tat Chi, I.D. No. G211357(0), hereby agree to use my provident fund in the sum of $194,657.45 for repayment of my debt."

8. Further the defendant says that the plaintiff declared to the Inland Revenue Department for the tax years to 1996, 1997 and 1998 commission paid to him totalling $1,349,728.00 which in any event exceeded the total advanced to him. The defendant also refers to the fact that Order 14 was only applied for some three years after the Writ was issued and contends that this is undesirable.

9. Mr Tang replies that no other monies were withheld and indeed they could not have been because the second and third Manager's Financing Agreements did not provide for this. Further, he says that the Deed of Trust constituting the Agent's Deferred Incentive Scheme, under which the agent's provident fund was held, an agent's entitlements were in any event charged with the settlement of all debts owing to the plaintiff. Ms Kelly Tang Siu Chau has filed an affirmation denying the settlement agreement which the defendant alleges; she says that she would, at the meeting, have known that the defendant owed much more than his provident fund entitlement and so would not have made such an agreement. Mr Davy Tang has left the company but there is an affirmation from another officer, Mr Lau, who says that he asked Mr Tang who told him that he had never estimated the size of the defendant's debt to the defendant.

10. Mr Tang has filed a further lengthy affirmation for the purposes of this appeal, going over the figures and the various commission statements produced, in order to refute the contentions of the defendant. It includes a chart showing the monthly balances, and the monthly commission statements are exhibited to show how the balances were arrived at. There is also an amplified explanation as to how the provident fund was set off against different items owed so as to produce the balance claimed.

11. The plaintiff argues that because the defendant has not given details of the other withholdings which he alleges, he has failed to discharge the threshold burden to show a triable issue; see Murjani v. Bank of India [1990] 1 HKLR 586. As to the allegation of a settlement agreement with Ms Kelly Tang the plaintiff argues that this is simply incredible.

12. The defendant argues that there is a triable issue. He relies on the observations of Godfrey JA in Ng Shou Chun v. Hung Chun San [1994] 1 HKC 155 at 158 :-

"It will in future be sufficient for the court to ask itself the simple question : 'Is what the defendant says credible?' If so, he must have leave to defend, if not, the plaintiff is entitled to summary judgment. The issue is not whether the defendant's assertions are to be believed, it is whether those assertions are believable."

And on the pithy observation of Rogers JA in Ng Lung Sang Anita v. Lam Yuk Lan [1999] 4 HKC 106 at 111 :-

"The old adage that if you have to sit down, it is not a case for Order 14 is equally applicable today as it was when it was first coined."

13. I add for good measure what Godfrey JA said on the same theme in Man Earn Ltd v. Wing Ting Fong [1996] 1 HKC 225 :-

"Unless it is obvious that the defence put forward by the defendant is 'frivolous and practically moonshine', Order 14 ought not to be applied : see Codd v. Delap (1905) 92 LT 510 per Lord Lindley at 511."

14. The arguments put forward in support of the believability of the defendant's case seem to concentrate more on perceived defects in the evidence put forward on behalf of the plaintiff than on any strengths to be found in the defendant's own case. In particular, much reliance is placed on what Ms Kelly Chan did not say, and the plaintiff's failure or inability to produce Mr Davy Tang to contradict personally the defendant's allegation that this gentleman told him that his owings to the plaintiff came to about $200,000. In addition, Mr Kwong for the defendant points out that the commission statements do not show any actual figures of $70,000 per month as credit. He also refers to the fact that the commission figures in the statements do not add up to the total commission declared to the Inland Revenue Department.

15. I have to look at the defendant's assertions to see whether they are believable. However, as Bokhary JA (as he then was) put it in Re Safe Rich Industries Limited, Civil Appeal No. 81 of 1994, unreported, 3 November 1994 :-

"The test at the summary stage is indeed as simple as whether the defendant's assertions are believable. But it must be recognised - because failure to recognise it would create a debt-dodgers' charter - that whether the defendant's assertions are believable is a question to be answered not by taking those assertions in isolation but rather by taking them in the context of so much of the background as either undisputed or beyond reasonable dispute."

16. Here it is not in dispute that the plaintiff advanced $905,000 and withheld $258,654.51. The plaintiff's witness has explained clearly and credibly how the final figure is arrived at, by reference to commission statements. It may be that Mr Kwong cannot make the figures add up, and this is no doubt something which would be raised in cross-examination if there were to be a trial, but I do not think this casts doubt on the truth of the plaintiff's case. The defendant says that there were further withholdings but they do not appear in the commission statements. However, there was no provision in the second and third Manager's Financing Agreements for any withholding of "Freezing Remuneration". Granted that there may have been a general power to withhold there is no correspondence to show that it was to be invoked and no suggestion that the defendant made any contemporaneous query about monies being withheld. The commission structure was complicated but one would expect the defendant as a manager to be on top of it and know pretty well what he could expect to be making, and to raise queries if he did not receive what he expected. The whole story that other monies were withheld, but the defendant does not know what they were, while at the same time he relied on the verbal assurance of someone who is now completely out of the picture that he only owed about $200,000 seems to me to show the unmistakable glimmer of the "moonshine" referred to in Codd v. Delap. It is not believable.

17. As to the allegation that the provident fund was accepted in full and final settlement, that simply does not appear in the defendant's own handwritten note. He is the author of the document and it has to be construed contra proferentem. It is of course true that he was no lawyer and neither was Ms Kelly Chan but it would have been easy enough for the defendant to make it clear that what he agreed to was full settlement. That needs no great term of art.

18. It is true that the plaintiff has taken a very long time to bring the Order 14 proceedings. However, there is no time limit for bringing such proceedings. See Morison, Son & Jones (Hong Kong) Ltd v. Yiu Wing Construction Co. Ltd [1989] 1 HKLR 432; Yuenfield Ltd v. Cuming Development Co. Ltd [1998] 1 HKLRD G37. Delay would be relevant if it had affected the parties in such a way that the application should not be dealt with at this stage but I cannot see that delay would have affected the parties here.

19. Mr Kwong also points out that while I am in no way fettered by the previous exercise of the Master's discretion, he heard the same (almost identical) arguments and gave unconditional leave to defend. This is a rehearing in which I have to approach the whole of the evidence afresh. I have the greatest respect for the Master but it is not surprising that different judges may take a different view of what is believable, as they may of what is to be believed. In my view the defendant's case is not believable.

20. The plaintiff's appeal therefore succeeds. The Master's order is set aside and there will be final judgment for the plaintiff in the sum of $471,174.58 with interest thereon at 13.08% from the date of the Writ until judgment and thereafter at the judgment rate until payment. Costs of the action including the costs below and of the appeal be to the plaintiff (nisi) to be taxed if not agreed.