ZURICH LIFE INSURANCE COMPANY LTD v. PANG MAN YIU

DCCJ 2465/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2465 OF 2007

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BETWEEN

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J U D G M E N T

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1.  The Plaintiff, the Zurich Life Insurance Co. Ltd. (Zurich) claimed against the defendant, Mr. Pang Man Yiu (“Mr. Pang”), for the sum of $140,000 with interests.

2.  Zurich’s claim was based on the contract made between Zurich and Mr. Pang contained in a Letter of Appointment dated 15 August 2005. Under the said Letter of Appointment, Zurich appointed Mr. Pang as its business manager upon confirmation of Mr. Pang’s registration at the Hong Kong Federation of Insurers. The appointment was subject to the terms and conditions set out in the Letter of Appointment and the Standard Agency Agreement. Other than signing on the Letter of Appointment, Mr. Pang further signed a Loan Agreement supplied by Zurich (“the Loan Agreement”) when he accepted the appointment.

3.  It is the Plaintiff’s case that in accordance with the Loan Agreement, Zurich had extended loans by way of monthly lump sum payments to Mr. Pang in accordance with the table set out in the said Loan Agreement (p. 113 of bundle B). Mr. Pang received $15,000 each month in the first 3 months up to October 2005 and a further allowance of $15,000 in August 2005 and 2 lump sums of $20,000 in January and April 2006 plus monthly instalments in the sum of $20,000 between November 2005 and January 2006.

4.  Under the said Loan Agreement, the loans were subject to the validation rules contained in the Loan Agreement. Further, it stipulated that should the Standard Agency Agreement be terminated within 36 months of the commencement date, 100% of the loan shall be repayable to Zurich.

5.  It is not disputed on pleadings that Mr. Pang signed the Letter of Appointment, the Standard Agency Agreement and the Loan Agreement in August 2005. He received monthly payments of $15,000 in the first 3 months and $20,000 from November 2005 and the special allowance periodically. It is also not disputed that the Agency Agreement was terminated on 24 May 2006. Consequently, under the terms of the Loan Agreement, Zurich demanded the repayment of the $140,000 advanced to Mr. Pang.

6.  Mr. Pang, however, denied he had any knowledge of the contents of the Loan Agreement. He further claimed that he had signed the Loan Agreement as a result of the misrepresentation of Zurich, therefore the Loan Agreement is not enforceable against him.

The Issues

7.  The issues before Court are :

A. whether Mr. Pang is liable to repay the loan to Zurich?

B. whether Mr. Pang has successfully discharged the burden of proof that he signed the Loan Agreement and the other documents as a result of the misrepresentation of Zurich?

A. Whether Mr. Pang was liable to repay the loan?

(i)  Was Mr. Pang an employee of Zurich?

8.  In paragraph 9 of Mr. Pang’s Amended Defence, he relied on Section 70 of the Employment Ordinance Cap. 57 that renders any term of an employment contract purporting to extinguish or reduce any right, benefit or protection of the employee provided by the Ordinance. He further relied on Section 32(1) of the Ordinance that disallowed deduction of wages from the wages or other sums due to an employee.

9.  The Employment Ordinance is not applicable in Mr. Pang’s case because nothing in the Letter of Appointment, Standard Agency Agreement or the Loan Agreement suggested Mr. Pang was appointed as Zurich’s employee. In fact, the 3 documents specifically referred to the appointment of Mr. Pang as Zurich’s agent for the purpose of soliciting applications for insurance and such other businesses as Zurich may from time to time transact (Clause 1.1 of the Standard Agency Agreement). Clause 1.3 of the Standard Agency Agreement provided that “it is understood and agreed that there is no employer-employee relationship expressed or implied” between Zurich and Mr. Pang.

(ii)  Would the fact that he had paid tax to the IRD affect his status?

10.  Mr. Pang relied also on the fact that he was made to pay tax to the Inland Revenue Department on the payments he received from Zurich to show that the payments and allowances were his income and not loans from Zurich.

11.  According to the evidence of Mr. Leung Shu Wing, the senior accounting officer of Zurich, Mr. Pang, like all insurance agents of Zurich, were granted certain sums of money under a loan agreement. The loan agreement provided that the loan would become repayable by the agent to Zurich if the appointment of the agent should be terminated within a prescribed period. In Mr. Pang’s case, the prescribed period for 100% repayment of the loan was 36 months under the Loan Agreement he signed. Should Mr. Pang’s agency agreement continue beyond 48 months, no repayment would be required.

12.  On the basis that the loan is only repayable should the agency agreement be pre-maturely terminated, the repayment is conditional. Consequently, after due consultation with the Inland Revenue Department, Zurich would compile the Form IR56M for all of its insurance agents during the active period of the agent’s appointment. For an agent whose appointment had been terminated before the end of the prescribed period, and who had repaid the loans to Zurich, Zurich’s accounts department would make a report reflecting the agent’s negative payment during the tax year in the Form IR56M. Mr. Leung pointed out that Form IR56M is designated as a notification of remuneration paid to persons other than employees, a form designed specifically for non-employees.

13.  From the evidence adduced, it is clear that Mr. Pang was not an employee of Zurich, neither did the Inland Revenue Department categorise him as an employed person when it demanded tax payment from him. The fact that he had paid tax to the Inland Revenue Department did not change his status from an insurance agent to an employee of Zurich. In any event, for the tax he had paid to the Inland Revenue Department on the sums he received from Zurich, he is entitled to ask for a refund as soon as he repaid the loan to Zurich.

B. Whether Mr. Pang has successfully discharged the burden of proof that he signed the loan agreement and the other documents as a result of misrepresentation

14.  Mr. Pang denied in his final submission that he had signed the Loan Agreement. However, in his evidence to Court he admitted he did sign the document and he had also seen the table setting out the monthly payments and allowances in the Loan Agreement. In paragraph 4 of his Defence he had also admitted he signed the Loan Agreement.

15.  I agree with Mr. Ng that when Mr. Pang made an admission in his pleading, it is an expressed admission. Further, the Defence and Amended Defence were drafted by his then solicitors, Mr. Pang must have made the admission with the benefit of legal advice. I accept there is no need for Zurich to prove Mr. Pang had signed the agreements.

16.  As to whether Mr. Pang understood what he had signed, Mr. Ng relied on paragraph 12-002 at p. 815-816 of Chitty on Contract Vol. 1, 13^th ed.: “Where the agreement of the parties has been reduced to writing and the document containing the agreement has been signed by one or both of them, it is well established that the party signing will ordinarily be bound by the terms of the written agreement whether or not he has read them and whether or not he is ignorant of their precise legal effect”.

17.  In the Loan Agreement that Mr. Pang signed, there is an expressed clause that stated that he:-

“agrees to the terms and conditions set out in [the loan agreement].” (p. 115 bundle B).

18.  In the Letter of Appointment that Mr. Pang admitted he signed, he had confirmed in the document that he has:-

“fully read, understood and agreed to the terms and conditions of this Letter of Appointment and schedules attached hereto, and have accordingly signed this Letter of Appointment hereto.”

19.  Clause H of the Letter of Appointment stated under “Termination”:-

“The Clauses 9 and 10 of the Standard Agency Agreement set out the termination conditions and termination benefits” (p. 110 bundle B).

Clauses 9-10 of the Standard Agency Agreement did deal with the issue of termination.  This document was given to Mr. Pang at the same time he was given the Letter of Appointment.

20.  Mr. Pang claimed he was given a big bundle of documents to sign and he was not given time to read them before signing because he was told by Mr. William Ng who was authorised by Mr. Davey Lee to give him the documents that he should sign them as soon as possible so that he could activate his appointment and for payment to be released in August 2005.

21.  It was Mr. Davey Lee’s evidence that he had explained to Mr. Pang at his interview in mid 2005 that if he was appointed he would be required to sign a loan agreement under which Zurich would pay him a certain sum each month in the nature of a loan which would be repayable should his appointment as business manager at Zurich be terminated within 4 years. He claimed Mr. Pang understood the conditions of appointment and agreed to them. Mr. Lee claimed it was on that basis that in August 2005 the Letter of Appointment and the Loan Agreement were issued to Mr. Pang. The Standard Agency Agreement was also given to Mr. Pang at the same time.

22.  The relevant pages of the Letter of Appointment are at p. 108-111 and the Loan Agreement at p. 113-115 of bundle B. They are only 4 pages and 3 pages long respectively. A table setting out the payment of loans and the loan period appeared at the front page of the Loan Agreement and a table specifying the repayment percentages on number of months as an agent of Zurich is found on page 2 of the Loan Agreement. Both tables are prominent and clearly printed. I find it incredible that Mr. Pang could have misunderstood these two documents in any way.

23.  Mr. Pang is a Chinese University graduate with a degree in Statistics. He had 10 years post graduation work experience before he joined Zurich as an insurance agent. In the 4 years before he joined Zurich, he had been engaged in senior management positions in the financial sector. He admitted he had passed 4 of the 5 parts of the insurer’s qualifying exams in 2003.

24.  With Mr. Pang’s experience in the financial and wealth management sector, I find it difficult to accept Mr. Pang would sign any contract without reading it and if he should have any doubts over the contract that he would fail to raise questions over it before putting his signature on the contract. It does not matter whether the documents were given to him by an agent of Mr. Lee or Mr. Lee personally, Mr. Pang should have read them before he signed them.

25.  I further find it difficult to believe for someone in Mr. Lee’s position not to have explained the nature of the Loan Agreement to Mr. Pang at the interview. Furthermore, the practice of insurance companies in Hong Kong appointing insurance agents as agents rather than employees is long standing, it should not be foreign to Mr. Pang.

26.  I find Mr. Pang’s evidence to be unreliable. He was ambivalent in his evidence. He tried to deny he signed the Letter of Appointment and the Loan Agreement in his final submission in spite of his admission under cross examination that he had signed them and did see the table of payments on the document. I am not convinced he had signed the two agreements as a result of misrepresentation. As an educated university graduate with many years of experience in the financial sector who had passed 4 out of 5 parts of the insurer’s qualifying exams and who had experience in selling insurance policies to clients in the past, he is clearly a knowledgeable person, not the naïve individual that he tried to paint himself at the trial.

Conclusion

27.  After hearing evidence from the Plaintiff and the Defendant and considering the documents produced, I hold Mr. Pang liable to repay the $140,000 he owed the Plaintiff under the terms of the Loan Agreement.

Interests

28.  Interests at ½ judgment rate from date of writ to date of judgment, thereafter at full judgment rate until full payment.

Costs

29.  Costs to the Plaintiff to be taxed if not agreed with certificate for counsel.