MANULIFE (INTERNATIONAL) LTD v. CHONG WAI LING also known as CHONG WAI LING FRANKIE

DCCJ 4042/2016

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4042 OF 2016

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D E C I S I O N

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Background

1.  This is the defendant’s application for leave to appeal to the Court of Appeal from my judgment dated 29 September 2017.  There are two grounds of appeal:

(1) Clause 5.2 of the PLA is a penalty clause and, hence, unenforceable.  

(2) The true nature of the agreement between the plaintiff and the defendant.

Ground 1: Penalty Clause

2.  Mr Leung for the defendant submitted in this application that I have erred in finding that clause 5.2 of the PLA is not a penalty clause.  Mr Leung submitted further to distinguish between the words “owing” and the phrase “likely to become due or owing” from the word “due” in the proviso of clause 17.1 of the CAA.  Mr Leung submitted that even if the defendant’s loan was not due when the agreement was terminated, such loan was owing or likely to become due or owing under the proviso of clause 17.1.

3.  Mr Ma for the plaintiff has different interpretation by reading clauses 2.2.2, 4.2.1, 5.2 and 5.3 of the PLA and submitted that the defendant’s loan was not owing or likely to become due or owing when the agreement was terminated.

4.  After hearing the submissions, I tend to agree with Mr Ma but there is a more fundamental point.  In paragraphs 24-26 of my decision dated 29 September 2017, I have held that:

“… There is no suggestion of breach of clause 17.1 on the part of the plaintiff. Parties agree that in the absence of any breach, the payment could not be regarded as penalty.”

Paragraph 25:

“Mr Ma also submitted that the penalty clause only applies to sums payable followed from a breach of contract but not on primary obligations. The clause 5.2 was only invoked after the termination as the defendant was obliged to repay the loan after the termination.”

Paragraph 26:

“I agree with Mr Ma that such contractual obligation for repayment is not a penalty payment. Therefore, I find that the second line of defence raised by the defendant is not a triable issue.”

5.  There is no dispute that there is no allegation of breach of clause 17.1 on the part of the plaintiff in the first place.  It is rather strange that now the defendant is trying to say that he was caught by clause 17.1 and was in breach of that clause.

6.  Secondly, according to the drafting of clause 5.2, ie the alleged penalty clause, there is no qualification of the word “terminated” in that clause.  According to clause 5.2 of the PLA:

“Notwithstanding anything to the contrary contained in this agreement, the agent shall repay 100% of the Loans immediately if the Agent’s Career Agent’s agreement is terminated for whatever reason within the first 4 years from its effective date.”

7.  The termination could be for whatever reasons.  It could be wrongful or not.  It is drafted in a rather neutral way.  Therefore, I do not accept that clause 5.2 of the PLA is a penalty clause even when one is to read it in conjunction with clause 17.1 of the CAA.

8.  As the termination of the defendant’s agreement with the plaintiff is without any allegation of breach of contract and I do not accept that clause 5.2 of the PLA is a penalty clause, I do not see the necessity to decide whether there is any breach of clause 17.1 when the agreement was terminated.  I maintain that the penalty-clause argument is not a triable issue and does not assist the defence case any further.

9.  For the other arguments in relation to the penalty clause, I have set out in my previous decision in paragraphs 19 to 26.  I do not intend to repeat my dealing with those arguments which were made before me on previous occasion.

Ground 2: The Nature of the Agreement Between the Parties

10.  I do not see any points which I have not dealt with in my previous written decision.  I just reiterate that my dealing with this argument could be found in paragraphs 9 to 18 of my written decision.  I do not think that the defendant could just repeat the arguments at this stage when applying for leave to appeal as this is not a rehearing of the application.  

Conclusion

11.  Save and except for the new interpretation of clause 17.1 of the CAA made by Mr Leung in relation to the distinction between “due” and “owing” and/or “likely to become due or owing”, I do not see any new arguments which have not been made before me.  As I have rejected the new interpretation of clause 17.1 for the reasons above, I do not find any reasonable prospect of success in the defendant’s application by repeating the same arguments which have been made before me and rejected by this court.

12.  I dismiss this application with costs to the plaintiff.

(Discussion re costs)

Order

13.  The defendant’s application for leave to appeal be dismissed with costs to the plaintiff agreed at HK$51,000.