AXA CHINA REGION INSURANCE CO LTD v. WONG HUEN KWONG AND OTHERS

HCMP 2435/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2435 OF 2004

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D E C I S I O N

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1.  On 23 September 2004, I granted an ex parte interim injunction in favour of the Plaintiff, AXA China Region Insurance Company Limited (“AXA”), restraining each of the eight Defendants to these proceedings from presenting winding-up petitions against AXA on the basis of sums demanded in various statutory demands served by their solicitors on AXA.  Although notice of the application had been given to the Defendants’ solicitors shortly before it was made, the Defendants were not represented at the application, which proceeded ex parte.

2.  On 30 September 2004, I continued the injunctions pending the hearing and determination of AXA’s summons for the continuation of the injunctions on an inter partes basis.

3.  At that hearing, Ms Fong, who appeared for the Defendants then as she does today, indicated that the Defendants would apply for the discharge of the ex parte injunction on the basis of material non-disclosure.  An application for the discharge of the ex parte injunctions was eventually made on 29 December 2004 by a summons issued on that date.

4.  Today’s hearing was the hearing of AXA’s application for continuation of the ex parte injunctions and the Defendants’ application for their discharge. 

5.  The statutory demands which had been served on AXA consisted of first, a demand dated 2 September 2004 by all the Defendants which was served on AXA’s solicitors under cover of a fax from the Defendants’ solicitors dated 1 September 2004; secondly, a set of eight demands, one by each of the Defendants, also dated 2 September 2004, which were served on AXA’s solicitors under cover of a fax from the Defendants’ solicitors dated 6 September 2004; and finally, a further set of eight demands all dated 14 September 2004 which were served at AXA’s registered office on 15 September 2004.

6.  The demands were for sums ranging from HK$20,220.00 to HK$66,662.50 and related to sums said to have been paid by the Defendants to AXA by way of initial annual premiums for various policies of life insurance issued by AXA to the Defendants between 30 June 2004 and 14 July 2004 (with one exception in the case of one Defendant to whom no policy had in fact been issued), all of which policies had been issued on the basis of applications which appeared to have been made by the Defendants.

7.  Between 14 July 2004 and 4 August 2004, each of the Defendants cancelled his or her respective policy within a cooling off period during which he or she was, by the terms of the policy, entitled to cancel it.  The Defendants sought repayment from AXA of the premiums which they said had been paid by them. 

8.  AXA is a major insurance company in Hong Kong.  According to its audited accounts for the year ended 31 December 2003, it had total assets of in excess of HK$1.6 billion, with liabilities of some HK$536 million, the balance of assets over liabilities being some HK$1.133 billion represented by equity of slightly over HK$30 million and insurance funds of slightly in excess of HK$1.1 billion.  It also appears from the balance sheet in respect of long term insurance business that forms part of those accounts that AXA has fairly substantial sums of money on deposit or fixed deposit with banks in Hong Kong.

9.  All of the Defendants’ applications for life insurance were submitted to AXA through a broker called Koffman Pioneer Financial Services Limited (“Koffman Pioneer”) from whom AXA received the premiums for the policies in question.  According to the evidence filed by the Plaintiff in support of its application for ex parte relief, on 22 July 2004 a Mr Bruce Chow, the chairman of Koffman Pioneer, informed AXA that it was believed that there had been a fraud by one of Koffman Pioneer’s consultants or referral agents. 

10.  In order to understand the nature of the fraud, it is necessary to set out very briefly some information as to the practice of the life insurance industry in relation to the payment of commissions and the collection of premiums.  Where applications for life insurance are submitted (in this case to Koffman Pioneer by its consultants or referral agents), the applications are then passed on to the insurer (in this case AXA) for processing and approval.  After the application is approved, the broker, (Koffmann Pioneer) contacts the insured to ensure that his or her personal details are correct and that he or she is satisfied with the product in question. 

11.  Premiums which have been received are paid over to AXA which, upon approving the policy, issues the policy.  All policies issued are subject to a cooling off period during which the policy can be cancelled by the policyholder.  If the policy is cancelled, the premium is ordinarily returned and the broker placing the policy receives no commission from AXA.  However, Koffman Pioneer’s internal arrangements with its consultants or referral agents was (as was confirmed by the evidence of Mr Ball for AXA to be a common practice in the insurance industry in Hong Kong) to pay its referral agents commission in respect of policies in advance of the expiry of the cooling off period.  Indeed, the evidence in this case is that Koffman Pioneer’s internal arrangements with its consultants or referral agents were that it paid the commissions payable to such consultants or referral agents to them prior to receiving from AXA the commission payable by AXA to Koffman Pioneer.  Koffman Pioneer would therefore be at risk in relation to such advance payments of commission in the event that a policy on which commission had been paid by it in advance was cancelled by the policyholder within the cooling off period. 

12.  In such a case, Koffman Pioneer would have paid commissions to its referral agent but would not be entitled to receive any commission from AXA.  It would then have to take such steps as were available to it to recover such overpaid commissions from the referral agents in question.

13.  Moreover, I was told at the hearing on 23 September 2004 by Mr Lamplough, who then appeared for AXA and who appears for it today, that the industry practice went further than merely paying commissions in advance, and that the practice was to pay commissions in an amount which often exceeded the premiums payable on the policy for the first year.  This was because the commissions payable were calculated by reference to the total premium that was expected to be generated by the policy over its lifetime and there was a certain amount of front-end loading whereby the commission payments were substantially paid in the first year with smaller trailing commission payments in subsequent years, the net effect of which was that the commission payments made on the inception of the policy often would exceed the premiums received for that year.

14.  This was a matter which was not in fact clear from the evidence filed in support of the application, but it was subsequently confirmed by the later affidavit of Mr Nigel Ball filed in compliance with an undertaking which I had sought and received from Mr Lamplough that such confirmatory evidence would be filed.

15.  Returning to the situation in the present case, on 22 July 2004, Mr Chow informed AXA that Koffman Pioneer had identified some 15 cases in which application had been made for insurance policies to be issued by AXA in respect of which premium had been paid to AXA and a policy issued.  Koffman Pioneer had itself paid commissions to the referral agent concerned but subsequent to the issue of the policies had had some problems in contacting the applicants for the policies as the contact details which it had for them were apparently incorrect.  This led Koffman Pioneer to check with AXA, as a result of which it was discovered that each of these 15 policies had been cancelled within the cooling off period and a request had been made in each case for the return of the premium relating to the policy directly to the applicant.

16.  This led Koffman Pioneer to believe that it had been the victim or a fraud at least involving the insurance agent or referral agent who had introduced these customers to it, and Koffman Pioneer promptly lodged a complaint with both the Hong Kong Police and the Independent Commission Against Corruption. 

17.  As a result, the police launched an investigation in the course of which they sought assistance and information from AXA, asking by a letter dated 27 July 2004 for the supply of documents relating to applications for insurance from 18 persons included among whom were the Defendants.

18.  Thereafter, on 21 August 2004, the Defendants’ solicitors, Wong & Poon, wrote to AXA, the Defendants having apparently previously sought repayment of their premiums from AXA but such payment having been declined or delayed for the time being.  The Defendants’ solicitors demanded repayment of the premiums in respect of their clients’ policies, noting in their letter that Koffman Pioneer had recommended to AXA that repayment should not be effected.

19.  On 31 August 2004, Wong & Poon wrote again to AXA threatening legal proceedings should repayment not be effected.  These letters appear to have been passed on by AXA to its solicitors, Messrs Holman Fenwick & Willan (“HFW”).  On 1 September 2004, there were telephone conversations between HFW and Wong & Poon which resulted in HFW sending two letters to Wong & Poon.  It seems that during the course of these conversations, Wong & Poon informed HFW that they were considering issuing statutory demands against AXA to be followed by petitions for the winding-up of AXA in the event that the premiums were not promptly repaid.

20.  In their second letter to Wong & Poon, HFW responded that AXA was financially sound and that the debts were disputed on grounds which were both bona fide and substantial.  HFW referred in this letter to the on-going police investigation and the fact that Koffman Pioneer had instructed AXA not to refund the premiums as the basis for suggesting that there was a dispute of this nature.

21.  Shortly thereafter, the first statutory demand and the first set of eight statutory demands were served.  Following their service, HFW wrote again to Wong & Poon on 8 September 2004, reiterating that the debt was disputed in good faith.  In this regard, they referred again to the two points which they had made in their second letter of 1 September 2004 to which I have referred, making reference in relation to the second of those points to the fact that Koffman Pioneer were the agents for the Defendants and suggesting (somewhat ambitiously) that it was the Defendants who had through their agents instructed AXA not to effect repayment of the premiums.  They referred also to the fact that information had been sought from the Defendants as to the manner in which payment had been made of the premiums which had been paid for the policies. 

22.  Particulars were sought of such payments and the manner and mode by which they were effected.  The name and contact details of the insurance agent from whom such policies had been purchased were sought as well.  It was observed that the information had not been provided despite a request having been made previously.  An assurance was also sought that winding-up proceedings would not be initiated at that stage.

23.  Wong & Poon responded on 14 September 2004.  They denied (not surprisingly) that their client had asked for payment to be withheld.  They also denied that their client had been asked for the information mentioned in HFW’s letter of 8 September 2004, but did not provide the information sought. 

24.  HFW responded on 15 September 2004, informing Wong & Poon that Koffman Pioneer had on 22 July 2004 instructed AXA not to pay as fraud was suspected.  It was also pointed out that they had been told that Koffman Pioneer had not dealt with the Defendants personally but that the Defendants had dealt with a sub-agent or referral agent.  HFW also explained the reasons for seeking the information which had been sought in the letter of 8 September 2004, making it clear that the concern of AXA and Koffman Pioneer was that the Defendants might not have paid the premium monies personally and that such monies had been funded by the referral agent as part of a scheme by which the referral agent would put up funds for policies to be issued, but subsequently to be cancelled after the payment of commissions to the agent, leaving the agent in possession of the net excess of the commissions received over the premiums paid.  In this letter, HFW also stated that their information from the police at that stage, obtained through their client, was that out of the eight Defendants six had been arrested, these being the 3^rd to the 8^th Defendants, who were presently on bail; that the 1^st Defendant had absconded and was wanted by the police; and that the 2^nd Defendant was being investigated by the police.

25.  No response to this statement was made prior to the application for the injunction being taken out on 23 September 2004. 

26.  There followed some further correspondence.  On 17 September 2004, there was a letter from Wong & Poon suggesting that it would be both impracticable and uneconomical for AXA to seek an injunction to restrain winding-up proceedings and suggesting that AXA should simply settle the amount which had been claimed.

27.  HFW wrote again on 20 September 2004, again explaining AXA’s position and pressing, again, for the information that had been sought in respect of the manner in which the premiums had been paid and the identity of the insurance broker in question.  HFW invited the Defendants, through their solicitors, to establish their right to be repaid the premiums. 

28.  The next day, 21 September 2004, HFW supplied Wong & Poon with copies of AXA’s financial statements in an attempt to demonstrate AXA’s strong financial position.  Nonetheless, no assurance was received that a petition for winding up would not be presented, and in those circumstances, the application was made before me on 23 September 2004 for the ex parte injunction which I granted.

29.  Since then, matters have moved on and the evidence has developed further.  The Defendants have now filed evidence in which each of them states on affirmation that they had paid the premiums themselves.  In each case, they say that the payment was made in the form of cash and they identify the Koffman Pioneer referral agent as a Chris Lee, although in the case of some of the Defendants, an acquaintance of theirs, at that stage identified only as Ferdi, was also named as having effected the introduction to Chris Lee.  In each case, it was said that cash had been paid either directly to Chris Lee or, in some cases, to Ferdi who passed it on to Chris Lee. 

30.  The 1^st Defendant also took issue with the suggestion that he had absconded.  He says that he was simply out of Hong Kong and that although the police had not been able to locate him he had not absconded and that the police had not suggested that he had.

31.  It would appear that it is accepted that the 3^rd to 8^th Defendants were in fact arrested, but it was said that they had all been released, their release having taken place at various points during October 2004.  The Defendants also reiterated in their affirmations that it remained their intention, if the injunction was discharged, to instruct Wong & Poon to present winding-up petitions against AXA.

32.  At the hearing before me on 23 September 2004, the application for the injunction was made on the basis that there having been a threat to present presenting winding-up proceedings against AXA, but there being a bona fide dispute of substance as to whether or not the sums claimed were payable by AXA to the Defendants, it would be an abuse of process for the Defendants to seek to petition for AXA’s winding up.

33.  At that stage, Mr Lamplough submitted primarily, I think, that the evidence which was available disclosed the existence of a prima facie case of fraud involving each of the Defendants.  In support of this submission, he relied on the nature of the fraud and the manner in which it was believed to have been carried out, which I have explained above, and placed reliance on the fact that each of the Defendants was the subject of the police investigation, that six of them had been arrested and that of the other two, one had, as far as the Plaintiff knew, absconded and the other was under investigation.

34.  Mr Lamplough also relied on the fact that despite repeated requests for information which would assist AXA in determining whether or not the Defendants were entitled to have the money paid back to them, the Defendants had failed to provide such information.  Mr Lamplough also mentioned in his skeleton argument that from AXA’s point of view, even if there was not sufficient evidence of a fraud, the worst case was that AXA could only be stakeholders, being caught in the invidious position of being faced with completing claims from Koffman Pioneer, who had instructed them not to repay the premiums to the Defendants, and the Defendants, who were demanding repayment of the premiums.

35.  Today, however, having regard to all the further information which has now come to light, including information supplied as a result of queries arising out of the information contained in the Defendants’ affirmations (which queries were not fully answered until 31 December 2004), Mr Lamplough no longer seeks to allege fraud against the Defendants.  He made it clear that AXA, in the light of this information, was not now suggesting that it could establish a fraud on the part of the Defendants, although he maintained that the position as at 23 September 2004 was different, in that on the material then available AXA did make that claim and had grounds for doing so.

36.  The consequence of the present stance of AXA as indicated by Mr Lamplough is that AXA no longer asserts a claim to be able to keep the premiums for itself, whereas previously it had done this on the basis that where a policy had been obtained by fraud, it was open to an insurer to rescind the policy but retain the premiums and not repay them to the insured.  It remains however AXA’s position that it is faced with competing claims from Koffman Pioneer and the Defendants.

37.  For her part, Miss Fong submitted that the order which I made on 23 September 2004 should never had been made in the first place on the basis of the material that was available at that time.  Although I have given careful consideration to this submission, I am afraid that I cannot agree with it.  It seems to me that, on the basis of the material then available, which included the facts, as far they were known, as to the applications for the policies; their cancellation shortly after their issue; the apparent inability of Koffman Pioneer to locate the Defendants at the time; the fact that the payments of commissions were made in advance of the cooling off period having expired; the investigation by the police and the arrests of six of the Defendants and the status of the other two as having either absconded or being under investigation; all of which was coupled with the persistent failure by the Defendants to provide the information which was requested by AXA with a view to enabling it to ascertain whether or not the Defendant’s claim was a genuine one, there was in those circumstances sufficient material to raise a prima facie case of fraud which would have justified AXA in refusing to repay to the Defendants the premiums which they claimed. 

38.  Although Miss Wong submitted that the Defendants had told AXA what they could, she was unable to point to anything in the correspondence to make good that submission.  As the correspondence which I have outlined above makes clear, the Defendants’ position all along appears to have been that they were not in fact obliged to tell AXA anything and that it was for AXA to make out a case of fraud if it felt that it was able to do so.

39.  This is precisely what AXA sought to do on 23 September 2004, and in my judgment on the material than put before me, and in the light of the fact that no answers had been provided, despite the opportunity to do so having been afforded to the Defendants, it was open to me to come to the conclusion which I did, that there was on the material then available a prima facie case made out that there had been a fraud committed by the insurance agent apparently with the connivance of the Defendants in this case.

40.  That no longer is the position given the material that has now come to light.  However, that does not detract in my view from the fact that as at 23 September 2004, it was open to me to come to the conclusion which I did.

41.  Miss Wong also submitted that there had been material non-disclosure in a number of respects.  Although the summons of 29 December 2004 does not give the grounds on which the discharge of the ex parte injunction was sought, material non-disclosure was a matter which was mentioned at the 30 September 2004 hearing, for which Miss Wong had supplied a skeleton argument in which some particulars of the alleged material non-disclosures were given.

42.  The first allegation was that there had been a material non-disclosure on the part of AXA in stating that the 1^st Defendant had absconded.  It was said that the actual position was that the 1^st Defendant was simply absent from Hong Kong or could not be located and correspondence with the police was put in, from which it appeared that the police have indicated that they would not have used the term “absconded” and that they would simply have said that the 1^st Defendant could not be located.

43.  It seems to me that, strictly speaking, this is not really a case of non-disclosure.  If anything, it is an allegation that AXA has misrepresented the position to the court in its evidence in support of the ex parte injunction.  However, it seems to me that if that ground were to be made out it would have to be shown that the Plaintiff was aware that it was misrepresenting the position or at least that the Plaintiff had in some respect been at fault in permitting the statement to be put forward in the form in which it was.

44.  It is quite clear that the Plaintiff did make inquiries with the police after the initial letter from the police of 27 July 2004 and that such enquires were made prior to the application on 23 September 2004.  It may be that the inquiries were made as early as around 8 September 2004 since it is in the letter of 8 September 2004 from HFW to Wong & Poon that the status of the various Defendants in the context of the police investigation was expressly mentioned.  As I have noted, no issue was taken with the suggestion that the 1^st Defendant had absconded.  In those circumstances, it seems to me difficult to suggest that the Plaintiff has been guilty of any such misrepresentation as deserves to be censured by the court by the discharge of the ex parte injunction which it obtained.

45.  The second ground of non-disclosure relied upon relates, I think, to the suggestion that the 2^nd Defendant was under investigation.  However, it seems to me from the evidence filed by the 2^nd Defendant that there is nothing in this ground as the 2^nd Defendant appears to accept that he was in fact invited to assist the police with their investigations.  It is also clear from the letter of 27 July 2004 from the police to AXA that among the persons whose insurance position was the subject of investigation was the 2^nd Defendant.  In such circumstances, I do not think that it can be said that there was in fact any non-disclosure or misrepresentation as to the status of the police inquiries concerning the 2^nd Defendant.

46.  It was also suggested that there had been a failure on the part of AXA to make further inquiries of the police shortly before the making of the application for ex parte relief.  However, it seems to me that having regard to the fact that the Plaintiff’s information was put fairly and squarely to the Defendants by HFW’s letter of 8 September 2004 and that no response had been received suggesting that any of that information was incorrect, in a situation in which there was correspondence passing between the parties in which issue had been taken with various other statements made by the Plaintiff, it does not seem to me to be a fair criticism to suggest that further inquiries should have been made when no point was taken as to the accuracy of the information which had been stated. 

47.  It was also said that there had been a failure to obtain information direct from Koffman Pioneer in the sense that there was no direct evidence from Koffman Pioneer before the Court, but that seems to me not so much to be a matter of non-disclosure but, rather, a point as to the adequacy or otherwise of the evidence put before the Court at the ex parte hearing.  For the reasons which I have already given, it was my view that the evidence then before me was sufficient to justify the grant of the injunction sought on an ex parte basis.

48.  Finally, the point was taken that there was a failure to disclose certain documents, principally the insurance applications and the receipts (of which there were three, issued to three of the defendants).  With respect, it does not seem to me that either of these amounts to a material non-disclosure. 

49.  So far as the insurance applications are concerned, the point made by Miss Wong was that there was a statement in the body of the insurance applications that a certain amount of premium was paid with the application.  However, the material point was not whether or not a premium was received by AXA (it being admitted by AXA that it did receive premiums), but from whom those premiums came.  AXA’s position is that it received premiums from Koffman Pioneer and has no information and no knowledge whether the premiums were actually funded by the Defendants themselves.  It was that information which it was seeking to elicit through the many requests by HFW in the first part of September 2004.

50.  The insurance application itself throws no light on this question.  Quite apart from not stating expressly that the premium monies had been supplied by the applicant himself, the three boxes to the right of that field which set out the various ways in which the premium monies might have been paid (cash, cheque or credit card) were left blank.

51.  In those circumstances, it does not seem to me that the disclosure of the polices would in any way have affected the court’s decision as to whether or not to grant an injunction at the ex parte stage. 

52.  Very much the same point can, I think, be made in respect of the receipts, since, from AXA’s point of view, having received an amount by way of premium in respect of a policy to be issued to a particular individual, it would naturally assume that it should issue the receipt to the individual concerned.  Moreover, it is to be noted that the receipts in question indicated that the payment of the premium in question were made by cheque, a cheque or bank account number being given.  By contrast, the Defendants have each said on affirmation that they paid their premiums by way of cash.  If anything, those receipts would indicate that the premiums that were received by AXA were, as AXA say, received from Koffman Pioneer and not from the Defendants directly.  I therefore do not think that this affords a ground for discharge on the basis of material non-disclosure. 

53.  Finally, at the hearing today, Miss Wong added one further ground of non-disclosure, which was to the effect that the 1^st Defendant was in fact a client of AXA, and had been a client of AXA prior to this incident.  No previous notice of this point appears to have been given, and having considered it, I do not think that the point is one that is particularly material.  It seems to me that whether or not the 1^st Defendant was a client does not in fact throw light, one way or the other, on whether or not he may have been a party to a fraud of the nature alleged.  That, it seems to me, falls to be judged on the basis of the material that was available, and as to that I have already expressed my views. 

54.  Moreover, this point having only been raised in the course of argument today and not having been adverted to, as far as I can see, in either the Defendants’ skeleton argument or their summons, the Plaintiff has not really had an opportunity to respond by evidence to the point as to whether or not it did make inquiries and whether or not it in fact knew at the time of the application for ex parte relief that the 1^st Defendant (or for that matter any of the other Defendants) was previously a customer of AXA.

55.  For those reasons, I find that there has been no material non-disclosure in this case and I therefore decline to discharge the ex parte order which I granted on 23 September 2004.  That said, however it is still necessary to consider the position and consider whether or not an injunction should continue in the light of the evidence that is now available. 

56.  I take into account the fact that fraud is no longer alleged.  It seems to me therefore that it cannot today be said that there is suggested by AXA to be a bona fide dispute of substance on the basis that the Defendants have been parties to a fraud in relation to the insurance premiums with which we are concerned.  However, AXA do still rely on there being a dispute as to whom they should make payment to.  AXA’s position is that having been instructed by Koffman Pioneer not to effect payment, they are not free to make payment to the Defendants.

57.  It seems to me that in a case where the potential target of a winding-up petition is saying that he does not know which of various completing claimants to monies in his hand he should pay, since there are two or perhaps more claimants so that he cannot safely pay one of them without running the risk of being liable to the others, he is effectively disputing his liability to pay the party who is threatening to present winding-up proceedings against him, albeit by reference to his liability (or potential liability) to pay some other party.

58.  In circumstances such as these, it seems to me that a person or company faced with a demand for payment can fairly say that, in the light of the dispute and uncertainty as to whom it should pay, it disputes its obligation to pay the party claiming payment in good faith on grounds which have some substance.  However, in that situation, it seems to me that the proper course would be for the party in possession of the monies to take out proceedings to enable the issue between the rival claimants to be determined, a procedure which is available through the interpleader procedure under the rules of court. 

59.  If AXA consider that this is a case in which it would be appropriate for them to interplead, it would be open to them to do so, and given that they no longer seek to suggest that the Defendants are parties to a fraud, it seems to me that AXA must come to a view as to whether or not they wish to interplead.  If they choose not to interplead, it seems to me that it would follow that they would no longer be suggesting that they had any basis for disputing their liability to the Defendants and it would thereupon be incumbent on them to make payment to the Defendants.

60.  With that in mind, it seems to me that the appropriate course at this stage would be to allow the injunction to continue but to require that AXA decide, within a relatively short timeframe, whether or not this is an appropriate case for them issue interpleader proceedings so as to leave the issue to be fought out as between Koffman Pioneer and the Defendants.  That is the nature of the order that I would be inclined to make at this stage.

61.  Once such an application is made, whether or not Koffman Pioneer will come forward to assert their entitlement to such sums as against the Defendants will soon become apparent.  If Koffman Pioneer chooses not to come forward, then no doubt the interpleader proceedings will be resolved in favour of the Defendants, in which case AXA will have to pay the Defendants such sums of monies as will then be undisputably due to them.

62.  The only question remaining is whether or not the injunction should continue only until the taking out of such interpleader relief, or whether it should continue beyond that point. 

63.  Ms Fong submitted that, in the light of AXA’s continued refusal to pay, there were grounds on which it could be inferred that AXA was unable to pay its debts.  In support of this proposition she relied on a number of authorities, in particular Cornhill Insurance Plc v Improvement Services Ltd [1986] 1 WLR 114 and a more recent Hong Kong decision, An Feng International Trading Ltd v Honour Link International Development Ltd [1999] 3 HKC 116.  With respect, it seems to me that both of those cases are cases in which the availability of the inference of inability to pay debts was firmly founded on the existence of a liability which was not and could not be substantially disputed or bona fide disputed on substantial grounds.

64.  In this case, as I have found, as at the ex parte stage, there were grounds on which the liability to pay the premiums to the Defendants could be disputed and even at this stage, in the light of the fact that there are rival claimants to the fund, it remains the case that there are grounds on which liability to pay is disputed bona fide and that such grounds were and remain of substance.

65.  In those circumstances, it does not seem to me that it is necessary or proper for the court to draw the inference that AXA are unable to pay their debts.  Having regard to the evidence as to their financial position which is disclosed in their audited accounts.  it seems to me that there is no question but that AXA are in a position to pay their debts.  In those circumstances, it does not seem to me that there is any basis for the court to think that there is a risk that, if it should turn out that AXA should pay such funds to the Defendants, it would not be able to do so.

66.  In those circumstances, I do not think that it would be necessary or appropriate for me to impose any term as to payment into court or payment to a stakeholder of the funds in question. 

67.  Since the Defendants have not indicated that they would refrain from presenting a petition for the winding up of AXA in the event that the injunction goes, it seems to me that it would be inappropriate for me to cause the injunction to terminate solely on the taking out of interpleader proceedings.  It seems to me, therefore, that the appropriate form of order would be for the injunction to continue provided that within a certain period AXA take out interpleader proceedings, interpleading as between the Defendants and Koffman Pioneer in respect of the various sums which are in issue in these proceedings.

68.  The consequence will be that if within that time limit no interpleader proceedings are taken out the injunction will lapse and AXA will have to make payment to the Defendants or otherwise be at risk of winding-up proceedings being brought against them.  If, however, interpleader proceedings are brought within the timeframe in question, the injunction will continue until their determination and payment to one or other party as a result of those proceedings.

69.  I should add that, in the context of the time limit within which the injunction will lapse if interpleader proceedings are not brought, I would be minded to have the injunction lapse a short period of time, say one week, after the latest date for the bringing of interpleader proceedings so as to enable AXA to make arrangements to effect payment in the event that interpleader proceedings are not brought.

70.  I shall now hear submissions on the question of the length of time within which interpleader proceedings should be brought and also on the question of costs.