SUM NGO SHEUNG WINNIE v. AXA CHINA REGIONAL INSURANCE CO LTD

DCCJ 3011/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3011 OF 2005

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REASONS FOR JUDGMENT

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1.  The Plaintiff joined National Mutual Insurance Company Limited (“National Mutual”), which was the Defendant’s predecessor-in-title, as an insurance agent in 1990.  It seemed that the Plaintiff was enjoying a successful career in this field, and she was appointed as an Unit Manager in July 1992, a Branch Manager in September 2001, a Senior Branch Manager in January 2002 and a Director of Agency in July 2002.  She is also a member of an association known as “Million Dollar Round Table”, its membership only consists of the top 1% of insurance agents in the world in term of revenue generated.

2.  On 11 April 2003, the Plaintiff, after more than 13 years of service, tendered her letter of resignation to the Defendant with effect from 10 May 2003.  However, the Defendant alleged that the Plaintiff, in breach of the Agent’s Contract dated 1 March 1994 (“the Agent’s Contract”), had induced 7 other insurance agents (“the 7 Agents”) to leave the Defendant and to join another insurance company known as American International Assurance Company Limited (“AIA”), and the Defendant refused to pay the Plaintiff: (i) commission and remuneration for the last month of her service with the Defendant; and (ii) the Defendant’s contribution of the Plaintiff’s provident fund.  As a result, the Plaintiff brought the present action against the Defendant to claim for the same.

3.  It is not disputed that the Defendant did not make the aforesaid payments to the Defendant.  The Defendant’s contribution of the Plaintiff’s provident fund, the sum of which is agreed at $669,111.68, is actually held on trust by the trustee of the provident fund, and the trustee has already written to the parties agreeing to be bound by the result of the present litigation.  For the commission and remuneration payable to the Plaintiff for her last month of service, the amount is not clear at this stage and both parties agree that, if the court rules the case in favour of the Plaintiff, there should be a separate inquiry to ascertain the amount owed by the Defendant calculated under the various complicated formulas.

4.  In such circumstances, whether the Plaintiff was in breach of the Agent’s Contract in inducing the 7 Agents to leave the Defendant is the only issue in the present case.  At the trial, I decided such issue in favour of the Plaintiff and I now give my reasons in writing.

The Defendant’s case

5.  According to clause 4.1 of the Agent’s Contract, the Plaintiff was not allowed to induce any insurance agent of the company to leave his or her service.  Clause 11.2(g) of the same contract provided that National Mutual, or the Defendant who subsequently succeeded its business, could terminate the Agent’s Contract without notice if the Plaintiff was in breach of any of the terms therein, and in such event, clause 12.3 provided that payment of commission and remuneration would be stopped whether or not they were accrued or not.

6.  The Defendant cannot produce any direct evidence to prove that the Plaintiff had induced the 7 Agents to leave the Defendant.  Instead, the Defendant relies on the following undisputed facts and invites the court to draw an inference, based on the balance of probabilities, that the Plaintiff had done the act complained of.  These facts are as follows:

(i)	when the Plaintiff tendered her letter of resignation on 11 April 2003, the 7 Agents in the team directly under the Plaintiff’s supervision also resigned: one before the Plaintiff’s resignation on 31 March 2003, and the other 6 on the same day of the Plaintiff’s resignation on 11 April 2003;
(ii)	the formats of the resignation letters tendered by Plaintiff and the 7 Agents were the same;
(iii)	the Plaintiff and the 7 Agents joined AIA about one and a half month later, with the 7 Agents working in the same team under the Plaintiff’s supervision; and
(iv)	a financial package would have been offered to the Plaintiff in joining AIA, in particular the benefit obtained by the Plaintiff would be greater if she joined AIA with a team of insurance agents.

7.  The evidence at the trial also shows that other senior insurance agents had, on quite a number of occasions in the past, left the Defendant with massive groups of insurance agents, but that does not necessarily mean that the Plaintiff had induced the 7 Agents to leave the Defendant on this particular occasion.  In particular, the number of agents involved in the present case is relatively small, with 3 of the 7 Agents only worked as agency secretaries who did not generate significant revenue in term of insurance policy sales.

The evidence of the Plaintiff

8.  In response to the Defendant’s allegation, the Plaintiff testified at the trial.  According to her, she was the Director of Agency of the Defendant supervising 2 branch managers, 5 unit managers and a group of about 45 agents prior to her resignation.  Inside her branch, there was a team of insurance agents directly under her supervision (“the Team”) which consisted of agents personally recruited by her.  The 7 Agents belonged to the Team.  3 of the 7 Agents, Madam So Pui Yan, Madam Fok Lai Ching Debbie and Madam Lam Yi Ki Anky, were in fact working as the Plaintiff’s agency secretaries, and the Plaintiff was responsible for paying their salaries.  That was why the records show that these 3 agents were not generating any significant revenue in term of insurance policy sales.  These secretaries had also obtained the licences for practicing as insurance agents because, only if they had such licences, they could communicate with clients of the Plaintiff’s branch on insurance matters.  Obviously, when the Plaintiff resigned from the Defendant, these secretaries would have to leave because no one was paying their salaries.

9.  Prior to her resignation, the relationship between the Plaintiff’s branch and the Defendant was not good.  From the Plaintiff’s standpoint, her branch was not treated fairly by the Defendant.  To quote some examples, the management of the Defendant had promised her that her branch would be provided with a separate office if her branch achieved a certain business target.  However, after the Plaintiff’s branch had done so, the Defendant did not honour its promise to provide a separate office.  Further, some of the agents in the Plaintiff’s branch indicated that they wanted to leave her branch and to join another one.  That was not permissible under the company structure, but the management of the Defendant put pressure on the Plaintiff to release such agents to another branch.  According to the Plaintiff, this was a serious matter as it would undermine the Plaintiff’s authority in the management of her branch.  By reason of such unhappy incidents, the morale in the Plaintiff’s branch was low and some of the agents, in particular those in the Team, knew that the Plaintiff was not happy working in the Defendant.  The Plaintiff eventually decided to leave the Defendant after more than 13 years of service.

10.  The Plaintiff’s agency secretaries had certain standard format for resignation letters stored in their computers.  If members in the Plaintiff’s branch recruited some new insurance agents, the secretaries would help these newly recruited agents to prepare resignation letters for their previous employers.  When the Plaintiff herself resigned from the Defendant, she just asked her secretary, Madam Lam Yi Ki Anky, to prepare such  standard resignation letter.  She believed that the other agents leaving the Defendant had also asked the Plaintiff’s secretaries to do the same.

11.  In the morning on 11 April 2003 prior to her resignation, she did inform the members of the Team and the 2 branch managers of her decision to resign.

12.  When the Plaintiff resigned, she wanted some time by herself to plan her future.  By that time, she was not sure whether she would further work as an insurance agent.  However, as she was a senior agent in the Defendant and the network of insurance agents in Hong Kong was small, her resignation was then widely known in the trade.  After a while, the Plaintiff received a call from her former colleague in National Mutual, Madam Anna Ueyama, who invited her to join AIA.  She also told the Plaintiff that she had approached the 7 Agents in the Team, and they all agreed to join AIA.  After some discussion, the Plaintiff accepted Madam Ueyama’s invitation.

13.  According to the Plaintiff, she had no plan to join AIA when she resigned from the Defendant.  In fact, she was earning a generous income from the Defendant prior to her departure.  Although she was given a one-off joining fee and bonus for a specified target in her first year, there was no guarantee that she could earn more by joining AIA.  In fact, she earned less after she left the Defendant.  Further, the Plaintiff would regard the financial package offered by AIA as some kind of compensation, as the agent would lose some of his or her previous clients by switching to another company, and it would take time to build up a new clientele with new businesses.  Hence, monetary gain was not the reason for her leaving the Defendant and subsequently joining AIA.  According to her, if that was her motive, she could have received other attractive packages in joining other senior insurance agents to leave the Defendant on many occasions in the past, but she had decided to stay in the Defendant all along.

14.  The Plaintiff did not know the specific reasons as to why the 7 Agents left the Defendant, with one of them actually resigned about 10 days before her own resignation.  However according to the Plaintiff, it was not too difficult to imagine the reasons.  As the morale in the Plaintiff’s branch was low by that time, the 7 Agents might feel that, like the Plaintiff, they would be unfairly treated by the Defendant if they continued their service with the Defendant, in particular after the departure of their agency leader.  They also probably felt sad because they had been working with the Plaintiff for a long time.  Further, after the departure of the Plaintiff, these agents, if they continued to work at the Defendant, would be “orphaned”, in the sense that they would either be transferred to another agency unit within the Defendant or directly supervised by the Defendant.  In either case, the agents concerned would have to adjust to possibly different working cultures and training from their previous agency units.  Obviously, no one would like this sort of adjustment.  For the 3 agency secretaries, they had additional reasons to leave because no one would be paying their salaries after the departure of the Plaintiff.  Hence, the Plaintiff believed that these factors might be the reasons for the 7 Agents to leave the Defendant.  In fact, apart from the 7 Agents, at least 3 others members in the Team also resigned and left the Defendant by that time, with one of them subsequently joining AIA but not working under the Plaintiff and the other 2 taking up jobs elsewhere.  The Plaintiff maintained that she had not in any way induced the 7 Agents to leave the Defendant.

15.  Throughout all these years as insurance agent, the Plaintiff herself had not recruited any agents from other insurance companies to join the Defendant.  All the insurance agents directly recruited by her came from other professions.

Assessment of the Plaintiff’s evidence

16.  At the trial, the Plaintiff gave a clear account about the history of her resignation and her subsequent recruitment by Madam Ueyama of AIA.  Despite the skillful cross-examination conducted by Mr. Westbrook SC, counsel for the Defendant, the Plaintiff’s evidence had remained unshaken throughout the course of her testimony.  Hence, I find her to be an honest and truthful witness.

17.  There are perhaps two points I would mention about the Plaintiff’s evidence.  Firstly, the Plaintiff showed some reluctance when she was asked about the financial package offered to her in joining AIA.  However, after the Plaintiff was made known of her obligation to give such evidence in court, she frankly disclosed all the details.  Obviously, the Plaintiff would prefer not to disclose such details as they were sensitive information in the trade.  This is quite understandable from her viewpoint, and I do not find her to be evasive at all.

18.  Secondly, there was some confusion as to whether Madam Ueyama knew all the 7 Agents when she left the Defendant or National Mutual about 8 to 9 years ago.  In fact, some of the 7 Agents had not joined the Defendant by that time, and so it was not then possible for Madam Ueyama to know all the 7 Agents.  However in clarifying her answers, the Plaintiff agreed that Madam Ueyama might not have known all the 7 Agents when she left the Defendant, but since Madam Ueyama was the Plaintiff’s personal friend and former colleague, and further Madam Ueyama was a celebrity and the insurance trade was a small one in Hong Kong, Madam Ueyama knew all the 7 Agents in Team supervised by the Plaintiff.  They also had contacts themselves, and Madam Ueyama would have had no difficulty in approaching the 7 Agents and in inviting them to join AIA.  Obviously, if they agreed to do so, this would provide additional incentive for the Plaintiff to accept Madam Ueyama’s invitation.

19.  As human network is always complicated, it is quite possible that the Plaintiff made a genuine mistake when she initially said that Madam Ueyama knew all the 7 Agents before she left the Defendant.  However, I have no reason to doubt the Plaintiff’s clarification in this regard, and this matter would not, in my judgment, undermine the creditability of her evidence.  Indeed, it is common ground that the morale in the Plaintiff’s branch was low by that time, and with the departure of the agency leader, it was quite possible for the 7 Agents to leave the Defendant all at the same time without any inducement by the Plaintiff.

Assessment of the Defendant’s case on inference

20.  As I have mentioned above, the Defendant’s case is one based on the drawing of inference.  Undoubtedly, the Plaintiff had induced the 7 Agents to leave is one of the inferences that can be drawn from the facts of the present case.  However, there are also other inferences that can be drawn, and so is the inference as contended for by the Defendant the more probable inference to be drawn from these facts?  In my judgment, the answer is clearly “no”.

21.  In respect of the same format used in all the resignation letters, it was quite possible that the Plaintiff and the 7 Agents had simply asked the Plaintiff’s agency secretaries to prepare their resignation letters, and in doing so, the secretaries just adopted the standard format stored in the computers.  If the Plaintiff had orchestrated the whole thing, it is also difficult to explain why one of the agents, Madam So Pui Yan, tendered the resignation letter with the same format more than 10 days before the Plaintiff and the other 6 agents did so.

22.  The Defendant also relies on the fact that the Plaintiff would probably receive an attractive financial package in joining AIA.  However, the fact that there was financial advantage in joining AIA, which was not even the case according to the Plaintiff, does not mean that the Plaintiff would leave because of such monetary gain.  In fact, the evidence clearly shows that, despite the previous mass defections of agents to other insurance companies and the probable attractive financial packages offered to those agents, the Plaintiff had continued to stay in the Defendant or National Mutual and pledged her loyalty with the company.  Hence, I would not draw the inference as contended for by the Defendant simply because of the monetary factor.

23.  Perhaps the stronger facts that can be relied on by the Defendant are that 6 agents in the Team resigned on the same day as that of the Plaintiff, and the Plaintiff and the 7 Agents joined AIA about one and a half month later.  However, even these matters would have to be considered in the light of the undisputed background of this case.  It is common ground that the morale in the Plaintiff’s branch was low by that time because of a series of unhappy incidents.  Further, in the case of the departure of their agency leader, the 7 Agents, if they continued their service with the Defendant, had to undergo a process of welcome adjustment and they might also worry that they would be unfairly treated by the Defendant.  Hence it would be quite possible for them to leave all at the same time without any inducement by the Plaintiff.

24.  Indeed, if the Plaintiff had orchestrated the whole thing and she had induced the 7 Agents to leave the Defendant, there leaves a number of unanswered questions.  Firstly, why did one of the 7 Agents, Madam So Pui Yan, tender her resignation letter 10 days before the others did so?  Secondly, if there was financial advantage to the Plaintiff in joining AIA with a group of insurance agents, why did the Plaintiff not approach all the 45 agents in her branch to leave?  Or at least the Plaintiff should have approached more than 7 agents, considering the fact that 3 of the 7 Agents were in fact agency secretaries without the ability or track records of generating any significant sales.  This had indeed happened in the past in some mass defection cases, but we are only talking about 4 income-generating agents in the present case which is a relatively small number.  In my judgment, it was just possible for them to leave without any inducement by the Plaintiff.

25.  Based on the aforesaid, I accept the evidence of the Plaintiff that she had not induced any of the 7 Agents to leave.  Even if I were to reject her evidence, there were simply many reasons for the 7 Agents to do so without any inducement by the Plaintiff, and I do not accept that the inference as contended for by the Defendant is the more probable one that should be drawn on the facts of the present case.  Hence, the Defendant’s case must fail.

Failure on the part of the Plaintiff to call the 7 Agents to testify at trial

26.  Of the 7 Agents, only 4 of them still now work for the Plaintiff.  However, as the Plaintiff had not called any of the 7 Agents to testify at the trial in support of her case, Mr. Westbrook relies on the cases of O’Donnell v. Reichard [1975] VR 916 and Li Sau Keung v Maxcredit Engineering Ltd. & Anor. [2004] 1 HKC 434 and invites the court to draw an adverse inference against the Plaintiff.

27.  Both cases relate to personal injuries claims.  In Reichard, the plaintiff refused to receive treatment after the accident and she left the hospital without the approval of the treating doctors.  The defendant contended that the plaintiff was a malingerer who unreasonably refused treatment, but the plaintiff did not call the 3 doctors treating her in the hospital to testify at the trial on her behalf.  In such circumstances, the Full Court of the Supreme Court of Victoria accepted that the jury was entitled to draw an adverse inference against the plaintiff by failing to call those relevant witnesses to testify at the trial.

28.  Such dicta was later adopted by the Hong Kong Court of Appeal in Maxcredit.  In the latter case, one of the main issues was whether the plaintiff fell from height in the accident as alleged by him.  According to the plaintiff, he did inform one employee of the 2^nd defendant, Mr. So, of the fall, but the latter failed to mention the fall in the accident report prepared by him.  At the trial, the defendants did not call Mr. So to testify on their behalf and the Court of Appeal held that an adverse inference could be drawn against the defendants.

29.  However, these 2 cases only support the proposition that where a party without explanation fails to call as a witness a person whom he might reasonably be expected to call, the jury is entitled to infer that the person’s evidence would not have helped that party’s case, and if appropriate, to draw adverse inferences of fact against that party (see: O’Donnell v. Reichard, ibid., at p. 929 and Li Sau Keung v Maxcredit Engineering Ltd. & Anor., ibid., at p. 443).  Obviously, the court must consider the explanation given by a party for not calling a particular witness, and it is a matter of fact for the court to decide whether to accept such explanation.

30.  As there are only 4 agents still working under the Plaintiff, we should focus on the explanation for not calling these 4 agents.  Unlike the facts in Reichard and Maxcredit, it is not too difficult to imagine what these agents would say in court.  Taking into account the close working and personal relationship between them and the Plaintiff, one would not expect them to say anything against the Plaintiff’s case.  I am sure that, if the Plaintiff calls these witnesses to testify at the trial, Mr. Westbrook would submit that the testimonies of these witnesses are not reliable because they are the existing agents working under the Plaintiff.  In such circumstances, the Plaintiff did not see the need to call these witnesses to testify, and in any event, the Defendant could have subpoenaed them to do so if that was in its interest.  In my judgment, this is a reasonable explanation.  The Defendant may lose the opportunity of exploring the possibility of inconsistent evidence given by these potential witnesses.  However if the Defendant wants to do so, it should bear the burden of calling these witnesses.

31.  Furthermore, I am of the view that the court should be cautious when penalizing a party from not calling certain witnesses to testify at the trial.  In Reichard, one would expect that the testimonies of the treating doctors, who were independent witnesses, might probably be adverse to the Plaintiff’s case.  Whereas in Maxcredit, the court would certainly like to ascertain from Mr. So the circumstances leading up to the preparation of the accident report.  Without his evidence, the court would be left in doubt about the material issue of the case.  Further by failing to call the witnesses to testify in these 2 cases, it gave the impression that the relevant parties had something to hide, as Gillard J said the following in the judgment of Reichard:

“

In relation to the plaintiff’s action in leaving the hospital and her conduct thereafter in refusing to have medical treatment, the defendant should as a matter of commonsense be entitled to rely on the absence of proof of the treating doctors as a basis for the jury to draw an adverse inference that the plaintiff’s advisers were afraid to call the doctors, that if they had done so and the doctors had gone into the witness box that evidence would probably be unfavourable to the plaintiff, and that as the plaintiff failed to call the doctors, the plaintiff’s case on the question of mitigation of loss would have been impaired, or the weight of the defendant’s case on such matter would have been increased.”(at * 17 of the Lexis copy of the judgment)

Under such circumstances, it was quite sensible for the courts to draw adverse inferences against the parties who failed to call the witnesses.

32.  The present case is different.  The Defendant’s case is one based on the drawing of inference without the support of any direct evidence.  The Plaintiff has no duty to help the Defendant to prove its case, and she can simply rebut the Defendant’s allegation by her own testimony.  This might be a tactical decision on the Plaintiff’s part to do as little as possible, and it does not give me the impression that she has something to hide about her own case.  If the Defendant wants to explore the possibility of inconsistent evidence from different potential witnesses, the Defendant should take up the responsibility of calling these witnesses.  Further, if the court were to penalize someone like the Plaintiff for not calling witnesses, it may be seen as a duty imposed on the Plaintiff to assist the Defendant to discharge the latter’s burden of proof, and it would encourage parties who simply rely on inferences to support a serious allegation to sit there and do nothing about proving their case.  This simply cannot be right.  Hence, I refuse to draw any adverse inference against the Plaintiff’s case by reason of the lack of these witnesses.

33.  In conclusion, the Defendant has not discharged the burden of proving that the Plaintiff had induced any of the 7 Agents to leave the Defendant, and I also accept the evidence of the Plaintiff that she had not done so.  I therefore grant judgment in favour of the Plaintiff and make a declaration that the termination of the Plaintiff’s service was wrongful.  Further, I order a separate inquiry to be held to ascertain the outstanding commission and remuneration owed by the Defendant to the Plaintiff.