RE KWOK YAN SANG

HCB3562/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

IN BANKRUPTCY PROCEEDING NO.3562 OF 2000

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REASONS FOR JUDGMENT

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Introduction

1. This is a bankruptcy petition taken out by the petitioner, American International Assurance Company, on 18 September 2000 against the debtor, Mr Kwok Yan Sang. On 24 September 2002, the hearing of the petition came before me. But the debtor was absent. He had previously faxed a letter dated 20 September 2002 to the petitioner's solicitors, seeking an adjournment on the ground that he had to attend hospital for medical examination on 22 September 2002. The application was opposed by Ms Mak, solicitors for the petitioner. After hearing Ms Mak, I refused the application for adjournment. There was simply no medical evidence before me to support the application. And there was no explanation why the debtor could not attend court today after his alleged medical examination two days ago. In the event, the hearing proceeded. The petitioner called only one witness, namely, Mr Chung Tsz Chung, a senior account officer, to give evidence.

2. At the end of the hearing, I made a bankruptcy order with costs against the debtor. These are my reasons.

The Petitioner's case

3. The petitioner's evidence can be summarized as follows.

4. The petitioner and the debtor entered into a Career Representative Senior Unit Manager's Contract dated 1 September 1997 ("the Contract") which was a contract for services whereby the debtor agreed to procure life insurance business in favour of the plaintiff. Some of the more pertinent clauses of the Contract read :

"1. The Company hereby authorises the Career Representative Senior Unit Manager as a Career Representative of the Company to procure and transmit to the Company applications for all forms of life assurance, or annuities and any other form of group insurance and personal accident insurance business what so ever where the Company has given written notification in respect of any such class or type of business and to deliver to any person accepted by the Company, following receipt of a properly completed application such group polices and individual contracts, notices, premium receipts and other relevant documents sent to the Career Representative Senior Unit Manager by the Company and whilst any such policy or contract shall continue to exist to collect and forthwith pay over to the Company all premium on such business.

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4. Should the Career Representative Senior Unit Manager decide to engage any staff or other person(s), such staff or other person(s) shall not be or be deemed to be engaged or employed by the Company or by the Career Representative Senior Unit Manager on behalf of the Company and any costs and/or expenses incurred as a result of such person(s) being engaged shall be the sole responsibility of the Career Representative Senior Unit Manager.

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7. The Career Representative Senior Unit Manager shall, at the sole discretion of the Company and on such terms and conditions as the Company may determine, recruit Career Representatives for the Company who shall enter into a contract for services with the Company as Career Representatives thereof, and thereafter the Career Representative Senior Unit Manager shall be responsible for their training and supervision which responsibility shall include but not limited to the extension of services to those policyholders who policies are written by the Career Representative Senior Unit Manager and/or his Agency Leaders and/or his Career Representatives.

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30. Notwithstanding Clause 15 hereof, the Company shall have the right at all times to set off any debt, obligation or liability due or owing from the Career Representative Senior Unit Manager, or any of his Agency Leaders or any Career Representative recruited by or transferred to him or any staff he may have engaged, to the Company against any sum due or owing to the Career Representative Senior Unit Manager, and the setting off shall not create a cause of action against the Company that any sums of money are withheld from the Career Representative Senior Unit Manager, when there is a debt or obligation as specified herein due to the Company.

Clause 4 of the Schedule of Expense Allowance

4. Career Representative Senior Unit Manager's Responsibility on Financed Career Representatives

Schedule of Minimum Requirement of First Year Production Bonus earned by each Finance Career Representative under direct supervision :

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Should the first year production bonus earned by any of the Financed Career Representative under the direct supervision of the Career Representative Senior Unit Manager fall below the minimum requirement set forth above, half of the financing costs hall be charged against the Career Representative Senior Unit Manager at he end of that accounting quarter. The financing costs is defined as the difference between three times the first year production bonus earned by the Career Representative and the remuneration including monthly allowance and first year production bonus earned by the Career Representative. Should the first year production bonus earned by the Financed Career Representative at the end of his/her first contract year reaches the minimum requirement as set forth above, the financing cost charged against the Career Representative Senior Unit Manager shall be reimbursed by the Company."

Mr Chung explained in his oral testimony that in short the financing costs referred to in clause 4 of the Schedule of Expense Allowance represented the deficit between the fixed amount paid to the debtor's down-line agent and the actual commission the agent earned for a particular month.

5. Pursuant to the Contract, the debtor recruited his brother Samuel Kwok Tin Loi as his down-line agent at the time when he joined the petitioner. On 1 December 1997, Samuel Kwok terminated his agency contract with the petitioner as a result of a fraud case. It is the petitioner's case that the debtor had thereby become liable for (1) the signing fees the petitioner paid to Samuel Kwok when he was recruited in the sum of HK$453,000 under clause 4 of the Contract; and (2) the financial costs of HK$105,746.16 under clause 4 of the Schedule of Expense Allowance.

6. The debtor signed a letter of undertaking dated 15 September 1998, acknowledging his liability for the said sum of HK$558,746.16 with interest, and agreed to repay the indebtedness by 96 equal monthly instalments. Subsequently, a total of HK$33,000 was paid by the debtor. As at 10 October 1999, the outstanding balance stood at HK$525,746.16.

7. Previously, the debtor had signed another letter of undertaking dated 28 October 1997 acknowledging to repay a personal loan of HK$51,000 advanced to him by the petitioner. The loan together with interest was to be repaid by 24 monthly equal instalments. As at 31 July 1999, the outstanding balance stood at HK$6,974.46.

8. According to Mr Chung, the debtor had not raised any objection after signing the two letters of undertaking.

9. It is the petitioner's case as explained by Mr Chung in his oral testimony that the debtor owed the petitioner a further sum of HK$206,087.13 as at 31 August 1999, consisting of (1) HK$195,450.78 incurred by him personally as the deficit between the commission he earned and the actual amount the petitioner paid to him in August 1999; and (2) HK$10,636.35 being the financing costs he was liable under clause 4 of the Schedule of Expenses Allowances.

10. The documents evidencing the aforesaid indebtednesses have been produced as evidence before me. The requisite statutory demand dated 12 January 2000 was served on the debtor personally on 6 March 2000. The debtor has not taken any step to set aside the statutory demand. Mr Chung filed an affirmation dated 23 September 2002 confirming that the total amount of HK$749,429.35 is still outstanding.

The debtor's grounds of opposition

11. In his affirmation filed in these proceedings, the debtor sought to raise two main grounds of opposition :

(1) He had not received any of the payments made to his down-line agents. Hence he was not liable for these sums.

(2) He was forced by circumstances and financial difficulty to sign the two letters of undertaking.

12. As noted above, the debtor did not appear. Nor did his witnesses. There is therefore no evidence to support his opposition. Indeed, his first ground of opposition is clearly contradicted by the express provisions of the Contract. It is devoid of any merit. It seems that the defendant seeks to raise the defence of duress or undue influence under the second ground. But the allegations are not supported by evidence and I reject it accordingly. Indeed, the allegation raised by the defendant in his affirmations, even if were to be accepted, falls short of establishing any defence of duress or undue influence at all. He had, by conduct, further confirmed the letter of undertaking dated 15 September 1998 by making partial repayments thereunder.

Conclusion

13. For the above reasons, I was satisfied that the debtor has been unable to repay the indebtedness as claimed. A bankruptcy order should be made against him with costs. And I so ordered.