FWD LIFE INSURANCE COMPANY (BERMUDA) LIMITED formerly known as ING LIFE INSURANCE COMPANY (BERMUDA) LIMITED v. LAM CHI CHUEN ALPHA

HCA 1159 and 1160/2017

[2019] HKCFI 2878

HCA 1159/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1159 OF 2017

________________________

________________________

HCA 1160/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1160 OF 2017

________________________

________________________

DECISION

________________________

Introduction

1.  By a summons filed on 20 June 2019 in HCA 1159/2017 (“the 1159 Summons”), the Plaintiff (“P”) applied for summary judgment for a sum of HKD 6,488,543.13 plus interests and costs against the Defendant in HCA 1159/2017 (“Lam”). 

2.  By a summons filed on 20 June 2019 in HCA 1160/2017 (“the 1160 Summons”), P applied for summary judgment for the smaller sum of HKD 1,330,634.54 plus interests and costs against the Defendant in HCA 1160/2017 (“Sin”). 

3.  The parties agreed the summonses should be heard together as the arguments raised were practically identical. 

4.  I heard both summonses substantively today.  My decision is to: -

(1)     Enter summary judgments in favour of P for the two principal sums claimed – ie HKD 6,488,543.13 for Lam and HKD 1,330,634.54 for Sin – plus interests pursuant to Sections 48 and 49 of the High Court Ordinance (Cap 4) at the rate of 1% above HSBC Prime Rate from the dates the respective causes of action accrued – ie 13 April 2017 for Lam and 23 March 2017 for Sin – until today and at the judgment rate hereinafter until full payment; 

(2)     Order Lam to pay for the costs of the whole action, including those of the 1159 Summons and all costs previously reserved, all of which to be taxed on the indemnity basis with Certificate for Two Counsel if not agreed, for HCA 1159/2017, to P; and

(3)     Order Sin to pay for the costs of the whole action, including those of the 1160 Summons and all costs previously reserved, all of which to be taxed on the indemnity basis with Certificate for Two Counsel if not agreed, for HCA 1160/2017, to P. 

(Collectively, “the Decision”).

5.  My reasons for the Decision are as follows. 

Background Facts

6.  P was an insurance company.  Lam and Sin (“Ds”) were P’s insurance agents.  Lam signed a “letter of offer” (“Lam’s LO”) with P on 11 September 2013.  Sin signed a similar document (“Sin’s LO”) with P.  The authenticity of these documents (“the LOs”) are agreed. 

7.  Apart from Lam’s LO, Lam also signed an individual agent’s agreement (“Lam’s IAA”) with P.  Sin signed a similar document (“Sin’s IAA”) with P.  The authenticity of these documents (“the IAAs”) are also agreed. 

8.  It is P’s case that the LOs said those sums of money paid over by P to Ds under the LOs were conditional advances and must be repaid to P upon the termination of the IAAs, in the manner as had been spelt out in the LOs.  Ds were said to be indebted to P for the principal sums claimed because of, inter alia, their refusal or failure to repay P as agreed. 

9.  Based on, inter alia, the above, P issued separate writs against (1) Lam; and (2) Sin on 17 May 2017. 

10.  On 20 June 2019, in support of the two summonses, P’s senior financial manager made and caused to be filed affirmations deposing to his belief that neither Lam nor Sin had any defence to P’s claims. 

Ds’ Submissions

11.  Mr Kevin Wong, Counsel for Ds, submits, inter alia, that I should grant unconditional leave to defend in both actions since each of Ds has the following bona fide defences: -

(1)     The sums claimed by P are in substance remuneration for Ds’ services to P (“Ground 1”);

(2)     The sums claimed by P are penalties (“Ground 2”); and

(3)     There was a fundamental breach by P (“Ground 3”). 

          (Collectively, “Ds’ Grounds”)

P’s Submissions

12.  Mr Norman Nip and Ms Kelly Shum, Counsel for P, submits, inter alia, that Ds’ Grounds were all unarguable, so I should enter judgment against each of Ds and order costs against them on full indemnity basis, as had been expressly provided for in the IAAs. 

My View on Ground 1 (the Remuneration Point)

13.  Ground 1 is, with respect, wholly unarguable. 

14.  I have read the LOs and the IAAs.  They are carefully drafted and elaborate documents which set out Ds’ legal obligations in relation to the sums currently claimed by P in the clearest way possible.  I cannot see how Ds can unilaterally relabel or reclassify the sums in question as if they had never seen or signed the LOs and the IAAs.  I am satisfied P’s claims are for “debts”, in the sense as had been famously defined by Millet LJ (as Lord Millet NPJ then was) in Jervis v Harris [1996] Ch 195, most recently applied in Hong Kong in Yuen Kam Lok Eddy v Lau George [2019] HKDC 1109 (paragraphs 87 & 88, per DDJ SH Lee). 

15.  Further, as has been correctly pointed out by Mr Nip, Counsel for P, there is a long line of authorities rejecting “remuneration” arguments raised by insurance agents in similar situations.  All authorities speak with one voice – conditional advances paid to insurance agents cannot be treated as those insurance agents’ remuneration at all.  See, eg, Re Lo Kwai Ying Louisa (unrep, HCB 3145/2015, 5 April 2017, Lok J). While cases must of course be decided on their own facts, Ds had completely failed to show why they should be treated differently on their own documents and factual scenarios. 

My View on Ground 2 (the Penalty Point)

16.  Ground 2 is also, with respect, wholly unarguable.

17.  To start with, I am bound by the ratio decidendi in Manulife (International) Limited v Chong Wai Ling also known as Chong Wai Ling Frankie [2018] HKCA 86 (paragraph 14 per Poon JA, as he then was) that the penalty rule only applies to sums payable from a breach of contract, but not to primary obligations.  That ratio is in any case obviously correct.  I cannot see how Ds can argue otherwise.  A contractual promise to repay money advanced on condition is simply not caught by the penalty rule. 

18.  Secondly, even if the penalty rule may apply (it does not), the sums claimed by P cannot possibly be penalties. 

19.  The starting point should be Cavendish Square Holding BV v Makdessi [2016] AC 1172, where Lord Hodge JSC said, at paragraph 255, the following: -

“… the correct test for a penalty is whether the sum or remedy stipulated as a consequence of a breach of contract is exorbitant or unconscionable when regard is had to the innocent party’s interest in the performance of the contract…”

20.  The “exorbitant or unconscionable” test in Cavendish Square had since been applied by Lam V-P of our Court of Appeal in Bank of China (Hong Kong) Ltd v Eddy Technology Co Ltd [2019] 2 HKLRD 493 at 502, paragraph 38, and forms part of the laws of Hong Kong. 

21.  With respect, there is nothing “exorbitant or unconscionable” in requiring Ds to pay P the sums claimed by P. 

My View on Ground 3 (the Fundamental Breach Point)

22.  Ground 3 is, with respect, wholly unarguable as well. 

23.  As had been pointed out by Mr Nip, Counsel for P, Ds never identified a single contractual term which was said to have been breached by P.  Since there was no breach, there was no fundamental breach. 

24.  I should add that, as Ma CJHC had said in Toy Major Trading Co Ltd v Hang Shun Plastic Toys Ltd [2007] 3 HKLRD 345, in summary judgment proceedings the duty is always on the defendants to “condescend to particulars” in explaining what their purported defences really are.  Ds cannot allege “breach” in these proceedings without identifying the term said to have been breached.  Ds’ attempt to do so in these proceedings is, with the greatest respect, somewhat unhelpful.  

Interests

25.  Since Ds fail to identify or show an arguable defence, I must enter summary judgment against Ds, and the question of interests arises. 

26.  Pre-judgment statutory interests should be at 1% above HSBC Prime Rate for the reasons set out by Lam V-P in Chow How Yeen Margaret v Wex Pharmaceuticals [2018] 3 HKLRD 163, [2018] HKCA 344 (see his paragraphs 44 to 59).  I can see no reason why I should depart from this long-standing practice dating all the way back to Cons JA’s 1984 judgment in Komala Deccof v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara [1984] HKLR 219, which has been consistently applied ever since.  See, eg, Jyotsna Textile Processors Private Ltd v Sonakaran International Ltd [2019] HKCFI 213.  On the facts of the two cases before me, interests should start to run on the dates the respective causes of action accrued. 

Costs

27.  Costs should follow the event.  P is the winner.  The costs of the summonses should be paid by Ds to P. 

28.  On the question of Certificate for Counsel, in my judgment it was reasonable, necessary and proper for both sides to engage Counsel to argue the summonses, given the potential consequences and the amount of money at stake.  Given the detailed factual analysis necessary to respond to Ds’ various arguments, and the fact that there are 2 separate cases before me, it is in my view reasonable, necessary and proper for P to have brought in Ms Shum to assist Mr Nip.  I certify the attendance of both Mr Nip and Ms Shum. 

29.  On the quantum of costs sought, P is content with costs being taxed instead of summarily assessed.  Given P’s stance, I order costs to be taxed if not agreed. 

30.  On the basis of taxation, Ribeiro PJ said this in Bank of China (Hong Kong) Ltd v Twin Profit Ltd (2012) 15 HKCFAR 560: -

“As with all questions of costs, the Court has a discretion which it exercises judicially… The parties’ agreement as to how costs should be dealt with provides the starting point...”

31.  I am satisfied, upon reading the IAAs, that Ds had agreed that all costs against Ds should be taxed on a full indemnity basis.  Whilst this agreement between the parties is just the starting point and does not in any way fetter my judicial discretion, on the evidence placed before me I can see no reason why I should depart from it. 

32.  By reason of the above, all costs payable by Ds to P should be taxed on the indemnity basis. 

Final Remarks

33.  I do thank all 3 Counsel for their most able assistance.