TSUI FUNG SIN v. PACIFIC CENTURY INSURANCE CO. LTD.

HCSD 34/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

APPLICATION TO SET ASIDE A STATUTORY DEMAND
NO. 34 OF 2001

____________

____________

_______________

D E C I S I O N

_______________

1. This is an application to set aside a statutory demand served on the debtor Madam Tsui Fung Sin on 10 December 2001. The applicant was a former insurance agent of the respondent, Pacific Century Insurance Company Limited. The debt in the statutory demand is in the sum of HK$40,934.29 and it is made up of three elements being an advance payment of production bonus in the sum of HK$38,584.11, overpaid commissions due to the lapse of certain policies in the sum of HK$1,506.81 and interest on the advance payment of production bonus from 15 November 2001 to 4 December 2001 in the sum of HK$843.37. The applicant seeks to set aside the statutory demand on the ground provided in rule 48(5)(b) of the Bankruptcy Rules, i.e. that the debt is disputed on grounds which appear to the court to be substantial.

2. In summary, what is alleged by the applicant is that she is not liable to pay the advance payment of production bonus because of an oral representation made to her by Miss Connie Tang and Mr Chan Ka Fai on behalf of the respondent before she signed two agreements. Further, the applicant has alleged that she had made an oral agreement with one Mr Choi from the Debt Collection Department of the respondent to compromise the respondent's claim by making payment of HK$10,000.00 in full and final settlement and that it was agreed that she could repay the said sum by ten equal monthly instalments commencing from November 2001.

3. The background matters may be given as follows. The applicant joined the respondent as an insurance agent on 21 June 2000. She signed two agreements when she joined. The first was called Agent's Contract for Selling Long Term Insurance Business, the other was called Agent's Advance Agreement. Mr Chan Ka Fai was the unit manager who recruited the applicant. She left the respondent in July 2001 on her resignation. It is not in dispute that she joined another insurance company in October 2001.

4. On 15 November 2001, the respondent issued a letter of demand to the applicant seeking payment of HK$40,090.92. It is apparently not in dispute that there were contacts between the applicant and Mr Choi, the internal collector of the respondent. What is in dispute is whether there was an agreement to compromise. On 30 November 2001, the applicant paid into the respondent's bank account the sum of HK$1,000.00. It was alleged by the respondent in their solicitors' letter that this sum was paid in cash and they did not know the identity of the depositor. However, it would appear from the deposit slip adduced by the applicant that the payment was made by cheque so that the respondent might have ascertained the identity of the person who had deposited that sum, contrary to the respondent's allegation.

5. Be that as it may, the central issue raised by the applicant is that she is not liable to pay the advance payment because of the oral representation made to her. In this respect, it is pertinent to note the terms of the Agent's Advance Agreement. It was provided in clause 1 that the respondent would pay to the applicant HK$4,000.00 a month for a maximum period of 12 months from 21 June 2000 as an advance payment of the production bonus. The material provision is clause 5 which provided that if the Agent's Contract was terminated for any reason at any time and the agent entered into an agreement with another insurance company, insurance broker firm or corporation as an agent, employee, director, consultant or any other capacity within six months of the date of termination of the Agent's Contract, the whole of the debit balance of the advance account of the agent should be immediately payable to the respondent.

6. The alleged oral representation made to the applicant by her unit manager, Mr Chan Ka Fai was in these terms. The respondent would pay the applicant HK$4,000.00 a month apart from commission as an advance payment of the production bonus provided she could meet the quota of the Annual First Year Premium at the rate of HK$15,000.00 a month, i.e. HK$180,000.00 a year. If she could reach that target, she would not be required to pay back to the respondent the monthly payments advanced to her "under any circumstances", even if she should join another insurance company in future within six months after termination of the service with the respondent, despite this was contrary to clause 5 of the Agent's Advance Agreement.

7. The applicant has alleged that Miss Connie Tang who was the senior of Mr Chan was present when Mr Chan made this representation and that Miss Tang had explained to her the contents of the two agreements she was to sign after Mr Chan finished his explanation and she had also repeated what Mr Chan had said to the applicant. Thus, the applicant had the understanding given to her by Mr Chan and Miss Tang that the respondent would not enforce clause 5 of the Agent's Advance Agreement as long as she could meet the quota of the Annual First Year Premium at HK$180,000.00.

8. The allegation of the oral representation is denied by the respondent. The main deponent for the respondent, Mr Tang Wai, who is a senior administrative assistant of agency operations of the respondent, has no personal knowledge of what was said at the interview when the applicant was recruited as an agent. Miss Connie Tang filed an affirmation on behalf of the respondent to say that it was Mr Chan Ka Fai who had recruited and interviewed the applicant. She was only introduced by Mr Chan to the applicant at the outset and she had just said a few words to welcome the applicant. She denied she had said anything about the agreements that the applicant was to sign and she did not say that the applicant would not be required to repay the advance payment if she could fulfil a specific target, whether as alleged or at all. Miss Tang further stated that she had allowed Mr Chan to use her room to interview the applicant and whilst she was with the applicant and Mr Chan, she did not hear Mr Chan say anything along the lines of the alleged representation.

9. The twist in this case is that the alleged representor, Mr Chan Ka Fai, has filed an affirmation on behalf of the applicant stating and confirming that he did make the oral representation as stated in the applicant's affirmation. This is a dispute that can only be resolved by cross-examination and is not appropriate to be dealt with on the affidavit evidence.

10. I have looked at other matters such as contemporaneous documents and matters essentially not in dispute to see whether the applicant's allegation of an oral representation is incredible when viewed against such matters.

11. Firstly, there is the question whether she was in receipt of the written agreements which contained terms contrary to the oral representation. The applicant has denied that she was given copies of these agreements after she had signed. The respondent's evidence, as I understand it, would seem to suggest that in the ordinary course of events, an agent would have been provided with copies of the agreements after they had been signed by all parties and this was no exception in the applicant's case. Assuming in the respondent's favour that the applicant did receive these agreements, I do not think this would necessarily have cast doubt on the applicant's allegation that the oral representation was made. The oral representation according to her was to the effect that this would override the terms of the written agreements. So even if she had received the agreements, this does not, in my view, render her allegation incredible in that she had failed to raise any query with the respondent until she received the demand letter in November 2001.

12. Secondly, there is the matter whether the applicant had received the monthly commission statements issued by the respondent. Again, the applicant has denied that she had ever received such monthly commission statements. It was submitted by Mr Chan Tak Ching who appeared on behalf of the respondent that it is apparent from the commission statements that they were issued every month and that the monthly commission statements would appear to accompany a cheque payment made to the applicant every month. The cheque payments made to the applicant differed every month. Without the monthly commission statements, the applicant would not be able to verify or ascertain if the amount she had received by cheque was correct. There is no dispute that the applicant had received the cheque payments. There is no suggestion on her part that she had ever queried the cheque payments made to her when she was the respondent's agent.

13. I am inclined to agree with Mr Chan that on the balance of probabilities, the applicant had received the monthly commission statements. However, even if this should be the position, it does not seem to me that the receipt of these statements would cast doubt on the credibility of the alleged oral representation. There was no indication in any of the monthly commission statements that the applicant was required to repay the advance payment. On the available evidence, the demand in writing was only made in the letter issued by the respondent in November 2001.

14. Thirdly, I have considered the alleged compromise agreement made by the applicant with Mr Choi for the respondent. The settlement agreement might indicate at least that the applicant had considered that she could be under some liability to pay the sum demanded of her. The applicant has explained in her affirmation she entered into the settlement agreement because she was told that she had not met the quota of the Annual First Year Premium for two months and it was for that reason that she told Mr Choi that she considered herself liable to pay the respondent the sum of HK$10,000.00 only. Viewed that in that light, I am unable to say that the settlement agreement would be conduct casting doubt on her credibility if the alleged oral representation was made to her.

15. As to the alleged oral agreement to compromise made between the applicant and Mr Choi, the applicant has produced a pay-in slip to support her allegation that she had made payment in accordance with the alleged oral compromise. Further, it might appear from the cheque she caused to be paid into the respondent's bank account that the respondent should be aware that it was she who had made the deposit. There is no evidence from Mr Choi on the alleged compromise although in the affirmation of Mr Tang Wai, he denied that Mr Choi had entered into such an agreement with the applicant. Further, Mr Tang stated that Mr Choi was not authorised to make such an agreement to compromise with the applicant and that neither Miss Connie Tang nor Mr Chan Ka Fai was authorised to make any representation to the applicant contrary to the terms of the written agreements. Even if Mr Choi, Miss Tang and Mr Chan did not have express authority to do what they did as alleged by the applicant, I am unable to say on the available evidence that none of the three would have apparent or ostensible authority to do what they were alleged to have done.

16. On the basis of the available evidence, I am not prepared to say that the allegations advanced by the applicant are tenuous and incredible. I am satisfied she has made out a ground under rule 48(5)(b) of the Bankruptcy Rules, in that she has raised a substantial dispute on the debt in the statutory demand.

17. On that basis, I set aside the statutory demand. The respondent would have to establish entitlement to the debt by an action in the ordinary way. I would hear the parties on costs.