AXA CHINA REGION INSURANCE CO LTD AND ANOTHER v. PACIFIC CENTURY INSURANCE CO LTD AND OTHERS

HCA 9093/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9093 OF 2000

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REASONS FOR DECISION

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1.  On 18 May 2005 I handed down the Decision (“the Decision”) in respect of:

(1)         The plaintiffs’ summons dated 19 August 2003 (“the Questionnaires application”); 

(2)         The plaintiffs’ summons dated 17 December 2003 (“the Non-compliance application”) seeking to enforce the 1^st defendant’s undertaking (“the Undertaking”) to the Court under the Order of Beeson J dated 29 September 2000 (“Beeson J’s Order”), and the Order of Deputy Judge To’s Order dated 24 July 2001 as amended on 23 January 2002 and re-amended on 7 February 2003 (collectively referred to as “DJ To’s Order”).

(3)         The 1^st defendant’s summons dated 13 May 2004 seeking (a) amendments of Beeson J’s Order and DJ To’s Order by inserting an undertaking as to damages,  (b) the discharge of the Undertakings, to the extent that they exceed the scope of DJ To’s Order, and (c) release from further compliance with DJ To’s Order.

2.  At paragraph 76 of the Decision, I made the following orders:

(A)     The Questionnaires application is dismissed.

(B)     On the Non-compliance application:

 (1)    The 1^st defendant is to further comply with the Undertaking by conducting a search of all the non-PMS policies issued on or after 21 July 2000, to the extent this was hitherto not done, with a view to delivering up to the plaintiffs  printouts from SAMS and copies thereof, if any, that are in its possession, custody or power, and that had hitherto not been delivered up to the plaintiffs.

 (2)    The 1^st defendant is to further to comply with paragraphs (3) and (4) of DJ To’s Order by carrying out further search, delivering up and disclosure of (a) white cards, underwriting notifications and daily consolidated reports, (b) the 7 policies and 169 policies respectively referred to in Geoff Wong’s 4th affirmation and Ralph Lau’s 13^th affirmation, and (c) the list of documents set out in the affirmation of Ho Wai Shing Steven.

(C)     On the 1^st defendant’s summons:

          Beeson J’s Order and DJ To’s Order be further amended by inserting the usual undertaking as to damages.  The further amended orders are to be filed and served within 14 days from the date of the handing down of the Decision.

3.  I invited the parties to endeavour to agree on: (1) the timetable for carrying out the further searches, delivery up and disclosure, (2) the costs of the summonses, and (3) the precise terms of the Order, with leave to apply for further directions in the event agreement cannot be reached on one or more of the matters.

4.  Consequently, the case was listed for further directions.  For the purpose of the hearing, the parties had lodged on an agreed list of outstanding issues for determination and direction.  At the conclusion of counsel’s submissions, I gave the directions sought.  My reasons for them appear below. 

5.  For ease of reference, I shall refer to the plaintiffs and the 1^st defendant as AXA and PCI respectively.

Compliance with the undertaking: 

Issues 1 and 2

6.  Issues 1 and 2 stem from paragraphs 58 and 76 of the Decision, which require PCI to further comply with the Undertaking by conducting a search of all the non-PMS policies issued on or after 21 July 2000, to the extent this was hitherto not done, for SAMS documents.   The questions raised are whether PCI is required to search (1) non-AXA PMS policies issued on or after 21 July 2000, and (2) non-WWP NB policies issued after 16 October 2000, other than the Protocol Policies.

7.  When preparing this part of the Decision, I was having in mind paragraph 13 of Ralph Lau’s 13^th affirmation and the chart entitled “ Summary of PCI policies searched for SAMS documents” prepared on behalf of PCI and handed up during the previous hearing.  Insofar as the affirmation is concerned, when it referred to non-PMS policies, the focus in paragraph 13 was on WWP NB policies and non-WWP NB policies.

8.  As for the chart, it divided PCI policies other than AXA PMS policies into two boxes, namely, New Business policies and non-AXA PMS policies.  The latter was labelled as irrelevant.  Although AXA had in the reply submission commented that it was unclear from the evidence that these policies had been excluded from the samples searched, there was no real dispute on PCI’s contention that these non-AXA PMS policies were irrelevant.

9.  In the Decision, by non-PMS policies, I was referring to the New Business policies, and effectively only the non-WWP NB policies, as according to PCI, the WWP NB policies had all been searched.  There was no intention to cover non-AXA PMS policies.

10.  As to the issue of Protocol Policies, I had not addressed my mind to this when dealing with the Non-compliance application in the context of the Undertaking.  Protocol Policies were those policies identified and searched in accordance with the Protocol introduced in November 2001.  The Protocol was accepted by Deputy Judge To as a suitable and helpful aid to the compliance of his orders.  Mr Yu SC submits that the Undertaking ought to be similarly restricted by the Protocol, apart from the temporal limit of 21 July 2000 that I had already ordered.

11.  I had in the Decision said I accepted AXA’s claim over the SAMS documents was proprietary in nature.  This is one of the reasons why I had rejected PCI’s construction of the Undertaking.  However, when considering the Non-compliance application and PCI’s application to discharge the Undertaking, the issue is whether the Undertaking should be strictly enforced or enforced in a reduced or restricted manner.   The fact that the SAMS claim is proprietary in nature is not conclusive of the issue.

12.  As indicated in the Decision, an important consideration in my deliberation is my view that further devotion of substantial resources to these interlocutory steps would carry little benefits to the parties in terms of the final adjudication and resolution of the claim.  The intention of my order on the Non-compliance application and the discharge application has therefore been to limit rather than to broaden the tasks of PCI in complying with the Undertaking.  I had adopted the temporal limit that was imported into DJ To’s Order so as to give a confined scope to the Undertaking as well as to introduce an element of uniformity to the Undertaking and DJ To’s Order. 

13.  As explained in Deputy Judge To’s decision of November 2001, the Protocol was introduced in recognition of the difficulties PCI faced in properly complying with its obligations under the interlocutory order.  It was to assist PCI’s task in the identification of policyholders who were AXA’s clients that had been served by former AXA agents.  These considerations are equally relevant to the compliance with the Undertaking.  I am of the view that it would be appropriate and fair to apply the Protocol to the Undertaking.  Accordingly, the search of non-WWP NB policies for SAMS documents is to be confined to the Protocol Policies.

Compliance with paragraphs (3) and (4) of DJ To’s Order:

 Issues 3 to 5

14.  Issue 3 relates to the further search ordered in paragraph 76 of the Decision in connection with the 169 policies referred to in the Ralph Lau’s 13^th affirmation.  As indicated at the outset of this direction hearing, the reference in the Decision should have been to the one policy out of the 169 policies referred to in the said affirmation.

15.  As for Issue 4, it is no longer in issue in view of AXA’s position at the hearing as conveyed by Mr Shieh SC.  It is accepted by AXA that the search for the Category A documents mentioned in Steven Ho’s affirmation should be subject to both the temporal limit of 21 July 2000 and the Protocol.

16.  On Issue 5, the question that calls for further direction is whether apart from the Category A documents, PCI is also required to search for the Category B documents mentioned in Steven Ho’s affirmation.  AXA’s position at the hearing is that the search of Category B documents will also be subject to the temporal limit and the Protocol.

17.  Steven Ho’s affirmation came about as a result of Mr Yu SC’s submissions on PCI’s application for release from further compliance with DJ To’s Order.  He suggested that AXA should provide PCI with a list of documents that AXA said fell within the same category as the White Cards, Underwriting Notifications and Daily Consolidated Reports, being documents that AXA would not have given to their policyholders.  In his reply submission, Mr Kotewall SC (who appeared for AXA at the previous hearing) indicated that AXA were prepared to provide the list as requested but without prejudice to AXA’s right to raise in the future other types of documents that would not have been provided to their policyholders.

18.  When Steven Ho’s affirmation came to be filed, it contained a reference to two types of documents: Category A documents were documents which were never given to the policyholders, and Category B documents were those that would not be given unless the policyholders   requested them.  As noted by Mr Yu SC, unlike the Category A documents, Category B documents are documents emanated from and submitted to AXA by the policyholders.  It is quite possible for the policyholders to have retained copies of them.

19.  Clearly, the list of documents that counsel suggested and envisaged at the previous hearing is confined to the Category A documents.  Mr Yu SC submits that the direction hearing is not an occasion to ask for documents that had not been applied for at the previous hearing.  I agree.   Category B documents was not the subject matter argued and it will not be right to extend the duty to search to cover them.

20.  Further, given that the objective is to assist PCI by giving a clear idea as to what documents to look for in further complying with paragraphs (3) and (4) of DJ To’s Order, the list of documents must be tied to the definition of Client Data.  At the previous hearing, AXA had accepted that it was appropriate and had agreed to give the assistance. 

21.  Client Data is the subject matter of PCI’s obligations under paragraphs (3) and (4) of DJ To’s Order.   It refers to information obtained by agents in the course of their agency with AXA, not being information previously known to him.   The underlying idea of the list of documents is that if the documents were never given to AXA’s policyholders, such as White Cards, Underwriting Notifications and Daily Consolidated Reports, then they must have been obtained by the agents in the course of their agency with AXA.  Category B documents, however, do not stand in the same category because it cannot be said that they must have been obtained by the agents in the course of their agency with AXA.  Indeed, the point is illustrated by the fact that AXA had sub-divided the documents into Category A and Category B in Steven Ho’s affirmation.

22.  Additionally, I had in paragraphs 73 and 74 of the Decision indicated my views on the strict enforcement versus therelease of the obligations under the interlocutory order.   I had concluded in favour of a limited further compliance with the order.  To extend the further search to the Category B documents would be contrary to my conclusion.

23.  For these reasons, my conclusion under Issue 5 is that PCI is not required to search for the Category B documents as further compliance of paragraphs (3) and (4) of DJ To’s Order.

Timetable for compliance:

 Issues 6 to 9

24.  In view of the outcome on Issues 1 to 5, it is not necessary to deal with Issues 6 to 9.  As to the time for PCI to further comply with the Undertaking and DJ To’s Order, parties are in agreement that PCI should have until 30 September 2005 to complete all the outstanding searches and the verifying affidavit should be filed within 28 days thereafter.  

Costs of the three summonses:

Issues 10 & 11

25.  On AXA’s Questionnaires application, there is agreement that PCI should have the costs in any event.

26.  On AXA’s Non-compliance application, PCI accepts at the direction hearing that AXA should have the costs in any event.

27.  What is in issue is the costs arising out of PCI’s summons. 

28.  In my view, the costs of the application to amend by inserting the undertakings as to damages should be dealt with separately.   PCI has to come to court to make the application in order to secure the undertaking.  Although AXA were prepared to give the usual undertaking, the indication only came about at the hearing.  And although PCI did not succeed in getting a wider undertaking, the time spent on arguing this was admittedly minimal.   The costs of this aspect of the summons should follow the normal rule of costs follow event.  I therefore order that PCI should have the costs of the application to amend Beeson J’s Order and DJ To’s Order to insert the undertaking as to damages in any event, to be taxed if not agreed.

29.  As to the costs on the remaining paragraphs of PCI’s summons, I agree with Mr Shieh SC’s analysis and argument.   In essence, PCI’s applications for a discharge of the Undertaking and release from DJ To’s Order were in response to AXA’s Non-compliance application.   The amended paragraph 6 of the summons was only introduced during the hearing.   Although I had, for reasons given in the Decision, taken the view that Unless orders would not be appropriate, I would not have gone on to consider the manner of further compliance with the Undertaking and DJ To’s Order but for PCI’s summons.   Thus viewed, in applying for the discharge and release, PCI is seeking the court’s indulgence.  It is also incumbent upon PCI to take out the application in order to secure the indulgence.  It follows that AXA should have the costs of paragraphs 5 and 6 (as amended) of the summons.

30.  However, to the extent that AXA had unsuccessfully opposed PCI’s application and the opposition had clearly lengthened the arguments and increased the costs on the dispute as to compliance with the Undertaking and DJ To’s Order, PCI should have the costs of the hearing on the discharge and release application.

31.  In view of the costs orders indicated above, it is necessary to apportion the costs of the hearing on the three summonses so as to facilitate the taxation under the costs order.  Having heard counsel, I consider that one-third of the costs of the hearing should be apportioned to the Questionnaires application, another one-third to the Non-compliance application and the remaining one-third to the application for discharge and release.  Accordingly, one-third of the costs of the hearing on the three summonses should go to AXA with the remaining two-thirds of the costs be to PCI.  The hearing is certified fit for two counsel to attend.

Costs of the application for directions

32.  Finally is the costs of the application for directions, which cover not only the direction hearing, but also the preparations and correspondence associated with it.  In deciding the costs for this, I bear in mind that Issue 3 arose out of my oversight in the Decision, that AXA has basically succeeded in Issues 10 and 11 on costs, whereas PCI’s contentions for the other issues have been upheld.   In the circumstances, I consider it appropriate and fair to award to PCI two-third of the costs of and incidental to the application for directions in any event, to be taxed if not agreed.

Conclusion

33.  To recap, the answers on the agreed list of outstanding issues and the consequential directions are as follows:

Issue 1         PCI is not required to search non-AXA PMS policies issued on or after 21 July 2000 for SAMS documents.

Issue 2         PCI is not required to search non-WWP NB policies issued after 16 October 2000 other than the Protocol Policies for SAMS documents.

Issue 3         In respect of amended paragraph 6 of PCI’ summons, the further search, delivery up and disclosure required is limited to the 169 policies referred to in the 13^th Affirmation of Ralph Lau Kim Ming dated 24 February 2004.                             

Issue 4         Other than WWP NB policies issued on or after 21 July 2000 and the Protocol Policies, PCI is not required to search other non-PMS policies issued on or after 21 July 2000 for the Category A documents referred to in the Affirmation of Ho Wai Shing Steven dated 7 July 2004.

Issue 5         PCI is not required to search for the Category B documents referred to in the Affirmation of Ho Wai Shing Steven dated 7 July 2004.

Issues 6 –9  They are not required to be dealt with.

Issues 10,11 The costs order on the three summonses are:

(a)     Subject to (e) and (f) below, the costs of AXA’s summons dated 19 August 2003 be to PCI against AXA in any event, to be taxed if not agreed.       

(b)     Subject to (e) and (f) below, the costs of AXA’s summons dated 17 December 2003 be to AXA against PCI in any event to be taxed if not agreed.

(c)     The costs of paragraphs 1, 2(a), 3 and 4 of PCI’s summons dated 13 May 2004 be to PCI against AXA in any event to be taxed if not agreed.

(d)     Subject to (e) and (f) below, the costs of paragraphs 2(b) & (c), 5 and 6 (as amended) of PCI’s summons dated 13 May 2004 be to AXA against PCI in any event to be taxed if not agreed.

(e)     One-third of the costs of the hearing on the three summonses be to AXA against PCI in any event, to be taxed if not agreed, with a certificate for two counsel.

(f)      Two-third of the costs of the hearing on the three summonses be to PCI against AXA in any event, to be taxed if not agreed, with a certificate for two counsel.

Timetable for compliance 

PCI was to have until 30 September 2005 to further comply with the Undertaking in Beeson J’s Order and also paragraphs (3) and (4) of DJ To’s Orders.

Costs of the direction hearing   

                   Two-third of PCI’s costs of and incidental to the direction hearing be paid by AXA in any event, to be taxed if not agreed.